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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000950144-01-502650.txt : 20010521
<SEC-HEADER>0000950144-01-502650.hdr.sgml : 20010521
ACCESSION NUMBER: 0000950144-01-502650
CONFORMED SUBMISSION TYPE: 10-K/A
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20010203
FILED AS OF DATE: 20010518
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: BOOKS A MILLION INC
CENTRAL INDEX KEY: 0000891919
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940]
IRS NUMBER: 630798460
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0131
FILING VALUES:
FORM TYPE: 10-K/A
SEC ACT:
SEC FILE NUMBER: 000-20664
FILM NUMBER: 1643350
BUSINESS ADDRESS:
STREET 1: 402 INDUSTRIAL LN
CITY: BIRMINGHAM
STATE: AL
ZIP: 35211
BUSINESS PHONE: 2059423737
MAIL ADDRESS:
STREET 1: 402 INDUSTRIAL LANE
CITY: BIRMINGHAM
STATE: AL
ZIP: 35211
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K/A
<SEQUENCE>1
<FILENAME>g69630e10-ka.txt
<DESCRIPTION>BOOKS-A-MILLION, INC.
<TEXT>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended February 3, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
-------------- ----------------
Commission File No. 0-20664
BOOKS-A-MILLION, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 63-0798460
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
402 INDUSTRIAL LANE
BIRMINGHAM, ALABAMA 35211
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (205) 942-3737
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
CONTINUED
<PAGE> 2
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
The aggregate market value of the voting stock held by non-affiliates
of the Registrant (assuming for these purposes, but without conceding, that all
executive officers and directors are "affiliates" of the Registrant) as of
April 17, 2001 (based on the closing sale price as reported on the NASDAQ
National Market on such date), was $28,936,887.
The number of shares outstanding of the Registrant's Common Stock as
of April 17, 2001 was 17,179,257.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year
ended February 3, 2001 are incorporated by reference into Part II of this
report.
Portions of the Proxy Statement for the Annual Meeting of Stockholders
to be held on June 7, 2001 are incorporated by reference into Part III of this
report.
<PAGE> 3
PART I
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This document contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, that involve a
number of risks and uncertainties. A number of factors could cause actual
results, performance, achievements of the Company, or industry results to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. These factors include,
but are not limited to, the competitive environment in the book retail industry
in general and in the Company's specific market areas; inflation; economic
conditions in general and in the Company's specific market areas; the number of
store openings and closings; the profitability of certain product lines,
capital expenditures and future liquidity; liability and other claims asserted
against the Company; uncertainties related to the Internet and the Company's
Internet initiative ; and other factors referenced herein. In addition, such
forward-looking statements are necessarily dependent upon assumptions,
estimates and dates that may be incorrect or imprecise and involve known and
unknown risks, uncertainties and other factors. Accordingly, any
forward-looking statements included herein do not purport to be predictions of
future events or circumstances and may not be realized. Given these
uncertainties, shareholders and prospective investors are cautioned not to
place undue reliance on such forward-looking statements. The Company disclaims
any obligations to update any such factors or to publicly announce the results
of any revisions to any of the forward-looking statements contained herein to
reflect future events or developments.
ITEM 1. BUSINESS
GENERAL
Books-A-Million, Inc. (the "Company" or the "Registrant") is a leading
book retailer and is one of the dominant book retailers in the southeastern
United States. The Company, which was founded in 1917, has developed several
store formats to address the various market areas it serves. Superstores, the
first of which was opened in 1988, average approximately 20,000 square feet and
operate under the name "Books-A-Million." Smaller bookstores, which are operated
under the name "Bookland," have approximately 4,000 square feet and are located
primarily in malls. The Company also operates newsstands under the name "Joe
Muggs Newsstands." Newsstands average approximately 2,300 square feet and are
located in mostly larger markets. All store formats offer a selection of best
sellers and other hardcover and paperback books, magazines, and newspapers. In
addition to the retail store formats, the Company offers its products over the
Internet at Booksamillion.com and Joemuggs.com. The Company is also a wholesaler
of books to, among others, bookstores, wholesale clubs, supermarkets, department
stores and mass merchandisers. Additionally, the Company has a subsidiary which
provides website development and maintenance services.
The Company was originally incorporated under the laws of the State of
Alabama in 1964 and was reincorporated in Delaware in September 1992. The
principal executive offices of the Company are located at 402 Industrial Lane,
Birmingham, Alabama 35211, and its telephone number is (205) 942-3737. Unless
the context otherwise requires, references to the Company include its wholly
owned subsidiaries, American Wholesale Book Company, Inc. ("American
Wholesale") and American Internet Service, Inc. ("AIS").
BOOKS-A-MILLION SUPERSTORES
The Company opened its first Books-A-Million superstore in April 1988.
The Company developed its superstores to capitalize on the growing consumer
demand for the convenience, selection and value associated with the superstore
retailing format. Each superstore is designed to be a receptive and open
environment conducive to browsing and reading and includes ample space for
promotional events open to the public, including book autograph sessions and
children's storytelling. The Company operated 145 Books-A-Million superstores
as of February 3, 2001.
Books-A-Million superstores emphasize selection, value and customer
service. Books-A-Million superstores offer an extensive selection of best
sellers and other hardcover and paperback books, magazines, local and
out-of-town newspapers, greeting cards and gifts. Books-A-Million superstores
also dedicate space to bargain books that are sold at a discount from
publishers' originally suggested retail prices. Each Books-A-Million superstore
has a service center staffed with associates who are knowledgeable about the
store's merchandise and who are trained to answer customers' questions, assist
customers in locating books within the store and place special orders. The
majority of the superstores also include an espresso
1
<PAGE> 4
and coffee bar called Joe Muggs. The Company's superstores are conveniently
located on major, high-traffic roads and in enclosed malls or strip shopping
centers with adequate parking. Books-A-Million superstores are generally open
seven days a week from 9:00 a.m. to 11:00 p.m.
BOOKLAND STORES
The Company's Bookland stores operate as traditional bookstores or
combination book and greeting card stores, both of which are tailored to the
size, demographics and competitive conditions of the particular market area.
Bookland stores average between 3,500 and 4,500 square feet and carry a broad
selection of best sellers and other hardcover and paperback books, bargain
books, magazines, gifts and greeting cards. The Company has 37 Bookland stores
as of February 3, 2001.
JOE MUGGS NEWSSTANDS
The Company's newsstands are concentrated in business and
entertainment districts and are tailored to the demographics of the particular
market area. Newsstands average approximately 2,300 square feet and carry a
broad selection of newspapers and magazines, along with hardcover and paperback
books. The newsstands also offer an espresso and coffee bar. The Company
operated 3 newsstands as of February 3, 2001.
MERCHANDISING
The Company employs several value-oriented merchandising strategies.
Books on the Company's best-seller list, which is developed exclusively by the
Company based on its sales and customer demand in its stores, are generally
sold in the Company's superstores at 33% below publishers' suggested retail
prices. In addition, superstore customers can join the Millionaire's Club and
save 10% on all purchases in Books-A-Million superstores, including already
discounted best-sellers. Bookland store customers can join the Read & Save Club
and enjoy similar discounts. The Company's point-of-sale computer system
provides the data necessary to enable the Company to anticipate consumer demand
and customize store inventory selection to reflect local customer interest and
demand.
MARKETING
The Company maintains a regional focus, which involves dedicating
space in its stores to books of regional and local interest and creating
special departments such as regional literature, cooking and religious books.
Store managers are given the flexibility to select titles that are responsive
to consumer demand in that particular market area, and the Company continuously
modifies its title selection in each bookstore to tailor selection to local
consumer preferences. The Company offers frequent promotions that have a
regional flavor, including book autograph sessions with popular regional
authors.
The Company promotes its bookstores principally through the use of
geographically concentrated newspaper advertising and direct mail circulars, as
well as point-of-sale materials posted and distributed in the stores. In
certain markets, television advertising is also used on a selective basis.
Store managers are instrumental in tailoring certain promotions for their
particular market area and in designing store displays. The Company also
arranges for special appearances and book autograph sessions with recognized
authors to attract customers and to build and reinforce customer awareness of
its stores. A substantial portion of the Company's advertising expenses are
reimbursed from publishers through their cooperative advertising programs.
STORE OPERATIONS AND SITE SELECTION
In choosing specific store sites within a market area, the Company
applies standardized site selection criteria that take into account numerous
factors, including the local demographics, desirability of available leasing
arrangements, proximity to existing Company operations and overall level of
retail activity. In general, stores are located on major high-traffic roads
convenient to customers and have adequate parking. The Company generally
negotiates short-term leases with renewal options. The Company periodically
reviews the profitability trends and prospects of each of its stores and
evaluates whether or not any underperforming stores should be closed, converted
to a different format or relocated to more desirable locations.
2
<PAGE> 5
INTERNET OPERATIONS
The Company, through its wholly owned subsidiary, AIS, sells a broad
range of products over the Internet under the name Booksamillion.com. Products
sold by Booksamillion.com are similar to those sold in the Company's
Books-A-Million superstores and include a wide selection of books, magazines
and gift items. Booksamillion.com also operates an online cafe on its web site
under the name Joemuggs.com. Joemuggs.com offers a wide selection of whole bean
coffee, confections and related gift items for purchase over the Internet.
The Company is assisted in its Internet development efforts through its
wholly owned subsidiary, NetCentral, Inc., which is based in Nashville,
Tennessee. In addition to providing web development and maintenance for all of
the Company's Internet sites and networking initiatives, NetCentral also serves
several outside customers by offering site development, web hosting and
technical services.
PURCHASING
The Company's purchasing decisions are centralized and are made by the
Company's merchandising department. The Company's buyers negotiate terms,
discounts and cooperative advertising allowances for all the Company's
bookstores and decide which books to purchase, in what quantity and for which
stores. The buyers use current inventory and sales information provided by the
Company's in-store point-of-sale computer system to make reorder decisions.
Although the majority of purchases are made by the Company's merchandising
department, individual store managers have the flexibility to influence
purchasing decisions in order to respond to local demand.
The Company purchases merchandise from over 500 vendors. The Company
purchases the majority of its music inventory from one supplier and
substantially all of its magazines from another supplier, each of which is a
related party and the majority of its collectors' supplies from one supplier.
No one vendor accounted for more than 8.9% of the Company's overall merchandise
purchases in the fiscal year ended February 3, 2001. In general, approximately
80% of the Company's inventory may be returned by the Company for full credit,
which substantially reduces the Company's risk of inventory obsolescence.
DISTRIBUTION CAPABILITIES
American Wholesale receives a substantial portion of its inventory
shipments, including substantially all of its books, at its two facilities
located in Florence and Tuscumbia, Alabama. Orders from the Company's
bookstores are processed by computer and assembled for delivery to the stores
on pre-determined weekly schedules. Substantially all deliveries of inventory
from American Wholesale's facilities are made by their dedicated transportation
fleet. At the time deliveries are made to each of the Company's stores, returns
of slow moving or obsolete books are picked up and returned to the American
Wholesale returns processing center. American Wholesale then returns these
books to publishers for credit.
COMPETITION
The retail bookstore industry is highly competitive and includes
competitors that have substantially greater financial and other resources than
the Company. The Company competes directly with national and regional bookstore
chains, independent bookstores, booksellers on the Internet, certain mass
merchandisers and greeting card stores. The Company is one of the top three
retail bookstore chains in the nation. In recent years, competing bookstore
chains have been expanding their businesses and certain leading regional and
national chains have developed and opened superstores and Internet web sites.
The Company also experiences indirect competition from retail specialty stores
that offer books in a particular area of specialty. Management believes that
the key competitive factors in the retail book industry are convenience of
location, selection, customer service and price.
SEASONALITY
Similar to many retailers, the Company's business is seasonal, with
its highest retail sales, gross profit and net income historically occurring in
its fourth fiscal quarter. This seasonal pattern reflects the increased demand
for books and gifts experienced during the year-end holiday selling season.
Working capital requirements are generally at their highest during the third
fiscal quarter and the early part of the fourth fiscal quarter due to the
seasonality of the Company's business. The Company's results of operations
depend significantly upon net sales generated during the fourth fiscal quarter,
3
<PAGE> 6
and any significant adverse trend in the net sales of such period would have a
material adverse effect on the Company's results of operations for the full
year. In addition to seasonality, the Company's results of operations may
fluctuate from quarter to quarter as a result of the amount and timing of sales
and profits contributed by new stores as well as other factors. Accordingly,
the addition of a large number of new stores in a particular fiscal quarter
could adversely affect the Company's results of operations for that quarter.
TRADEMARKS
"Books-A-Million," "BAM!," "Bookland," "Books & Co.," "Millionaire's
Club," "Sweet Water Press," "Thanks-A-Million," "Big Fat Coloring Book," "Up
All Night Reader," "Kids-A-Million," "Teachers First," "The Write-Price,"
"Bambeanos," "Book$mart" and "NetCentral" are the primary registered trademarks
of the Company. Management does not believe that these trademarks are crucial
to the continuation of the Company's operations.
EMPLOYEES
As of fiscal year end, the Company employed approximately 2,800
full-time associates and 2,200 part-time associates. The number of part-time
associates employed by the Company fluctuates based upon seasonal needs. None
of the Company's associates are covered by a collective bargaining agreement,
and management believes that the Company's relations with its associates are
excellent.
ITEM 2. PROPERTIES
The Company's bookstores are located either in enclosed malls or strip
shopping centers. All of the Company's stores are leased. Generally, these
leases have terms ranging from five to ten years and require the Company to pay
a fixed minimum rental fee and/or a rental fee based on a percentage of net
sales together with certain customary costs (such as property taxes, common
area maintenance and insurance).
The Company's principal executive offices are located in a 20,550
square foot leased building located in Birmingham, Alabama. The lease, which is
with a related party, extends to January 31, 2006.
American Wholesale owns its wholesale distribution center that is
located in an approximately 252,000 square foot facility located in Florence,
Alabama. During fiscal 1995 and 1996, the Company financed the acquisition and
construction of the wholesale distribution facility through loans obtained from
the proceeds of an industrial revenue bond, which are secured by a mortgage
interest in this facility. The Company also leases, from a related party, a
second warehouse facility, which is located in an approximately 277,000 square
foot facility in Tuscumbia, Alabama. In addition, the Company leases all of the
tractors that pull the company owned trailers, which comprise its
transportation fleet.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings incidental to its
business. In the opinion of management, after consultation with legal counsel,
the ultimate liability, if any, with respect to those proceedings is not
presently expected to materially affect the financial position or results of
operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information under the heading "Market and Dividend Information"
follows page 20 and is the inside back cover of the Annual Report to
Stockholders for the year ended February 3, 2001 is incorporated herein by
reference.
4
<PAGE> 7
ITEM 6. SELECTED FINANCIAL DATA
The information under the heading "Selected Consolidated Financial
Data" for the years ended February 1, 1997, through February 3, 2001 on page 4
of the Annual Report to Stockholders for the year ended February 3, 2001, is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information under the heading "Management's Discussion & Analysis
of Financial Condition & Results of Operations" on pages 5 through 7 of the
Annual Report to Stockholders for the year ended February 3, 2001 is
incorporated herein by reference.
ITEM 7.A. MARKET RISK
The Company is subject to market risk from interest rate fluctuations
involving its credit facilities. The average amount of debt outstanding under
the Company's credit facilities was $64.1 million during fiscal 2001. However,
the Company utilizes both fixed and variable debt to manage this exposure. On
February 9, 1998, the Company entered into an interest rate swap agreement with
a five year term which carries a notional principal amount of $30.0 million. The
swap effectively fixes the interest rate on $30.0 million of variable rate debt
at 6.78%. The swap agreement expires on February 11, 2003. The counter party to
the interest rate swap is one of the Company's primary banks. The Company
believes the credit and liquidity risk of the counter party failing to meet its
obligation is remote as the Company settles its interest position with the bank
on a quarterly basis. The Company also maintains a $7.5 million interest rate
swap that effectively fixes the interest rate on an Industrial Development
Revenue Bond at 7.98%. The swap was entered into in June 1996 and has a term of
ten years.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of the Registrant and its
subsidiaries included in the Annual Report to Stockholders for the year ended
February 3, 2001 are incorporated herein by reference:
Consolidated Balance Sheets as of February 3, 2001 and January 29,
2000.
