BOOKS-A-MILLION, INC.

                            2005 INCENTIVE AWARD PLAN

 

                                    ARTICLE 1

 

                                     PURPOSE

 

      The purpose of the Books-A-Million, Inc. 2005 Incentive Award Plan (the

"Plan") is to promote the success and enhance the value of Books-A-Million,

Inc., a Delaware corporation (the "Company") by linking the personal interests

of the members of the Board, Employees, and Consultants to those of Company

stockholders and by providing such individuals with an incentive for outstanding

performance to generate superior returns to Company stockholders. The Plan is

further intended to provide flexibility to the Company in its ability to

motivate, attract, and retain the services of members of the Board, Employees,

and Consultants upon whose judgment, interest, and special effort the successful

conduct of the Company's operation is largely dependent.

 

                                    ARTICLE 2

 

                          DEFINITIONS AND CONSTRUCTION

 

      Wherever the following terms are used in the Plan they shall have the

meanings specified below, unless the context clearly indicates otherwise. The

singular pronoun shall include the plural where the context so indicates.

 

      2.1 "Award" means an Option, a Restricted Stock award, a Stock

Appreciation Right award, a Performance Share award, a Performance Stock Unit

award, a Performance Award, a Dividend Equivalents award, a Stock Payment award,

a Deferred Stock award, a Restricted Stock Unit award, or a Performance-Based

Award granted to a Participant pursuant to the Plan.

 

      2.2 "Award Agreement" means any written agreement, contract, or other

instrument or document evidencing an Award, including through electronic medium.

 

      2.3 "Board" means the Board of Directors of the Company.

 

      2.4 "Change of Control" means and includes each of the following:

 

            (a) A transaction or series of transactions (other than an offering

of Stock to the general public through a registration statement filed with the

Securities and Exchange Commission) whereby any "person" or related "group" of

"persons" (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange

Act) (other than the Company, any of its subsidiaries, an employee benefit plan

maintained by the Company or any of its subsidiaries, or a "person" that, prior

to such transaction, directly or indirectly controls, is controlled by, or is

under common control with, the Company) directly or indirectly acquires

beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)

of securities of the Company possessing more than fifty percent (50%) of the

total combined voting power of the Company's securities outstanding immediately

after such acquisition; or

 

            (b) During any period of two consecutive years, individuals who, at

the beginning of such period, constitute the Board together with any new

director(s) (other than a director designated by a person who shall have entered

into an agreement with the Company to effect a transaction described in Section

2.4(a) or Section 2.4(c)) whose election by the Board or nomination for election

by the Company's stockholders was approved by a vote of at least two-thirds of

the directors then still in office who either were directors at the beginning of

the two year period or whose election or nomination for election was previously

so approved, cease for any reason to constitute a majority thereof; or

 

            (c) The consummation by the Company (whether directly involving the

Company or indirectly involving the Company through one or more intermediaries)

of (x) a merger, consolidation, reorganization, or business combination or (y) a

sale or other disposition of all or substantially all of the Company's assets or

(z) the acquisition of assets or stock of another entity, in each case other

than a transaction:

 

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                  (i) Which results in the Company's voting securities

outstanding immediately before the transaction continuing to represent (either

by remaining outstanding or by being converted into voting securities of the

Company or the person that, as a result of the transaction, controls, directly

or indirectly, the Company or owns, directly or indirectly, all or substantially

all of the Company's assets or otherwise succeeds to the business of the Company

(the Company or such person, the "Successor Entity")) directly or indirectly, at

least a majority of the combined voting power of the Successor Entity's

outstanding voting securities immediately after the transaction, and

 

                  (ii) After which no person or group beneficially owns voting

securities representing 50% or more of the combined voting power of the

Successor Entity; provided, however, that no person or group shall be treated

for purposes of this Section 2.4(c)(ii) as beneficially owning 50% or more of

combined voting power of the Successor Entity solely as a result of the voting

power held in the Company prior to the consummation of the transaction; or

 

            (d) The Company's stockholders approve a liquidation or dissolution

of the Company. The Committee shall have full and final authority, which shall

be exercised in its discretion, to determine conclusively whether a Change of

Control of the Company has occurred pursuant to the above definition, and the

date of the occurrence of such Change of Control and any incidental matters

relating thereto.

 

      2.5 "Code" means the Internal Revenue Code of 1986, as amended.

 

      2.6 "Committee" means the committee of the Board described in Article 12.

 

      2.7 "Consultant" means any consultant or adviser if: (a) the consultant or

adviser renders bona fide services to the Company; (b) the services rendered by

the consultant or adviser 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 adviser is a natural person who has contracted directly with the

Company to render such services.

 

      2.8 "Covered Employee" means an Employee who is, or could be, a "covered

employee" within the meaning of Section 162(m) of the Code.

 

      2.9 "Deferred Stock" means a right to receive a specified number of shares

of Stock during specified time periods pursuant to Article 8.

 

      2.10 "Disability" means that the Participant qualifies to receive

long-term disability payments under the Company's long-term disability insurance

program, as it may be amended from time to time.

 

      2.11 "Dividend Equivalents" means a right granted to a Participant

pursuant to Article 8 to receive the equivalent value (in cash or Stock) of

dividends paid on Stock.

 

      2.12 "Effective Date" shall have the meaning set forth in Section 13.1.

 

      2.13 "Employee" means any officer or other employee (as defined in

accordance with Section 3401(c) of the Code) of the Company or any Subsidiary.

 

      2.14 "Exchange Act" means the Securities Exchange Act of 1934, as amended.

 

      2.15 "Fair Market Value" means, as of any given date, (a) if Stock is

traded on an exchange, the closing price of a share of Stock as reported in the

Wall Street Journal for the first trading date immediately prior to such date

during which a sale occurred; or (b) if Stock is not traded on an exchange but

is quoted on NASDAQ or a successor or other quotation system, (i) the last sales

price (if the Stock is then listed as a National Market Issue under the NASD

National Market System) or (ii) the mean between the closing representative bid

and asked prices (in all other cases) for the Stock on the date immediately

prior to such date on which sales prices or bid and asked prices, as applicable,

are reported by NASDAQ or such successor quotation system; or (c) if such Stock

is not publicly traded on an exchange and not quoted on NASDAQ or a successor

quotation system, the mean between the closing bid and asked prices for the

Stock on the day previous to such date, as determined in good faith by the

Committee; or (d) if the Stock is not publicly traded, the fair market value

established by the Committee acting in good faith.

 

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      2.16 "Full Value Award" means any Award other than an Option, SAR or other

Award for which the Participant pays the intrinsic value (whether directly or by

forgoing a right to receive a cash payment from the Company).

 

      2.17 "Incentive Stock Option" means an Option that is intended to meet the

requirements of Section 422 of the Code or any successor provision thereto.

 

      2.18 "Independent Director" means a member of the Board who is not an

Employee of the Company.

