<PAGE>
As filed with the Securities and Exchange Commission on October 9, 1998
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 58-1865271
- --------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
211 NORTH UNION STREET, #100
Alexandria, VA 22314
---------------------------------
(Address of principal executive offices)
1997 STOCK INCENTIVE PLAN
-------------------------
(Full title of the plans)
WILLIAM V. CAREY
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
211 NORTH UNION STREET, #100
ALEXANDRIA, VA 22314
(703) 838-5568
(Name, address and telephone number, including area code, of
agent for service)
Copy to:
STEVEN E. BALLEW, ESQ.
HOGAN & HARTSON L.L.P.
555 THIRTEENTH STREET, N.W.
WASHINGTON, D.C. 20004-1109
(202) 637-5600
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================
PROPOSED PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT TO MAXIMUM OFFERING AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED BE REGISTERED PRICE PER SHARE (1) PRICE (1) FEE (1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per
share 750,000 $6.50 $4,875,000 $1,439
=================================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457(c) and (h) solely for purposes of calculating
the amount of the registration fee.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
The documents containing the information specified in Part I of Form S-8
will be sent or given to participants as specified by Rule 428(b)(1) of the
Securities Act of 1933, as amended (the "Securities Act"). In accordance with
the instructions to Part I of Form S-8, such documents will not be filed with
the Securities and Exchange Commission (the "Commission") either as part of this
Registration Statement or as prospectuses or prospectus supplements pursuant to
Rule 424 of the Securities Act.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
Central European Distribution Corporation (the "Registrant") hereby
incorporates by reference into this Registration Statement the following
documents filed by it with the Commission:
(a) The Registrant's final prospectus dated July 27, 1998 as filed with
the Commission pursuant to Rule 424(b) of the Securities Act, which contains
audited consolidated financial statements as of December 31, 1997 and 1996 and
for each of the years in the period ended December 31, 1997 (the "Prospectus");
(b) The Registrant's registration statement on Form 8-A (File Number
000-24341) as filed with the Commission on May 23, 1998;
(c) All reports filed with the Commission pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
since July 27, 1998; and
(d) The description of the Registrant's Common Stock, par value $.01 per
share (the "Common Stock"), contained in the Prospectus.
In addition, all documents and reports filed by the Registrant subsequent
to the date hereof pursuant to Sections 13(a), 13(c), 14, or 15(d) of the
Exchange Act, prior to the filing of a post-effective amendment which indicates
that all securities offered have been sold or which deregisters all securities
remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and to be part hereof from the date of filing of such
documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable. (The Common Stock is registered under Section 12 of the
Exchange Act.)
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
2
<PAGE>
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law ("DGCL"), a
corporation may indemnify its directors, officers, employees and agents and its
former directors, officers, employees and agents and those who serve, at the
corporation's request, in such capacities with another enterprise, against
expenses (including attorneys' fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in which they or
any of them were or are made parties or are threatened to be made parties by
reason of their serving or having served in such capacity. The DGCL provides,
however, that such person must have acted in good faith and in a manner such
person reasonably believed to be in (or not opposed to) the best interests of
the corporation and, in the case of a criminal action, such person must have had
no reasonable cause to believe his or her conduct was unlawful. In addition, the
DGCL does not permit indemnification in any action or suit by or in the right of
the corporation, where such person has been adjudged liable to the corporation,
unless, and only to the extent that, a court determines that such person fairly
and reasonably is entitled to indemnity for costs the court deems proper in
light of liability adjudication. Indemnity is mandatory to the extent a claim,
issue or matter has been successfully defended.
The Certificate of Incorporation of the Registrant contains provisions
that provide that no director of the Registrant shall be liable for breach of
fiduciary duty as a director except for (a) any breach of the director's duty of
loyalty to the Registrant or its stockholders; (b) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the law;
(c) liability under Section 174 of the DGCL; or (d) any transaction from which
the director derived an improper personal benefit. The Certificate of
Incorporation contains provisions that further provide for the indemnification
of directors and officers to the fullest extent permitted by the DGCL. Under
the Bylaws of the Registrant, the Registrant is required to advance expenses
incurred by an officer or director in defending any such action if the director
or officer undertakes to repay such amount if it is determined that the director
or officer is not entitled to indemnification. In addition, the Registrant has
entered into indemnity agreements with each of its directors pursuant to which
the Registrant has agreed to indemnify the directors as permitted by the DGCL
and has obtained directors and officers liability insurance.
* * *
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 Commission such indemnification is
against public policy as expressed in the Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
3
<PAGE>
ITEM 8. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1 Certificate of Incorporation of the Registrant (filed as Exhibit
3.1 to the Registration Statement on Form S-1 (File No. 33-42387)
(the "Registration Statement") and incorporated herein by
reference).
4.2 Bylaws of the Registrant (filed as Exhibit 3.2 to the Registration
Statement and incorporated herein by reference).
4.3 Form of Common Stock Certificate of the Registrant (filed as Exhibit 4
to the Registration Statement and incorporated herein by reference).
4.4 1997 Stock Incentive Plan, as amended.
5.1 Opinion of Hogan & Hartson L.L.P. regarding the legality of the
securities being registered.
23.1 Consent of Ernst & Young Audit Sp. z o.o.
23.2 Consent of Hogan & Hartson L.L.P. (included in their opinion filed as
Exhibit 5.1 hereto).
24.1 Power of Attorney (included on signature pages).
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) 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;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the Registrant pursuant to Section 13 or 15(d) of the
Exchange Act that are incorporated by reference in this Registration
Statement.
(2) 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
4
<PAGE>
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) 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.
(b) 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 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to 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.
(c) The undertaking concerning indemnification is as set forth under the
response to Item 6.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
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 Alexandria, Virginia on the 9th day of October 1998.
CENTRAL EUROPEAN DISTRIBUTION
CORPORATION
BY: /s/ William V. Carey
-----------------------------------
William V. Carey
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William V. Carey and Jeffrey Peterson,
jointly and severally, each in his own capacity, as true and lawful attorneys-
in-fact, with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any amendments to this Registration
Statement (including post-effective amendments), and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE
/s/ William V. Carey Chairman, Chief Executive Officer and
- --------------------
William V. Carey Director (Principal executive officer)
/s/ Jeffrey Peterson Vice Chairman, Executive Director
- --------------------
Jeffrey Peterson
/s/ Robert Bohojlo Chief Financial Officer
- ------------------
Robert Bohojlo (Principal financial officer and
principal accounting officer)
6
<PAGE>
SIGNATURE TITLE
/s/ Joseph S. Conti Director
- --------------------------
Joseph S. Conti
/s/ James T. Grossmann Director
- --------------------------
James T. Grossmann
/s/ James B. Kelly Director
- --------------------------
James B. Kelly
Director
- --------------------------
Jan W. Laskowski
/s/ Joe M. Richardson Director
- --------------------------
Joe M. Richardson
7
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1 Certificate of Incorporation of the Registrant (filed as Exhibit 3.1
to the Registration Statement on Form S-1 (File No. 33-42387) (the
"Registration Statement") and incorporated herein by reference).