Consolidated Statements of Operations for the Fiscal Years Ended
February 3, 2001, January 29, 2000 and January 30, 1999.
Consolidated Statements of Stockholders' Investment for the Fiscal
Years Ended February 3, 2001, January 29, 2000 and January 30, 1999.
Consolidated Statements of Cash Flows for the Fiscal Years Ended
February 3, 2001, January 29, 2000 and January 30, 1999.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
The information under the heading "Summary of Quarterly Results
(Unaudited)" on page 19 of the Annual Report to Stockholders for the
Fiscal Years Ended February 3, 2001 and January 29, 2000 are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
5
<PAGE> 8
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The sections under the heading "Proposal I-Election of Directors"
entitled "Nominees for Election - Term Expiring 2004", "Incumbent Director -
Term Expiring 2002" and "Incumbent Directors - Term Expiring 2003" on pages 3
and 4 of the Proxy Statement for the Annual Meeting of Stockholders to be held
June 7, 2001, are incorporated herein by reference for information on the
directors of the Registrant.
EXECUTIVE OFFICERS
All executive officers of the Company are elected annually by and
serve at the discretion of the Board of Directors. The executive officers of
the Company are listed below:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Clyde B. Anderson 40 Chairman of the Board and Chief Executive Officer
Sandra B. Cochran 42 President and Secretary
Terrance G. Finley 47 President, American Internet Service, Inc.
Richard S. Wallington 42 Chief Financial Officer
</TABLE>
Clyde B. Anderson has served as a director of the Company since August
1987. Mr. Anderson has served as the Chairman of the Board of the Company since
January 2000 and the Chief Executive Officer of the Company since July 1992.
Mr. Anderson served as the President of the Company from November 1987 to
August 1999. 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 and the
brother of Terry C. Anderson, both members of the Company's Board of Directors.
Sandra B. Cochran has served as President of the Company since August
1999 and Secretary since June 1998. Ms. Cochran served as the Executive Vice
President from February 1996 to August 1999 and as Chief Financial Officer from
September 1993 to August 1999. Ms. Cochran previously served as Vice President
and Assistant Secretary of the Company from August 1992 to September 1993.
Prior to joining the Company, Ms. Cochran served as a Vice President (as well
as in other capacities) of SunTrust Securities, Inc., a subsidiary of SunTrust
Banks, Inc. for more than five years.
Terrance G. Finley has served as the President of American Internet
Service, Inc. since December 1998. Mr. Finley served as Senior Vice
President - Merchandising from January 1998 to December 1998. Mr. Finley served
as Vice President - Merchandising from April 1994 to January 1998 and was named
an executive officer of the Company in March 1995. Mr. Finley served as the
General Manager of Book$mart from February 1992 to April 1994. Prior to joining
the Company, Mr. Finley served as the Vice President - Sales for Smithmark
Publishers.
Richard S. Wallington has served as the Chief Financial Officer of the
Company since August 1999. Mr. Wallington served as Vice President and
Controller from September 1993 to August 1999. Prior to joining the Company,
Mr. Wallington served as the Director of Financial Reporting for Woodward &
Lothrop, a retail department store company.
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
6
<PAGE> 9
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 with all applicable Section 16(a) filing requirements during fiscal
2001.
ITEM 11. EXECUTIVE COMPENSATION
The sections under the heading "Executive Compensation," other than
those entitled "Report on Executive Compensation", "Compensation Committee
Interlocks and Insider Participation", "Certain Relationships and Related
Transactions" and "Performance Graph", on pages 10 through 17 of the Proxy
Statement for the Annual Meeting of Stockholders to be held June 7, 2001 are
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section under the heading "Proposal I-Election of Directors"
entitled "Beneficial Ownership of Common Stock" on pages 8 and 9 of the Proxy
Statement for the Annual Meeting of Stockholders to be held June 7, 2001 is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The sections under the heading "Executive Compensation" entitled
"Compensation Committee Interlocks and Insider Participation" and "Certain
Relationships and Related Transactions" on pages 12 and 13 of the Proxy
Statement for the Annual Meeting of Stockholders to be held June 7, 2001 are
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following Consolidated Financial Statements of Books-A-Million,
Inc. and its subsidiaries, included in the Registrant's Annual Report to
Stockholders for the fiscal year ended February 3, 2001 are incorporated by
reference in Part II, Item 8:
Consolidated Balance Sheets as of February 3, 2001 and January 29,
2000.
Consolidated Statements of Operations for the Fiscal Years Ended
February 3, 2001, January 29, 2000 and January 30, 1999.
Consolidated Statements of Stockholders' Investment for the Fiscal
Years Ended February 3, 2001, January 29, 2000 and January 30, 1999.
Consolidated Statements of Cash Flows for the Fiscal Years Ended
February 3, 2001, January 29, 2000 and January 30, 1999.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
2. Financial Statement Schedule:
The following consolidated financial statement schedule of
Books-A-Million, Inc. is attached hereto:
Schedule 2 Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are not applicable, and therefore
have been omitted.
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<PAGE> 10
3. Exhibits **
<TABLE>
<CAPTION>
Exhibit Number
--------------
<S> <C>
3.1 -- Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to Registration
Statement on Form S-1, File No. 33-52256, originally filed September 21, 1992).
3.2 -- Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to Registration Statement on Form S-1,
File No. 33-52256, originally filed September 21, 1992).
4.1 -- See Exhibits 3.1 and 3.2 hereto incorporated herein by reference to the Exhibits of the same number to
Registration Statement on Form S-1, File No. 33-52256, originally filed September 21, 1992.
10.1 -- Lease Agreement between First National Bank of Florence, Alabama, as Trustee, and Bookland Stores, Inc.
(which is a predecessor of the Registrant), an Alabama corporation, dated January 30, 1991 (incorporated by
reference to Exhibit 10.1 to Registration Statement on Form S-1, File No. 33-52256, originally filed
September 21, 1992).
*10.2 -- Amended and Restated Stock Option Plan (incorporated by reference to Exhibit 10.2 to
Annual Report on Form 10-K for the fiscal year ended January 30, 1999, File No. 0-20664, filed
on April 30, 1999).
*10.3 -- Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.7 to Registration Statement on Form S-1,
File No. 33-52256, originally filed September 21, 1992).
*10.4 -- Amendment to Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.6 to Annual Report on Form
10-K for the fiscal year ended January 29, 1994, File No. 0-20664, filed on April 29, 1994).
*10.5 -- 1999 Amended and Restated Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.5 to Annual
Report on Form 10-K for the fiscal year ended January 29, 2000, File No. 0-20664, filed on April 28, 2000).
*10.6 -- 401(k) Plan (together with related documents) (incorporated by reference to Exhibit 10.9 to Registration
Statement on Form S-1, File No. 33-52256, originally filed September 21, 1992).
10.7 -- Shareholders Agreement dated as of September 1, 1992 (incorporated by reference to
Exhibit 10.9 to Annual Report on Form 10-K for the fiscal year ended January 31, 1993,
File No. 0-20664, filed May 3, 1993).
*10.8 -- Executive Incentive Plan (incorporated by reference to Exhibit 10.8 to Annual Report on
Form 10-K for the fiscal year ended January 28, 1995, File No. 0-20664, filed April 28, 1995).
10.9 -- Short-Term Credit Agreement dated as of October 27, 1995, between the
Company and AmSouth Bank, N.A. (incorporated by reference to Exhibit 10.6 to Annual
Report on Form 10-K for the fiscal year ended February 3, 1996, File No. 0-20664, filed
May 3, 1996).
10.10 -- Revolving Loan Agreement dated as of October 27, 1995 between the Company and
AmSouth Bank, N.A. (incorporated by reference to Exhibit 10.10 to Annual Report on
Form 10-K for the fiscal year ended February 3, 1996, File 0-20664, filed May 3, 1996).
10.11 -- First amendment to Short-Term Credit Agreement, dated as of November 1, 1996
between the Company and AmSouth Bank, N.A. (incorporated by reference to Exhibit 10.11 to
Annual Report on Form 10-K for the fiscal year ended February 1, 1997, File 0-20664, filed May
2, 1997).
</TABLE>
8
<PAGE> 11
<TABLE>
<S> <C>
10.12 -- First amendment to Revolving Loan Agreement dated June 4, 1997 between the Company and
AmSouth Bank of Alabama, SunTrust Bank, Atlanta and NationsBank, N.A. and Master Assignment and
Acceptance Agreement dated November 7, 1997 between AmSouth Bank, NationsBank, N.A.,
SunTrust Bank, Atlanta and SouthTrust Bank, N. A. (incorporated by reference to Exhibit 10.11
to Annual Report on Form 10-K for the fiscal year ended January 31, 1998, File 0-20664, filed
May 1, 1998).
10.13 -- Second amendment to Short-Term Credit Agreement, dated June 4, 1997 between the Company
and AmSouth Bank of Alabama (incorporated by reference to Exhibit 10.12 to Annual Report on
Form 10-K for the fiscal year ended January 31, 1998, File 0-20664, filed May 1, 1998).
10.14 -- Second amendment to Revolving Loan Agreement dated June 19, 1998 between the Company and
AmSouth Bank of Alabama, SunTrust Bank, Atlanta, NationsBank, N.A. and SouthTrust Bank, National
Association and Master Assignment and Acceptance Agreement dated November 7, 1997 between AmSouth
Bank, NationsBank, N.A., SunTrust Bank, Atlanta and SouthTrust Bank, N. A. (incorporated by
reference to Exhibit 10.14 to Annual Report on Form 10-K for the fiscal year ended January 30,
1999, File No. 0-20664, filed on April 30, 1999).
10.15 -- Third amendment to Short-Term Credit Agreement, dated June 3, 1998 between the Company
and AmSouth Bank of Alabama (incorporated by reference to Exhibit 10.15 to Annual Report on
Form 10-K for the fiscal year ended January 30, 1999, File No. 0-20664, filed on April 30, 1999).
10.16 -- Third amendment to Revolving Loan Agreement dated June 18, 1999 between the Company and AmSouth
Bank of Alabama, SunTrust Bank, Atlanta, NationsBank, N.A. and SouthTrust Bank, N.A. and Master Assignment
and Acceptance Agreement dated November 7, 1997 between AmSouth Bank, NationsBank, N.A., SunTrust Bank,
Atlanta and SouthTrust Bank, N. A. (incorporated by reference to Exhibit 10.16 to Annual Report on
Form 10-K for the fiscal year ended January 29, 2000, File No. 0-20664, filed on April 28, 2000).
10.17 -- Fourth Amendment to Short-Term credit agreement, dated September 25, 2000 between the Company and AmSouth Bank.
10.18 -- Fourth Amendment to Revolving Loan Agreement dated September 25, 2000 between the Company and AmSouth Bank,
SunTrust Bank, Atlanta, NationsBank, N.A. and SouthTrust Bank, N.A.
*10.19 -- Stock Option Plans for Booksamillion.com, American Internet Service, Inc., Netcentral, Inc. and Faithpoint, Inc.
13 -- Portions of the Annual Report to Stockholders for the year ended February 3, 2001 that
are expressly incorporated by reference into Part II of this Report.
21 -- Subsidiaries of the Registrant.
23 -- Consent of Independent Public Accountants to the incorporation of their report on the Company's
consolidated financial statements for the fiscal year ended February 3, 2001, into the
Registration Statements on Form S-8. (File Nos. 33-72812 and 33-86980).
</TABLE>
* The indicated exhibit is a compensatory plan required to be filed as
an exhibit to this Annual Report on Form 10-K.
** The Company has financed certain capital expenditures with proceeds of
an industrial development revenue bond (the "Bond"), for which the outstanding
balance as of February 3, 2001, is less than 10% of the Company's total assets.
The Bond documents have not been included as an exhibit hereto but the Company
will provide such documents to the Securities and Exchange Commission upon
request.
9
<PAGE> 12
(b) Reports on Form 8-K
Not applicable.
(c) See Item 14(a) (3), the Exhibit Index and the Exhibits attached
hereto.
(d) See Item 14(a) (2).
10
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BOOKS-A-MILLION, INC.
by: /s/ Clyde B. Anderson
-------------------------------
Clyde B. Anderson
Chairman of the Board and
Chief Executive Officer
Date: May 4, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
PRINCIPAL EXECUTIVE OFFICER:
/s/ Clyde B. Anderson
- -------------------------------------------------
Clyde B. Anderson
Chairman of the Board and Chief Executive Officer
Date: May 4, 2001
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ Richard S. Wallington
- -------------------------------------------------
Richard S. Wallington
Chief Financial Officer
Date: May 4, 2001
DIRECTORS:
/s/ Clyde B. Anderson
- -------------------------------------------------
Clyde B. Anderson
Date: May 4, 2001
/s/ Charles C. Anderson
- -------------------------------------------------
Charles C. Anderson
Date: May 4, 2001
<PAGE> 14
DIRECTORS:
/s/ Ronald G. Bruno
- -------------------------------------------------
Ronald G. Bruno
Date: May 4, 2001
/s/ J. Barry Mason
- -------------------------------------------------
J. Barry Mason
Date: May 4, 2001
/s/ Terry C. Anderson
- -------------------------------------------------
Terry C. Anderson
Date: May 4, 2001
/s/ William H. Rogers, Jr.
- -------------------------------------------------
William H. Rogers, Jr.
Date: May 4, 2001
<PAGE> 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Books-A-Million, Inc.:
We have audited in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements of BOOKS-A-MILLION, INC.
(A Delaware corporation) AND ITS SUBSIDIARIES incorporated by reference in this
Form 10-K and have issued our report thereon dated March 19, 2001. Our audit
was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the accompanying index is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 19, 2001
S-1
<PAGE> 16
SCHEDULE 2.
BOOKS-A-MILLION, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JANUARY 30, 1999, JANUARY 29, 2000 AND FEBRUARY 3, 2001
<TABLE>
<CAPTION>
CHARGED/
BALANCE AT (CREDITED) (DEDUCTIONS)/
BEGINNING TO COSTS RECOVERIES BALANCE AT
OF YEAR AND EXPENSES NET END OF YEAR
---------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED JANUARY 30, 1999:
Allowance for doubtful accounts $ 355,514 $691,870 $(108,761) $ 938,623
FOR THE YEAR ENDED JANUARY 29, 2000:
Allowance for doubtful accounts $ 938,623 $898,830 $(348,556) $1,488,897
FOR THE YEAR ENDED FEBRUARY 3, 2001:
Allowance for doubtful accounts $1,488,897 $218,044 $(920,060) $ 786,881
</TABLE>
S-2
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
- -------
<S> <C>
3.1 -- Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to Registration
Statement on Form S-1, File No. 33-52256, originally filed September 21, 1992).
3.2 -- Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to Registration Statement on Form
S-1, File No. 33-52256, originally filed September 21, 1992).
4.1 -- See Exhibits 3.1 and 3.2 hereto incorporated herein by reference to the Exhibits of the same number to
Registration Statement on Form S-1, File No. 33-52256, originally filed September 21, 1992.
10.1 -- Lease Agreement between First National Bank of Florence, Alabama, as Trustee, and Bookland Stores, Inc.
(which is a predecessor of the Registrant), an Alabama corporation, dated January 30, 1991 (incorporated
by reference to Exhibit 10.1 to Registration Statement on Form S-1, File No. 33-52256, originally filed
September 21, 1992).
*10.2 -- Amended and Restated Stock Option Plan.
*10.3 -- Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.7 to Registration Statement on Form S-1,
File No. 33-52256, originally filed September 21, 1992).
*10.4 -- Amendment to Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.6 to Annual Report on Form
10-K for the fiscal year ended January 29, 1994, File No. 0-20664, filed on April 29, 1994).
*10.5 -- 1999 Amended and Restated Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.5 to Annual
Report on Form 10-K for the fiscal year ended January 29, 2000, File No. 0-20664, filed on April 28, 2000).
*10.6 -- 401(k) Plan (together with related documents) (incorporated by reference to Exhibit 10.9 to Registration
Statement on Form S-1, File No. 33-52256, originally filed September 21, 1992).