 

      2.19 "Non-Employee Director" means a member of the Board who qualifies as

a "Non-Employee Director" as defined in Rule 16b-3(b)(3) under the Exchange Act,

or any successor definition adopted by the Board.

 

      2.20 "Non-Qualified Stock Option" means an Option that is not intended to

be an Incentive Stock Option.

 

      2.21 "Option" means a right granted to a Participant pursuant to Article 5

of the Plan to purchase a specified number of shares of Stock at a specified

price during specified time periods. An Option may be either an Incentive Stock

Option or a Non-Qualified Stock Option.

 

      2.22 "Participant" means a person who, as a member of the Board,

Consultant or Employee, has been granted an Award pursuant to the Plan.

 

      2.23 "Performance Award" means a right granted to a Participant pursuant

to Article 8 to receive a cash bonus payment contingent upon achieving certain

performance goals established by the Committee.

 

      2.24 "Performance-Based Award" means an Award granted to selected Covered

Employees pursuant to Articles 6 and 8, but which is subject to the terms and

conditions set forth in Article 9.

 

      2.25 "Performance Criteria" means the criteria that the Committee selects

for purposes of establishing the Performance Goal or Performance Goals for a

Participant for a Performance Period. The Performance Criteria that will be used

to establish Performance Goals shall be limited to the following: net earnings

(either before or after interest, taxes, depreciation and amortization),

economic value-added (as determined by the Committee), sales or revenue, net

income (either before or after taxes), operating earnings, cash flow (including,

but not limited to, operating cash flow and free cash flow), cash flow return on

capital, return on net assets, return on stockholders' equity, return on assets,

return on capital, stockholder returns, return on sales, gross or net profit

margin, productivity, expense, margins, operating efficiency, customer

satisfaction, working capital, earnings per share, price per share of Stock, and

market share, any of which may be measured either in absolute terms or as

compared to any incremental increase or as compared to results of a peer group.

The Committee shall, within the time prescribed by Section 162(m) of the Code,

define in an objective fashion the manner of calculating the Performance

Criteria it selects to use for such Performance Period for such Participant.

 

      2.26 "Performance Goals" means, for a Performance Period, the goals

established in writing by the Committee for the Performance Period based upon

the Performance Criteria. Depending on the Performance Criteria used to

establish such Performance Goals, the Performance Goals may be expressed in

terms of overall Company performance or the performance of a division, business

unit, or an individual. The Committee, in its discretion, may, within the time

prescribed by Section 162(m) of the Code, adjust or modify the calculation of

Performance Goals for such Performance Period in order to prevent the dilution

or enlargement of the rights of Participants (a) in the event of, or in

anticipation of, any unusual or extraordinary corporate item, transaction,

event, or development, or (b) in recognition of, or in anticipation of, any

other unusual or nonrecurring events affecting the Company, or the financial

statements of the Company, or in response to, or in anticipation of, changes in

applicable laws, regulations, accounting principles, or business conditions.

 

      2.27 "Performance Period" means the one or more periods of time, which may

be of varying and overlapping durations, as the Committee may select, over which

the attainment of one or more Performance Goals will be measured for the purpose

of determining a Participant's right to, and the payment of, a Performance-Based

Award.

 

      2.28 "Performance Share" means a right granted to a Participant pursuant

to Article 8, to receive Stock, the payment of which is contingent upon

achieving certain performance goals established by the Committee.

 

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      2.29 "Performance Stock Unit" means a right granted to a Participant

pursuant to Article 8, to receive Stock, the payment of which is contingent upon

achieving certain performance goals established by the Committee.

 

      2.30 "Plan" means this Books-A-Million, Inc., 2005 Incentive Award Plan,

as it may be amended from time to time.

 

      2.31 "Prior Plan" means the Books-A-Million, Inc. Stock Option Plan.

 

      2.32 "Qualified Performance-Based Compensation" means any compensation

that is intended to qualify as "qualified performance-based compensation" as

described in Section 162(m)(4)(C) of the Code.

 

      2.33 "Restricted Stock" means Stock awarded to a Participant pursuant to

Article 6 that is subject to certain restrictions and may be subject to risk of

forfeiture.

 

      2.34 "Restricted Stock Unit" means an Award granted pursuant to Article 8.

 

      2.35 "Stock" means the common stock of the Company, par value $0.01 per

share, and such other securities of the Company that may be substituted for

Stock pursuant to Article 11.

 

      2.36 "Stock Appreciation Right" or "SAR" means a right granted pursuant to

Article 7 to receive a payment equal to the excess of the Fair Market Value of a

specified number of shares of Stock on the date the SAR is exercised over the

Fair Market Value on the date the SAR was granted as set forth in the applicable

Award Agreement.

 

      2.37 "Stock Payment" means (a) a payment in the form of shares of Stock,

or (b) an option or other right to purchase shares of Stock, as part of any

bonus, deferred compensation or other arrangement, made in lieu of all or any

portion of the compensation, granted pursuant to Article 8.

 

      2.38 "Subsidiary" means any corporation or other entity of which a

majority of the outstanding voting stock or voting power is beneficially owned

directly or indirectly by the Company.

 

                                    ARTICLE 3

 

                           SHARES SUBJECT TO THE PLAN

 

      3.1 Number of Shares.

 

            (a) Subject to Article 11 and Section 3.1(b), the aggregate number

of shares of Stock which may be issued or transferred pursuant to Awards

(including, without limitation, Incentive Stock Options) under the Plan is

300,000.

 

            (b) To the extent that an Award terminates, expires, or lapses for

any reason, any shares of Stock subject to the Award shall again be available

for the grant of an Award pursuant to the Plan. To the extent permitted by

applicable law or any exchange rule, shares of Stock issued in assumption of, or

in substitution for, any outstanding awards of any entity acquired in any form

of combination by the Company or any Subsidiary shall not be counted against

shares of Stock available for grant pursuant to this Plan. Shares of Stock which

are delivered by the Participant or withheld by the Company upon the exercise of

any Award under the Plan, in payment of the exercise price thereof or tax

withholding thereon, may again be optioned, granted or awarded hereunder,

subject to the limitations of Section 3.1(a). If any shares of Restricted Stock

are forfeited by the Participant or repurchased by the Company, such shares may

again be optioned, granted or awarded hereunder, subject to the limitations of

Section 3.1(a). Notwithstanding the provisions of this Section 3.1(b), no shares

of Stock may again be optioned, granted or awarded if such action would cause an

Incentive Stock Option to fail to qualify as an incentive stock option under

Section 422 of the Code.

 

      3.2 Stock Distributed. Any Stock distributed pursuant to an Award may

consist, in whole or in part, of authorized and unissued Stock, treasury Stock

or Stock purchased on the open market.

 

      3.3 Limitation on Number of Shares Subject to Awards and Limit on

Performance Awards. Notwithstanding any provision in the Plan to the contrary,

and subject to Article 11, the maximum number of shares of Stock with respect to

one or more Awards that may be granted to any one Participant during any fiscal

year shall be 100,000. The maximum amount that may be paid in cash during any

fiscal year with respect to a Performance-Based Award that is intended to be a

Performance Award shall be $1,000,000.

