<PAGE>
As filed with the Securities and Exchange Commission on February 19, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CD WAREHOUSE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
<TABLE>
<S> <C>
5735 73-11504999
(Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification No.)
</TABLE>
1204 Sovereign Row
Oklahoma City, Oklahoma 73108
(405) 949-2422
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
<TABLE>
<CAPTION>
CD WAREHOUSE, INC. AMENDED 1996 STOCK OPTION PLAN
(Full title of the plan)
<S> <C>
COPIES TO:
JERRY W. GRIZZLE, PRESIDENT
President and Chief Executive Officer JEANETTE C. TIMMONS, ESQ.
CD Warehouse, Inc. Day Edwards Federman Propester & Christensen, P.C.
1204 Sovereign Row 2900 Oklahoma Tower
Oklahoma City, Oklahoma 73108 210 Park Avenue
(405) 949-2422 Oklahoma City, Oklahoma 73102
(405) 239-2121
</TABLE>
(Name, address, including zip code, and telephone number,
including area code, of agents for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) PRICE PER SHARE OFFERING PRICE (2) REGISTRATION FEE (3)
====================================================================================================================================
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value per share 600,000 (2) $5,035,656.2 $1,399.91
====================================================================================================================================
</TABLE>
(1) Pursuant to Rule 416(a), also covers additional securities that may be
offered as a result of stock splits, stock dividends or similar
transactions.
(2) The number of shares of common stock, par value $.01 per share ("Common
Stock"), stated above consists of (a) the aggregate number of shares of
Common Stock which may be sold upon the exercise of options which have been
previously granted as well as (b) the aggregate number of shares of Common
Stock which may be sold upon the exercise of options which may hereafter be
granted, under the CD Warehouse, Inc. 1996 Amended Stock Option Plan (the
"Plan"). The calculation of the proposed maximum offering price, made
solely for the purpose of determining the registration fee pursuant to the
provisions of Rule 457(h) under the Securities Act of 1933, as amended (the
"Securities Act"), was computed as follows: (i) in the case of shares of
Common Stock which may be purchased upon exercise of outstanding options,
the fee is calculated on the basis of the price at which the options may be
exercised; and (ii) in the case of shares of Common Stock for which options
have not yet been granted and the option price of which is therefore
unknown, the fee is calculated on the basis of the average of the high and
low sale prices per share of the Common Stock as of a date February 16,
1999 within 5 business days prior to filing this Registration Statement.
(3) The registration fee was calculated pursuant to Rule 457(h) and Section
6(b) of the Securities Act of 1933, as amended, as $278 per $1 million,
pro-rated for amounts less than $1 million.
================================================================================
<PAGE>
INTRODUCTION
This Registration Statement on Form S-8 is filed by CD Warehouse,
Inc., a Delaware corporation (the "Company," "CD Warehouse" or the
"Registrant"), relating to an aggregate 600,000 shares of its common stock, par
value $0.01 per share (the "Common Stock") issuable to eligible employees,
officers, directors and advisors of the Company under the CD Warehouse, Inc.
Amended 1996 Stock Option Plan (the "Plan").
PART I
INFORMATION REQUIRED IN SECTION 10(A) PROSPECTUS
ITEM 1. PLAN INFORMATION.
Not filed as part of this Registration Statement pursuant to Note to
Part 1 of Form S-8.
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.
Not filed as part of this Registration Statement pursuant to Note to
Part 1 of Form S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents, which previously have been filed by the
Company with the Securities and Exchange Commission (the "Commission"), are
incorporated herein by reference and made a part hereof:
(i) The Company's latest Annual Report on Form 10-K for the fiscal
year ended December 31, 1997;
(ii) All other reports filed pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act") since
the end of the fiscal year covered by the Annual Report
referred to in (i) above; and
(iii) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A (Registration No.
000-21887), filed with the Commission on December 17, 1996,
including any amendment or report filed for the purpose of
updating such description.
All reports and other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Registration Statement and prior to the filing of a post-effective
amendment hereto, which indicates that all securities offered hereunder have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such documents.