10.7 -- Shareholders Agreement dated as of September 1, 1992 (incorporated by reference to Exhibit 10.9 to Annual
Report on Form 10-K for the fiscal year ended January 31, 1993, File No. 0-20664, filed May 3, 1993).
*10.8 -- Executive Incentive Plan (incorporated by reference to Exhibit 10.8 to Annual Report on Form 10-K for the
fiscal year ended January 28, 1995, File No. 0-20664, filed April 28, 1995).
10.9 -- Short-Term Credit Agreement dated as of October 27, 1995, between the Company and AmSouth Bank, N.A.
(incorporated by reference to Exhibit 10.6 to Annual Report on Form 10-K for the fiscal year ended February
3, 1996, File No. 0-20664, filed May 3, 1996).
10.10 -- Revolving Loan Agreement dated as of October 27, 1995 between the Company and AmSouth Bank, N.A.
(incorporated by reference to Exhibit 10.10 to Annual Report on Form 10-K for the fiscal year ended
February 3, 1996, File 0-20664, filed May 3, 1996).
10.11 -- First amendment to Short-Term Credit Agreement, dated as of November 1, 1996 between the Company and
AmSouth Bank, N.A. (incorporated by reference to Exhibit 10.11 to Annual Report on Form 10-K for the
fiscal year ended February 1, 1997, File 0-20664, filed May 2, 1997).
10.12 -- First amendment to Revolving Loan Agreement dated June 4, 1997 between the Company and AmSouth Bank of
Alabama, SunTrust Bank, Atlanta and NationsBank, N.A. and Master Assignment and Acceptance Agreement dated
November 7, 1997 between AmSouth Bank, NationsBank, N.A., SunTrust Bank, Atlanta and SouthTrust Bank, N.A.
(incorporated by reference to Exhibit 10.11 to Annual Report on Form 10-K for the fiscal year ended
January 31, 1998, File 0-20664, filed May 1, 1998).
10.13 -- Second amendment to Short-Term Credit Agreement, dated June 4, 1997 between the Company and AmSouth
Bank of Alabama (incorporated by reference to Exhibit 10.12 to Annual Report on Form 10-K for the fiscal
year ended January 31, 1998, File 0-20664, filed May 1, 1998).
10.14 -- Second amendment to Revolving Loan Agreement dated June 19, 1998 between the Company and AmSouth Bank of Alabama,
SunTrust Bank, Atlanta, NationsBank, N.A. and SouthTrust Bank, N.A. and Master Assignment and Acceptance
Agreement dated November 7, 1997 between AmSouth Bank, NationsBank, N.A., SunTrust Bank, Atlanta and SouthTrust
Bank, N. A. (incorporated by reference to Exhibit 10.14 to Annual Report on Form 10-K for the fiscal year ended
January 30, 1999, File No. 0-20664, filed on April 30, 1999).
10.15 -- Third amendment to Short-Term Credit Agreement, dated June 3, 1998 between the Company and AmSouth Bank of
Alabama (incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K for the fiscal year ended
January 30, 1999, File No. 0-20664, filed on April 30, 1999).
</TABLE>
<PAGE> 18
<TABLE>
<S> <C>
*10.16 -- Third amendment to Revolving Loan Agreement dated June 18, 1999 between the Company and AmSouth Bank of Alabama,
SunTrust Bank, Atlanta, NationsBank, N.A. and SouthTrust Bank, N.A. and Master Assignment and Acceptance
Agreement dated November 7, 1997 between AmSouth Bank, NationsBank, N.A., SunTrust Bank, Atlanta and SouthTrust
Bank, N. A. (incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K for the fiscal year ended
January 29, 2000, File No. 0-20664, filed on April 28, 2000).
10.17 -- Fourth Amendment to Short-Term credit agreement, dated September 25, 2000 between the Company and AmSouth Bank.
10.18 -- Fourth Amendment to Revolving Loan Agreement dated September 25, 2000 between the Company and AmSouth Bank,
SunTrust Bank, Atlanta, NationsBank, N.A. and SouthTrust Bank, N.A.
*10.19 -- Stock Option Plans for Booksamillion.com, American Internet Service, Inc., Netcentral, Inc. and Faithpoint, Inc.
13 -- Portions of the Annual Report to Stockholders for the year ended February 3, 2001 that are expressly
incorporated by reference into Part II of this Report.
21 -- Subsidiaries of the Registrant.
23 -- Consent of Independent Public Accountants to the incorporation of their report on the Company's consolidated
financial statements for the fiscal year ended February 3, 2001, into the Registration Statements on Form S-8.
(File Nos. 33-72812 and 33-86980).
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.17
<SEQUENCE>2
<FILENAME>g69630ex10-17.txt
<DESCRIPTION>FOURTH AMENDMENT TO SHORT-TERM CREDIT AGREEMENT
<TEXT>
<PAGE> 1
EXHIBIT 10.17
<PAGE> 2
FOURTH AMENDMENT
TO SHORT-TERM CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO SHORT-TERM CREDIT AGREEMENT dated September
25, 2000 ("this Amendment") is entered into by BOOKS-A-MILLION, INC., a Delaware
corporation ("BAM"), AMERICAN WHOLESALE BOOK COMPANY, INC., an Alabama
corporation ("AWBC"; BAM and AWBC are sometimes together referred to as the
"Borrowers") and AMSOUTH BANK, an Alabama banking corporation formerly known as
AmSouth Bank of Alabama (the "Lender").
RECITALS
A. The Borrowers and the Lender have heretofore entered into a
Short-Term Credit Agreement dated as of October 27, 1995, as amended by a First
Amendment thereto dated as of November 1, 1996, a Second Amendment thereto dated
June 4, 1997 and by a Third Amendment thereto dated June 3, 1998 (as so amended,
the "Agreement") whereby the Lender made available to the Borrowers a revolving
credit facility in an aggregate principal amount outstanding not to exceed
$10,000,000 (the "Revolving Facility"), the proceeds of which were to be used by
the Borrowers for general corporate purposes.
B. The Borrowers have applied to the Lender for an extension of
the Termination Date of the Revolving Facility until May 30, 2001 and for an
increase in the amount of the Maximum Credit Amount to $15,000,000, the proceeds
of which will continue to be used by the Borrowers for general corporate
purposes.
C. The Borrowers and the Lender wish to amend the Agreement as
requested by the Borrowers and as further set forth in this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the recitals and the mutual
obligations and covenants contained herein, the Borrowers and the Lender hereby
agree as follows:
1. Capitalized terms used in this Amendment and not otherwise
defined herein have the respective meanings attributed thereto in the Agreement.
2. The defined term "Assumption Agreement" is hereby added to
Article I of the Agreement and shall read as follows:
"Assumption Agreement shall have the meaning attributed to
that term in Section 2.1(i)."
<PAGE> 3
3. The defined term "Borrowers" set forth in Article I of the
Agreement is hereby amended to read, in its entirety, as follows:
"Borrowers shall mean BAM, AWBC and all other entities that
hereafter become Participating Entities."
4. The defined term "Maximum Credit Agreement" set forth in
Article I of the Agreement is hereby amended to read, in its entirety, as
follows:
"Maximum Credit Amount shall mean $15,000,000."
5. The defined term "Participating Entity" is hereby added to
Article I of the Agreement and shall read as follows:
"Participating Entity shall mean any Subsidiary that hereafter
executes and delivers to the Lender an Assumption Agreement and all of
the documents necessary to assume joint and several liability as to the
Credit Obligations."
6. The defined term "Revolving Facility" set forth in Article I
of the Agreement is hereby amended to read, in its entirety, as follows:
"Revolving Facility shall mean the credit facility made
available to the Borrowers by the Lender under the terms of Article 2
in an aggregate amount of up to $15,000,000 as reduced by the Borrowers
pursuant to Section 2.6 hereof."
7. The defined term "Termination Date" set forth in Article I of
the Agreement is hereby amended to read, in its entirety, as follows:
"Termination Date" means May 30, 2001, as the same may be
extended from time to time in accordance with Section 2.7 hereof."
8. The reference to the figure "$10,000,000" as it refers to the
defined term "Note" in Section 2.1(a) of the Agreement is hereby amended to
refer instead to the figure "$15,000,000."
9. Section 2.1 of the Agreement is hereby amended to add at the
end thereof the following subparagraph (i):
"(i) each person that is to become after the date of this
Amendment a Participating Entity shall, at the time it is to become a
Participating Entity, execute and deliver to the Lender, in accordance
with the provisions of Section 7.13, an Assumption Agreement in the
form attached hereto as Schedule 2.1 ("Assumption Agreement")."
10. The references in Sections 2.1, 2.3(b), 2.3(c), 3.2, 5.9 and
9.15 of the Agreement to the term "AWBC" shall be amended to read "AWBC and each
Participating Entity".
3
<PAGE> 4
11. Article 2 of the Agreement is hereby amended to add at the end
thereof the following Section 2.8:
"SECTION 2.8 FEES. As consideration for the Lender's agreement
to provide the Short-Term Facility, the Borrowers agree to pay to the
Lender a facility fee computed at a per annum rate of 12.5 basis points
(.125%) times the Maximum Credit Amount (the "Facility Fee"). The
Facility Fee shall be payable in arrears on each Quarterly Payment
Date, commencing on October 1, 2000, and on the Termination Date or the
date of any earlier termination of this Agreement. The Facility Fee
shall be computed on an Actual/360 Basis."
12. Article 6 of the Agreement is hereby amended to add at the end
thereof the following Section 6.4:
"SECTION 6.4 ADDITIONAL SUPPORTING DOCUMENTS. The Lender shall
also have received on or before any date after the Closing Date on
which a person becomes a Participating Entity (i) a copy of resolutions
of the Board of Directors and, if necessary, the shareholders, partners
or members of such person certified as in full force and effect on the
date thereof by the Secretary or Assistant Secretary of such person,
authorizing such person's execution, delivery and performance of, the
Loan Documents and all other agreements and instruments that this
Agreement requires to be executed, delivered and performed by such
person; (ii) a copy of the organizational documents of such person,
certified as true and correct on and as of the date on which Loan
Documents are executed and delivered by such person; (iii) certificates
of good standing with respect to such person from the appropriate
Governmental Authorities in the jurisdiction under the laws of which
such person is incorporated or formed; (iv) an Opinion of Counsel to
such person consistent with the form of the Opinions of Counsel to the
Borrowers delivered pursuant to Section 6.3 (with such changes therein
as are appropriate in the circumstances) as to the execution and
delivery by such person of the Loan Documents and other matters related
thereto; (v) fully executed copies of all Loan Documents that this
Agreement requires to be executed or delivered (or both) by such person
(including a fully executed Assumption Agreement); and (vi) such
additional supporting documents as the Lender or its counsel may
reasonably request."
13. Article 7 of the Agreement is hereby amended to add at the end
thereof the following Section 7.13:
"SECTION 7.13 CREATION OR ACQUISITION OF SUBSIDIARIES. The
Borrowers may from time to time create or acquire new Subsidiaries in
accordance with this Agreement, provided that promptly (and in any
event within fifteen (15) Business Days) after the creation or direct
or indirect acquisition by any Borrower of any such new Subsidiary,
such new Subsidiary will execute and deliver to the Lender an
Assumption Agreement and all other documents necessary to cause it to
become jointly and severally liable for all the Credit Obligations
(subject to the limitations provided in the Assumption Agreement)."
4
<PAGE> 5
14. Notwithstanding the execution of this Amendment, all of the
indebtedness evidenced by the Note shall remain in full force and effect, as
modified hereby, and all of the collateral described in the Agreement and the
Loan Documents shall remain subject to the liens, security interests and
assignments of the Agreement and the Loan Documents as security for the
indebtedness evidenced by the Note and all other indebtedness described therein;
and nothing contained in this Amendment shall be construed to constitute a
novation of the indebtedness evidenced by the Note; and nothing contained in
this Amendment should be construed to release, satisfy, discharge, terminate or
otherwise affect or impair in any manner whatsoever (a) the validity or
enforceability of the indebtedness evidenced by the Note; (b) the liens,
security interests, assignments and conveyances effected by the Agreement or the
Loan Documents, or the priority thereof; (c) the liability of any maker,
endorser, surety, guarantor or other person that may now or hereafter be liable
under or on account of the Note or the Agreement or the Loan Documents; or (d)
any other security or instrument now or hereafter held by the Lender as security
for or as evidence of any of the above-described indebtedness.
15. All references in the Loan Documents to "Credit Agreement"
shall refer to the Agreement as amended by this Amendment, and as the Agreement
may be further amended from time to time.
16. The Borrowers hereby certify that the organization documents
of the Borrowers have not been amended since June 3, 1998.
17. The Borrowers hereby represent and warrant to the Lender that
all representations and warranties contained in the Agreement are true and
correct as of the date hereof (except representations and warranties that are
expressly limited to an earlier date); and the Borrowers hereby certify that no
Event of Default nor any event that, upon notice or lapse of time or both, would
constitute an Event of Default, has occurred and is continuing.
18. Except as hereby amended, the Agreement shall remain in full
force and effect as written. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which when
taken together shall constitute one and the same instrument. The covenants and
agreements contained in this Amendment shall apply to and inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns.
19. Nothing contained herein shall be construed as a waiver,
acknowledgment or consent to any breach of or Event of Default under the
Agreement and the Loan Documents not specifically mentioned herein.
20. This Amendment shall be governed by the laws of the State of
Alabama.
5
<PAGE> 6
IN WITNESS WHEREOF, each of the Borrowers and the Lender has caused
this Amendment to be executed and delivered by its duly authorized corporate
officer as of the day and year first above written.
BOOKS-A-MILLION, INC.
By: /s/ Sandra B. Cochran
--------------------------------------
Its President
AMERICAN WHOLESALE BOOK COMPANY, INC.
By: /s/ Sandra B. Cochran
------------------------------------
Its President
Hand Delivery Address:
402 Industrial Lane
Birmingham, Alabama 35211
FAX: (205) 945-1772
Attention: Chief Financial Officer
Mailing Address:
Post Office Box 19768
Birmingham, Alabama 35219
FAX: (205) 945-1772
Attention: Chief Financial Officer
<PAGE> 7
AMSOUTH BANK
By: /s/ David A. Simmons
------------------------------------
Its Senior Vice President
Hand Delivery Address:
Upper Lobby, AmSouth-Sonat Tower
1900 Fifth Avenue North
Birmingham, Alabama 35203
FAX: (205) 801-0157
Attention: Metropolitan Commercial
Banking Department
Mailing Address:
Post Office Box 11007
Birmingham, Alabama 35288
FAX: (205) 801-0157
Attention: Metropolitan Commercial
Banking Department
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>3
<FILENAME>g69630ex10-18.txt
<DESCRIPTION>FOURTH AMENDMENT TO REVOLVING LOAN AGREEMENT
<TEXT>
<PAGE> 1
EXHIBIT 10.18
<PAGE> 2
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT dated as of September 25,
2000 ("this Amendment") is entered into by BOOKS-A-MILLION, INC., a Delaware
corporation ("BAM"), AMERICAN WHOLESALE BOOK COMPANY, INC., an Alabama
corporation ("AWBC"; BAM and AWBC are sometimes together referred to as the
"Borrowers"), AMSOUTH BANK, an Alabama banking corporation formerly known as
AmSouth Bank of Alabama ("AmSouth"), SUNTRUST BANK, ATLANTA, a Georgia banking
corporation, BANK OF AMERICA, N.A., a national banking association, and
SOUTHTRUST BANK, an Alabama banking corporation (collectively, the "Lenders"),
and AMSOUTH BANK, an Alabama banking corporation formerly known as AmSouth Bank
of Alabama, as agent for the Lenders (the "Agent").
RECITALS
A. The Borrowers, the Agent and the Lenders are parties to that
certain Credit Agreement dated October 27, 1995 as amended by a First Amendment
thereto dated June 4, 1997, a Second Amendment thereto dated June 19, 1998 and a
Third Amendment thereto dated as of June 18, 1999 (collectively, the
"Agreement") pursuant to which the Lenders have made available to the Borrowers
a revolving credit facility in an aggregate principal amount outstanding not to
exceed $90,000,000, the proceeds of which are to be used by the Borrowers for
general corporate purposes.