 

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                                    ARTICLE 4

 

                          ELIGIBILITY AND PARTICIPATION

 

      4.1 Eligibility.

 

            (a) General. Persons eligible to participate in this Plan include

Employees, Consultants, and all members of the Board, as determined by the

Committee.

 

            (b) Foreign Participants. Notwithstanding any provision of the Plan

to the contrary, in order to comply with the laws in other countries in which

the Company and its Subsidiaries operate or have Employees, Consultants or

members of the Board, the Committee, in its sole discretion, shall have the

power and authority to: (i) determine which Subsidiaries shall be covered by the

Plan; (ii) determine which Employees, Consultants or members of the Board

outside the United States are eligible to participate in the Plan; (iii) modify

the terms and conditions of any Award granted to Employees, Consultants or

members of the Board outside the United States to comply with applicable foreign

laws; (iv) establish subplans and modify exercise procedures and other terms and

procedures, to the extent such actions may be necessary or advisable (any such

subplans and/or modifications shall be attached to this Plan as appendices);

provided, however, that no such subplans and/or modifications shall increase the

share limitations contained in Sections 3.1 and 3.3 of the Plan; and (v) take

any action, before or after an Award is made, that it deems advisable to obtain

approval or comply with any necessary local governmental regulatory exemptions

or approvals. Notwithstanding the foregoing, the Committee may not take any

actions hereunder, and no Awards shall be granted, that would violate the

Exchange Act, the Code, any securities law or governing statute or any other

applicable law.

 

      4.2 Participation. Subject to the provisions of the Plan, the Committee

may, from time to time, select from among all eligible individuals, those to

whom Awards shall be granted and shall determine the nature and amount of each

Award. No individual shall have any right to be granted an Award pursuant to

this Plan.

 

                                    ARTICLE 5

 

                                  STOCK OPTIONS

 

      5.1 General. The Committee is authorized to grant Options to Participants

on the following terms and conditions:

 

            (a) Exercise Price. The exercise price per share of Stock subject to

an Option shall be determined by the Committee and set forth in the Award

Agreement; provided that the exercise price for any Option shall not be less

than 100% of the Fair Market Value on the date of grant.

 

            (b) Time and Conditions of Exercise. The Committee shall determine

the time or times at which an Option may be exercised in whole or in part;

provided that the term of any Option granted under the Plan shall not exceed ten

years. The Committee shall also determine the performance or other conditions,

if any, that must be satisfied before all or part of an Option may be exercised.

 

            (c) Payment. The Committee shall determine the methods by which the

exercise price of an Option may be paid and the form of payment, including,

without limitation: (i) cash (or its equivalent), (ii) shares of Stock held for

such period of time as may be required by the Committee in order to avoid

adverse financial accounting consequences and having a Fair Market Value on the

date of delivery equal to the aggregate exercise price of the Option or

exercised portion thereof or (iii) other property acceptable to the Committee

(including through the delivery of a notice that the Participant has placed a

market sell order with a broker with respect to shares of Stock then issuable

upon exercise of the Option, and that the broker has been directed to pay a

sufficient portion of the net proceeds of the sale to the Company in

satisfaction of the Option exercise price; provided that payment of such

proceeds is then made to the Company upon settlement of such sale). The

Committee shall also determine the methods by which shares of Stock shall be

delivered or deemed to be delivered to Participants. Notwithstanding any other

provision of the Plan to the contrary, no Participant who is a member of the

Board or an "executive officer" of the Company within the meaning of Section

13(k) of the Exchange Act shall be permitted to pay the exercise price of an

Option in any method which would violate Section 13(k) of the Exchange Act.

 

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            (d) Evidence of Grant. All Options shall be evidenced by an Award

Agreement between the Company and the Participant. The Award Agreement shall

include such additional provisions as may be specified by the Committee.

 

      5.2 Incentive Stock Options. Incentive Stock Options shall be granted only

to Employees and the terms of any Incentive Stock Options granted pursuant to

the Plan, in addition to the requirements of Section 5.1, must comply with the

following additional provisions of this Section 5.2:

 

            (a) Expiration of Option. An Incentive Stock Option may not be

exercised to any extent by anyone after the first to occur of the following

events:

 

                  (i) Ten years from the date it is granted, unless an earlier

time is set in the Award Agreement;

 

                  (ii) Three months after the Participant's termination of

employment as an Employee; and

 

                  (iii) One year after the date of the Participant's termination

of employment or service on account of Disability or death. Upon the

Participant's Disability or death, any Incentive Stock Options exercisable at

the Participant's Disability or death may be exercised by the Participant's

legal representative or representatives, by the person or persons entitled to do

so pursuant to the Participant's last will and testament, or, if the Participant

fails to make testamentary disposition of such Incentive Stock Option or dies

intestate, by the person or persons entitled to receive the Incentive Stock

Option pursuant to the applicable laws of descent and distribution.

 

            (b) Individual Dollar Limitation. The aggregate Fair Market Value

(determined as of the time the Option is granted) of all shares of Stock with

respect to which Incentive Stock Options are first exercisable by a Participant

in any calendar year may not exceed $100,000 or such other limitation as imposed

by Section 422(d) of the Code, or any successor provision. To the extent that

Incentive Stock Options are first exercisable by a Participant in excess of such

limitation, the excess shall be considered Non-Qualified Stock Options.

 

            (c) Ten Percent Owners. An Incentive Stock Option shall be granted

to any individual who, at the date of grant, owns stock possessing more than ten

percent of the total combined voting power of all classes of Stock of the

Company only if such Option is granted at a price that is not less than 110% of

Fair Market Value on the date of grant and the Option is exercisable for no more

than five years from the date of grant.

 

            (d) Transfer Restriction. The Participant shall give the Company

prompt notice of any disposition of shares of Stock acquired by exercise of an

Incentive Stock Option within (i) two years from the date of grant of such

Incentive Stock Option or (ii) one year after the transfer of such shares of

Stock to the Participant.

 

            (e) Expiration of Incentive Stock Options. No Award of an Incentive

Stock Option may be made pursuant to this Plan after the tenth anniversary of

the Effective Date.

 

            (f) Right to Exercise. During a Participant's lifetime, an Incentive

Stock Option may be exercised only by the Participant.

 

                                    ARTICLE 6

 

                             RESTRICTED STOCK AWARDS

 

      6.1 Grant of Restricted Stock. The Committee is authorized to make Awards

of Restricted Stock to any Participant selected by the Committee in such amounts

and subject to such terms and conditions as determined by the Committee. All

Awards of Restricted Stock shall be evidenced by an Award Agreement.

 

      6.2 Issuance and Restrictions. Restricted Stock shall be subject to such

restrictions on transferability and other restrictions as the Committee may

impose (including, without limitation, limitations on the right to vote

Restricted Stock or the right to receive dividends on the Restricted Stock).