For purposes of this Registration Statement, any document or any
statement contained in a document incorporated or deemed to be incorporated
herein by reference shall be deemed to be modified or superseded to the extent
that a subsequently filed document or a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
herein by reference modifies or supersedes such document or such statement in
such document. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
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<PAGE>
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
The legality of the securities offered pursuant to this Registration
Statement has been passed upon for the Company by Day, Edwards, Federman,
Propester & Christensen, P.C. Bruce W. Day, General Counsel and Secretary of
the Company, is a stockholder and director of Day, Edwards, Federman, Propester
& Christensen, P.C. Mr. Day owns shares and options to purchase shares of
Common Stock of the Company.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Corporation Law of the State of Delaware grants every
corporation the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
other than an action by or in the right of the corporation, by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses, including attorneys'
fees, judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
The Delaware statute also grants every corporation the power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that he
is or was a director, officer, employee, or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or other
enterprise against expenses, including attorneys' fees, actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue, or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
The Delaware statute provides that to the extent that a director,
officer, employee, or agent of a corporation has been successful on the merits
or otherwise in defense of any action, suit, or proceeding referred to in the
statute, or in defense of any claim, issue, or matter therein, he shall be
indemnified against expenses, including attorneys' fees, actually incurred by
him in connection therewith.
THE COMPANY'S CHARTER AND BYLAW PROVISIONS
Articles Nine and Eleven of the Registrant's Amended and Restated
Certificate of Incorporation indemnify and exculpate the directors, officers,
employees, and agents of the Registrant from and against certain liabilities.
Article Nine provides that the Registrant shall indemnify to the full extent
permitted under the General Corporation Law of the State of Delaware any
director, officer, employee, or agent of the Registrant. Article Eleven
provides that a director of the Registrant shall have no personal liability to
the Registrant or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (a) for any breach of the director's
duty of loyalty to the Registrant or its shareholders, (b) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (c) for acts or omissions specified in Section 174 of the General
Corporation Law of the State of Delaware
II-3
<PAGE>
regarding the unlawful payment of dividends and the unlawful purchase or
redemption of the Registrant's stock, and (d) for any transaction from which the
director derived an improper personal benefit.
OTHER ARRANGEMENTS
The Company maintains a directors' and officers' liability insurance
policy insuring its directors and officers against certain liabilities and
expenses incurred by them in their capacities as such and insuring the Company,
under certain circumstances, in the event that indemnification payments are made
by the Company to such directors and officers.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
Unless otherwise indicated below as being incorporated by reference to
another filing of the Company with the Commission, each of the following
exhibits is filed herewith:
Exhibit
Number Name of Exhibit
------ ---------------
4.1 Amended and Restated Certificate of Incorporation (filed as Exhibit
3.1 to the Company's Registration Statement on Form SB-2, file number
333-15139 and incorporated herein by reference)
4.2 Amended and Restated Bylaws (filed as Exhibit 3.2 to the Company's
Registration Statement on Form SB-2, file number 333-15139 and
incorporated herein by reference)
4.3 Specimen Certificate of the Common Stock (filed as Exhibit 4.1 to the
Company's Registration Statement on Form SB-2, file number 333-15139
and incorporated herein by reference)
4.4 CD Warehouse, Inc. Amended 1996 Stock Option Plan
5.1 Opinion of Day, Edwards, Federman, Propester & Christensen, P.C. as to
the legality of the securities covered by the Registration Statement.
23.1 Consent of Ernst & Young, LLP.
23.2 Consent of Day Edwards Federman Propester & Christensen, P.C.
(included in Exhibit 5.1).
24.1 Powers of Attorney (contained on signature page hereto).
ITEM 9. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement
to include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-4
<PAGE>
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(2) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, CD Warehouse,
Inc. certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Oklahoma City, and State of Oklahoma, on the 17th day
of February, 1999.
CD WAREHOUSE, INC.
By: /s/ Jerry W. Grizzle
-----------------------------------------
Jerry W. Grizzle
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jerry W. Grizzle and Doyle E. Motley, and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments, exhibits thereto and other documents in connection
therewith) to this Registration Statement and any subsequent registration
statement filed by the registrant pursuant to Securities and Exchange Commission
Rule 462, which relates to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the require of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Jerry W. Grizzle President, Chief Executive Officer February 17, 1999
- ---------------------
Jerry W. Grizzle and Chairman of the Board
(Principal Executive Officer)
/s/ Gary D. Johnson Executive Vice President, Chief
- -------------------
Gary D. Johnson Operating Officer and Director February 18, 1999
(Principal Executive Officer)
/s/ Christopher M. Salyer Director
- -------------------------
Christopher M. Salyer February 17, 1999
/s/ Ronald V. Perry Director
- ------------------- February 17, 1999
Ronald V. Perry
/s/ Robert O. McDonald Director
- ----------------------
Robert O. McDonald February 17, 1999
/s/ Doyle E. Motley Senior Vice President and Chief
- -------------------
Doyle E. Motley Financial Officer February 17, 1999
(Principal Financial and Accounting
</TABLE>
II-6
<PAGE>
EXHIBIT 4.4
CD WAREHOUSE, INC.