B. The Borrowers have requested the Lenders and the Agent amend
the Agreement, as hereinafter set forth.
C. The Lenders and the Agent are willing to make such amendment
only if, among other things, the Borrowers enter into this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, the
Borrowers, the Lenders and the Agent hereby agree as follows:
1. Capitalized terms used in this Amendment and not otherwise
defined herein have the respective meanings attributed thereto in the Agreement.
2. The defined term "Cash Management Line of Credit" set forth in
Article I of the Agreement is hereby amended to read, in its entirety, as
follows:
<PAGE> 3
"Cash Management Line of Credit shall mean that certain line
of credit in the maximum principal amount of $15,000,000 made available
by AmSouth, as lender, to the Borrowers pursuant to a Short-Term Credit
Agreement dated as of October 27, 1995, as amended by a certain First
Amendment thereto dated November 1, 1996, by a Second Amendment thereto
dated June 4, 1997, by a Third Amendment thereto dated June 3, 1998 and
by a Fourth Amendment thereto dated September 25, 2000, with a maturity
date of May 30, 2001, as the same may be renewed or extended from time
to time hereafter."
3. The defined term "Assumption Agreement" is hereby added to
Article I of the Agreement and shall read as follows:
"Assumption Agreement shall have the meaning attributed to
that term in Section 2.1(i)."
4. The defined term "Borrowers" set forth in Article I of the
Agreement is hereby amended to read, in its entirety, as follows:
"Borrowers shall mean BAM, AWBC and all other entities that
hereafter become Participating Entities."
5. The defined term "Participating Entity" is hereby added to
Article I of the Agreement and shall read as follows:
"Participating Entity shall mean any Subsidiary that hereafter
executes and delivers to the Agent an Assumption Agreement and all of
the documents necessary to assume joint and several liability as to the
Credit Obligations."
6. Section 2.1 of the Agreement is hereby amended to add at the
end thereof the following subparagraph (i):
"(i) each person that is to become after the date of this
Amendment a Participating Entity shall, at the time it is to become a
Participating Entity, execute and deliver to the Agent, in accordance
with the provisions of Section 7.13, an Assumption Agreement in the
form attached hereto as Schedule 2.1 ("Assumption Agreement")."
7. The references in Sections 2.1, 3.2, 5.9 and 10.15 of the
Agreement to the term "AWBC" shall be amended to read "AWBC and each
Participating Entity".
8. Article 6 of the Agreement is hereby amended to add at the end
thereof the following Section 6.4:
"SECTION 6.4 ADDITIONAL SUPPORTING DOCUMENTS. The Agent shall
also have received on or before any date after the Closing Date on
which a person
3
<PAGE> 4
becomes a Participating Entity (i) a copy of resolutions of the Board
of Directors and, if necessary, the shareholders, partners or members
of such person certified as in full force and effect on the date
thereof by the Secretary or Assistant Secretary of such person,
authorizing such person's execution, delivery and performance of, the
Loan Documents and all other agreements and instruments that this
Agreement requires to be executed, delivered and performed by such
person; (ii) a copy of the organizational documents of such person,
certified as true and correct on and as of the date on which Loan
Documents are executed and delivered by such person; (iii) certificates
of good standing with respect to such person from the appropriate
Governmental Authorities in the jurisdiction under the laws of which
such person is incorporated or formed; (iv) an Opinion of Counsel to
such person consistent with the form of the Opinions of Counsel to the
Borrowers delivered pursuant to Section 6.3 (with such changes therein
as are appropriate in the circumstances) as to the execution and
delivery by such person of the Loan Documents and other matters related
thereto; (v) fully executed copies of all Loan Documents that this
Agreement requires to be executed or delivered (or both) by such person
(including a fully executed Assumption Agreement); and (vi) such
additional supporting documents as the Agent or its counsel may
reasonably request."
9. Article 7 of the Agreement is hereby amended to add at the end
thereof the following Section 7.13:
"SECTION 7.13 CREATION OR ACQUISITION OF SUBSIDIARIES. The
Borrowers may from time to time create or acquire new Subsidiaries in
accordance with this Agreement, provided that promptly (and in any
event within fifteen (15) Business Days) after the creation or direct
or indirect acquisition by any Borrower of any such new Subsidiary,
such new Subsidiary will execute and deliver to the Agent an Assumption
Agreement and all other documents necessary to cause it to become
jointly and severally liable for all the Credit Obligations (subject to
the limitations provided in the Assumption Agreement)."
10. Notwithstanding the execution of this Amendment, all of the
indebtedness evidenced by each of the Notes shall remain in full force and
effect, as modified hereby, and nothing contained in this Amendment shall be
construed to constitute a novation of the indebtedness evidenced by any of the
Notes or to release, satisfy, discharge, terminate or otherwise affect or impair
in any manner whatsoever (a) the validity or enforceability of the indebtedness
evidenced by any of the Notes; (b) the liens, security interests, assignments
and conveyances effected by the Agreement or the Loan Documents, or the priority
thereof; (c) the liability of any maker, endorser, surety, guarantor or other
person that may now or hereafter be liable under or on account of any of the
Notes or the Agreement or the Loan Documents; or (d) any other security or
instrument now or hereafter held by the Agent or the Lenders as security for or
as evidence of any of the above-described indebtedness.
4
<PAGE> 5
11. All references in the Loan Documents to "Credit Agreement"
shall refer to the Agreement as amended by this Amendment, and as the Agreement
may be further amended from time to time.
12. The Borrowers hereby certify that the organizational documents
of the Borrowers have not been amended since June 18, 1999.
13. The Borrowers hereby represent and warrant to the Agent and
the Lenders that all representations and warranties contained in the Agreement
are true and correct as of the date hereof; and the Borrowers hereby certify
that no Event of Default nor any event that, upon notice or lapse of time or
both, would constitute an Event of Default, has occurred and is continuing.
14. Except as hereby amended, the Agreement shall remain in full
force and effect as written. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which when
taken together shall constitute one and the same instrument. The covenants and
agreements contained in this Amendment shall apply to and inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns.
15. Nothing contained herein shall be construed as a waiver,
acknowledgment or consent to any breach of or Event of Default under the
Agreement and the Loan Documents not specifically mentioned herein.
16. This Amendment shall be governed by the laws of the State of
Alabama.
[Remainder of this page intentionally blank]
5
<PAGE> 6
IN WITNESS WHEREOF, each of the Borrowers, the Lenders and the Agent
has caused this Amendment to be executed and delivered by its duly authorized
corporate officer as of the day and year first above written.
BOOKS-A-MILLION, INC.
By: /s/ Sandra B. Cochran
--------------------------------------
Its President
AMERICAN WHOLESALE BOOK COMPANY, INC.
By: /s/ Sandra B. Cochran
--------------------------------------
Its President
<PAGE> 7
AMSOUTH BANK
By: /s/ David A. Simmons
----------------------------------------
Its Senior Vice President
<PAGE> 8
SUNTRUST BANK, ATLANTA
By: /s/ David Edge
----------------------------------------
Its Vice President
<PAGE> 9
BANK OF AMERICA, N.A.
By: /s/ David B. Jackson
----------------------------------------
Its: Vice President
<PAGE> 10
SOUTHTRUST BANK
By: /s/ Austin Davis
----------------------------------------
Its: Commercial Loan Officer
<PAGE> 11
AMSOUTH BANK, as Agent
By: /s/ David A. Simmons
----------------------------------------
Its Senior Vice President
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.19
<SEQUENCE>4
<FILENAME>g69630ex10-19.txt
<DESCRIPTION>STOCK OPTION PLANS FOR BOOKSAMILLION.COM
<TEXT>
<PAGE> 1
EXHIBIT 10.19
<PAGE> 2
BOOKSAMILLION.COM, INC.
STOCK OPTION PLAN
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, Consultants
and Directors in order 1) to provide an additional incentive to each Employee,
Consultant or Director to work to increase the value of the Company's stock, and
2) to provide each Employee, Consultant 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 Administrator - means the Board or the Committee responsible
for conducting the general administration of the Plan, as applicable, in
accordance with Section 5 hereof.
2.2 Board - means the Board of Directors of the Company.
2.3 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) the term "person" means a natural
person, corporation, partnership, joint venture, trust, government or
instrumentality of a government, and 2) customary agreements with or between
underwriters and selling group members with respect to a bona fide public
offering of Stock shall be disregarded.
2.4 Code - means the Internal Revenue Code of 1986, as amended.
2.5 Consultant - means any consultant or advisor if: (a) the
consultant or advisor renders bona fide services to the Company; (b) the
services rendered by the consultant or advisor are not in connection with the
offer or sale of securities in a capital raising transaction and do not directly
or indirectly promote or maintain a market for the Company's securities; and (c)
the consultant or advisor is a natural person.
2.6 Committee - means the committee appointed by the Board to
administer this Plan in accordance with Section 5 hereof.
2.7 Company - means booksamillion.com, Inc., an Alabama
corporation, and any successor to such corporation.
2.8 Director - means any member of the Board who is not an
employee of the Company or a Subsidiary.
2.9 Employee - means an officer or other employee (as defined in
Section 3401(c) of the Code) of any of the Company, any Parent Corporation or
any Subsidiary who the Administrator, acting in its absolute discretion, has
determined to be eligible for the grant of an Option under this Plan.
<PAGE> 3
2.10 Exchange Act - means the Securities Exchange Act of 1934, as
amended.
2.11 Fair Market Value - means (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) 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) 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
Administrator, or (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) if no newspaper or trade journal
reports such closing price or if no such price quotation is available, the price
which the Administrator 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.
2.12 Independent Director - means a Director who is not an
Employee.
2.13 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.
2.14 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.
2.15 Option - means an ISO or a Non-ISO.
2.16 Option Certificate - means the written certificate or
instrument which sets forth the terms of an Option granted to an Employee,
Consultant or Director under this Plan.
2.17 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.
2.18 Parent Corporation - means any corporation which is a parent
of the Company within the meaning of Section 424(e) of the Code.
2.19 Plan - means this Booksamillion.com, Inc. Stock Option Plan,
as amended from time to time.
2.20 Rule 16b-3 - means the exemption under Rule 16b-3 to
Section 16(b) of the Exchange Act or any successor to such rule.
2.21 Stock - means the $0.01 par value common stock of the Company.
2.22 Subsidiary - means a corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) of the Company.
2.23 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 10,000 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.
<PAGE> 4
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
Unless and until the Board delegates administration to a Committee as
set forth below, the Plan shall be administered by the Board. The Board may
delegate administration of the Plan to a Committee or Committees of one or more
members of the Board, and the term "Committee" shall apply to any person or
persons to whom such authority has been delegated. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. Notwithstanding the foregoing,
however, from and after the first date upon which shares of Stock are listed (or
approved for listing) upon notice of issuance on any securities exchange or
designated (or approved for designation) upon notice of issuance as a national
market security on an interdealer quotation system, a Committee of the Board
shall administer the Plan and the Committee shall consist solely of two or more
Independent Directors each of whom is both an "outside director," within the
meaning of Section 162(m) of the Code, and a "non-employee director" within the
meaning of Rule 16b-3. Within the scope of such authority, the Board or the
Committee may (a) delegate to a committee of one or more members of the Board
who are not Independent Directors the authority to grant awards under the Plan
to eligible persons who are either (i) not then "covered employees," within the
meaning of Section 162(m) of the Code and are not expected to be "covered
employees" at the time of recognition of income resulting from such award or
(ii) not persons with respect to whom the Company wishes to comply with Section
162(m) of the Code and/or (b) delegate to a committee of one or more members of
the Board who are not "non-employee directors," within the meaning of Rule
16b-3, the authority to grant awards under the Plan to eligible persons who are
not then subject to Section 16 of the Exchange Act. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may only be filled by the Board.
SECTION 6
ELIGIBILITY
Only Employees, Consultants and Directors shall be eligible for the
grant of Options under this Plan; provided, however, that no ISO shall be
granted to any person who is not an Employee.
SECTION 7
GRANT OF OPTIONS
7.1 Administrator Action. The Administrator, acting in its
absolute discretion, shall have the right to grant Options to Employees,
Consultants and Directors 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 shall be evidenced by an Option Certificate, and each such Option
Certificate shall 1) specify whether the Option is an ISO or Non-ISO and 2)
<PAGE> 5
incorporate such other terms and conditions as the Administrator, 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
Administrator 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) satisfies the requirements of Section 422 of
the Code and 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.
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, Consultant or Director may (in the
absolute discretion of the Administrator) 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 Administrator. The Option Price shall be
payable in full upon the exercise of any Option and, at the discretion of the
Administrator, an Option Certificate can provide for the payment of the Option
Price either in cash, by check, by means of a full recourse promissory note, in
Stock or in such other form as is acceptable to the Administrator. 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
Administrator or its delegate.
SECTION 9
EXERCISE PERIOD
Each Option granted under this Plan to an Employee, Consultant or
Director 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
ISO exercisable after the earlier of:
(a) 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
(b) The date which is the tenth anniversary of the date the Option is
granted, if the Option is 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 (x) 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, (y) the exercise of an
Option granted to a Director after the termination of such Director's services
as a Director for any reason whatsoever, including death or disability or (z)
the exercise of an Option granted to a Consultant after the termination of such
Consultant's services as a Consultant for any reason whatsoever, including death
or disability.
<PAGE> 6
SECTION 10
NONTRANSFERABILITY
No Option granted under this Plan shall be transferable by an Employee,
Consultant 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, Consultant or Director only by such Employee, Consultant 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, Consultant 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, Consultant 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, Consultant 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:
(a) 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
(b) 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.
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 Administrator 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 Administrator 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
<PAGE> 7
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 Administrator 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 to an Employee, Consultant or Director may, at
the direction of the Administrator, 1) be cancelled unilaterally by the Company
(subject to such conditions, if any, as the Administrator 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
Administrator on a date set by the Administrator for this purpose by dividing
(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) the then Fair Market
Value of a share of such Stock, or 2) be cancelled unilaterally by the Company
if the Option Price equals or exceeds the Fair Market Value of a share of Stock
on such date.
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 Administrator thereafter shall have the right to take such action
with respect to any unexercised Options, or all such Options, as the
Administrator 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. The Administrator shall have the right to take different
action under this Section 14.2 with respect to different Employees, Consultants
or Directors or different groups of Employees, Consultants or Directors as the
Administrator deems appropriate under the circumstances.
SECTION 15
AMENDMENT OR TERMINATION
This Plan may be amended by the Administrator from time to time to the
extent that the Administrator 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) to increase the number of
shares of Stock reserved under Section 3, or 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 otherwise determined by
the Administrator. The Administrator 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 Administrator shall not have the right unilaterally to modify,
amend or cancel any Option granted before such suspension or termination unless
(x) the Employee, Consultant or Director consents in writing to such
modification, amendment or cancellation, or (y) 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, Consultant 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
<PAGE> 8
exercise of such Option pending the actual delivery of Stock subject to such
Option to such Employee, Consultant or Director.
16.2 No Contract of Employment. The grant of an Option to an
Employee, Consultant or Director under this Plan shall not constitute a contract
of employment a right to continue as a Consultant or a right to continue to
serve on the Board, as applicable and shall not confer on any Employee,
Consultant 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, Consultant 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.
16.4 Withholding. The exercise of any Option granted under this
Plan shall constitute full and complete consent by an Employee, Consultant or
Director to whatever action the Administrator deems necessary or appropriate to
satisfy the federal and state tax withholding requirements, if any, which the
Administrator acting in its discretion deems applicable to such exercise. The
Administrator also shall have the right to provide in an Option Certificate that
an Employee, Consultant or Director 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,
Consultant or Director 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 Alabama.
* * * * *
IN WITNESS WHEREOF, the Company has caused its duly authorized
officer to execute this Plan this 15th day of December, 2000 to evidence its
adoption of this Plan.
BOOKSAMILLION.COM, INC.
BY: /s/ Terrance G. Finley
--------------------------------------
<PAGE> 9
AMERICAN INTERNET SERVICE, INC.