These restrictions may lapse separately or in combination at such times,

pursuant to such circumstances, in such installments, or otherwise, as the

Committee determines at the time of the grant of the Award or thereafter.

 

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      6.3 Forfeiture. Except as otherwise determined by the Committee at the

time of the grant of the Award or thereafter, upon termination of employment or

service during the applicable restriction period, Restricted Stock that is at

that time subject to restrictions shall be forfeited; provided, however, that,

the Committee may (a) provide in any Restricted Stock Award Agreement that

restrictions or forfeiture conditions relating to Restricted Stock will be

waived in whole or in part in the event of terminations resulting from specified

causes, and (b) in other cases waive in whole or in part restrictions or

forfeiture conditions relating to Restricted Stock.

 

      6.4 Certificates for Restricted Stock. Restricted Stock granted pursuant

to the Plan may be evidenced in such manner as the Committee shall determine. If

certificates representing shares of Restricted Stock are registered in the name

of the Participant, certificates must bear an appropriate legend referring to

the terms, conditions, and restrictions applicable to such Restricted Stock, and

the Company may, at its discretion, retain physical possession of the

certificate until such time as all applicable restrictions lapse.

 

                                    ARTICLE 7

 

                            STOCK APPRECIATION RIGHTS

 

      7.1 Grant of Stock Appreciation Rights.

 

            (a) A Stock Appreciation Right may be granted to any Participant

selected by the Committee. A Stock Appreciation Right shall be subject to such

terms and conditions not inconsistent with the Plan as the Committee shall

impose and shall be evidenced by an Award Agreement.

 

            (b) A Stock Appreciation Right shall entitle the Participant (or

other person entitled to exercise the Stock Appreciation Right pursuant to the

Plan) to exercise all or a specified portion of the Stock Appreciation Right (to

the extent then exercisable pursuant to its terms) and to receive from the

Company an amount equal to the product of (i) the excess of (A) the Fair Market

Value of the Stock on the date the Stock Appreciation Right is exercised over

(B) the Fair Market Value of the Stock on the date the Stock Appreciation Right

was granted and (ii) the number of shares of Stock with respect to which the

Stock Appreciation Right is exercised, subject to any limitations the Committee

may impose.

 

      7.2 Payment and Limitations on Exercise.

 

            (a) Payment of the amounts determined under Section 7.1(b) above

shall be in cash, in Stock (based on its Fair Market Value as of the date the

Stock Appreciation Right is exercised) or a combination of both, as determined

by the Committee in the Award Agreement.

 

            (b) To the extent payment for a Stock Appreciation Right is to be

made in cash, the Award Agreement shall, to the extent necessary to comply with

the requirements to Section 409A of the Code, specify the date of payment which

may be different than the date of exercise of the Stock Appreciation Right. If

the date of payment for a Stock Appreciation Right is later than the date of

exercise, the Award Agreement may specify that the Participant be entitled to

earnings on such amount until paid.

 

            (c) To the extent any payment under Section 7.1(b) is effected in

Stock, it shall be made subject to satisfaction of all provisions of Article 5

above pertaining to Options.

 

                                    ARTICLE 8

 

                              OTHER TYPES OF AWARDS

 

      8.1 Performance Share Awards. Any Participant selected by the Committee

may be granted one or more Performance Share awards which shall be denominated

in a number of shares of Stock and which may be linked to any one or more of the

Performance Criteria or other specific performance criteria determined

appropriate by the Committee, in each case on a specified date or dates or over

any period or periods determined by the Committee. In making such

determinations, the Committee shall consider (among such other factors as it

deems relevant in light of the specific type of award) the contributions,

responsibilities and other compensation of the particular Participant.

 

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      8.2 Performance Stock Units. Any Participant selected by the Committee may

be granted one or more Performance Stock Unit awards which shall be denominated

in unit equivalent of shares of Stock and/or units of value including dollar

value of shares of Stock and which may be linked to any one or more of the

Performance Criteria or other specific performance criteria determined

appropriate by the Committee, in each case on a specified date or dates or over

any period or periods determined by the Committee. In making such

determinations, the Committee shall consider (among such other factors as it

deems relevant in light of the specific type of award) the contributions,

responsibilities and other compensation of the particular Participant.

 

      8.3 Performance Award. Any Participant selected by the Committee may be

granted a Performance Award. The value of such Performance Awards may be linked

to any one or more of the Performance Criteria or other specific performance

criteria determined appropriate by the Committee, in each case on a specified

date or dates or over any Performance Period determined by the Committee. In

making such determinations, the Committee shall consider (among such other

factors as it deems relevant in light of the specific type of award) the

contributions, responsibilities and other compensation of the Participant.

 

      8.4 Dividend Equivalents.

 

            (a) Any Participant selected by the Committee may be granted

Dividend Equivalents based on the dividends declared on the shares of Stock that

are subject to any Award, to be credited as of dividend payment dates, during

the period between the date the Award is granted and the date the Award is

exercised, vests or expires, as determined by the Committee. Such Dividend

Equivalents shall be converted to cash or additional shares of Stock by such

formula and at such time and subject to such limitations as may be determined by

the Committee.

 

            (b) Dividend Equivalents granted with respect to Options or SARs

that are intended to be Qualified Performance-Based Compensation shall be

payable, with respect to pre-exercise periods, regardless of whether such Option

or SAR is subsequently exercised.

 

      8.5 Stock Payments. Any Participant selected by the Committee may receive

Stock Payments in the manner determined from time to time by the Committee;

provided, that unless otherwise determined by the Committee such Stock Payments

shall be made in lieu of base salary, bonus, or other cash compensation

otherwise payable to such Participant. The number of shares shall be determined

by the Committee and may be based upon the Performance Criteria or other

specific criteria determined appropriate by the Committee, determined on the

date such Stock Payment is made or on any date thereafter.

 

      8.6 Deferred Stock. Any Participant selected by the Committee may be

granted an award of Deferred Stock in the manner determined from time to time by

the Committee. The number of shares of Deferred Stock shall be determined by the

Committee and may be linked to the Performance Criteria or other specific

criteria determined to be appropriate by the Committee, in each case on a

specified date or dates or over any period or periods determined by the

Committee. Stock underlying a Deferred Stock award will not be issued until the

Deferred Stock award has vested, pursuant to a vesting schedule or criteria set

by the Committee. Unless otherwise provided by the Committee, a Participant

awarded Deferred Stock shall have no rights as a Company stockholder with

respect to such Deferred Stock until such time as the Deferred Stock Award has

vested and the Stock underlying the Deferred Stock Award has been issued.

 

      8.7 Restricted Stock Units. The Committee is authorized to make Awards of

Restricted Stock Units to any Participant selected by the Committee in such

amounts and subject to such terms and conditions as determined by the Committee.