AMENDED 1996 STOCK OPTION PLAN
PART I
DEFINITIONS AND ADMINISTRATIVE MATTERS
1. PURPOSE. The purpose of the Amended 1996 Stock Option Plan (the "Plan") of
CD Warehouse, Inc. (the "Company") is to advance the interests of the Company
and its shareholders by encouraging and providing for the acquisition of an
equity interest in the Company by employees, officers, directors and advisers,
by providing additional incentives to such persons, and by enabling the Company
to attract and retain the services of such persons who make substantial
contributions to the Company through their ability, loyalty and efforts.
2. DEFINITIONS. The following definitions are applicable to the Plan.
2.1 "Adviser" means any adviser or other consultant selected by the
Committee, who is neither an Employee of the Company or a Subsidiary
nor a Director.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
2.4 "Committee" means the entire board of directors or any committee
thereof consisting of two or more directors of the Company who are
"Non-Employee Directors" as such term is used in Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or such number of directors or Non-Employee Directors
as is required by Rule 16b-3 or any successor rule.
2.5 "Common Stock" means the Common Stock, par value $.01 per share, of
the Company.
2.6 "Effective Date" of the Plan means December 10, 1996 and the
"Effective Date" of the Amended Plan means May 1, 1998
2.7 "Employee" means any person, including a director who is employed by
the Company (or by any Subsidiary) and is compensated for such
employment by a regular salary.
2.8 "Fair Market Value" means the closing sales price of the Common Stock
as reported on the Nasdaq interdealer quotation system or, if
applicable, the exchange on which the Common Stock is traded, on the
date of grant of a stock option, or if no sale of the Common Stock was
made on such system or exchange on such date then on the next
preceding day on which such a sale was made.
2.9 "Subsidiary" means any corporation owned, in whole or in part, by the
Company.
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3. ADMINISTRATION.
3.1 The portion of the Plan with respect to the grant of options pursuant
to Part II shall be administered by the Committee. Subject to the terms of
the Plan, with respect to the grant of options pursuant to Part II, the
Committee is authorized to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it; to determine the Employees to
whom options will be granted; to determine the type of option and the
amount, size, timing and terms of each such grant; and to make all other
determinations, including factual determinations, necessary or advisable
for the Plan's administration, provided that the Committee may delegate to
the Chief Executive Officer of the Company, or such other officer as may be
designated by the Committee, the authority, subject to guidelines
prescribed by the Committee, to grant options to Employees, and Advisers
who are not then subject to the provisions of Section 16 of the Exchange
Act and to determine the number of shares to be covered by any such option
and the Committee may authorize any one or more of such persons to execute
and deliver documents on behalf of the Committee, provided that no such
delegation may be made that would cause grants of options to persons
subject to Section 16 of the Exchange Act to fail to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange
Act. Determinations, interpretations or other actions made or taken by the
Committee pursuant to the provisions of the Plan shall be final and binding
and conclusive for all purposes and upon all persons.
3.2 The Committee may grant new options to an optionee to replace
outstanding options and condition the grant upon the surrender and
cancellation of all or a portion of any outstanding options granted under
Section II of the Plan. Subject to the provisions of the Plan, such new
options shall be exercisable at such price, during such period and on such
other terms and conditions as are specified by the Committee at the time of
the grant of the new options. Upon surrender, the outstanding options
shall be canceled and the share of Common Stock previously subject thereto
shall again be available for grant under the Plan. The Committee may also
amend or modify outstanding options with the consent of the optionee
affected thereby.
3.3 The portion of the Plan with respect to the grant of options pursuant
to Part III shall be administered by the Board of Directors. Grants of
stock options under Part III of the Plan and the amount, price and timing
of the awards to be granted will be automatic, as described in Part III
hereof. All questions of interpretation of the Plan with respect to the
grant of options pursuant to Part III will be determined by the Board, and
such determination shall, unless otherwise determined by the Board, be
final and conclusive on all persons having any interest hereunder.
4. SHARES SUBJECT TO PLAN.
4.1 Subject to adjustment as provided in Sections 14 and 22, the total
number of shares of Common Stock that may be issued upon exercise of
options granted under this Plan shall not exceed six hundred thousand
(600,000). If any options expires, is terminated unexercised or is
canceled, the shares subject to such options, to the extent of any such
expiration, termination or cancellation, shall again be available for grant
under the Plan.
4.2 In any fiscal year of the Company, the maximum number of shares of
Common Stock with respect to which options may be granted to any optionee
shall not exceed 10% of the Common Stock outstanding as of the first
business day of such fiscal year, as adjusted for stock splits, stock
dividends or other similar changes affecting the Common Stock.