4.2 Bylaws of the Registrant (filed as Exhibit 3.2 to the Registration
Statement and incorporated herein by reference).
4.3 Form of Common Stock Certificate of the Registrant (filed as Exhibit 4
to the Registration Statement and incorporated herein by reference).
4.4 1997 Stock Incentive Plan, as amended.
5.1 Opinion of Hogan & Hartson L.L.P. regarding the legality of the
securities being registered.
23.1 Consent of Ernst & Young Audit Sp. z o.o.
23.2 Consent of Hogan & Hartson L.L.P. (included in their opinion filed as
Exhibit 5.1 hereto).
24.1 Power of Attorney (included on signature pages).
8
<PAGE>
EXHIBIT 4.4
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
1997 STOCK INCENTIVE PLAN
AS AMENDED
<PAGE>
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
1997 STOCK INCENTIVE PLAN AS AMENDED
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
1. PURPOSE............................................................ 1
2. DEFINITIONS........................................................ 1
3. ADMINISTRATION OF THE PLAN......................................... 2
4. STOCK SUBJECT TO THE PLAN.......................................... 5
5. EFFECTIVE DATE AND TERM OF THE PLAN................................ 6
6. DISCRETIONARY GRANTS............................................... 6
7. GRANTS TO OUTSIDE DIRECTORS........................................ 6
8. LIMITATIONS ON GRANTS.............................................. 7
9. AWARD AGREEMENT.................................................... 7
10. OPTION PRICE....................................................... 7
11. VESTING, TERM AND EXERCISE OF OPTIONS.............................. 8
12. STOCK APPRECIATION RIGHTS (SARS)................................... 10
13. TRANSFERABILITY OF OPTIONS......................................... 12
14. RESTRICTED STOCK................................................... 12
15. PARACHUTE LIMITATIONS.............................................. 15
16. REQUIREMENTS OF LAW................................................ 15
17. AMENDMENT AND TERMINATION OF THE PLAN.............................. 17
18. EFFECT OF CHANGES IN CAPITALIZATION................................ 17
19. DISCLAIMER OF RIGHTS............................................... 19
20. NONEXCLUSIVITY OF THE PLAN......................................... 20
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
21. WITHHOLDING TAXES..................................................... 20
22. CAPTIONS.............................................................. 20
23. OTHER PROVISIONS...................................................... 20
24. NUMBER AND GENDER..................................................... 20
25. SEVERABILITY.......................................................... 21
26. GOVERNING LAW......................................................... 21
</TABLE>
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<PAGE>
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
1997 STOCK INCENTIVE PLAN AS AMENDED
Central European Distribution Corporation, a Delaware corporation (the
"Company"), sets forth herein the terms of its 1997 Stock Incentive Plan As
Amended (the "Plan") as follows:
1. PURPOSE
The Plan is intended to enhance the Company's ability to attract and retain
highly qualified officers, key employees, outside directors, and other persons
to advance the interests of the Company by providing such persons with stronger
incentives to continue to serve the Company and its affiliates (as defined
herein) and to expend maximum effort to improve the business results and
earnings of the Company. The Plan is intended to accomplish this objective by
providing to eligible persons an opportunity to acquire or increase a direct
proprietary interest in the operations and future success of the Company. To
this end, the Plan provides for the grant of stock options, stock appreciation
rights, restricted stock and restricted stock units in accordance with the terms
hereof. Stock options granted under the Plan may be non-qualified stock options
or incentive stock options, as provided herein, except that stock options
granted to outside directors shall in all cases be non-qualified stock options.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including
Award Agreements), the following definitions shall apply:
2.1 "affiliate" of, or person "affiliated" with, a person means any
company or other trade or business that controls, is controlled by or is under
common control with such person within the meaning of Rule 405 of Regulation C
under the 1933 Act (as defined herein).
2.2 "Award Agreement" means the stock option agreement, stock appreciation
rights agreement, restricted stock agreement, restricted stock unit agreement or
other written agreement between the Company and a Grantee that evidences and
sets out the terms and conditions of a Grant.
2.3 "Benefit Arrangement" shall have the meaning set forth in SECTION 15
hereof.
2.4 "Board" means the Board of Directors of the Company.
<PAGE>
2.5 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended.
2.6 "Committee" means a Committee of, and designated from time to time by
resolution of the Board, which shall consist of no fewer than two members of the
Board, none of whom shall be an officer or other salaried employee of the
Company or any affiliate, and each of whom shall qualify in all respects as a
"non-employee director" within the meaning of Rule 16b-3 under the Exchange Act
or any successor rule or regulation. Commencing on the Effective Date, and until
such time as the Board shall determine otherwise, the Committee shall be the
Compensation Committee of the Board.
2.7 "Company" means Central European Distribution Corporation.
2.8 "Effective Date" means November 27, 1997, the date on which the Plan
was adopted by the Board.
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.10 "Fair Market Value" means the value of a share of Stock, determined as
follows: if on the Grant Date or other determination date the Stock is listed
on an established national or regional stock exchange, is admitted to quotation
on a Nasdaq market, or is publicly traded on an established securities market,
the Fair Market Value of a share of Stock shall be the closing price of the
Stock on such exchange or in such market (the highest such closing price if
there is more than one such exchange or market) on the Grant Date or such other
determination date (or if there is no such reported closing price, the Fair
Market Value shall be the mean between the highest bid and lowest asked prices
or between the high and low sale prices on such trading day) or, if no sale of
Stock is reported for such trading day, on the next preceding day on which any
sale shall have been reported. If the Stock is not listed on such an exchange,
quoted on such system or traded on such a market, Fair Market Value shall be the
value of the Stock as determined by the Committee in good faith.
2.11 "Grant" means an award of an Option, Stock Appreciation Rights,
Restricted Stock or Restricted Stock Units under the Plan.
2.12 "Grant Date" means (a) for Grants other than Grants to Outside
Directors, the later of (i) the date as of which the Committee approves the
Grant or (ii) the date as of which the Grantee and the Company or Service
Provider enter into the relationship resulting in the Grantee's becoming
eligible to receive a Grant, and (b) for Grants to Outside Directors, the date
on which such Grant is made in accordance with SECTION 7 hereof.