STOCK OPTION PLAN
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, Consultants
and Directors in order 1) to provide an additional incentive to each Employee,
Consultant or Director to work to increase the value of the Company's stock, and
2) to provide each Employee, Consultant 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 Administrator - means the Board or the Committee responsible
for conducting the general administration of the Plan, as applicable, in
accordance with Section 5 hereof.
2.2 Board - means the Board of Directors of the Company.
2.3 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) the term "person" means a natural
person, corporation, partnership, joint venture, trust, government or
instrumentality of a government, and 2) customary agreements with or between
underwriters and selling group members with respect to a bona fide public
offering of Stock shall be disregarded.
2.4 Code - means the Internal Revenue Code of 1986, as amended.
2.5 Consultant - means any consultant or advisor if: (a) the
consultant or advisor renders bona fide services to the Company; (b) the
services rendered by the consultant or advisor are not in connection with the
offer or sale of securities in a capital raising transaction and do not directly
or indirectly promote or maintain a market for the Company's securities; and (c)
the consultant or advisor is a natural person.
2.6 Committee - means the committee appointed by the Board to
administer this Plan in accordance with Section 5 hereof.
2.7 Company - means American Internet Service, Inc., an Alabama
corporation, and any successor to such corporation.
2.8 Director - means any member of the Board who is not an
employee of the Company or a Subsidiary.
2.9 Employee - means an officer or other employee (as defined in
Section 3401(c) of the Code) of any of the Company, any Parent Corporation or
any Subsidiary who the Administrator, acting in its absolute discretion, has
determined to be eligible for the grant of an Option under this Plan.
2.10 Exchange Act - means the Securities Exchange Act of 1934, as
amended.
<PAGE> 10
2.11 Fair Market Value - means (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) 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) 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
Administrator, or (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) if no newspaper or trade journal
reports such closing price or if no such price quotation is available, the price
which the Administrator 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.
2.12 Independent Director - means a Director who is not an
Employee.
2.13 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.
2.14 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.
2.15 Option - means an ISO or a Non-ISO.
2.16 Option Certificate - means the written certificate or
instrument which sets forth the terms of an Option granted to an Employee,
Consultant or Director under this Plan.
2.17 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.
2.18 Parent Corporation - means any corporation which is a parent
of the Company within the meaning of Section 424(e) of the Code.
2.19 Plan - means this American Internet Service, Inc. Stock Option
Plan, as amended from time to time.
2.20 Rule 16b-3 - means the exemption under Rule 16b-3 to
Section 16(b) of the Exchange Act or any successor to such rule.
2.21 Stock - means the $0.01 par value common stock of the Company.
2.22 Subsidiary - means a corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) of the Company.
2.23 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 10,000 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.
<PAGE> 11
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
Unless and until the Board delegates administration to a Committee as
set forth below, the Plan shall be administered by the Board. The Board may
delegate administration of the Plan to a Committee or Committees of one or more
members of the Board, and the term "Committee" shall apply to any person or
persons to whom such authority has been delegated. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. Notwithstanding the foregoing,
however, from and after the first date upon which shares of Stock are listed (or
approved for listing) upon notice of issuance on any securities exchange or
designated (or approved for designation) upon notice of issuance as a national
market security on an interdealer quotation system, a Committee of the Board
shall administer the Plan and the Committee shall consist solely of two or more
Independent Directors each of whom is both an "outside director," within the
meaning of Section 162(m) of the Code, and a "non-employee director" within the
meaning of Rule 16b-3. Within the scope of such authority, the Board or the
Committee may (a) delegate to a committee of one or more members of the Board
who are not Independent Directors the authority to grant awards under the Plan
to eligible persons who are either (i) not then "covered employees," within the
meaning of Section 162(m) of the Code and are not expected to be "covered
employees" at the time of recognition of income resulting from such award or
(ii) not persons with respect to whom the Company wishes to comply with Section
162(m) of the Code and/or (b) delegate to a committee of one or more members of
the Board who are not "non-employee directors," within the meaning of Rule
16b-3, the authority to grant awards under the Plan to eligible persons who are
not then subject to Section 16 of the Exchange Act. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may only be filled by the Board.
SECTION 6
ELIGIBILITY
Only Employees, Consultants and Directors shall be eligible for the
grant of Options under this Plan; provided, however, that no ISO shall be
granted to any person who is not an Employee.
SECTION 7
GRANT OF OPTIONS
7.1 Administrator Action. The Administrator, acting in its
absolute discretion, shall have the right to grant Options to Employees,
Consultants and Directors 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 shall be evidenced by an Option Certificate, and each such Option
Certificate shall 1) specify whether the Option is an ISO or Non-ISO and 2)
<PAGE> 12
incorporate such other terms and conditions as the Administrator, 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
Administrator 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) satisfies the requirements of Section 422 of
the Code and 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.
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, Consultant or Director may (in the
absolute discretion of the Administrator) 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 Administrator. The Option Price shall be
payable in full upon the exercise of any Option and, at the discretion of the
Administrator, an Option Certificate can provide for the payment of the Option
Price either in cash, by check, by means of a full recourse promissory note, in
Stock or in such other form as is acceptable to the Administrator. 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
Administrator or its delegate.
SECTION 9
EXERCISE PERIOD
Each Option granted under this Plan to an Employee, Consultant or
Director 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
ISO exercisable after the earlier of:
(a) 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
(b) The date which is the tenth anniversary of the date the Option is
granted, if the Option is 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 (x) 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, (y) the exercise of an
Option granted to a Director after the termination of such Director's services
as a Director for any reason whatsoever, including death or disability or (z)
the exercise of an Option granted to a Consultant after the termination of such
Consultant's services as a Consultant for any reason whatsoever, including death
or disability.
<PAGE> 13
SECTION 10
NONTRANSFERABILITY
No Option granted under this Plan shall be transferable by an Employee,
Consultant 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, Consultant or Director only by such Employee, Consultant 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, Consultant 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, Consultant 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, Consultant 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:
(a) 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
(b) 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.
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 Administrator 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 Administrator 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
<PAGE> 14
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 Administrator 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 to an Employee, Consultant or Director may, at
the direction of the Administrator, 1) be cancelled unilaterally by the Company
(subject to such conditions, if any, as the Administrator 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
Administrator on a date set by the Administrator for this purpose by dividing
(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) the then Fair Market
Value of a share of such Stock, or 2) be cancelled unilaterally by the Company
if the Option Price equals or exceeds the Fair Market Value of a share of Stock
on such date.
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 Administrator thereafter shall have the right to take such action
with respect to any unexercised Options, or all such Options, as the
Administrator 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. The Administrator shall have the right to take different
action under this Section 14.2 with respect to different Employees, Consultants
or Directors or different groups of Employees, Consultants or Directors as the
Administrator deems appropriate under the circumstances.
SECTION 15
AMENDMENT OR TERMINATION
This Plan may be amended by the Administrator from time to time to the
extent that the Administrator 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) to increase the number of
shares of Stock reserved under Section 3, or 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
in the 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 otherwise determined by
the Administrator. The Administrator 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 Administrator shall not have the right unilaterally to modify,
amend or cancel any Option granted before such suspension or termination unless
(x) the Employee, Consultant or Director consents in writing to such
modification, amendment or cancellation, or (y) 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, Consultant 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
<PAGE> 15
exercise of such Option pending the actual delivery of Stock subject to such
Option to such Employee, Consultant or Director.
16.2 No Contract of Employment. The grant of an Option to an
Employee, Consultant or Director under this Plan shall not constitute a contract
of employment, a right to continue as a Consultant or a right to continue to
serve on the Board, as applicable and shall not confer on any Employee,
Consultant 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, Consultant 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.
16.4 Withholding. The exercise of any Option granted under this
Plan shall constitute full and complete consent by an Employee, Consultant or
Director to whatever action the Administrator deems necessary or appropriate to
satisfy the federal and state tax withholding requirements, if any, which the
Administrator acting in its discretion deems applicable to such exercise. The
Administrator also shall have the right to provide in an Option Certificate that
an Employee, Consultant or Director 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,
Consultant or Director 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 Alabama.
* * * * *
IN WITNESS WHEREOF, the Company has caused its duly authorized
officer to execute this Plan this 28th day of December, 2000 to evidence its
adoption of this Plan.
AMERICAN INTERNET SERVICE, INC.
BY: /s/ Terrance G. Finley
--------------------------------------
<PAGE> 16
NETCENTRAL, INC.
STOCK OPTION PLAN
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, Consultants
and Directors in order 1) to provide an additional incentive to each Employee,
Consultant or Director to work to increase the value of the Company's stock, and
2) to provide each Employee, Consultant 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 Administrator - means the Board or the Committee responsible
for conducting the general administration of the Plan, as applicable, in
accordance with Section 5 hereof.
2.2 Board - means the Board of Directors of the Company.
2.3 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) the term "person" means a natural
person, corporation, partnership, joint venture, trust, government or
instrumentality of a government, and 2) customary agreements with or between
underwriters and selling group members with respect to a bona fide public
offering of Stock shall be disregarded.
2.4 Code - means the Internal Revenue Code of 1986, as amended.
2.5 Consultant - means any consultant or advisor if: (a) the
consultant or advisor renders bona fide services to the Company; (b) the
services rendered by the consultant or advisor are not in connection with the
offer or sale of securities in a capital raising transaction and do not directly
or indirectly promote or maintain a market for the Company's securities; and (c)
the consultant or advisor is a natural person.
2.6 Committee - means the committee appointed by the Board to
administer this Plan in accordance with Section 5 hereof.
2.7 Company - means NetCentral, Inc., a Tennessee corporation, and
any successor to such corporation.
2.8 Director - means any member of the Board who is not an
employee of the Company or a Subsidiary.
2.9 Employee - means an officer or other employee (as defined in
Section 3401(c) of the Code) of any of the Company, any Parent Corporation or
any Subsidiary who the Administrator, acting in its absolute discretion, has
determined to be eligible for the grant of an Option under this Plan.
<PAGE> 17
2.10 Exchange Act - means the Securities Exchange Act of 1934, as
amended.
2.11 Fair Market Value - means (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) 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) 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
Administrator, or (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) if no newspaper or trade journal
reports such closing price or if no such price quotation is available, the price
which the Administrator 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.
2.12 Independent Director - means a Director who is not an
Employee.
2.13 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.
2.14 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.
2.15 Option - means an ISO or a Non-ISO.
2.16 Option Certificate - means the written certificate or
instrument which sets forth the terms of an Option granted to an Employee,
Consultant or Director under this Plan.
2.17 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.
2.18 Parent Corporation - means any corporation which is a parent
of the Company within the meaning of Section 424(e) of the Code.
2.19 Plan - means this NetCentral, Inc. Stock Option Plan, as
amended from time to time.
2.20 Rule 16b-3 - means the exemption under Rule 16b-3 to
Section 16(b) of the Exchange Act or any successor to such rule.
2.21 Stock - means the $0.01 par value common stock of the Company.
2.22 Subsidiary - means a corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) of the Company.
2.23 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 10,000 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.
<PAGE> 18
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
Unless and until the Board delegates administration to a Committee as
set forth below, the Plan shall be administered by the Board. The Board may
delegate administration of the Plan to a Committee or Committees of one or more
members of the Board, and the term "Committee" shall apply to any person or
persons to whom such authority has been delegated. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. Notwithstanding the foregoing,
however, from and after the first date upon which shares of Stock are listed (or
approved for listing) upon notice of issuance on any securities exchange or
designated (or approved for designation) upon notice of issuance as a national
market security on an interdealer quotation system, a Committee of the Board
shall administer the Plan and the Committee shall consist solely of two or more
Independent Directors each of whom is both an "outside director," within the
meaning of Section 162(m) of the Code, and a "non-employee director" within the
meaning of Rule 16b-3. Within the scope of such authority, the Board or the
Committee may (a) delegate to a committee of one or more members of the Board
who are not Independent Directors the authority to grant awards under the Plan
to eligible persons who are either (i) not then "covered employees," within the
meaning of Section 162(m) of the Code and are not expected to be "covered
employees" at the time of recognition of income resulting from such award or
(ii) not persons with respect to whom the Company wishes to comply with Section
162(m) of the Code and/or (b) delegate to a committee of one or more members of
the Board who are not "non-employee directors," within the meaning of Rule
16b-3, the authority to grant awards under the Plan to eligible persons who are
not then subject to Section 16 of the Exchange Act. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may only be filled by the Board.
SECTION 6
ELIGIBILITY
Only Employees, Consultants and Directors shall be eligible for the
grant of Options under this Plan; provided, however, that no ISO shall be
granted to any person who is not an Employee.
SECTION 7
GRANT OF OPTIONS
7.1 Administrator Action. The Administrator, acting in its
absolute discretion, shall have the right to grant Options to Employees,
Consultants and Directors 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 shall be evidenced by an Option Certificate, and each such Option
Certificate shall 1) specify whether the Option is an ISO or Non-ISO and 2)
<PAGE> 19
incorporate such other terms and conditions as the Administrator, 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
Administrator 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) satisfies the requirements of Section 422 of
the Code and 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.
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, Consultant or Director may (in the
absolute discretion of the Administrator) 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 Administrator. The Option Price shall be
payable in full upon the exercise of any Option and, at the discretion of the
Administrator, an Option Certificate can provide for the payment of the Option
Price either in cash, by check, by means of a full recourse promissory note, in
Stock or in such other form as is acceptable to the Administrator. 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
Administrator or its delegate.
SECTION 9
EXERCISE PERIOD
Each Option granted under this Plan to an Employee, Consultant or
Director 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
ISO exercisable after the earlier of:
(a) 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
(b) The date which is the tenth anniversary of the date the Option is
granted, if the Option is 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 (x) 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, (y) the exercise of an
Option granted to a Director after the termination of such Director's services
as a Director for any reason whatsoever, including death or disability or (z)
the exercise of an Option granted to a Consultant after the termination of such
Consultant's services as a Consultant for any reason whatsoever, including death
or disability.
<PAGE> 20
SECTION 10
NONTRANSFERABILITY
No Option granted under this Plan shall be transferable by an Employee,
Consultant 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, Consultant or Director only by such Employee, Consultant 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, Consultant 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, Consultant 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, Consultant 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:
(a) 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
(b) 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.
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 Administrator 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 Administrator 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
<PAGE> 21
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 Administrator 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 to an Employee, Consultant or Director may, at
the direction of the Administrator, 1) be cancelled unilaterally by the Company
(subject to such conditions, if any, as the Administrator 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
Administrator on a date set by the Administrator for this purpose by dividing
(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) the then Fair Market
Value of a share of such Stock, or 2) be cancelled unilaterally by the Company
if the Option Price equals or exceeds the Fair Market Value of a share of Stock
on such date.
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 Administrator thereafter shall have the right to take such action
with respect to any unexercised Options, or all such Options, as the
Administrator 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. The Administrator shall have the right to take different
action under this Section 14.2 with respect to different Employees, Consultants
or Directors or different groups of Employees, Consultants or Directors as the
Administrator deems appropriate under the circumstances.
SECTION 15
AMENDMENT OR TERMINATION
This Plan may be amended by the Administrator from time to time to the
extent that the Administrator 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) to increase the number of
shares of Stock reserved under Section 3, or 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 otherwise determined by
the Administrator. The Administrator 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 Administrator shall not have the right unilaterally to modify,
amend or cancel any Option granted before such suspension or termination unless
(x) the Employee, Consultant or Director consents in writing to such
modification, amendment or cancellation, or (y) there is a dissolution or
liquidation of the Company or a transaction described in Section 13 or Section
14 of this Plan.
<PAGE> 22
SECTION 16
MISCELLANEOUS
16.1 No Stockholder Rights. No Employee, Consultant 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, Consultant or Director.
16.2 No Contract of Employment. The grant of an Option to an
Employee, Consultant or Director under this Plan shall not constitute a contract
of employment a right to continue as a Consultant or a right to continue to
serve on the Board, as applicable and shall not confer on any Employee,
Consultant 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, Consultant 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.