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<PAGE>
5. DESIGNATION OF OPTIONEES.
5.1 Optionees under Part II of the Plan shall be selected, from time to
time, by the Committee from among those Employees and Advisers who, in the
opinion of the Committee, occupy responsible positions and who have the
capacity to contribute materially to the continued growth, development and
long-term success of the Company and its Subsidiaries.
5.2 All Directors on the date of grant shall be eligible to receive
options under Part III of the Plan.
PART II
GRANTS TO EMPLOYEES AND ADVISERS
6. GRANT OF OPTIONS. The Committee shall have complete discretion in
determining the number of shares of Common Stock subject to options granted to
each optionee. The Committee may grant any type of option to purchase Common
Stock that is permitted by law on the date of grant, including but not limited
to, an "incentive stock option" ("ISO") within the meaning of Section 422 of the
Code or a "non-statutory stock option." ISO's may be granted only to Employees.
In no event, however, shall the aggregate Fair Market Value (determined at the
time the option is granted) of Common Stock with respect to which ISO's are
exercisable for the first time by an optionee in any calendar year under the
Plan and all other plans of the Company and its "parent" and "subsidiary"
corporations (within the meaning of Sections 424(e) and (f) of the Code), if
any, exceed $100,000. Nothing in this Section shall be deemed to prevent the
grant of non-statutory stock options in amounts which exceed the maximum
established by Section 422(d) of the Code.
Each option shall be evidenced by an option agreement that shall specify
the type of option granted, the option price, the duration of the option, the
number of shares of Common Stock to which the option pertains, the conditions
upon which such options shall become exercisable and such other provisions as
the Committee shall determine. Each option which is intended to qualify as an
ISO shall be clearly designated as such and shall comply with the applicable
provisions of the Code pertaining to ISO's.
No ISO may be granted hereunder after the expiration of the earlier of 10
years from (i) the date of the adoption of the Plan, or (ii) the date the Plan
was approved by the stockholders of the Company.
7. OPTION PRICE. Except as hereinafter provided, the purchase price of each
share of Common Stock issuable upon exercise of each option shall be not less
than 100% of the Fair Market Value of the Common Stock on the date of grant, as
determined by the Committee, provided, however, in the event that an ISO is
granted to an Employee who possesses more than 10% of the total combined voting
power of all classes of stock of the Company, taking into account the
attribution rules of Code Section 422(d), the purchase price of each share of
Common Stock issuable upon exercise of each ISO shall be determined by the
Committee on the date of grant and shall not be less than 110% of the Fair
Market Value of the Common Stock on the date of grant.
8. EXERCISE OF OPTIONS. The period during which options shall be exercisable
shall be fixed by the Committee, but in no event shall an option be exercisable
after the expiration of ten (10) years from the date such option is granted.
Subject to the foregoing, options shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee shall in each
instance determine, which restrictions and conditions need not be the same for
all options. In the event an ISO is granted to an Employee who possesses more
than 10% of the total combined voting power of all classes of stock of the
Company, taking into account the attribution rules of Code Section 422(d), the
period during which such ISO's shall be exercisable shall be fixed by the
Committee, but in no event shall such ISO's be exercisable after the expiration
of five (5) years from the date such option is granted.
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<PAGE>
9. PAYMENT OF OPTION PRICE. No shares of Common Stock shall be issued upon
exercise of an option until full payment of the option price therefor has been
made. To the extent permitted by the Committee, payment of the option price may
be made: (i) in cash; (ii) by exchange of Common Stock valued at its Fair Market
Value on the date of exercise; (iii) by requesting that the Company withhold
from the number of shares of Common Stock otherwise issuable upon exercise of
the option that number of shares of Common Stock having an aggregate fair market
value on the date of exercise (the difference between the exercise price and the
fair market value on the date of exercise) equal to the exercise price for all
of the shares of Common Stock as to which the option is being exercised; (iv) by
means of a brokers' cashless exercise procedure; or (v) by any combination of
the foregoing. Where payment of the option price is to be made with shares of
Common Stock acquired under any compensation plan of the Company, such shares
will not be accepted as payment unless the optionee has acquired such shares at
least six months prior to such payment.
10. RIGHTS OF STOCKHOLDERS. Neither an optionee nor his or her legal
representatives or beneficiaries shall have any of the rights of a stockholder
with respect to any shares subject to any option until such shares shall have
been issued upon the proper exercise of such option.