2
<PAGE>
2.13 "Grantee" means a person who receives or holds an Option, Stock
Appreciation Rights, Restricted Stock or Restricted Stock Units under the Plan.
2.14 "Incentive Stock Option" means an "incentive stock option" within the
meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.
2.15 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.16 "Option Period" means the period during which Options may be
exercised as set forth in SECTION 11 hereof.
2.17 "Option Price" means the purchase price for each share of Stock
subject to an Option or Stock Appreciation Rights.
2.18 "Other Agreement" shall have the meaning set forth in SECTION 15
hereof.
2.19 "Outside Director" means a member of the Board who is not an officer
or employee of the Company.
2.20 "Plan" means the Central European Distribution Corporation 1997 Stock
Incentive Plan.
2.21 "Reporting Person" means a person who is required to file reports
under Section 16(a) of the Exchange Act.
2.22 "Restricted Period" means the period during which Restricted Stock or
Restricted Stock Units are subject to restrictions or conditions pursuant to
SECTION 14.2 hereof.
2.23 "Restricted Stock" means shares of Stock, awarded to a Grantee
pursuant to SECTION 14 hereof, that are subject to restrictions and to a risk of
forfeiture.
2.24 "Restricted Stock Unit" means a unit awarded to a Grantee pursuant to
SECTION 14 hereof, which represents a conditional right to receive a share of
Stock in the future, and which is subject to restrictions and to a risk of
forfeiture.
2.25 "Securities Act" means the Securities Act of 1933, as now in effect
or as hereafter amended.
2.26 "Service Provider" means a consultant or adviser to the Company, a
manager of the Company's properties or affairs, or other similar service
provider or
3
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affiliate of the Company, and employees of any of the foregoing, as such persons
may be designated from time to time by the Committee pursuant to SECTION 6
hereof.
2.27 "Stock" means the common stock, par value $0.01 per share, of the
Company.
2.28 "Stock Appreciation Right" means a right granted pursuant to SECTION
15 hereof to receive a payment by the Company of an amount equal to the excess
of the fair market value of the shares of Stock subject to such Grant, or
portion thereof, so surrendered over the Option Price of such shares.
2.28 "Subsidiary" means any "subsidiary corporation" of the Company within
the meaning of Section 425(f) of the Code.
2.29 "Termination Date" shall be the date upon which an Option shall
terminate or expire, as set forth in SECTION 11.2 hereof.
3. ADMINISTRATION OF THE PLAN
3.1 General. The Plan shall be administered by the Board, which shall
-------
have the full power and authority to take all actions and to make all
determinations required or provided for under the Plan, any Option granted or
any Award Agreement entered into hereunder. The Board shall have full power and
authority to take all such other actions and determinations not inconsistent
with the specific terms and provisions of the Plan, which the Board deems to be
necessary or appropriate to the administration of the Plan, any Option granted
hereunder or any Award Agreement entered into hereunder. The Board's
interpretation and construction of any provision of the Plan, any Option granted
hereunder or any Award Agreement entered into hereunder shall be final, binding
and conclusive.
3.2 Committee. The Board, in its sole discretion, may provide that the
---------
role of the Committee shall be limited to making recommendations to the Board
concerning any determinations to be made and actions to be taken by the Board
pursuant to or with respect to the Plan, or the Board may delegate to the
Committee such powers and authorities related to the administration of the Plan,
as set forth in SECTION 3.1 above, as the Board shall determine, consistent with
the Certificate of Incorporation and By-laws of the Corporation and applicable
law. In the event that the Plan or any Option granted or Award Agreement
entered into hereunder provides for any action to be taken by or determination
to be made by the Board, such action may be taken by or such determination may
be made by the Committee if the power and authority to do so has been delegated
to the Committee by the Board as provided for in this Section. Unless otherwise
expressly determined by the Board, any such action or determination by the
Committee shall be final and conclusive.
4
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3.3 Discretionary Grants. Subject to SECTION 3.4 hereof and to the other
--------------------
terms and conditions of the Plan, the Committee shall have full and final
authority to designate Grantees, (i) to determine the type or types of Grant to
be made to a Grantee, (ii) to determine the number of shares of Stock to be
subject to a Grant, (iii) to establish the terms and conditions of each Grant
(including, but not limited to, the exercise price of any Option, the nature and
duration of any restriction or condition (or provision for lapse thereof)
relating to the vesting, exercise, transfer, or forfeiture of a Grant or the
shares of Stock subject thereto, and any terms or conditions that may be
necessary to qualify Options as Incentive Stock Options), (iv) to prescribe the
form of each Award Agreement evidencing a Grant, and (v) to amend, modify, or
supplement the terms of any outstanding Grant. Such authority specifically
includes the authority, in order to effectuate the purposes of the Plan but
without amending the Plan, to modify Grants to eligible individuals who are
foreign nationals or are individuals who are employed outside the United States
to recognize differences in local law, tax policy, or custom. As a condition to
any subsequent Grant, the Committee shall have the right, at its discretion, to
require Grantees to return to the Company Grants previously awarded under the
Plan. Subject to the terms and conditions of the Plan, any such new Grant shall
be upon such terms and conditions as are specified by the Committee at the time
the new Grant is made.
3.4 Grants to Outside Directors. With respect to Grants of Options to
----------------------------
Outside Directors pursuant to SECTION 7 hereof, the Committee's responsibilities
under the Plan shall be limited to taking all legal actions necessary to
document the Options so granted, to interpret the Award Agreements evidencing
such Options, to maintain appropriate records and reports regarding such
Options, and to take all acts authorized by this Plan or otherwise reasonably
necessary to effect the purposes hereof.
3.5 No Liability. No member of the Board or of the Committee shall be
------------
liable for any action or determination made in good faith with respect to the
Plan or any Grant or Award Agreement.
3.6 Applicability of Rule 16b-3. Those provisions of the Plan that make
---------------------------
express reference to Rule 16b-3 under the Exchange Act shall apply only to
Reporting Persons.
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in SECTION 17 hereof, the number of
shares of Stock available for issuance under the Plan shall be 750,000. Stock
issued or to be issued under the Plan shall be authorized but unissued shares.
If any shares covered by a Grant are not purchased or are forfeited, or if a
Grant otherwise terminates without delivery of any Stock subject thereto, then
the number of shares
5
<PAGE>
of Stock counted against the aggregate number of shares available under the Plan
with respect to such Grant shall, to the extent of any such forfeiture or
termination, again be available for making Grants under the Plan.