At the time of grant, the Committee shall specify the date or dates on which the

Restricted Stock Units shall become fully vested and nonforfeitable, and may

specify such conditions to vesting as it deems appropriate. At the time of

grant, the Committee shall specify the maturity date applicable to each grant of

Restricted Stock Units which shall be no earlier than the vesting date or dates

of the Award and may be determined at the election of the grantee. On the

maturity date, the Company shall transfer to the Participant one unrestricted,

fully transferable share of Stock for each Restricted Stock Unit scheduled to be

paid out on such date and not previously forfeited. The Committee shall specify

the purchase price, if any, to be paid by the grantee to the Company for such

shares of Stock.

 

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      8.8 Term. Except as otherwise provided herein, the term of any Award of

Performance Shares, Performance Stock Units, Dividend Equivalents, Stock

Payments, Deferred Stock, or Restricted Stock Units shall be set by the

Committee in its discretion.

 

      8.9 Exercise or Purchase Price. The Committee may establish the exercise

or purchase price, if any, of any Award of Performance Shares, Performance Stock

Units, Deferred Stock, Stock Payments, or Restricted Stock Units; provided,

however, that such price shall not be less than the par value of a share of

Stock, unless otherwise permitted by applicable state law.

 

      8.10 Exercise upon Termination of Employment or Service. An Award of

Performance Shares, Performance Stock Units, Dividend Equivalents, Deferred

Stock, Stock Payments, and Restricted Stock Units shall only be exercisable or

payable while the Participant is an Employee, Consultant or a member of the

Board, as applicable; provided, however, that the Committee in its sole and

absolute discretion may provide that an Award of Performance Shares, Performance

Stock Units, Dividend Equivalents, Stock Payments, Deferred Stock, or Restricted

Stock Units may be exercised or paid subsequent to a termination of employment

or service, as applicable, or following a Change of Control of the Company, or

because of the Participant's retirement, death or disability, or otherwise.

 

      8.11 Form of Payment. Payments with respect to any Awards granted under

this Article 8 shall be made in cash, in Stock or a combination of both, as

determined by the Committee.

 

      Award Agreement. All Awards under this Article 8 shall be subject to such

additional terms and conditions as determined by the Committee and shall be

evidenced by an Award Agreement.

 

                                    ARTICLE 9

 

                            PERFORMANCE-BASED AWARDS

 

      9.1 Purpose. The purpose of this Article 9 is to provide the Committee the

ability to qualify Awards other than Options and SARs and that are granted

pursuant to Articles 6 and 8 as Qualified Performance-Based Compensation. If the

Committee, in its discretion, decides to grant a Performance-Based Award to a

Covered Employee, the provisions of this Article 9 shall control over any

contrary provision contained in Articles 6 or 8; provided, however, that the

Committee may in its discretion grant Awards to Covered Employees or other

Participants that are based on Performance Criteria or Performance Goals but

that do not satisfy the requirements of this Article 9.

 

      9.2 Applicability. This Article 9 shall apply only to those Covered

Employees selected by the Committee to receive Performance-Based Awards. The

designation of a Covered Employee as a Participant for a Performance Period

shall not in any manner entitle the Participant to receive an Award for the

period. Moreover, designation of a Covered Employee as a Participant for a

particular Performance Period shall not require designation of such Covered

Employee as a Participant in any subsequent Performance Period and designation

of one Covered Employee as a Participant shall not require designation of any

other Covered Employees as a Participant in such period or in any other period.

 

      9.3 Procedures with Respect to Performance-Based Awards. To the extent

necessary to comply with the Qualified Performance-Based Compensation

requirements of Section 162(m)(4)(C) of the Code, with respect to any Award

granted under Articles 6 and 8 which may be granted to one or more Covered

Employees, no later than ninety (90) days following the commencement of any

fiscal year in question or any other designated fiscal period or period of

service (or such other time as may be required or permitted by Section 162(m) of

the Code), the Committee shall, in writing, (a) designate one or more Covered

Employees, (b) select the Performance Criteria applicable to the Performance

Period, (c) establish the Performance Goals, and amounts of such Awards, as

applicable, which may be earned for such Performance Period, and (d) specify the

relationship between Performance Criteria and the Performance Goals and the

amounts of such Awards, as applicable, to be earned by each Covered Employee for

such Performance Period. Following the completion of each Performance Period,

the Committee shall certify in writing whether the applicable Performance Goals

have been achieved for such Performance Period. In determining the amount earned

by a Covered Employee, the Committee shall have the right to reduce or eliminate

(but not to increase) the amount payable at a given level of performance to take

into account additional factors that the Committee may deem relevant to the

assessment of individual or corporate performance for the Performance Period.

 

                                       29

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      9.4 Payment of Performance-Based Awards. Unless otherwise provided in the

applicable Award Agreement, a Participant must be employed by the Company or a

Subsidiary on the day a Performance-Based Award for such Performance Period is

paid to the Participant. Furthermore, a Participant shall be eligible to receive

payment pursuant to a Performance-Based Award for a Performance Period only if

the Performance Goals for such period are achieved. In determining the amount

earned under a Performance-Based Award, the Committee may reduce or eliminate

the amount of the Performance-Based Award earned for the Performance Period, if

in its sole and absolute discretion, such reduction or elimination is

appropriate.

 

      9.5 Additional Limitations. Notwithstanding any other provision of the

Plan, any Award which is granted to a Covered Employee and is intended to

constitute Qualified Performance-Based Compensation shall be subject to any

additional limitations set forth in Section 162(m) of the Code (including any

amendment to Section 162(m) of the Code) or any regulations or rulings issued

thereunder that are requirements for qualification as qualified

performance-based compensation as described in Section 162(m)(4)(C) of the Code,

and the Plan shall be deemed amended to the extent necessary to conform to such

requirements.

 

                                   ARTICLE 10

 

                         PROVISIONS APPLICABLE TO AWARDS

 

      10.1 Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan

may, in the discretion of the Committee, be granted either alone, in addition

to, or in tandem with, any other Award granted pursuant to the Plan. Awards

granted in addition to or in tandem with other Awards may be granted either at

the same time as or at a different time from the grant of such other Awards.

 

      10.2 Award Agreement. Awards under the Plan shall be evidenced by Award

Agreements that set forth the terms, conditions and limitations for each Award

which may include the term of an Award, the provisions applicable in the event

the Participant's employment or service terminates, and the Company's authority

to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an

Award.

 

      10.3 Limits on Transfer. No right or interest of a Participant in any

Award may be pledged, encumbered, or hypothecated to or in favor of any party

other than the Company or a Subsidiary, or shall be subject to any lien,

obligation, or liability of such Participant to any other party other than the

Company or a Subsidiary. Except as otherwise provided by the Committee, no Award

shall be assigned, transferred, or otherwise disposed of by a Participant other

than by will or the laws of descent and distribution. The Committee by express

provision in the Award or an amendment thereto may permit an Award (other than

an Incentive Stock Option) to be transferred to, exercised by and paid to

certain persons or entities related to the Participant, including but not

limited to members of the Participant's family, charitable institutions, or

trusts or other entities whose beneficiaries or beneficial owners are members of

the Participant's family and/or charitable institutions, or to such other

persons or entities as may be expressly approved by the Committee, pursuant to

such conditions and procedures as the Committee may establish. Any permitted

transfer shall be subject to the condition that the Committee receive evidence

satisfactory to it that the transfer is being made for estate and/or tax

planning purposes (or to a "blind trust" in connection with the Participant's

termination of employment or service with the Company or a Subsidiary to assume

a position with a governmental, charitable, educational or similar non-profit

institution) and on a basis consistent with the Company's lawful issue of

securities.