11. NON-TRANSFERABILITY OF OPTIONS. No option may be sold, transferred,
pledged, assigned or otherwise alienated or hypothecated otherwise than by will
or by the laws of descent and distribution or, with respect to non-qualified
stock options, pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder. Except as otherwise specifically provided herein, all options
granted to an optionee under the Plan shall be exercisable during the lifetime
of such optionee only by such optionee. When an optionee dies, the personal
representative or other person entitled to succeed to the rights of the optionee
(the "Successor Optionee") may exercise such rights, subject to furnishing to
the Company proof satisfactory to the Company of his or her right to receive the
option under optionee's will or under the applicable laws of descent and
distribution.
12. TERMINATION OF EMPLOYMENT OR SERVICE OF OPTIONEE. Subject to the condition
that no option shall be exercisable after the expiration of the period fixed by
the Committee in accordance with Section 8 hereof:
12.1 In the event that (i) an Employee ceases to be an Employee of the
Company or its Subsidiaries by reason of a discharge for cause or a
voluntary separation of the optionee from the Company without the consent
of the Company or its Subsidiary or (ii) an Adviser ceases to be an Adviser
to the Company by reason of a termination for cause or a voluntary
termination without the consent of the Company, any options granted to such
optionee under the Plan shall terminate immediately, unless the Committee
shall otherwise determine.
12.2 In the event that an optionee shall die while employed by the Company
or while serving as an Adviser or within three months after (i) termination
of employment or service of an optionee due to disability or (ii)
retirement of an optionee who is an Employee on the Employee's Retirement
Date, any option granted to such optionee under the Plan shall be
exercisable to the extent then exercisable or on such accelerated basis as
the Committee may determine, by his successor in interest, within one year
after the death of the optionee, unless the Committee shall otherwise
determine.
12.3 In the event that the employment or service of the optionee
terminates for any reason (other than as described in Section 12.1 or
Section 12.2), including due to disability (within the meaning of Code
Section 422(e)(3)) and, with respect to an Employee, retirement on the
Employee's Retirement Date (as hereinafter defined), any option granted to
such optionee under the Plan shall be exercisable to the extent then
exercisable or on such accelerated basis as the Committee may determine,
within a period of three months after such termination, unless the
Committee shall otherwise determine.
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<PAGE>
12.4 For purposes of this Section 12, "Retirement Date" shall mean any
date an Employee is otherwise entitled to retire under the Company's
retirement plans and shall include normal retirement at age 65, early
retirement at age 62 and retirement at age 60 after 30 years of service.
13. RIGHTS OF EMPLOYEES. Nothing in the Plan shall interfere with or limit in
any way the right of the Company or any Subsidiary to terminate any optionee's
employment at any time, nor confer upon any optionee any right to continue in
the employ of the Company or any Subsidiary. No optionee shall have the right
to be selected as an optionee, or having been so selected, to be selected again
as an optionee. No grant of an option shall constitute a part of the base
salary or any other compensation of any Employee under any other benefit plan of
the Company or any Subsidiary unless expressly so provided in such other benefit
plan.
14. ADJUSTMENTS IN SHARES SUBJECT TO PLAN. If the Company shall at any time
change the number of issued shares of Common Stock without new consideration to
the Company (such as by stock dividend or stock split), the total number of
shares available under the Plan, the number of shares to be granted to each
optionee pursuant to the Plan, hereof, and the number and price of shares of
Common Stock subject to outstanding options, shall be adjusted so that the
aggregate consideration payable to the Company and the value of each option
shall not be changed. If, during the term of any option granted under this
Plan, the Common Stock shall be changed into another kind of stock or into
securities of another corporation, whether as a result of a reorganization,
recapitalization, sale, merger, consolidation, or other similar transaction, or
if additional rights shall be offered with respect to the Common Stock, the
Board shall cause adequate provision to be made so that the optionees shall
thereafter be entitled to receive, upon the due exercise of any outstanding
options, the securities or rights that the optionees would have been entitled to
receive had they owned the Common Stock acquired on the exercise of such options
on the effective date of any such transaction.
PART III
GRANTS TO DIRECTORS
15. GRANT OF OPTIONS. On the first business day immediately following the date
that an individual is first elected to serve as a member of the Board of
Directors, such Director shall be granted an option to purchase 10,000 shares of
the Common Stock. The foregoing number of shares is subject to adjustment as
provided in Section 22 and subject to the adjustment that if the Director is
elected to fill a vacancy by the Board of Directors, such Director shall be
granted an option to purchase the number of shares determined by multiplying
10,000 shares by a fraction the denominator of which is 12 and the numerator of
which is the estimated number of months remaining until the next annual
stockholders meeting. Thereafter, each year on the first business day
immediately following the date of the Company's Annual Meeting of Stockholders,
each individual reelected or continuing as a Director shall automatically
receive an option to acquire 10,000 shares of the Company's Common Stock,
subject to adjustment as provided in Section 22 and as noted above
(collectively, the "Director Options").