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1 Effective Date. The Plan shall be effective as of the Effective Date,
--------------
subject to approval of the Plan within one year of the Effective Date, by a
majority of the votes cast on the proposal at a meeting of shareholders,
provided that the total votes cast represent a majority of all shares entitled
to vote. Upon approval of the Plan by the shareholders of the Company as set
forth above, all Grants made under the Plan on or after the Effective Date shall
be fully effective as if the shareholders of the Company had approved the Plan
on the Effective Date. If the shareholders fail to approve the Plan within one
year after the Effective Date, any Grants made hereunder shall be null and void
and of no effect.
5.2 Term. The Plan shall terminate on the tenth anniversary of the
----
Effective Date.
6. DISCRETIONARY GRANTS
6.1 Company or Subsidiary Employees. Grants (including Grants of Incentive
-------------------------------
Stock Options) may be made under the Plan to any employee of the Company or of
any Subsidiary, including any such employee who is an officer or director of the
Company or of any Subsidiary, as the Committee shall determine and designate
from time to time.
6.2 Service Providers. Grants may be made under the Plan to any Service
-----------------
Provider whose participation in the Plan is determined by the Committee to be in
the best interests of the Company and is so designated by the Committee;
provided, however, that Grants to Service Providers who are not employees of the
- --------
Company or of any Subsidiary shall not be Incentive Stock Options.
6.3 Successive Grants. An eligible person may receive more than one Grant,
-----------------
subject to such restrictions as are provided herein.
7. GRANTS TO OUTSIDE DIRECTORS
Each Outside Director who is initially elected to the Board on or after the
Effective Date shall, upon the date of his or her initial election by the Board
or the shareholders of the Company, automatically be awarded a Grant of an
Option, which shall not be an Incentive Stock Option, to purchase 3,500 shares
of Stock (which amount shall be subject to adjustment as provided in SECTION 17
hereof).
6
<PAGE>
8. LIMITATIONS ON GRANTS
8.1 Limitation on Shares of Stock Subject to Grants. The maximum number of
-----------------------------------------------
shares of Stock subject to Options that can be awarded under the Plan to any
person eligible for a Grant under SECTION 6 hereof is 60,000 per year. The
maximum number of shares of Restricted Stock that can be awarded under the Plan
(including for this purpose any shares of Stock represented by Restricted Stock
Units) to any person eligible for a Grant under SECTION 6 hereof is 60,000 per
year.
8.2 Limitations on Incentive Stock Options. An Option shall constitute an
---------------------------------------
Incentive Stock Option only (i) if the Grantee of such Option is an employee of
the Company or any Subsidiary of the Company; (ii) to the extent specifically
provided in the related Award Agreement; and (iii) to the extent that the
aggregate Fair Market Value (determined at the time the Option is granted) of
the shares of Stock with respect to which all Incentive Stock Options held by
such Grantee become exercisable for the first time during any calendar year
(under the Plan and all other plans of the Grantee's employer and its
affiliates) does not exceed $100,000. This limitation shall be applied by
taking Options into account in the order in which they were granted.
9. AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award Agreement,
to be executed by the Company and by the Grantee, in such form or forms as the
Committee shall from time to time determine. Award Agreements granted from time
to time or at the same time need not contain similar provisions but shall be
consistent with the terms of the Plan. Each Award Agreement evidencing a Grant
of Options shall specify whether such Options are intended to be non-qualified
stock options or Incentive Stock Options.
10. OPTION PRICE
The Option Price of each Option shall be fixed by the Committee and stated
in the Award Agreement evidencing such Option. The Option Price shall be the
aggregate Fair Market Value on the Grant Date of the shares of Stock subject to
the Option; provided, however, that in the event that a Grantee would otherwise
-------- -------
be ineligible to receive an Incentive Stock Option by reason of the provisions
of Sections 422(b)(6) and 424(d) of the Code (relating to ownership of more than
ten percent of the Company's outstanding Stock), the Option Price of an Option
granted to such Grantee that is intended to be an Incentive Stock Option shall
be not less than the greater of the par value of a share of Stock or 110 percent
of the Fair Market Value of a share of Stock on the Grant Date. In no case
shall the Option Price of any Option be less than the par value of a share of
Stock.
7
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11. VESTING, TERM AND EXERCISE OF OPTIONS
11.1 Vesting and Option Period. Each Option granted under the Plan shall
-------------------------
be exercisable, in whole or in part, at any time and from time to time over a
period commencing on or after the Grant Date and ending upon the expiration or
termination of the Option, as the Committee shall determine and set forth in the
Award Agreement relating to such Option; provided, however, that each Option
-------- -------
granted to an Outside Director shall be exercisable, in whole or in part, at any
time and from time to time over the period commencing on the Grant Date and
ending upon the expiration or termination of the Option. Without limiting the
foregoing, the Committee, subject to the terms and conditions of the Plan, may
in its sole discretion provide that an Option granted to persons other than
Outside Directors may not be exercised in whole or in part for a stated period
or periods of time during which such Option is outstanding. For purposes of this
SECTION 11.1, fractional numbers of shares of Stock subject to an Option shall
be rounded down to the next nearest whole number. The period during which any
Option shall be exercisable in accordance with the foregoing schedule shall
constitute the "Option Period" with respect to such Option.
11.2 Term. Each Option granted under the Plan shall terminate, and all
----
rights to purchase shares of Stock thereunder shall cease, upon the expiration
of ten years from the date such Option is granted, or, with respect to Options
granted to persons other than Outside Directors, under such circumstances and on
such date prior thereto as is set forth in the Plan or as may be fixed by the
Committee and stated in the Award Agreement relating to such Option (the
"Termination Date"); provided, however, that in the event that the Grantee would
-------- -------
otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership
of more than ten percent of the outstanding Stock), an Option granted to such
Grantee that is intended to be an Incentive Stock Option shall not be
exercisable after the expiration of five years from its Grant Date.
11.3 Acceleration. Any limitation on the exercise of an Option contained
------------
in any Award Agreement may be rescinded, modified or waived by the Committee, in
its sole discretion, at any time and from time to time after the Grant Date of
such Option, so as to accelerate the time at which the Option may be exercised.
Notwithstanding any other provision of the Plan, no Option shall be exercisable
in whole or in part prior to the date the Plan is approved by the shareholders
of the Company as provided in SECTION 5.1 hereof.