 

      10.4 Beneficiaries. Notwithstanding Section 10.3, a Participant may, in

the manner determined by the Committee, designate a beneficiary to exercise the

rights of the Participant and to receive any distribution with respect to any

Award upon the Participant's death. A beneficiary, legal guardian, legal

representative, or other person claiming any rights pursuant to the Plan is

subject to all terms and conditions of the Plan and any Award Agreement

applicable to the Participant, except to the extent the Plan and Award Agreement

otherwise provide, and to any additional restrictions deemed necessary or

appropriate by the Committee. If the Participant is married and resides in a

community property state, a designation of a person other than the Participant's

spouse as his or her beneficiary with respect to more than 50% of the

Participant's interest in the Award shall not be effective without the prior

written consent of the Participant's spouse. If no beneficiary has been

designated or survives the Participant, payment shall be made to the person

entitled thereto pursuant to the Participant's will or the laws of descent and

distribution. Subject to the foregoing, a beneficiary designation may be changed

or revoked by a Participant at any time provided the change or revocation is

filed with the Committee.

 

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<PAGE>

 

      10.5 Stock Certificates. Notwithstanding anything herein to the contrary,

the Company shall not be required to issue or deliver any certificates

evidencing shares of Stock pursuant to the exercise of any Award, unless and

until the Board has determined, with advice of counsel, that the issuance and

delivery of such certificates is in compliance with all applicable laws,

regulations of governmental authorities and, if applicable, the requirements of

any exchange on which the shares of Stock are listed or traded. All Stock

certificates delivered pursuant to the Plan are subject to any stop-transfer

orders and other restrictions as the Committee deems necessary or advisable to

comply with federal, state, or foreign jurisdiction, securities or other laws,

rules and regulations and the rules of any national securities exchange or

automated quotation system on which the Stock is listed, quoted, or traded. The

Committee may place legends on any Stock certificate to reference restrictions

applicable to the Stock. In addition to the terms and conditions provided

herein, the Board may require that a Participant make such reasonable covenants,

agreements, and representations as the Board, in its discretion, deems advisable

in order to comply with any such laws, regulations, or requirements. The

Committee shall have the right to require any Participant to comply with any

timing or other restrictions with respect to the settlement or exercise of any

Award, including a window-period limitation, as may be imposed in the discretion

of the Committee.

 

      10.6 Paperless Exercise. In the event that the Company establishes, for

itself or using the services of a third party, an automated system for the

exercise of Awards, such as a system using an internet website or interactive

voice response, then the paperless exercise of Awards by a Participant may be

permitted through the use of such an automated system.

 

                                   ARTICLE 11

 

                          CHANGES IN CAPITAL STRUCTURE

 

      11.1 Adjustments. In the event of any stock dividend, stock split,

combination or exchange of shares, merger, consolidation, spin-off,

recapitalization or other distribution (other than normal cash dividends) of

Company assets to stockholders, or any other change affecting the shares of

Stock or the share price of the Stock, the Committee shall make such

proportionate adjustments, if any, as the Committee in its discretion may deem

appropriate to reflect such change with respect to (a) the aggregate number and

kind of shares that may be issued under the Plan (including, but not limited to,

adjustments of the limitations in Sections 3.1 and 3.3); (b) the terms and

conditions of any outstanding Awards (including, without limitation, any

applicable performance targets or criteria with respect thereto); and (c) the

grant or exercise price per share for any outstanding Awards under the Plan. Any

adjustment affecting an Award intended as Qualified Performance-Based

Compensation shall be made consistent with the requirements of Section 162(m) of

the Code.

 

      11.2 Change of Control. In the event of any transaction or event described

in Section 11.1 or any unusual or nonrecurring transactions or events affecting

the Company, any affiliate of the Company, or the financial statements of the

Company or any affiliate, or of changes in applicable laws, regulations or

accounting principles, the Committee, in its sole and absolute discretion, and

on such terms and conditions as it deems appropriate, either by the terms of the

Award or by action taken prior to the occurrence of such transaction or event

and either automatically or upon the Participant's request, is hereby authorized

to take any one or more of the following actions whenever the Committee

determines that such action is appropriate in order to prevent dilution or

enlargement of the benefits or potential benefits intended to be made available

under the Plan or with respect to any Award under the Plan, to facilitate such

transactions or events or to give effect to such changes in laws, regulations or

principles:

 

                  (i) To provide for either (A) termination of any such Award in

exchange for an amount of cash, if any, equal to the amount that would have been

attained upon the exercise of such Award or realization of the Participant's

rights (and, for the avoidance of doubt, if as of the date of the occurrence of

the transaction or event described in this Section 11.2 the Committee determines

in good faith that no amount would have been attained upon the exercise of such

Award or realization of the Participant's rights, then such Award may be

terminated by the Company without payment) or (B) the replacement of such Award

with other rights or property selected by the Committee in its sole discretion;

 

                  (ii) To provide that such Award be assumed by the successor or

survivor corporation, or a parent or subsidiary thereof, or shall be substituted

for by similar options, rights or awards covering the stock of the successor or

survivor corporation, or a parent or subsidiary thereof, with appropriate

adjustments as to the number and kind of shares and prices;

 

                  (iii) To make adjustments in the number and type of shares of

Common Stock (or other securities or property) subject to outstanding Awards,

and in the number and kind of outstanding Restricted Stock or Deferred

 

                                       31

<PAGE>

 

Stock and/or in the terms and conditions of (including the grant or exercise

price), and the criteria included in, outstanding options, rights and awards and

options, rights and awards which may be granted in the future;

 

                  (iv) To provide that such Award shall be exercisable or

payable or fully vested with respect to all shares covered thereby,

notwithstanding anything to the contrary in the Plan or the applicable Award

Agreement; and

 

                  (v) To provide that the Award cannot vest, be exercised or

become payable after such event.

 

      11.3 Outstanding Awards - Certain Mergers. Subject to any required action

by the stockholders of the Company, in the event that the Company shall be the

surviving corporation in any merger or consolidation (except a merger or

consolidation as a result of which the holders of shares of Stock receive

securities of another corporation), each Award outstanding on the date of such

merger or consolidation shall pertain to and apply to the securities that a

holder of the number of shares of Stock subject to such Award would have

received in such merger or consolidation.

 

      11.4 Outstanding Awards - Other Changes. In the event of any other change

in the capitalization of the Company or corporate change other than those

specifically referred to in this Article 11, the Committee may, in its absolute

discretion, make such adjustments in the number and kind of shares or other

securities subject to Awards outstanding on the date on which such change occurs

and in the per share grant or exercise price of each Award as the Committee may

consider appropriate to prevent dilution or enlargement of rights.