16. TYPES OF OPTIONS. All options granted under Part III of the Plan shall be
non-statutory options for purposes of the Code.
17. OPTION PRICE. The purchase price of each share of Common Stock issuable
upon exercise of an option will be equal to the Fair Market Value of the Common
Stock on the date of grant.
18. PERIOD OF OPTION AND RIGHTS TO EXERCISE.
18.1 Except as set forth herein, each Director who receives options under
this Plan must continue to hold office as a Director of the Company
until the next annual stockholder's meeting before he can exercise any
part thereof. Thereafter, subject to the provisions of the Plan, the
Director Options
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will vest and be exercisable by such Director, on a cumulative basis,
as to all Director Options granted theretofore.
18.2 The right to exercise a Director Option will expire on the tenth
anniversary of the date on which the option was granted.
18.3 Once an annual installment grant of a Director Option has become
exercisable, such installment grant may be exercised in whole at any time
or in part from time to time until the expiration of the option, whether or
not any option granted previously to the optionee remains outstanding at
the time of such exercise.
19. PAYMENT OF OPTION PRICE. Payment or provision for payment of the purchase
price shall be made as follows: (i) In cash; (ii) By exchange of Common Stock
valued at its Fair Market Value on the date of exercise; (iii) By means of a
brokers' cashless exercise procedure by the delivery to the Company of an
exercise notice together with irrevocable instructions to a broker to deliver
promptly to the Company the amount of proceeds necessary to pay the purchase
price of the shares of Common Stock as to which such exercise relates; or (iv)
By any combination of the foregoing.
Where payment of the purchase price is to be made with shares of Common
Stock acquired under any compensation plan of the Company, such shares will not
be accepted as payment unless the Director has acquired such shares at least six
months prior to such payment.
20. TERMINATION OF SERVICE. Upon cessation of service as a Director (for
reasons other than retirement or death), including cessation of service due to
physical or mental disability that prevents such person from rendering further
services as a Director, only those options exercisable at the date of cessation
of service shall be exercisable by the Director. Such options shall be
exercisable until the first to occur of: (i) the expiration of the remaining
term of the option or (ii) three months after cessation of service of the
Director.
Upon the retirement or death of a Director, options shall be exercisable as
follows:
(a) Upon retirement as a Director pursuant to a retirement plan maintained
by the Company, all options shall continue to be exercisable during their
terms as if such person had remained a Director.
(b) In the event of the death of a Director while a member of the Board,
or within the period after termination of service during which the options
are exercisable by the Director in accordance with Sections 18 and 20, the
options granted to him shall be exercisable until the first to occur of:
(i) the expiration of the remaining term of the option or (ii) one year
after the date of the Director's death, but only to the extent that the
Director would have been entitled to exercise the options had he lived
during such period.
21. NO GUARANTEED TERM OF OFFICE. Nothing in this Plan or any modification
thereof, and no grant of an option, or any term thereof, shall be deemed an
agreement or condition guaranteeing to any Director any particular term of
office or limiting the right of the Company, the Board of Directors or the
stockholders to terminate the term of office of any Director under the
circumstances set forth in the Company's Certificate of Incorporation or Bylaws,
or as otherwise provided by law.
22. ADJUSTMENTS IN SHARES SUBJECT TO PLAN. If the Company shall at any time
change the number of issued shares of Common Stock without new consideration to
the Company (such as by stock dividend or stock split), the total number of
shares available under the Plan, the number of shares to be granted to each
optionee pursuant to the Plan, hereof, and the number and price of shares of
Common Stock subject to outstanding options, shall be adjusted so that the
aggregate consideration payable to the Company and the value of each option
shall not be changed. If, during the term of any option granted under this
Plan, the Common Stock shall be changed into another kind of
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stock or into securities of another corporation, whether as a result of a
reorganization, recapitalization, sale, merger, consolidation, or other similar
transaction, or if additional rights shall be offered with respect to the Common
Stock, the Board shall cause adequate provision to be made so that the optionees
shall thereafter be entitled to receive, upon the due exercise of any
outstanding options, the securities or rights that the optionees would have been
entitled to receive had they owned the Common Stock acquired on the exercise of
such options on the effective date of any such transaction.
23. OTHER RESTRICTIONS. Sections 10 and 11 of the Plan shall apply to options
granted pursuant to Part III of the Plan.
PART IV
MISCELLANEOUS
24. LEGAL COMPLIANCE. All certificates for Common Stock delivered under the
Plan shall be subject to such transfer and other restrictions as the Committee
may deem advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any stock exchange or quotation system upon
which the Common Stock is then listed or quoted and any applicable federal or
state securities law, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate references to such restrictions.