11.4 Termination of Employment or Other Relationship. Upon the termination
-----------------------------------------------
(i) of the employment of a Grantee with the Company or a Service Provider, (ii)
of a Service Provider's relationship with the Company, or (iii) of an Outside
Director's service to the Company, other than, in the case of individuals, by
reason of death or "permanent and total disability" (within the meaning of
8
<PAGE>
Section 22(e)(3) of the Code), any Option or portion thereof held by such
Grantee that has not vested in accordance with the provisions of SECTION 11.1
hereof shall terminate immediately, and any Option or portion thereof that has
vested in accordance with the provisions of SECTION 11.1 hereof but has not been
exercised shall terminate at the close of business on the ninetieth day
following the Grantee's termination of service, employment, or other
relationship, unless the Committee, in its discretion, extends the period during
which the Option may be exercised (which period may not be extended beyond the
original term of the Option). Upon termination of an Option or portion thereof,
the Grantee shall have no further right to purchase shares of Stock pursuant to
such Option or portion thereof. Whether a leave of absence or leave on military
or government service shall constitute a termination of employment for purposes
of the Plan shall be determined by the Committee, which determination shall be
final and conclusive. For purposes of the Plan, a termination of employment,
service or other relationship shall not be deemed to occur if the Grantee is
immediately thereafter employed with an affiliate of the Company or any other
Service Provider, or is engaged as a Service Provider or an Outside Director of
the Company. Whether a termination of a Service Provider's or an Outside
Director's relationship with the Company shall have occurred shall be determined
by the Committee, which determination shall be final and conclusive.
11.5 Rights in the Event of Death. If a Grantee dies while employed by the
----------------------------
Company or a Service Provider, or while serving as a Service Provider or an
Outside Director, all Options granted to such Grantee shall fully vest on the
date of death, and the executors or administrators or legatees or distributees
of such Grantee's estate shall have the right, at any time within two years
after the date of such Grantee's death (or such longer period as the Committee,
in its discretion, may determine prior to the expiration of such one-year
period) and prior to termination of the Option pursuant to SECTION 11.2 above,
to exercise any Option held by such Grantee at the date of such Grantee's death.
11.6 Rights in the Event of Disability. If a Grantee terminates employment
---------------------------------
with the Company or a Service Provider, or (if the Grantee is a Service Provider
who is an individual or is an Outside Director) ceases to provide services to
the Company, in either case by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Grantee, such
Grantee's Options shall continue to vest, and shall be exercisable to the extent
that they are vested, for a period of one year after such termination of
employment or service (or such longer period as the Committee, in its
discretion, may determine prior to the expiration of such one-year period),
subject to earlier termination of the Option as provided in SECTION 11.2 above.
Whether a termination of employment or service is to be considered by reason of
"permanent and total disability" for purposes of the Plan shall be determined by
the Committee, which determination shall be final and conclusive.
9
<PAGE>
11.7 Limitations on Exercise of Option. Notwithstanding any other
---------------------------------
provision of the Plan, in no event may any Option be exercised, in whole or in
part, prior to the date the Plan is approved by the shareholders of the Company
as provided herein, or after ten years following the date upon which the Option
is granted, or after the occurrence of an event referred to in SECTION 17 hereof
which results in termination of the Option.
11.8 Method of Exercise. An Option that is exercisable may be exercised by
------------------
the Grantee's delivery to the Company of written notice of exercise on any
business day, at the Company's principal office, addressed to the attention of
the Committee. Such notice shall specify the number of shares of Stock with
respect to which the Option is being exercised and shall be accompanied by
payment in full of the Option Price of the shares for which the Option is being
exercised. The minimum number of shares of Stock with respect to which an Option
may be exercised, in whole or in part, at any time shall be the lesser of (i)
100 shares or such lesser number set forth in the applicable Award Agreement and
(ii) the maximum number of shares available for purchase under the Option at the
time of exercise. Payment of the Option Price for the shares purchased pursuant
to the exercise of an Option shall be made in cash or in cash equivalents. An
attempt to exercise any Option granted hereunder other than as set forth above
shall be invalid and of no force and effect. Unless otherwise stated in the
applicable Award Agreement, an individual holding or exercising an Option shall
have none of the rights of a shareholder (for example, the right to receive cash
or dividend payments or distributions attributable to the subject shares of
Stock or to direct the voting of the subject shares of Stock ) until the shares
of Stock covered thereby are fully paid and issued to him. Except as provided in
SECTION 18 hereof, no adjustment shall be made for dividends, distributions or
other rights for which the record date is prior to the date of such issuance.
11.9 Delivery of Stock Certificates. Promptly after the exercise of an
------------------------------
Option by a Grantee and the payment in full of the Option Price, such Grantee
shall be entitled to the issuance of a stock certificate or certificates
evidencing his or her ownership of the shares of Stock subject to the Option.
12. STOCK APPRECIATION RIGHTS (SARS)
12.1 In General. Subject to the terms and conditions of the Plan, the
----------
Committee may, in its sole and absolute discretion, grant to a Grantee rights to
receive payment by the Company of an amount equal to the excess of the fair
market value of the shares of Stock subject to such Award Agreement, or portion
thereof, so surrendered (determined in the manner described in SECTION 2.10
above as of the date the SARs are exercised) over the Option Price of such
shares. Such payment may be made, as determined by the Committee in accordance
with SECTIONS 12.4 and 12.5 below and set forth in the Award Agreement, either
in shares of Stock or in cash or in any combination thereof. All SARs shall be
10
<PAGE>
evidenced by provisions in an Award Agreement, which provisions shall comply
with and be subject to the terms and conditions set forth in this SECTION 12.
12.2 Grant. Each SAR shall relate to a specific number of shares of Stock.
-----
The number of SARs held by a Grantee shall be reduced by the number of SARs
exercised for Stock or cash under the provisions of the Award Agreement.
12.3 Exercise. SARs that are exercisable hereunder and under the Award
--------
Agreement may be exercised by delivering to the Company on any business day, at
its principal office, addressed to the attention of the Committee, written
notice of exercise, which notice shall specify the number of SARs being
exercised. The date upon which such written notice is received by the Company
shall be the exercise date of the SARs. Except to the extent that SARs are
exercised for cash as provided in SECTION 12.5 below, the individual exercising
SARs shall receive, without payment therefor to the Company, the number of
shares of Stock determined under SECTION 12.4 below. Promptly after the
exercise of SARs, the individual exercising the SARs shall be entitled to the
issuance of a Stock certificate or certificates evidencing ownership of such
shares. An individual holding or exercising SARs shall have none of the rights
of a shareholder with respect to any shares of Stock covered by the SARs until
shares of Stock are issued to him or her, and, except as provided in SECTION 19
below, no adjustment shall be made for dividends or other rights for which the
record date is prior to the date of such issuance.