 

      11.5 No Other Rights. Except as expressly provided in the Plan, no

Participant shall have any rights by reason of any subdivision or consolidation

of shares of stock of any class, the payment of any dividend, any increase or

decrease in the number of shares of stock of any class or any dissolution,

liquidation, merger, or consolidation of the Company or any other corporation.

Except as expressly provided in the Plan or pursuant to action of the Committee

under the Plan, no issuance by the Company of shares of stock of any class, or

securities convertible into shares of stock of any class, shall affect, and no

adjustment by reason thereof shall be made with respect to, the number of shares

of Stock subject to an Award or the grant or exercise price of any Award.

 

                                   ARTICLE 12

 

                                 ADMINISTRATION

 

      12.1 Committee. The Plan shall be administered by the Compensation

Committee of the Board; provided, however that the Compensation Committee may

delegate to a committee of one or more members of the Board the authority to

grant or amend Awards to Participants other than (a) senior executives of the

Company who are subject to Section 16 of the Exchange Act or (b) Covered

Employees. The Committee shall consist of at least two individuals, each of whom

qualifies as (x) a Non-Employee Director, and (y) an "outside director" pursuant

to Code Section 162(m) and the regulations issued thereunder. Reference to the

Committee shall refer to the Board if the Compensation Committee ceases to exist

and the Board does not appoint a successor Committee. Reference to the Committee

shall refer to the Board if the Compensation Committee ceases to exist and the

Board does not appoint a successor Committee. In its sole discretion, the Board

may at any time and from time to time exercise any and all rights and duties of

the Committee under the Plan except with respect to matters which under Rule

16b-3 under the Exchange Act or Section 162(m) of the Code, or any regulations

or rules issued thereunder, are required to be determined in the sole discretion

of the Committee. Notwithstanding the foregoing, the full Board, acting by a

majority of its members in office, shall conduct the general administration of

the Plan with respect to Awards granted to Independent Directors and for

purposes of such Awards the term "Committee" as used in this Plan shall be

deemed to refer to the Board.

 

      12.2 Action by the Committee. A majority of the Committee shall constitute

a quorum. The acts of a majority of the members present at any meeting at which

a quorum is present, and acts approved in writing by a majority of the Committee

in lieu of a meeting, shall be deemed the acts of the Committee. Each member of

the Committee is entitled to, in good faith, rely or act upon any report or

other information furnished to that member by any officer or other employee of

the Company or any Subsidiary, the Company's independent certified public

accountants, or any executive compensation consultant or other professional

retained by the Company to assist in the administration of the Plan.

 

      12.3 Authority of Committee. Subject to any specific designation in the

Plan, the Committee has the exclusive power, authority and discretion to:

 

                                       32

<PAGE>

 

            (a) Designate Participants to receive Awards;

 

            (b) Determine the type or types of Awards to be granted to each

Participant;

 

            (c) Determine the number of Awards to be granted and the number of

shares of Stock to which an Award will relate;

 

            (d) Determine the terms and conditions of any Award granted pursuant

to the Plan, including, but not limited to, the exercise price, grant price, or

purchase price, any restrictions or limitations on the Award, any schedule for

lapse of forfeiture restrictions or restrictions on the exercisability of an

Award, and accelerations or waivers thereof, any provisions related to

non-competition and recapture of gain on an Award, based in each case on such

considerations as the Committee in its sole discretion determines; provided,

however, that the Committee shall not have the authority to accelerate the

vesting or waive the forfeiture of any Performance-Based Awards;

 

            (e) Determine whether, to what extent, and pursuant to what

circumstances an Award may be settled in, or the exercise price of an Award may

be paid in, cash, Stock, other Awards, or other property, or an Award may be

canceled, forfeited, or surrendered;

 

            (f) Prescribe the form of each Award Agreement, which need not be

identical for each Participant;

 

            (g) Decide all other matters that must be determined in connection

with an Award;

 

            (h) Establish, adopt, or revise any rules and regulations as it may

deem necessary or advisable to administer the Plan;

 

            (i) Interpret the terms of, and any matter arising pursuant to, the

Plan or any Award Agreement; and

 

            (j) Make all other decisions and determinations that may be required

pursuant to the Plan or as the Committee deems necessary or advisable to

administer the Plan.

 

      12.4 Decisions Binding. The Committee's interpretation of the Plan, any

Awards granted pursuant to the Plan, any Award Agreement and all decisions and

determinations by the Committee with respect to the Plan are final, binding, and

conclusive on all parties.

 

                                   ARTICLE 13

 

                          EFFECTIVE AND EXPIRATION DATE

 

      13.1 Effective Date; Effect of Approval on Prior Plan. The Plan is

effective as of the date the Plan is approved by the Company's stockholders (the

"Effective Date"). The Plan will be deemed to be approved by the stockholders if

it receives the affirmative vote of the holders of a majority of the shares of

stock of the Company present or represented and entitled to vote at a meeting

duly held in accordance with the applicable provisions of the Company's Bylaws.

No additional awards will be made under the Prior Plan on or after the Effective

Date.

 

      13.2 Expiration Date. The Plan will expire on, and no Award may be granted

pursuant to the Plan after, the tenth anniversary of the Effective Date. Any

Awards that are outstanding on the tenth anniversary of the Effective Date shall

remain in force according to the terms of the Plan and the applicable Award

Agreement.

 

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<PAGE>

 

                                   ARTICLE 14

 

                    AMENDMENT, MODIFICATION, AND TERMINATION

 

      14.1 Amendment, Modification, And Termination. Subject to Section 15.14,

with the approval of the Board, at any time and from time to time, the Committee

may terminate, amend or modify the Plan; provided, however, that (a) to the

extent necessary and desirable to comply with any applicable law, regulation, or

stock exchange rule, the Company shall obtain stockholder approval of any Plan

amendment in such a manner and to such a degree as required, and (b) stockholder

approval is required for any amendment to the Plan that (i) increases the number

of shares available under the Plan (other than any adjustment as provided by

Article 11), (ii) permits the Committee to grant Options with an exercise price

that is below Fair Market Value on the date of grant, (iii) permits the

Committee to extend the exercise period for an Option beyond ten years from the

date of grant, or (iv) results in a material increase in benefits or a change in

eligibility requirements. Notwithstanding any provision in this Plan to the

contrary, absent approval of the stockholders of the Company, no Option may be

amended to reduce the per share exercise price of the shares subject to such

Option below the per share exercise price as of the date the Option is granted

and, except as permitted by Article 11, no Option may be granted in exchange

for, or in connection with, the cancellation or surrender of an Option having a

higher per share exercise price.

 

      14.2 Awards Previously Granted. Except with respect to amendments made

pursuant to Section 15.14, no termination, amendment, or modification of the

Plan shall adversely affect in any material way any Award previously granted

pursuant to the Plan without the prior written consent of the Participant.