16.4 Withholding. The exercise of any Option granted under this
Plan shall constitute full and complete consent by an Employee, Consultant or
Director to whatever action the Administrator deems necessary or appropriate to
satisfy the federal and state tax withholding requirements, if any, which the
Administrator acting in its discretion deems applicable to such exercise. The
Administrator also shall have the right to provide in an Option Certificate that
an Employee, Consultant or Director 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,
Consultant or Director 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 Tennessee.
* * * * *
IN WITNESS WHEREOF, the Company has caused its duly authorized
officer to execute this Plan this 3rd day of January, 2001 to evidence its
adoption of this Plan.
NETCENTRAL, INC.
BY: /s/ Terrance G. Finley
--------------------------------------
<PAGE> 23
FAITHPOINT, INC.
STOCK OPTION PLAN
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, Consultants
and Directors in order 1) to provide an additional incentive to each Employee,
Consultant or Director to work to increase the value of the Company's stock, and
2) to provide each Employee, Consultant 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 Administrator - means the Board or the Committee responsible
for conducting the general administration of the Plan, as applicable, in
accordance with Section 5 hereof.
2.2 Board - means the Board of Directors of the Company.
2.3 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) the term "person" means a natural
person, corporation, partnership, joint venture, trust, government or
instrumentality of a government, and 2) customary agreements with or between
underwriters and selling group members with respect to a bona fide public
offering of Stock shall be disregarded.
2.4 Code - means the Internal Revenue Code of 1986, as amended.
2.5 Consultant - means any consultant or advisor if: (a) the
consultant or advisor renders bona fide services to the Company; (b) the
services rendered by the consultant or advisor are not in connection with the
offer or sale of securities in a capital raising transaction and do not directly
or indirectly promote or maintain a market for the Company's securities; and (c)
the consultant or advisor is a natural person.
2.6 Committee - means the committee appointed by the Board to
administer this Plan in accordance with Section 5 hereof.
2.7 Company - means FaithPoint, Inc., an Alabama corporation, and
any successor to such corporation.
2.8 Director - means any member of the Board who is not an
employee of the Company or a Subsidiary.
2.9 Employee - means an officer or other employee (as defined in
Section 3401(c) of the Code) of any of the Company, any Parent Corporation or
any Subsidiary who the Administrator, acting in its absolute discretion, has
determined to be eligible for the grant of an Option under this Plan.
2.10 Exchange Act - means the Securities Exchange Act of 1934, as
amended.
<PAGE> 24
2.11 Fair Market Value - means (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) 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) 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
Administrator, or (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) if no newspaper or trade journal
reports such closing price or if no such price quotation is available, the price
which the Administrator 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.
2.12 Independent Director - means a Director who is not an
Employee.
2.13 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.
2.14 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.
2.15 Option - means an ISO or a Non-ISO.
2.16 Option Certificate - means the written certificate or
instrument which sets forth the terms of an Option granted to an Employee,
Consultant or Director under this Plan.
2.17 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.
2.18 Parent Corporation - means any corporation which is a parent
of the Company within the meaning of Section 424(e) of the Code.
2.19 Plan - means this FaithPoint, Inc. Stock Option Plan, as
amended from time to time.
2.20 Rule 16b-3 - means the exemption under Rule 16b-3 to
Section 16(b) of the Exchange Act or any successor to such rule.
2.21 Stock - means the $0.01 par value common stock of the Company.
2.22 Subsidiary - means a corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) of the Company.
2.23 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 10,000 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.
<PAGE> 25
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
Unless and until the Board delegates administration to a Committee as
set forth below, the Plan shall be administered by the Board. The Board may
delegate administration of the Plan to a Committee or Committees of one or more
members of the Board, and the term "Committee" shall apply to any person or
persons to whom such authority has been delegated. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. Notwithstanding the foregoing,
however, from and after the first date upon which shares of Stock are listed (or
approved for listing) upon notice of issuance on any securities exchange or
designated (or approved for designation) upon notice of issuance as a national
market security on an interdealer quotation system, a Committee of the Board
shall administer the Plan and the Committee shall consist solely of two or more
Independent Directors each of whom is both an "outside director," within the
meaning of Section 162(m) of the Code, and a "non-employee director" within the
meaning of Rule 16b-3. Within the scope of such authority, the Board or the
Committee may (a) delegate to a committee of one or more members of the Board
who are not Independent Directors the authority to grant awards under the Plan
to eligible persons who are either (i) not then "covered employees," within the
meaning of Section 162(m) of the Code and are not expected to be "covered
employees" at the time of recognition of income resulting from such award or
(ii) not persons with respect to whom the Company wishes to comply with Section
162(m) of the Code and/or (b) delegate to a committee of one or more members of
the Board who are not "non-employee directors," within the meaning of Rule
16b-3, the authority to grant awards under the Plan to eligible persons who are
not then subject to Section 16 of the Exchange Act. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may only be filled by the Board.
SECTION 6
ELIGIBILITY
Only Employees, Consultants and Directors shall be eligible for the
grant of Options under this Plan; provided, however, that no ISO shall be
granted to any person who is not an Employee.
SECTION 7
GRANT OF OPTIONS
7.1 Administrator Action. The Administrator, acting in its
absolute discretion, shall have the right to grant Options to Employees,
Consultants and Directors 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 shall be evidenced by an Option Certificate, and each such Option
Certificate shall 1) specify whether the Option is an ISO or Non-ISO and 2)
incorporate such other terms and conditions as the Administrator, acting in its
absolute discretion, deems
<PAGE> 26
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 Administrator 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) satisfies the requirements of Section 422 of
the Code and 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.
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, Consultant or Director may (in the
absolute discretion of the Administrator) 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 Administrator. The Option Price shall be
payable in full upon the exercise of any Option and, at the discretion of the
Administrator, an Option Certificate can provide for the payment of the Option
Price either in cash, by check, by means of a full recourse promissory note, in
Stock or in such other form as is acceptable to the Administrator. 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
Administrator or its delegate.
SECTION 9
EXERCISE PERIOD
Each Option granted under this Plan to an Employee, Consultant or
Director 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
ISO exercisable after the earlier of:
(a) 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
(b) The date which is the tenth anniversary of the date the Option is
granted, if the Option is 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 (x) 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, (y) the exercise of an
Option granted to a Director after the termination of such Director's services
as a Director for any reason whatsoever, including death or disability or (z)
the exercise of an Option granted to a Consultant after the termination of such
Consultant's services as a Consultant for any reason whatsoever, including death
or disability.
<PAGE> 27
SECTION 10
NONTRANSFERABILITY
No Option granted under this Plan shall be transferable by an Employee,
Consultant 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, Consultant or Director only by such Employee, Consultant 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, Consultant 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, Consultant 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, Consultant 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:
(a) 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
(b) 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.
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 Administrator 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 Administrator 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
<PAGE> 28
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 Administrator 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 to an Employee, Consultant or Director may, at
the direction of the Administrator, 1) be cancelled unilaterally by the Company
(subject to such conditions, if any, as the Administrator 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
Administrator on a date set by the Administrator for this purpose by dividing
(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) the then Fair Market
Value of a share of such Stock, or 2) be cancelled unilaterally by the Company
if the Option Price equals or exceeds the Fair Market Value of a share of Stock
on such date.
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 Administrator thereafter shall have the right to take such action
with respect to any unexercised Options, or all such Options, as the
Administrator 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. The Administrator shall have the right to take different
action under this Section 14.2 with respect to different Employees, Consultants
or Directors or different groups of Employees, Consultants or Directors as the
Administrator deems appropriate under the circumstances.
SECTION 15
AMENDMENT OR TERMINATION
This Plan may be amended by the Administrator from time to time to the
extent that the Administrator 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) to increase the number of
shares of Stock reserved under Section 3, or 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 otherwise determined by
the Administrator. The Administrator 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 Administrator shall not have the right unilaterally to modify,
amend or cancel any Option granted before such suspension or termination unless
(x) the Employee, Consultant or Director consents in writing to such
modification, amendment or cancellation, or (y) 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, Consultant 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, Consultant or Director.
<PAGE> 29
16.2 No Contract of Employment. The grant of an Option to an
Employee, Consultant or Director under this Plan shall not constitute a contract
of employment a right to continue as a Consultant or a right to continue to
serve on the Board, as applicable and shall not confer on any Employee,
Consultant 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, Consultant 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.
16.4 Withholding. The exercise of any Option granted under this
Plan shall constitute full and complete consent by an Employee, Consultant or
Director to whatever action the Administrator deems necessary or appropriate to
satisfy the federal and state tax withholding requirements, if any, which the
Administrator acting in its discretion deems applicable to such exercise. The
Administrator also shall have the right to provide in an Option Certificate that
an Employee, Consultant or Director 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,
Consultant or Director 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 Alabama.
* * * * *
IN WITNESS WHEREOF, the Company has caused its duly authorized
officer to execute this Plan this 15th day of December, 2000 to evidence its
adoption of this Plan.
FAITHPOINT, INC.
BY: /s/ Terrance G. Finley
-------------------------------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>5
<FILENAME>g69630ex13.txt
<DESCRIPTION>PORTIONS OF THE ANNUAL REPORT TO STOCKHOLDERS
<TEXT>
<PAGE> 1
EXHIBIT 13
[BOOKS-A-MILLION LOGO]
PORTIONS OF THE ANNUAL REPORT TO STOCKHOLDERS
Selected Consolidated
Financial Data
(For fiscal years 1997-2001)
<TABLE>
<CAPTION>
Fiscal Year Ended
(In thousands, except per share amounts) 2/3/01 1/29/00 1/30/99 1/31/98 2/1/97
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $418,606 $404,057 $347,877 $324,762 $278,613
Cost of products sold 309,397 296,316 256,793 238,342 206,269
------------------------------------------------------------
Gross profit 109,209 107,741 91,084 86,420 72,344
Operating, selling and
administrative expenses 84,667 80,117 66,394 59,260 50,636
Depreciation and amortization 14,793 13,830 12,974 11,588 9,540
------------------------------------------------------------
Operating profit 9,749 13,794 11,716 15,572 12,168
Interest expense, net 4,804 4,211 4,435 4,331 2,826
------------------------------------------------------------
Income before income taxes 4,945 9,583 7,281 11,241 9,342
Provision for income taxes 1,879 3,641 2,767 4,272 3,550
------------------------------------------------------------
Net income $ 3,066 $ 5,942 $ 4,514 $ 6,969 $ 5,792
============================================================
Weighted average number of
shares outstanding - basic 17,955 17,981 17,497 17,425 17,405
============================================================
Net income per share - basic $ 0.17 $ 0.33 $ 0.26 $ 0.40 $ 0.33
============================================================
Weighted average number of
shares outstanding - diluted 17,991 18,250 17,554 17,428 17,580
============================================================
Net income per share - diluted $ 0.17 $ 0.33 $ 0.26 $ 0.40 $ 0.33
============================================================
</TABLE>
<TABLE>
<CAPTION>
As of
(In thousands) 2/3/01 1/29/00 1/30/99 1/31/98 2/1/97
- ---------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Working capital $104,124 $ 93,872 $ 84,022 $ 82,771 $ 70,629
Property and equipment, net 60,659 64,232 67,377 65,814 63,147
Total assets 292,541 286,785 271,551 245,816 233,539
Long-term debt 41,526 35,936 36,944 45,240 37,645
Stockholders' investment 123,230 121,405 115,022 103,485 96,420
</TABLE>
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This document contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, that involve a number of
risks and uncertainties. A number of factors could cause actual results,
performance, achievements of the Company, or industry results to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. These factors include, but are not
limited to, the competitive environment in the book retail industry in general
and in the Company's specific market areas; inflation; economic conditions in
general and in the Company's specific market areas; the number of store
openings and closings; the profitability of certain product lines; capital
expenditures and future liquidity; liability and other claims asserted against
the Company; uncertainties related to the Internet and the Company's Internet
operations; and other factors referenced herein. In addition, such
forward-looking statements are necessarily dependent upon assumptions, estimates
and dates that may be incorrect or imprecise and involve known and unknown
risks, uncertainties and other factors. Accordingly, any forward-looking
statements included herein do not purport to be predictions of future events or
circumstances and may not be realized. Given these uncertainties, stockholders
and prospective investors are cautioned not to place undue reliance on such
forward-looking statements. The Company disclaims any obligation to update any
such factors or to publicly announce the results of any of the forward-looking
statements contained herein to reflect future events or developments.
4
<PAGE> 2
[BOOKS-A-MILLION LOGO]
Management's Discussion
and Analysis
of Financial Condition & Results of Operations
GENERAL
The Company was founded in 1917 and currently operates 201 retail bookstores,
including 155 superstores, concentrated in the southeastern United States.
The Company's growth strategy is focused on opening superstores in new and
existing market areas, particularly in the Southeast. In addition to opening new
stores, management intends to continue its practice of reviewing the
profitability trends and prospects of existing stores and closing or relocating
underperforming stores or converting stores to different formats.
RESULTS OF OPERATIONS
The following table sets forth statement of operations data expressed as a
percentage of net sales for the periods presented.
<TABLE>
<CAPTION>
Fiscal Year Ended
2/3/01 1/29/00 1/30/99
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Gross profit 26.1% 26.6% 26.2%
Operating, selling, and administrative expenses 20.2% 19.8% 19.1%
Depreciation and amortization 3.5% 3.4% 3.7%
Operating profit 2.4% 3.4% 3.4%
Interest expense, net 1.2% 1.0% 1.3%
Income before income taxes 1.2% 2.4% 2.1%
Provision for income taxes 0.5% 0.9% 0.8%
Net income 0.7% 1.5% 1.3%
</TABLE>
FISCAL 2001 COMPARED TO FISCAL 2000
Net sales increased $14.5 million, or 3.6%, to $418.6 million in fiscal 2001
from $404.1 million in fiscal 2000. Comparable store sales decreased 2.9% for
fiscal year 2001. The increase in net sales resulted from net sales generated by
twelve new stores opened during fiscal 2001, and five new stores opened in the
second half of fiscal 2000. In addition, the Company closed seven
underperforming stores in fiscal 2001.
The factors affecting the future trend of comparable store sales include, among
others, overall demand for products the Company sells, the Company's marketing
programs, pricing strategies, store operations and competition.
Gross profit increased $1.5 million, or 1.4%, to $109.2 million in fiscal 2001
from $107.7 million in fiscal 2000. Gross profit as a percentage of net sales
decreased to 26.1% in fiscal 2001 from 26.6% in fiscal 2000, primarily due to
increased occupancy costs and higher warehouse distribution costs as a
percentage of net sales.
Operating, selling and administrative expenses increased $4.6 million, or 5.7%,
to $84.7 million in fiscal 2001, from $80.1 million in fiscal 2000. Operating,
selling and administrative expenses as a percentage of net sales increased to
20.2% in fiscal 2001 from 19.8% in fiscal 2000, primarily due to the lower
comparable store sales for fiscal 2001.
5
<PAGE> 3
[BOOKS-A-MILLION LOGO]
Management's Discussion
and Analysis
of Financial Condition & Results of Operations
Depreciation and amortization increased $1.0 million, or 7.0%, to $14.8 million
in fiscal 2001 from $13.8 million in fiscal 2000. Depreciation and amortization
as a percentage of net sales increased to 3.5% in fiscal 2001 from 3.4% in
fiscal 2000, primarily due to increased investment in information systems
technology.
Net interest expense increased $0.6 million, or 14.1%, to $4.8 million in fiscal
2001 from $4.2 million in fiscal 2000, primarily due to increased average
borrowings during fiscal 2001.
FISCAL 2000 COMPARED TO FISCAL 1999
Net sales increased $56.2 million, or 16.1%, to $404.1 million in fiscal 2000
from $347.9 million in fiscal 1999. Comparable store sales increased 8.2% for
fiscal year 2000. The increase in net sales resulted from net sales generated by
twelve new stores opened during fiscal 2000, and eleven new stores opened in the
second half of fiscal 1999. In addition, the Company closed five underperforming
stores in fiscal 2000.
The factors affecting the future trend of comparable store sales include, among
others, overall demand for products the Company sells, the Company's marketing
programs, pricing strategies, store operations and competition.