12.4 Number of Shares of Stock. The number of shares of Stock which shall
-------------------------
be issued pursuant to the exercise of SARs shall be determined by dividing (i)
the total number of SARs being exercised, multiplied by the amount by which the
fair market value (determined in the manner described in SECTION 2.10 above) of
a share of Stock on the exercise date exceeds the Option Price of the shares of
Stock subject to the Award Agreement by (ii) the fair market value (determined
in the manner described in SECTION 2.10 above) of a share of Stock on the
exercise date of the SARs; provided, however, that no fractional share shall be
-------- -------
issued on exercise of SARs, and that cash shall be paid by the Company to the
individual exercising SARs in lieu of any such fractional share.
11
<PAGE>
12.5 Exercise of SARs for Cash. The Committee shall have sole discretion to
-------------------------
determine whether, and shall set forth in the Award Agreement the circumstances
under which, payment in respect of SARs granted to any Grantee shall be made in
shares of Stock, or in cash, or in a combination thereof. Promptly after the
exercise of an SAR for cash, the individual exercising the SAR shall receive in
respect of said SAR an amount of money equal to the difference between the fair
market value (determined in the manner described in SECTION 2.10 above) of a
share of Stock on the exercise date and the Option Price.
12.6 Limitations. SARs shall be exercisable at such times and under such
-----------
terms and conditions as the Committee, in its sole and absolute discretion,
shall determine and set forth in the Award Agreements; provided, however, that
-------- -------
an SAR may be exercised only at such times and by such individuals as the Award
Agreement provides; and provided, further, that an SAR may be exercised only at
-------- -------
such times as the fair market value (determined in the manner described in
SECTION 2.10 above) of a share of Stock on the exercise date exceeds the Option
Price. Adjustments in the number, kind, or Option Price of shares of Stock for
which Awards are granted pursuant to SECTION 19 below shall be made as necessary
to the related SARs held by each Grantee. Any amendment, suspension or
termination of the Plan pursuant to SECTION 18 below shall be deemed an
amendment, suspension or termination of SARs to the same extent.
13. TRANSFERABILITY OF OPTIONS
During the lifetime of an Optionee, only such Optionee (or, in the event of
legal incapacity or incompetency, the guardian or legal representative of the
Optionee) may exercise the Option, except as otherwise specifically permitted by
this SECTION 13. No Option shall be assignable or transferable other than by
will or in accordance with the laws of descent and distribution; provided,
--------
however, to the extent permitted under the applicable Award Agreement, and to
- -------
the extent the transfer is in compliance with any applicable restrictions on
transfers, an Optionee may transfer a non-qualified stock option to a family
member of the Optionee (defined as an individual who is related to the Optionee
by blood or adoption), to a trust established and maintained for the benefit of
the Optionee or a family member of the Optionee (as determined under applicable
state law and the Code) or to a partnership in which family members are the only
partners, provided that (x) there may be no consideration for any such transfer,
and (y) subsequent transfers of transferred Options are prohibited except those
in accordance with this SECTION 13 or by will or the laws of descent and
distribution.
14. RESTRICTED STOCK
14.1 Grant of Restricted Stock or Restricted Stock Units. The Committee may
---------------------------------------------------
from time to time grant Restricted Stock or Restricted Stock Units to persons
12
<PAGE>
eligible to receive such Grants as set forth in SECTION 6 hereof, subject to
such restrictions, conditions and other terms as the Committee may determine.
14.2 Restrictions. At the time a Grant of Restricted Stock or Restricted
------------
Stock Units is made, the Committee shall establish a period of time (the
"Restricted Period") applicable to such Restricted Stock or Restricted Stock
Units. Each Grant of Restricted Stock or Restricted Stock Units may be subject
to a different Restricted Period. The Committee may, in its sole discretion, at
the time a Grant of Restricted Stock or Restricted Stock Units is made,
prescribe restrictions in addition to or other than the expiration of the
Restricted Period, including the satisfaction of corporate or individual
performance objectives, which may be applicable to all or any portion of the
Restricted Stock or Restricted Stock Units. Such performance objectives shall
be established in writing by the Committee prior to the ninetieth day of the
year in which the Grant is made and while the outcome is substantially
uncertain. Performance objectives shall be based on Stock price, market share,
sales, earnings per share, return on equity or costs. Performance objectives
may include positive results, maintaining the status quo or limiting economic
losses. The Committee also may, in its sole discretion, shorten or terminate
the Restricted Period or waive any other restrictions applicable to all or a
portion of the Restricted Stock or Restricted Stock Units. Neither Restricted
Stock nor Restricted Stock Units may be sold, transferred, assigned, pledged or
otherwise encumbered or disposed of during the Restricted Period or prior to the
satisfaction of any other restrictions prescribed by the Committee with respect
to such Restricted Stock or Restricted Stock Units.
14.3 Restricted Stock Certificates. The Company shall issue, in the name of
-----------------------------
each Grantee to whom Restricted Stock has been granted, stock certificates
representing the total number of shares of Restricted Stock granted to the
Grantee, as soon as reasonably practicable after the Grant Date. The Secretary
of the Company shall hold such certificates for the Grantee's benefit until such
time as the Restricted Stock is forfeited to the Company, or the restrictions
lapse.
14.4 Rights of Holders of Restricted Stock. Unless the Committee otherwise
-------------------------------------
provides in an Award Agreement, holders of Restricted Stock shall have the right
to vote such Stock and the right to receive any dividends declared or paid with
respect to such Stock. The Committee may provide that any dividends paid on
Restricted Stock must be reinvested in shares of Stock, which may or may not be
subject to the same vesting conditions and restrictions applicable to such
Restricted Stock. All distributions, if any, received by a Grantee with respect
to Restricted Stock as a result of any stock split, stock dividend, combination
of shares, or other similar transaction shall be subject to the restrictions
applicable to the original Grant.
14.5 Rights of Holders of Restricted Stock Units. Unless the Committee
-------------------------------------------
otherwise provides in an Award Agreement, holders of Restricted Stock Units
shall have no rights as stockholders of the Company. The Committee may provide
in an
13
<PAGE>
Award Agreement evidencing a Grant of Restricted Stock Units that the holder of
such Restricted Stock Units shall be entitled to receive, upon the Company's
payment of a cash dividend on its outstanding Stock, a cash payment for each
Restricted Stock Unit held equal to the per-share dividend paid on the Stock.
Such Award Agreement may also provide that such cash payment will be deemed
reinvested in additional Restricted Stock Units at a price per unit equal to the
Fair Market Value of a share of Stock on the date that such dividend is paid.