 

                                   ARTICLE 15

 

                               GENERAL PROVISIONS

 

      15.1 No Rights to Awards. No Participant, employee, or other person shall

have any claim to be granted any Award pursuant to the Plan, and neither the

Company nor the Committee is obligated to treat Participants, employees, and

other persons uniformly.

 

      15.2 No Stockholders Rights. No Award gives the Participant any of the

rights of a stockholder of the Company unless and until shares of Stock are in

fact issued to such person in connection with such Award.

 

      15.3 Withholding. The Company or any Subsidiary shall have the authority

and the right to deduct or withhold, or require a Participant to remit to the

Company, an amount sufficient to satisfy federal, state, local and foreign taxes

(including the Participant's employment tax obligations) required by law to be

withheld with respect to any taxable event concerning a Participant arising as a

result of this Plan. The Committee may in its discretion and in satisfaction of

the foregoing requirement allow a Participant to elect to have the Company

withhold shares of Stock otherwise issuable under an Award (or allow the return

of shares of Stock) having a Fair Market Value equal to the sums required to be

withheld. Notwithstanding any other provision of the Plan, the number of shares

of Stock which may be withheld with respect to the issuance, vesting, exercise

or payment of any Award (or which may be repurchased from the Participant of

such Award within six months after such shares of Stock were acquired by the

Participant from the Company) in order to satisfy the Participant's federal,

state, local and foreign income and payroll tax liabilities with respect to the

issuance, vesting, exercise or payment of the Award shall be limited to the

number of shares which have a Fair Market Value on the date of withholding or

repurchase equal to the aggregate amount of such liabilities based on the

minimum statutory withholding rates for federal, state, local and foreign income

tax and payroll tax purposes that are applicable to such supplemental taxable

income.

 

      15.4 No Right to Employment or Services. Nothing in the Plan or any Award

Agreement shall interfere with or limit in any way the right of the Company or

any Subsidiary to terminate any Participant's employment or services at any

time, nor confer upon any Participant any right to continue in the employ or

service of the Company or any Subsidiary.

 

      15.5 Unfunded Status of Awards. The Plan is intended to be an "unfunded"

plan for incentive compensation. With respect to any payments not yet made to a

Participant pursuant to an Award, nothing contained in the Plan or any Award

Agreement shall give the Participant any rights that are greater than those of a

general creditor of the Company or any Subsidiary.

 

                                       34

<PAGE>

 

      15.6 Indemnification. To the extent allowable pursuant to applicable law,

each member of the Committee or of the Board shall be indemnified and held

harmless by the Company from any loss, cost, liability, or expense that may be

imposed upon or reasonably incurred by such member in connection with or

resulting from any claim, action, suit, or proceeding to which he or she may be

a party or in which he or she may be involved by reason of any action or failure

to act pursuant to the Plan and against and from any and all amounts paid by him

or her in satisfaction of judgment in such action, suit, or proceeding against

him or her; provided he or she gives the Company an opportunity, at its own

expense, to handle and defend the same before he or she undertakes to handle and

defend it on his or her own behalf. The foregoing right of indemnification shall

not be exclusive of any other rights of indemnification to which such persons

may be entitled pursuant to the Company's Certificate of Incorporation or

Bylaws, as a matter of law, or otherwise, or any power that the Company may have

to indemnify them or hold them harmless.

 

      15.7 Relationship to other Benefits. No payment pursuant to the Plan shall

be taken into account in determining any benefits pursuant to any pension,

retirement, savings, profit sharing, group insurance, welfare or other benefit

plan of the Company or any Subsidiary except to the extent otherwise expressly

provided in writing in such other plan or an agreement thereunder.

 

      15.8 Expenses. The expenses of administering the Plan shall be borne by

the Company and its Subsidiaries.

 

      15.9 Titles and Headings. The titles and headings of the Sections in the

Plan are for convenience of reference only and, in the event of any conflict,

the text of the Plan, rather than such titles or headings, shall control.

 

      15.10 Fractional Shares. No fractional shares of Stock shall be issued and

the Committee shall determine, in its discretion, whether cash shall be given in

lieu of fractional shares or whether such fractional shares shall be eliminated

by rounding up or down as appropriate.

 

      15.11 Limitations Applicable to Section 16 Persons. Notwithstanding any

other provision of the Plan, the Plan, and any Award granted or awarded to any

Participant who is then subject to Section 16 of the Exchange Act, shall be

subject to any additional limitations set forth in any applicable exemptive rule

under Section 16 of the Exchange Act (including any amendment to Rule 16b-3

under the Exchange Act) that are requirements for the application of such

exemptive rule. To the extent permitted by applicable law, the Plan and Awards

granted or awarded hereunder shall be deemed amended to the extent necessary to

conform to such applicable exemptive rule.

 

      15.12 Government and Other Regulations. The obligation of the Company to

make payment of awards in Stock or otherwise shall be subject to all applicable

laws, rules, and regulations, and to such approvals by government agencies as

may be required. The Company shall be under no obligation to register pursuant

to the Securities Act of 1933, as amended, any of the shares of Stock paid

pursuant to the Plan. If the shares paid pursuant to the Plan may in certain

circumstances be exempt from registration pursuant to the Securities Act of

1933, as amended, the Company may restrict the transfer of such shares in such

manner as it deems advisable to ensure the availability of any such exemption.

 

      15.13 Governing Law. The Plan and all Award Agreements shall be construed

in accordance with and governed by the laws of the State of Delaware.

 

      15.14 Section 409A. To the extent that the Committee determines that any

Award granted under the Plan is subject to Section 409A of the Code, the Award

Agreement evidencing such Award shall incorporate the terms and conditions

required by Section 409A of the Code. To the extent applicable, the Plan and

Award Agreements shall be interpreted in accordance with Section 409A of the

Code and Department of Treasury regulations and other interpretive guidance

issued thereunder, including without limitation any such regulations or other

guidance that may be issued after the Effective Date. Notwithstanding any

provision of the Plan to the contrary, in the event that following the Effective

Date the Committee determines that any Award may be subject to Section 409A of

the Code and related Department of Treasury guidance (including such Department

of Treasury guidance as may be issued after the Effective Date), the Committee

may adopt such amendments to the Plan and the applicable Award Agreement or

adopt other policies and procedures (including amendments, policies and

procedures with retroactive effect), or take any other actions, that the

Committee determines are necessary or appropriate to (a) exempt the Award from

Section 409A of the Code and/or preserve the intended tax treatment of the

benefits provided with respect to the Award, or (b) comply with the requirements

of Section 409A of the Code and related Department of Treasury guidance.

 

                                       35

<PAGE>

 

                                    * * * * *

 

      I hereby certify that the foregoing Plan was duly adopted by the Board of

Directors of Books-A-Million, Inc. on ____________ __, 2005.

 

                                    * * * * *

 

      I hereby certify that the foregoing Plan was approved by the stockholders

of Books-A-Million, Inc. on ____________ __, 2005.

 

      Executed on this ____ day of _______________, 2005.

 

                                          ________________________________