The Committee may suspend the exercise of any option so long as it determines
that registration or qualification under any federal or state securities laws is
required in connection therewith and has not been completed.
25. CHANGE IN CONTROL. A "Change in Control" for purposes of this Plan shall
mean any one of the events described below:
25.1 At any time during a period of two (2) years, at least a majority of
the Board shall not consist of Continuing Directors. "Continuing
Directors" shall mean directors of the Company at the beginning of such
two-year period and directors who subsequently became such and whose
selection or nomination for election by the Company's stockholders was
approved by a majority of the then Continuing Directors; or
25.2 Any person or "group" (as determined for purposes of Regulation 13D-G
promulgated by the Commission under the Exchange Act or under any successor
regulation), but excluding any majority-owned subsidiary or any employee
benefit plan sponsored by the Company or any subsidiary or any trust or
investment manager for the account of such a plan, shall have acquired
"beneficial ownership" (as determined for purposes of such regulation) of
the Company's securities representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding securities unless
such acquisition is approved in advance by a majority of the directors of
the Company who were in office immediately preceding such acquisition and
any individual selected to fill any vacancy created by reason of the death
or disability of any such director; or
25.3 The Company becomes a party to a merger, consolidation or share
exchange in which either (i) the Company will not be the surviving
corporation or (ii) the Company will be the surviving corporation and any
outstanding shares of Common Stock will be converted into shares of any
other company (other than a reincorporation or the establishment of a
holding company involving no change in ownership of the Company or other
securities or cash or other property (excluding payments made solely for
fractional shares)); or
25.4 The Company's stockholders (i) approve any plan or proposal for the
disposition or other transfer of all, or substantially all, of the assets
of the Company, whether by means of a merger, reorganization, liquidation
or dissolution or otherwise or (ii) dispose of, or become obligated to
dispose of, 50% or more of the outstanding capital stock of the Company by
tender offer or otherwise.
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If a Change in Control has occurred, all outstanding options granted under
the Plan shall be immediately exercisable by the holder of the option for the
total remaining number of Shares covered by the option and shall survive any
such event for the balance of their term.
26. AMENDMENTS AND TERMINATION. The Board shall have the right at any time to
amend, suspend or terminate this Plan in any respect which it may deem to be in
the best interests of the Company; provided, however, that it may not, without
the approval of the stockholders of the Company: (i) except as provided in
Sections 14 and 22 hereof, increase the maximum number of shares reserved for
issuance under the Plan; (ii) except as provided in Sections 14 and 22 hereof,
change the provisions of the Plan relating to the establishment of the option
price; (iii) change the class of persons eligible to participate in the Plan; or
(iv) make any change that would result in any Non-Employee Director losing his
status as a "disinterested administrator" under Rule 16b-3 with respect to any
employee benefit plan of the Company or result in transactions under the Plan
not qualifying for an exemption under Rule 16b-3 or any successor rule.
Except as provided in Sections 14 and 22 hereof, no amendment, modification
or termination of the Plan shall in any manner adversely affect any grant of
options theretofore granted under the Plan, without the consent of the optionee
affected thereby.
27. TAX WITHHOLDING. The Company shall have the authority, with respect to
options granted after the Effective Date, to withhold, or to require an Employee
to remit to the Company, prior to the issuance or delivery of any shares
hereunder, an amount sufficient to satisfy federal, state and local withholding
requirements on any exercise of an option, provided that such withholding does
not result in the loss of the availability of the exemption under Rule 16b-3.
Notwithstanding the last sentence of Section 9 hereof, the Committee may, in its
sole discretion, permit the holder of an option to elect to satisfy withholding
taxes, if any, arising in connection with the exercise of an option either (i)
by delivering to the Company shares of Common Stock then held by such holder or
(ii) by directing the Company to retain shares of Common Stock otherwise
issuable upon the exercise of such option. Any such election shall be
irrevocable and shall be subject to such rules as the Committee may, from time
to time, prescribe.
28. ADDITIONAL RESTRICTIONS. All options shall be subject to and shall contain
such provisions, limitations and restrictions as may be required on the date of
grant to permit the grant of the options to comply with or qualify for the
exemptions with respect to grants of options and stock provided by regulations
under Section 16 of the Exchange Act and other applicable provisions of federal
and state securities laws, and to satisfy the requirements of other applicable
regulatory authorities.
29. TERMINATION OF THE PLAN. The Plan shall terminate ten (10) years after the
Effective Date, subject to earlier termination by the Board pursuant to Section
25.