Gross profit increased $16.6 million, or 18.3%, to $107.7 million in fiscal 2000
from $91.1 million in fiscal 1999. Gross profit as a percentage of net sales
increased to 26.6% in fiscal 2000 from 26.2% in fiscal 1999, primarily due to
decreased occupancy costs and lower warehouse distribution costs as a percentage
of net sales.
Operating, selling and administrative expenses increased $13.7 million, or
20.7%, to $80.1 million in fiscal 2000, from $66.4 million in fiscal 1999.
Operating, selling and administrative expenses as a percentage of net sales
increased to 19.8% in fiscal 2000 from 19.1% in fiscal 1999, primarily due to
costs incurred related to the development of new business opportunities.
Depreciation and amortization increased $0.8 million, or 6.6%, to $13.8 million
in fiscal 2000 from $13.0 million in fiscal 1999. Depreciation and amortization
as a percentage of net sales decreased to 3.4% in fiscal 2000 from 3.7% in
fiscal 1999, primarily the result of lower capital expenditures due to fewer
stores opened in fiscal 2000 than in the previous year.
Net interest expense was relatively constant in fiscal year 2000, at $4.2
million, versus $4.4 million in fiscal year 1999.
SEASONALITY AND QUARTERLY RESULTS
Similar to many retailers, the Company's business is seasonal, with its highest
retail sales, gross profit and net income historically occurring in the fourth
fiscal quarter. This seasonal pattern reflects the increased demand for books
and gifts experienced during the year-end holiday selling season. Working
capital requirements are generally highest during the third fiscal quarter and
the early part of the fourth fiscal quarter due to the seasonality of the
Company's business.
6
<PAGE> 4
[BOOKS-A-MILLION LOGO]
Management's Discussion
and Analysis
of Financial Condition & Results of Operations
In addition, the Company's results of operations may fluctuate from quarter to
quarter as a result of the amount and timing of sales and profits contributed by
new stores as well as other factors. New stores require the Company to incur
pre-opening expenses and often require several months of operation before
generating acceptable sales volumes. Accordingly, the addition of a large number
of new stores in a particular quarter could adversely affect the Company's
results of operations for that quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a revolving credit facility that allows borrowings up to $90.0
million, for which no principal repayments are due until the facility expires on
June 18, 2003, and an unsecured working capital line of credit for $15.0
million, which is subject to annual renewal. As of February 3, 2001, $33.3
million was outstanding under these facilities combined. Additionally, as of
February 3, 2001, the Company has outstanding borrowings associated with the
issuance of an industrial revenue bond totaling $7.5 million.
The Company's capital expenditures totaled $12.4 million in fiscal 2001. These
expenditures were primarily used to open new stores, perform renovations and
make improvements to existing stores, expand existing warehouse facilities and
invest in management information systems. Management estimates that capital
expenditures for fiscal 2002 will be approximately $14.8 million and that such
amounts will be used primarily for new stores, renovation and improvements to
existing stores and investments in management information systems. Management
believes that existing cash balances and net cash from operating activities,
together with borrowings under the Company's credit facilities, will be adequate
to finance the Company's planned capital expenditures and to meet the Company's
working capital requirements for fiscal 2002.
RELATED-PARTY ACTIVITIES
As discussed in Note 6 of Notes to Consolidated Financial Statements, the
Company conducts business with other entities in which certain officers,
directors and principal stockholders of the Company have controlling ownership
interests. The most significant related-party transactions include inventory
purchases from, and sales to, related parties. Related-party inventory purchases
decreased in fiscal 2001 due to lower magazine purchases. Related-party sales
transactions increased in fiscal 2001 due to higher bargain book sales.
Management believes the terms of these related-party transactions are
substantially equivalent to those available from unrelated parties and,
therefore, have no significant impact on gross profit.
FINANCIAL POSITION
During fiscal 2001, the Company opened twelve new stores. The store openings
resulted in increased inventory balances at February 3, 2001, as compared to
January 29, 2000. Reduced capital expenditures, as compared to fiscal 2000, and
the closing of seven stores during fiscal 2001 resulted in lower net property
and equipment balances at February 3, 2001, as compared to January 29, 2000.
7
<PAGE> 5
[BOOKS-A-MILLION LOGO]
Consolidated Balance
Sheets
(As of 2/3/01 and 1/29/00)
<TABLE>
<CAPTION>
As of
(In thousands) 2/3/01 1/29/00
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and temporary cash investments $ 5,282 $ 4,920
Accounts receivable, net of allowance for doubtful accounts of
$787 and $1,489, respectively 8,417 8,781
Related party receivables 2,358 4,161
Inventories 205,986 194,624
Prepayments and other 4,521 3,339
Deferred income taxes 3,791 5,084
-----------------------------
Total Current Assets 230,355 220,909
-----------------------------
Property and Equipment:
Land 628 628
Buildings 5,986 5,442
Equipment 48,252 40,646
Furniture and fixtures 38,350 35,904
Leasehold improvements 41,562 42,235
Construction in process 123 599
-----------------------------
134,901 125,454
Less accumulated depreciation and amortization 74,242 61,222
-----------------------------
Net Property and Equipment 60,659 64,232
-----------------------------
Other Assets:
Goodwill, net 1,410 1,453
Other 117 191
-----------------------------
Total Other Assets 1,527 1,644
-----------------------------
Total Assets $ 292,541 $ 286,785
=============================
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable:
Trade $ 95,006 $ 94,090
Related party 7,504 9,415
Accrued income taxes 650 2,092
Accrued expenses 22,611 20,970
Current portion of long-term debt 460 470
-----------------------------
TOTAL CURRENT LIABILITIES 126,231 127,037
-----------------------------
LONG-TERM DEBT 41,526 35,936
-----------------------------
DEFERRED INCOME TAXES 1,554 2,407
-----------------------------
COMMITMENTS AND CONTINGENCIES -- --
-----------------------------
STOCKHOLDERS' INVESTMENT:
Preferred stock, $.01 par value; 1,000,000 shares authorized, no shares outstanding -- --
Common stock, $.01 par value; 30,000,000 shares authorized, 18,092,001
and 18,080,646 shares issued and outstanding at February 3, 2001
and January 29, 2000, respectively 181 181
Additional paid-in capital 70,634 70,564
Treasury stock at cost (597,600 shares at February 3, 2001 and
81,600 shares at January 29, 2000) (1,563) (252)
Retained earnings 53,978 50,912
-----------------------------
Total Stockholders' Investment 123,230 121,405
-----------------------------
Total Liabilities and Stockholders' Investment $ 292,541 $ 286,785
=============================
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
8
<PAGE> 6
[BOOKS-A-MILLION LOGO]
Consolidated Statements
of Operations
(For the fiscal years ended 2/3/01, 1/29/00 and 1/30/99)
<TABLE>
<CAPTION>
Fiscal Year Ended
(In thousands, except per share data) 2/3/01 1/29/00 1/30/99
- -------------------------------------------------------------------------------------------------------------
53 Weeks 52 Weeks 52 Weeks
<S> <C> <C> <C>
Net sales $418,606 $404,057 $347,877
Cost of products sold, including warehouse
distribution and store occupancy costs(1) 309,397 296,316 256,793
--------------------------------------------
GROSS PROFIT 109,209 107,741 91,084
Operating, selling and administrative expenses 84,667 80,117 66,394
Depreciation and amortization 14,793 13,830 12,974
--------------------------------------------
OPERATING PROFIT 9,749 13,794 11,716
--------------------------------------------
Interest expense, net 4,804 4,211 4,435
--------------------------------------------
INCOME BEFORE INCOME TAXES 4,945 9,583 7,281
Provision for income taxes 1,879 3,641 2,767
--------------------------------------------
NET INCOME $ 3,066 $ 5,942 $ 4,514
============================================
Weighted average number of shares outstanding - basic 17,955 17,981 17,497
--------------------------------------------
NET INCOME PER SHARE - BASIC $ 0.17 $ 0.33 $ 0.26
============================================
Weighted average number of shares outstanding - diluted 17,991 18,250 17,554
--------------------------------------------
NET INCOME PER SHARE - DILUTED $ 0.17 $ 0.33 $ 0.26
============================================
</TABLE>
(1) Inventory purchases from related parties were $34,128, $34,548 and $36,836,
respectively, for the periods presented above.
The accompanying notes are an integral part of these consolidated
statements.
9
<PAGE> 7
[BOOKS-A-MILLION LOGO]
Consolidated Statements of
Stockholders' Investment
(As of February 3, 2001)
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
------------------- Paid-In ------------------- Retained
(In thousands) Shares Amount Capital Shares Amount Earnings
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 31, 1998 17,428 $174 $ 62,925 -- $ -- $40,386
Net Income -- -- -- -- -- 4,514
Issuance of stock for employee stock purchase plan 16 -- 78 -- --
Purchase of treasury stock -- -- -- 82 (252) --
Exercise of stock options 461 5 4,132 -- -- --
Tax benefit from exercise of stock options -- -- 2,333 -- -- --
Issuance of stock for acquisition
accounted for as pooling of interests 112 1 2 -- -- 70
Contributions from certain stockholders -- -- 1,054 -- -- --
Tax provision for contributions from certain
stockholders -- -- (400) -- -- --
------------------------------------------------------------------------
BALANCE, JANUARY 30, 1999 18,017 180 70,124 82 (252) 44,970
Net Income -- -- -- -- -- 5,942
Issuance of stock for employee stock purchase plan 16 -- 77 -- -- --
Exercise of stock options 48 1 306 -- -- --
Tax benefit from exercise of stock options -- -- 57 -- -- --
------------------------------------------------------------------------
BALANCE, JANUARY 29, 2000 18,081 181 70,564 82 (252) 50,912
Net Income -- -- -- -- -- 3,066
Purchase of treasury stock -- -- -- 516 (1,311) --
Issuance of stock for employee stock purchase plan 11 -- 70 -- -- --
------------------------------------------------------------------------
BALANCE, FEBRUARY 3, 2001 18,092 $181 $ 70,634 598 $(1,563) $53,978
========================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
10
<PAGE> 8
[BOOKS-A-MILLION LOGO]
Consolidated Statements
of Cash Flows
(For the fiscal years ended 2/3/01, 1/29/00 and 1/30/99)
<TABLE>
<CAPTION>
Fiscal Year Ended
(Dollars in thousands) 2/3/01 1/29/00 1/30/99
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,066 $ 5,942 $ 4,514
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 14,793 13,830 12,974
(Gain) loss on sale of property 1,237 1,156 (472)
Deferred income tax provision (credit), net 440 (103) (912)
(Increase) decrease in assets:
Accounts receivable 364 3,501 (550)
Related party receivables 1,803 (163) 3,561
Inventories (11,362) (19,413) (23,899)
Prepayments and other (1,171) (444) (2,223)
Increase (decrease) in liabilities:
Accounts payable (995) 2,315 22,258
Accrued income taxes (1,442) 1,673 (321)
Accrued expenses 1,641 4,178 2,817
-------------------------------------
Total adjustments 5,308 6,530 13,233
-------------------------------------
Net cash provided by operating activities 8,374 12,472 17,747
-------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 66 1,742 1,627
Capital expenditures (12,417) (13,462) (15,682)
-------------------------------------
Net cash used in investing activities (12,351) (11,720) (14,055)
-------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and
purchase of shares under employee stock purchase plan 70 384 4,215
Contributions from certain stockholders -- -- 1,054
Purchase of treasury stock (1,311) -- (252)
Issuance of other debt -- 1,409 --
Repayments of other debt (262) -- --
Borrowings under credit facilities 176,592 169,103 153,475
Repayments under credit facilities (170,750) (171,050) (161,771)
-------------------------------------
Net cash provided by (used in) financing activities 4,339 (154) (3,279)
-------------------------------------
NET INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS 362 598 413
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF YEAR 4,920 4,322 3,909
-------------------------------------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR $ 5,282 $ 4,920 $ 4,322
=====================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 4,904 $ 4,318 $ 4,625
Income taxes, net of refunds $ 2,881 $ 1,882 $ 4,026
=====================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
11
<PAGE> 9
[BOOKS-A-MILLION LOGO]
Notes to Consolidated
Financial Statements
(For the fiscal years ended 2/3/01, 1/29/00 and 1/30/99)
1. Summary of Significant Accounting Policies
Business
Books-A-Million, Inc., and its subsidiaries (the "Company") are principally
engaged in the sale of books, magazines and related items through a chain of
retail bookstores. The Company presently operates 201 bookstores in 18 states
and the District of Columbia, which are predominantly located in the
southeastern United States. The Company also serves as a wholesale book
distributor for certain other retailers and wholesalers and operates a retail
Internet website. The Company presently consists of Books-A-Million, Inc., and
its wholly owned subsidiaries, American Wholesale Book Company, Inc. ("American
Wholesale") and American Internet Services, Inc ("AIS"). All significant
intercompany balances and transactions have been eliminated in consolidation.
Basis of Presentation
The Company operates on a 52-53 week year, with the fiscal year ending on the
Saturday closest to January 31. Fiscal year 2001 was a 53-week period. Fiscal
years 2000 and 1999 were 52-week periods.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Inventories
Inventories are valued at the lower of cost or market, using the retail method,
with cost determined on a first-in, first-out ("FIFO") basis and market based on
the lower of replacement cost or estimated realizable value. The Company
includes certain distribution and other expenses in its inventory costs.
Property and Equipment
Property and equipment are recorded at cost. Depreciation on equipment and
furniture and fixtures is provided on the straight-line method over the
estimated service lives, which range from three to seven years. Depreciation of
leasehold improvements is provided on the straight-line basis over the periods
of the applicable leases.
Maintenance and repairs are charged to expense as incurred. Costs of renewals
and betterments are capitalized by charges to property accounts and depreciated
using applicable annual rates. The cost and accumulated depreciation of assets
sold, retired or otherwise disposed of are removed from the accounts, and the
related gain or loss is credited or charged to income.
Goodwill
The Company amortizes goodwill on a straight-line basis over 40 years. As of
February 3, 2001 and January 29, 2000, accumulated amortization of goodwill was
$295,000 and $252,000, respectively. The Company continually evaluates whether
events or circumstances have occurred that indicate the remaining estimated
useful life of goodwill may warrant revision or that the remaining balance of
goodwill may not be recoverable. When factors indicate that goodwill should be
evaluated for possible impairment, the Company uses an estimate of the related
operating profits over the remaining life of the goodwill in measuring
recoverability.
Store Opening Costs
Non-capital expenditures incurred in preparation for opening new retail stores
are expensed as incurred.
Insurance Accruals
The Company is subject to large deductibles under its workers' compensation
policy. Insurance coverage is maintained in amounts management considers
adequate. Amounts are accrued currently for the estimated cost of claims
incurred, both reported and unreported.
12
<PAGE> 10
[BOOKS-A-MILLION LOGO]
Notes to Consolidated
Financial Statements
(For the fiscal years ended 2/3/01, 1/29/00 and 1/30/99)
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
Statements of Cash Flows
For purposes of the consolidated statements of cash flows, the Company considers
all short-term, highly liquid investments with original maturities of 90 days or
less to be temporary cash investments.
Earnings Per Share
Basic net income per share ("EPS") excludes dilution and is computed by dividing
income available to common shareholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock are
exercised, converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company. Diluted EPS has been
computed based on the average number of shares outstanding including the effect
of outstanding stock options, if dilutive, in each respective year. A
reconciliation of the weighted average shares for basic and diluted EPS is as
follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
(In thousands) 2/3/01 1/29/00 1/30/99
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average shares outstanding:
Basic 17,955 17,981 17,497
Dilutive effect of stock options outstanding 36 269 57
----------------------------------
Diluted 17,991 18,250 17,554
==================================
</TABLE>
Options outstanding of 1,391,000, 464,000 and 619,000 for the years ended
February 3, 2001, January 29, 2000 and January 30, 1999, respectively, were not
included in the table above as they were anti-dilutive.
Disclosure of Fair Value of Financial Instruments
Statement of Financial Accounting Standards ("SFAS") No. 107, Disclosure About
Fair Value of Financial Instruments, requires all businesses to disclose the
fair value of financial instruments, both assets and liabilities recognized and
not recognized on the balance sheet, for which it is practicable to estimate
fair value. Based upon their remaining term to maturity and the current interest
rate environment, the estimated fair values of the Company's financial
instruments recognized on the balance sheet at February 3, 2001 and January 29,
2000 approximate their carrying values at those dates.
Legal
The Company is a party to various legal proceedings incidental to its business.
In the opinion of management, after consultation with legal counsel, the
ultimate liability, if any, with respect to those proceedings is not presently
expected to materially affect the financial position or results of operations of
the Company.
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, amended by
SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133, and SFAS No. 138,
Accounting for Certain Derivatives and Certain Hedging Activities. SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in
13
<PAGE> 11
[BOOKS-A-MILLION LOGO]
Notes to Consolidated
Financial Statements
(For the fiscal years ended 2/3/01, 1/29/00 and 1/30/99)
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate and assess the effectiveness of transactions
that receive hedge accounting. The adoption of these statements may increase
volatility of earnings. The Company adopted these statements on February 4,
2001, which will result in decreasing retained earnings by $465,000 in the first
quarter of fiscal 2002.
Contributions from Certain Stockholders
In fiscal 1999, contributions of short-swing profits from certain stockholders
were received by the Company totaling $1,054,000 with a related tax provision of
$400,000 charged to paid-in capital.
Prior Year Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
presentation.
2. Income Taxes
A summary of the components of the income tax provision is as follows (dollars
in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
2/3/01 1/29/00 1/30/99
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 1,386 $ 3,448 $ 3,337
State 53 296 342
----------------------------------------
1,439 3,744 3,679
----------------------------------------
Deferred taxes arising from:
Depreciation (871) 1,270 (321)
Accruals 593 (522) (443)
Inventory (110) (113) 25
Other 828 (738) (173)
----------------------------------------
440 (103) (912)
----------------------------------------
Provision for income taxes $ 1,879 $ 3,641 $ 2,767
========================================
</TABLE>
A reconciliation of the federal statutory income tax rate to the effective
income tax rate is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
2/3/01 1/29/00 1/30/99
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax rate 34.0% 34.0% 34.0%
State income tax provision 1.0% 2.8% 3.1%
Other 3.0% 1.2% 0.9%
----------------------------
Effective income tax rate 38.0% 38.0% 38.0%
============================
</TABLE>
Temporary differences which created deferred tax assets and liabilities at
February 3, 2001 and January 29, 2000, are detailed below (dollars in
thousands):
<TABLE>
<CAPTION>
As of 2/3/01 As of 1/29/00
--------------------------------------------------------
Current Noncurrent Current Noncurrent
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation $ -- $ (1,404) $ -- $ (2,275)
Accruals 2,543 -- 3,136 --
Inventory 988 -- 878 --
Other 260 (150) 1,070 (132)
--------------------------------------------------------
Deferred tax asset (liability) $ 3,791 $ (1,554) $ 5,084 $ (2,407)
========================================================
</TABLE>
No valuation allowance is deemed necessary by management, as the realization of
recorded deferred tax assets is considered more likely than not.
14
<PAGE> 12
[BOOKS-A-MILLION LOGO]
Notes to Consolidated
Financial Statements
(For the fiscal years ended 2/3/01, 1/29/00 and 1/30/99)
3. Debt and Lines of Credit
The Company has a revolving credit facility that allows borrowings up to $90
million for which no principal repayments are due until the facility expires on
June 18, 2003, and an unsecured working capital line of credit for $15 million,
increased from $10 million in September, 2000, which is subject to annual
renewal. Both credit facilities have certain financial and non-financial
covenants with which the Company is in compliance. As of February 3, 2001 and
January 29, 2000, $33.3 million and $27.5 million, respectively, were
outstanding under these credit facilities. The maximum and average outstanding
balances during fiscal 2001 were $81.0 million and $64.1 million, respectively.
The outstanding borrowings as of February 3, 2001, had interest rates ranging
from 6.41% to 7.20%.
The Company is subject to interest rate fluctuations involving its credit
facilities. However, the Company uses both fixed and variable debt to manage
this exposure. On February 9, 1998, the Company entered into an interest rate
swap agreement with a five year term that carries a notional principal amount of
$30.0 million. The swap effectively fixes the interest rate on $30.0 million of
variable rate debt at 6.78%. The swap agreement expires on February 11, 2003.
The counter party to the interest rate swap is one of the Company's primary
banks. The Company believes the credit and liquidity risk of the counter party
failing to meet its obligation is remote as the Company settles its interest
position with the bank on a quarterly basis.
During fiscal 1996 and fiscal 1995, the Company financed the acquisition and
construction of certain warehouse and distribution facilities through loans,
obtained from the proceeds of an industrial development revenue bond (the
"Bond"), which are secured by a mortgage interest in these facilities. As of
February 3, 2001 and January 29, 2000, there was $7.5 million of borrowings
outstanding under these arrangements, at variable rates. The Bond has a maturity
date of December 1, 2019, with a purchase provision obligating the Company to
repurchase the Bond on May 11, 2005, unless extended by the bondholder. Such an
extension may be renewed annually by the bondholder, at the Company's request,
to a date no more than five years from the renewal date. The Company maintains a
$7.5 million interest rate swap that effectively fixes the interest rate on the
Bond at 7.98%. The swap was entered into in May 1996 and has a term of ten
years.
4. Leases
The Company leases the premises for its retail bookstores under operating
leases, which expire in various years through the year 2013. Many of these
leases contain renewal options and require the Company to pay executory costs
(such as property taxes, maintenance, and insurance). In addition to fixed
minimum rentals, some of the Company's leases require contingent rentals based
on a percentage of sales, which the Company records throughout the year based
upon best available information.
The Company also leases certain office, warehouse and retail store space from
related parties. Rental expense under these leases was approximately $658,000,
$674,000 and $624,000 in fiscal 2001, 2000 and 1999, respectively. Total minimum
future rental payments under these leases are $1,479,000.
Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of one year as of February 3, 2001, are as follows (in
thousands):
<TABLE>
<CAPTION>
Fiscal Year
-------------------------------------------------
<S> <C>
2002 $ 27,728
2003 24,168
2004 22,364
2005 20,981
2006 18,408
Subsequent years 42,124
--------
Total $155,773
========
</TABLE>
15
<PAGE> 13
[BOOKS-A-MILLION LOGO]
Notes to Consolidated
Financial Statements
(For the fiscal years ended 2/3/01, 1/29/00 and 1/30/99)
Rental expense for all operating leases consisted of the following (in
thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
2/3/01 1/29/00 1/30/99
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rentals $ 26,084 $ 23,458 $ 21,151
Contingent rentals 496 596 425
----------------------------------------
Total $ 26,580 $ 24,054 $ 21,576
========================================
</TABLE>
5. Employee Benefit Plans
401(k) Profit-Sharing Plan
The Company and its subsidiaries maintain a 401(k) plan covering all employees
who have completed 12 months of service and who are at least 21 years of age,
and permit participants to contribute from 2% to 15% of compensation to the
plan. Company matching and supplemental contributions are made at management's
discretion. The expense under this plan was $335,000, $554,000 and $333,000 in
fiscal 2001, 2000 and 1999, respectively.
Stock Option Plan
The Company maintains a stock option plan reserving 3,300,000 shares of the
Company's common stock for grants to executive officers, directors, and key
employees. Prior to January 9, 2001, all options granted to employees become
exercisable in equal annual increments over a five-year period and expire on the
sixth anniversary of the date of grant. On January 9, 2001, the Compensation
Committee approved an amendment to the Stock Option Plan that allows all options
granted after that date to vest in equal annual increments over a three-year
period and expire on the tenth anniversary of the date of the grant. All stock
options have exercise prices generally equal to the fair market value of the
common stock on the date of grant. A summary of the status of the Company's
stock option plan is as follows (shares in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------------------------------
February 3, 2001 January 29, 2000 January 30, 1999
----------------------- ----------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
----------------------- ----------------------- -----------------------
Shares Exercise Price Shares Exercise Price Shares Exercise Price
----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 1,562 $ 8.26 1,335 $ 8.25 1,571 $ 7.57
Granted 804 1.87 632 8.21 432 10.83
Exercised -- -- (49) 6.31 (461) 8.98
Forfeited (174) 9.84 (356) 8.44 (207) 7.25
------------------- ------------------- -------------------
Outstanding at end of year 2,192 $ 5.79 1,562 $ 8.20 1,335 $ 8.25
------------------- ------------------- -------------------
Exercisable at end of year 736 $ 7.57 363 $ 8.62 315 $ 8.58
------------------- ------------------- -------------------
Weighted average fair value
of options granted $ 1.75 $ 7.33 $ 9.30
=================== =================== ===================
</TABLE>
During fiscal years 2001, 2000 and 1999, the Company recognized tax benefits
related to the exercise of stock options in the amount of $0, $57,000 and
$2,333,000, respectively. The tax benefits were credited to paid-in capital in
the respective years.
The following table summarizes information about stock options outstanding at
February 3, 2001 (shares in thousands):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------- -------------------------------
Weighted
Number Average Number
Outstanding at Remaining Weighted Exercisable at Weighted
Range of February 3, Contractual Average February 3, Average
Exercise Price 2001 Life (Years) Exercise Price 2001 Exercise Price
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1.38 - $ 6.50 1,252 6.93 $ 3.28 377 $ 5.80
$ 6.51 - $13.00 940 4.30 $ 9.13 359 $ 9.44
</TABLE>
16
<PAGE> 14
[BOOKS-A-MILLION LOGO]
Notes to Consolidated
Financial Statements
(For the fiscal years ended 2/3/01, 1/29/00 and 1/30/99)
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 established financial accounting and reporting
standards for stock-based compensation and for transactions in which an entity
issues its equity instruments to acquire goods and services for non-employees.
In accordance with SFAS No. 123, the Company continues to account for and record
compensation expense under APB No. 25. However, the Company adopted the
disclosure only provisions of SFAS No. 123, as required. If the Company had
recorded compensation expense in accordance with SFAS No. 123 under the fair
value based method, the Company's net income and net income per share would have
been as indicated below:
<TABLE>
<CAPTION>
Fiscal Year Ended
(In thousands except per share data) 2/3/01 1/29/00 1/30/99
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income-as reported $ 3,066 $ 5,942 $ 4,514
Net income-pro forma 2,024 5,307 4,257
Net income per share-diluted, as reported 0.17 0.33 0.26
Net income per share-diluted, pro forma 0.11 0.29 0.24
</TABLE>
For the purposes of the foregoing calculation, the fair value of each option
grant is estimated on the date of grant using the Black-Scholes option pricing
model. The assumptions used in connection with this model show no expected
dividend yield, a five-year or ten-year expected life of the options, and an
expected stock price volatility rate of 1.20 with risk-free interest rates
ranging from 4.99% to 6.76%.
Employee Stock Purchase Plan
The Company maintains an employee stock purchase plan under which 200,000 shares
of the Company's common stock are reserved for purchase by employees at 85% of
the fair market value of the common stock. Of the total reserved shares, 90,414
shares have been purchased as of February 3, 2001.
6. Related Party Transactions
Certain stockholders of the Company have controlling ownership interests in
other entities with which the Company conducts business. Transactions between
the Company and these various other entities ("related parties") are summarized
in the following paragraphs and Note 4.
The Company purchases a portion of its inventories for resale from related
parties; such purchases amounted to $34,128,000, $34,548,000 and $36,836,000 in
fiscal 2001, 2000 and 1999, respectively. The Company sells a portion of its
inventories to related parties; such sales amounted to $ 3,940,000, $2,841,000
and $5,301,000 in fiscal 2001, 2000 and 1999, respectively. The Company also
purchases logistics services from a related party that amounted to $250,000,
$445,000 and $128,000 in fiscal 2001, 2000 and 1999, respectively.
7.Subsequent Events (Unaudited)
During March 2001, the Company acquired the assets and assumed the leases of 18
retail bookstores from Crown Books Corporation. The stores are located in the
Washington, D.C. and Chicago metropolitan areas. The results of operations for
the acquired stores will be reflected in the consolidated financial statements
for the Company beginning in the first quarter of fiscal 2002.
17
<PAGE> 15
[BOOKS-A-MILLION LOGO]
Report of Independent
Accountants
Arthur Andersen LLP
To Books-A-Million, Inc.:
We have audited the accompanying consolidated balance sheets of Books-A-Million,
Inc. (a Delaware corporation), and its subsidiaries as of February 3, 2001, and
January 29, 2000, and the related consolidated statements of operations,
stockholders' investment, and cash flows for each of the three fiscal years in
the period ended February 3, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Books-A-Million, Inc. and its
subsidiaries as of February 3, 2001, and January 29, 2000, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended February 3, 2001, in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 19, 2001
18
<PAGE> 16
[BOOKS-A-MILLION LOGO]
Summary of Quarterly
Results (Unaudited)
(For the fiscal years ended 2/3/01 and 1/29/00)
<TABLE>
<CAPTION>
Fiscal Year Ended February 3, 2001
----------------------------------------------------------------
First Second Third Fourth
(In thousands, except per share amounts) Quarter Quarter Quarter Quarter Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 93,099 $ 93,629 $ 90,133 $141,745 $418,606
Gross profit 24,700 24,344 22,235 37,930 109,209
Operating profit (loss) 1,793 342 (1,295) 8,909 9,749
Net income (loss) 471 (568) (1,637) 4,800 3,066
Net income (loss) per share - basic(1) 0.03 (0.03) (0.09) 0.27 0.17
Net income (loss) per share - diluted(1) 0.03 (0.03) (0.09) 0.27 0.17
<CAPTION>
Fiscal Year Ended January 29, 2000
----------------------------------------------------------------
First Second Third Fourth
(In thousands, except per share amounts) Quarter Quarter Quarter Quarter Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 85,127 $ 89,878 $ 91,162 $137,890 $404,057
Gross profit 22,357 23,364 22,081 39,939 107,741
Operating profit (loss) 1,517 1,196 (319) 11,400 13,794
Net income (loss) 310 19 (924) 6,537 5,942
Net income (loss) per share - basic 0.02 0.00 (0.05) 0.36 0.33
Net income (loss) per share -diluted 0.02 0.00 (0.05) 0.36 0.33
</TABLE>
(1) The sum of quarterly per share amounts are different from the annual
per share amounts because of differences in the weighted average number
of common and common equivalent shares used in the quarterly and annual
computations.
19
<PAGE> 17
Market and Dividend Information
Common Stock
The Common Stock of Books-A-Million, Inc., is traded in the Nasdaq National
Market under the symbol BAMM. The chart below sets forth the high and low stock
prices for each quarter of the fiscal years ending February 3, 2001, and January
29, 2000.
<TABLE>
<CAPTION>
Quarter Ended High Low
- ---------------------------------------------
<S> <C> <C>
January 2001 $ 3.25 $ 1.38
October 2000 3.75 2.25
July 2000 4.75 3.13
April 2000 8.25 4.00
January 2000 $12.00 $ 7.63
October 1999 12.19 7.50
July 1999 16.63 7.00
April 1999 17.00 8.00
</TABLE>
The closing price on April 17, 2001, was $2.36. No cash dividends have been
declared since completion of the Company's initial public offering in 1992. As
of April 17, 2001, Books-A-Million, Inc. had approximately 13,600 stockholders
based on the number of individual participants represented by security position
listings.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>6
<FILENAME>g69630ex21.txt
<DESCRIPTION>SUBSIDARIES TO THE REGISTRANT
<TEXT>
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Registrant
The Company's subsidiaries are the following:
American Wholesale Book Company, Inc., an Alabama corporation.
American Internet Service, Inc., an Alabama corporation.
Booksamillion.com, Inc., an Alabama corporation.
Faithpoint, Inc., an Alabama corporation.
NetCentral, Inc., a Tennessee corporation.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>7
<FILENAME>g69630ex23.txt
<DESCRIPTION>CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
<TEXT>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included or incorporated by reference in this Form 10-K, into the
Company's previously filed Registration Statements on File Nos. 33-72812 and
33-86980.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
April 30, 2001
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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