30. COMPLIANCE WITH RULE 16B-3. With respect to persons subject to Section 16
of the Exchange Act, transactions under this plan are intended to comply with
all applicable conditions of Rule 16b-3 or its successors under the Exchange
Act. To the extent any provision of the plan or action by the Committee fails
to so comply, it shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Committee.
31. SUBSTITUTION OF OPTIONS IN A MERGER, CONSOLIDATION OR SHARE EXCHANGE. In
the event that the Company becomes a party to a merger, consolidation or share
exchange (a "Business Combination") and in connection therewith substitutes
options under the Plan for options of another party to such Business
Combination, notwithstanding the provisions of the Plan, the terms of such
substituted options may have the same terms and conditions (provided that the
number of shares issuable and the exercise prices are adjusted in accordance
with the terms of the Business Combination) as the former options of such other
party to the Business Combination, provided, however, that the exercise price of
the options to be granted under the Plan shall be lawful consideration as
determined by the Committee.
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32. EFFECTIVE DATE; AUTOMATIC TERMINATION OF PLAN. The Amended Plan shall
become effective on May 1, 1998, provided it has been approved by the
stockholders of the Company. The Plan shall automatically terminate on April
30, 2008, unless it is earlier terminated by the Board pursuant to the
provisions of Section 26 hereof. Termination of the Plan shall not affect
awards previously granted under the Plan.
The undersigned, the duly qualified Chairman of the Board of Directors of
the Company, a Delaware corporation, in accordance with Section 157 of the
General Corporation Law of the State of Delaware (title 8, sections 101 et.seq.
of the Delaware Code), and the Certificate of Incorporation of the Company,
hereby certifies the foregoing to be a true and complete copy of the CD
Warehouse Inc. Amended 1996 Stock Option Plan as adopted on the 24th day of
March, 1998, by a resolution of the Board of Directors.
Dated this 24/th/ day of March, 1998.
/s/ Jerry Grizzle
--------------------------------------------
Jerry W. Grizzle, Chairman of the Board of
Directors CD WAREHOUSE, INC.
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EXHIBIT 5.1
[Letterhead of Day, Edwards, Federman, Propester & Christensen, P.C.]
February 18, 1999
CD Warehouse, Inc.
1204 Sovereign Row
Oklahoma City, Oklahoma 73108
Re: CD Warehouse, Inc.
Registration Statement on Form S-8
covering the registration of an aggregate 600,000 shares
File No. 333-__________
Gentlemen:
We have acted as counsel to CD Warehouse, Inc. (the "Company") and certain
selling stockholders (the "Selling Stockholders") in connection with the
registration under the Securities Act of 1933, as amended (the "Act") of an
aggregate of 600,000 shares (the "Shares") of the Company's common stock, par
value $0.01 per share (the "Common Stock"), to be sold by the Selling
Stockholders upon the terms and subject to the conditions set forth in the
Company's registration statement on Form S-8, File No. 333-_______ (the
"Registration Statement").
In connection therewith, we have examined copies of the Company's Amended
and Restated Certificate of Incorporation, Amended and Restated Bylaws, the
corporate proceedings with respect to the offering of shares, and such other
documents and instruments as we have deemed necessary or appropriate for the
expression of the opinions contained herein. In such examination, we have
assumed the genuineness of all signatures, the authenticity and completeness of
all documents submitted to us as originals, the conformity to the original
documents of all documents submitted to us as copies and the correctness of all
statements of fact contained in such documents.
Based on the foregoing, and having regard for such legal considerations as
we have deemed relevant, we are of the opinion that the Shares to be sold by the
Selling Stockholders by means of the Registration Statement, when sold in
accordance with the terms and conditions set forth in the Registration
Statement, will be duly and validly issued, fully paid and nonassessable.
We are members of the Bar of the State of Oklahoma and we express no
opinion as to the laws of any jurisdiction other than the laws of the
State of Oklahoma and the federal laws of the
<PAGE>
DAY, EDWARDS, FEDERMAN, PROPESTER & CHRISTENSEN, P.C.
CD Warehouse, Inc.
Page 2
United States of America. This opinion is for the benefit of the Company and
this opinion may not be relied upon in any manner whatsoever by any other person
or entity.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
DAY, EDWARDS, FEDERMAN, PROPESTER & CHRISTENSEN, P.C.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
Form S-8 No. 333-________ pertaining to the CD Warehouse, Inc. Amended 1996
Stock Option Plan of our report dated February 27, 1998, with respect to the
consolidated financial statements of CD Warehouse, Inc. included in its Annual
Report Form 10-KSB for the year ended December 31, 1997, filed with the
Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Oklahoma City, Oklahoma
February 18, 1999