14.6 Termination of Employment or Other Relationship. Upon the termination
-----------------------------------------------
of the employment of a Grantee with the Company or a Service Provider, or of a
Service Provider's relationship with the Company, in either case other than, in
the case of individuals, by reason of death or "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code), any Restricted Stock or
Restricted Stock Units held by such Grantee that has not vested, or with respect
to which all applicable restrictions and conditions have not lapsed, shall
immediately be deemed forfeited, unless the Committee, in its discretion,
determines otherwise. Upon forfeiture of Restricted Stock or Restricted Stock
Units, the Grantee shall have no further rights with respect to such Grant,
including but not limited to any right to vote Restricted Stock or any right to
receive dividends with respect to shares of Restricted Stock or Restricted Stock
Units. Whether a leave of absence or leave on military or government service
shall constitute a termination of employment for purposes of the Plan shall be
determined by the Committee, which determination shall be final and conclusive.
For purposes of the Plan, a termination of employment, service or other
relationship shall not be deemed to occur if the Grantee is immediately
thereafter employed with the Company or any other Service Provider, or is
engaged as a Service Provider. Whether a termination of a Service Provider's
relationship with the Company shall have occurred shall be determined by the
Committee, which determination shall be final and conclusive.
14.7 Rights in the Event of Death. If a Grantee dies while employed by the
----------------------------
Company or a Service Provider or while serving as a Service Provider, all
Restricted Stock or Restricted Stock Units granted to such Grantee shall fully
vest on the date of death, and the shares of Stock represented thereby shall be
deliverable in accordance with the terms of the Plan to the executors,
administrators, legatees or distributees of the Grantee's estate.
14.8 Rights in the Event of Disability. If a Grantee terminates employment
---------------------------------
with the Company or a Service Provider, or (if the Grantee is a Service Provider
who is an individual) ceases to provide services to the Company, in either case
by reason of the "permanent and total disability" (within the meaning of Section
22(e)(3) of the Code) of such Grantee, such Grantee's Restricted Stock or
Restricted Stock Units shall continue to vest in accordance with the applicable
Award Agreement for a period of one year after such termination of employment or
service (or such longer period as the Committee, in its discretion, may
determine
14
<PAGE>
prior to the expiration of such one-year period), subject to the earlier
forfeiture of such Restricted Stock or Restricted Stock Units in accordance with
the terms of the applicable Award Agreement. Whether a termination of employment
or service is to be considered by reason of "permanent and total disability" for
purposes of the Plan shall be determined by the Committee, which determination
shall be final and conclusive.
14.9 Delivery of Stock and Payment Therefor. Upon the expiration or
--------------------------------------
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee, the restrictions applicable to shares of
Restricted Stock or Restricted Stock Units shall lapse, and, upon payment by the
Grantee to the Company, in cash or by check, of the aggregate par value of the
shares of Stock represented by such Restricted Stock or Restricted Stock Units,
a stock certificate for such shares shall be delivered, free of all such
restrictions, to the Grantee or the Grantee's beneficiary or estate, as the case
may be.
15. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other agreement,
contract, or understanding heretofore or hereafter entered into by a Grantee
with the Company or any Subsidiary, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an "Other Agreement"), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
participants or beneficiaries of which the Grantee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or
for the Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified
individual," as defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Restricted Stock Unit held by that Grantee and any right to receive any
payment or other benefit under this Plan shall not become exercisable or vested
(i) to the extent that such right to exercise, vesting, payment, or benefit,
taking into account all other rights, payments, or benefits to or for the
Grantee under this Plan, all Other Agreements, and all Benefit Arrangements,
would cause any payment or benefit to the Grantee under this Plan to be
considered a "parachute payment" within the meaning of Section 280G(b)(2) of the
Code as then in effect (a "Parachute Payment") and (ii) if, as a result of
---
receiving a Parachute Payment, the aggregate after-tax amounts received by the
Grantee from the Company under this Plan, all Other Agreements, and all Benefit
Arrangements would be less than the maximum after-tax amount that could be
received by the Grantee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment, or benefit under this Plan, in conjunction with
all other rights, payments, or benefits to or for the Grantee under any Other
Agreement or any Benefit Arrangement would cause the Grantee to be considered to
have received a Parachute Payment under this Plan that would have the effect of
decreasing the
15
<PAGE>
after-tax amount received by the Grantee as described in clause (ii) of the
preceding sentence, then the Grantee shall have the right, in the Grantee's sole
discretion, to designate those rights, payments, or benefits under this Plan,
any Other Agreements, and any Benefit Arrangements that should be reduced or
eliminated so as to avoid having the payment or benefit to the Grantee under
this Plan be deemed to be a Parachute Payment.
16. REQUIREMENTS OF LAW
16.1 General. The Company shall not be required to sell or issue any shares
-------
of Stock under any Grant if the sale or issuance of such shares would constitute
a violation by the Grantee, any other individual exercising an Option, or the
Company of any provision of any law or regulation of any governmental authority,
including without limitation any United States federal or state securities laws
or regulations. If at any time the Company shall determine, in its discretion,
that the listing, registration or qualification of any shares subject to a
Grant upon any securities exchange or under any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of shares hereunder, no shares of Stock may be issued or sold to the
Grantee or any other individual exercising an Option pursuant to such Grant
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Company,
and any delay caused thereby shall in no way affect the date of termination of
the Grant. Specifically, in connection with the Securities Act, upon the
exercise of any Option or the delivery of any shares of Restricted Stock or
Stock underlying Restricted Stock Units, unless a registration statement under
such Act is in effect with respect to the shares of Stock covered by such Grant,
the Company shall not be required to sell or issue such shares unless the
Committee has received evidence satisfactory to it that the Grantee or any other
individual exercising an Option may acquire such shares pursuant to an
exemption from registration under the Securities Act. Any determination in this
connection by the Committee shall be final, binding, and conclusive. The
Company may, but shall in no event be obligated to, register any securities
covered hereby pursuant to the Securities Act. The Company shall not be
obligated to take any affirmative action in order to cause the exercise of an
Option or the issuance of shares of Stock pursuant to the Plan to comply with
any law or regulation of any governmental authority. As to any jurisdiction
that expressly imposes the requirement that an Option shall not be exercisable
until the shares of Stock covered by such Option are registered or are exempt
from registration, the exercise of such Option (under circumstances in which the
laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.
16.2 Rule 16b-3. It is the intent of the Company that Grants pursuant to
----------
the Plan and the exercise of Options granted hereunder will qualify for the
exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any
provision
16
<PAGE>
of the Plan or action by the Committee does not comply with the requirements of
Rule 16b-3, it shall be deemed inoperative to the extent permitted by law and
deemed advisable by the Committee, and shall not affect the validity of the
Plan. In the event that Rule 16b-3 is revised or replaced, the Board may
exercise its discretion to modify this Plan in any respect necessary to satisfy
the requirements of, or to take advantage of any features of, the revised
exemption or its replacement.
17. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Grants have not been
made; provided, however, that the Board shall not, without approval of the
-------- -------
Company's shareholders, amend the Plan such that it does not comply with the
Code. The Company may retain the right in an Award Agreement to cause a
forfeiture of the gain realized by a Grantee on account of the Grantee taking
actions in "competition with the Company," as defined in the applicable Award
Agreement. Furthermore, the Company may annul a Grant if the Grantee is an
employee of the Company or an affiliate and is terminated "for cause" as defined
in the applicable Award Agreement. Except as permitted under this SECTION 17 or
SECTION 18 hereof, no amendment, suspension, or termination of the Plan shall,
without the consent of the Grantee, alter or impair rights or obligations under
any Grant theretofore awarded under the Plan.
18. EFFECT OF CHANGES IN CAPITALIZATION
18.1 Changes in Stock. If the number of outstanding shares of Stock is
----------------
increased or decreased or the shares of Stock are changed into or exchanged for
a different number or kind of shares or other securities of the Company on
account of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Company occurring after the Effective
Date, the number and kinds of shares for which Grants of Options, Restricted
Stock and Restricted Stock Units may be made under the Plan shall be adjusted
proportionately and accordingly by the Company. In addition, the number and
kind of shares for which Grants are outstanding shall be adjusted
proportionately and accordingly so that the proportionate interest of the
Grantee immediately following such event shall, to the extent practicable, be
the same as immediately before such event. Any such adjustment in outstanding
Options shall not change the aggregate Option Price payable with respect to
shares that are subject to the unexercised portion of the Option outstanding but
shall include a corresponding proportionate adjustment in the Option Price per
share.
18.2 Reorganization in Which the Company Is the Surviving Entity and in
------------------------------------------------------------------
Which No Change of Control Occurs. Subject to SECTION 18.3 hereof, if the
- ---------------------------------
17
<PAGE>
Company shall be the surviving entity in any reorganization, merger, or
consolidation of the Company with one or more other entities, any Option
theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to such
Option would have been entitled immediately following such reorganization,
merger, or consolidation, with a corresponding proportionate adjustment of the
Option Price per share so that the aggregate Option Price thereafter shall be
the same as the aggregate Option Price of the shares remaining subject to the
Option immediately prior to such reorganization, merger, or consolidation.
Subject to any contrary language in an Award Agreement evidencing a Grant of
Restricted Stock, any restrictions applicable to such Restricted Stock shall
apply as well to any replacement shares received by the Grantee as a result of
the reorganization, merger or consolidation.
18.3 Dissolutions, Sale of Assets, Etc. Upon the dissolution or
---------------------------------
liquidation of the Company or upon a merger, consolidation, or reorganization of
the Company with one or more other entities in which the Company is not the
surviving entity, or upon a sale of substantially all of the assets of the
Company to another entity, or upon any transaction (including, without
limitation, a merger or reorganization in which the Company is the surviving
entity) that results in any person or entity (or person or entities acting as a
group or otherwise in concert) owning eighty percent or more of the combined
voting power of all classes of securities of the Company, (i) all outstanding
shares of Restricted Stock and Restricted Stock Units shall be deemed to have
vested, and all restrictions and conditions applicable to such shares of
Restricted Stock and Restricted Stock Units shall be deemed to have lapsed,
immediately prior to the occurrence of such event, and (ii) all Options
outstanding hereunder shall become immediately exercisable for a period of
fifteen days immediately prior to the scheduled consummation of the event,
except to the extent provision is made in writing in connection with such
transaction for the continuation of the Plan or the assumption of such Options,
Restricted Stock and Restricted Stock Units theretofore granted, or for the
substitution for such Options, Restricted Stock and Restricted Stock Units of
new options, restricted stock and restricted stock units covering the stock of a
successor Company, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares or units and exercise prices,
in which event the Plan and Options, Restricted Stock and Restricted Stock Units
theretofore granted shall continue in the manner and under the terms so
provided. Any exercise of an Option during such fifteen-day period shall be
conditioned upon the consummation of the event and shall be effective only
immediately before the consummation of the event. Upon consummation of any such
event, the Plan and all outstanding but unexercised Options shall terminate,
except to the extent the Plan is continued or of the assumption of or
substitution for such Options theretofore granted. The Committee shall send
written notice of an event that will result in such a termination to all
individuals who hold Options not later than the time at which the Company gives
notice thereof to its shareholders.
18
<PAGE>
18.4 Adjustments. Adjustments under this SECTION 18 related to shares of
-----------
Stock or securities of the Company shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive. No
fractional shares or other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share.
18.5 No Limitations on Company. The making of Grants pursuant to the Plan
-------------------------
shall not affect or limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations, or changes of its capital or
business structure or to merge, consolidate, dissolve, or liquidate, or to sell
or transfer all or any part of its business or assets.
19. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Grant or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any affiliate, or to interfere in any way with any
contractual or other right or authority of the Company or any Service Provider
either to increase or decrease the compensation or other payments to any
individual at any time, or to terminate any employment or other relationship
between any individual and the Company or a Service Provider. No provision in
the Plan or in any Grant awarded or Award. Agreement entered into pursuant to
the Plan shall be construed to confer upon any individual the right to remain in
the service of the Company as a director (including as an Outside Director), or
shall interfere with or restrict in any way the rights of the Company's
shareholders to remove any director pursuant to the provisions of the Delaware
General Corporation Law, as from time to time amended. In addition,
notwithstanding anything contained in the Plan to the contrary, unless otherwise
stated in the applicable Award Agreement, no Grant awarded under the Plan shall
be affected by any change of duties or position of the Optionee (including a
transfer to or from the Company or a Service Provider), so long as such Grantee
continues to be a director, officer, consultant, employee, or independent
contractor (as the case may be) of the Company or a Service Provider. The
obligation of the Company to pay any benefits pursuant to this Plan shall be
interpreted as a contractual obligation to pay only those amounts described
herein, in the manner and under the conditions prescribed herein. The Plan
shall in no way be interpreted to require the Company to transfer any amounts to
a third party trustee or otherwise hold any amounts in trust or escrow for
payment to any participant or beneficiary under the terms of the Plan. No
Grantee shall have any of the rights of a shareholder with respect to the shares
of Stock subject to an Option except to the extent the certificates for such
shares of Stock shall have been issued upon the exercise of the Option.
19
<PAGE>
20. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
shareholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
21. WITHHOLDING TAXES
The Company, a Subsidiary or a Service Provider, as the case may be, shall
have the right to deduct from payments of any kind otherwise due to a Grantee
any taxes of any kind required by applicable law to be withheld with respect to
the vesting of or other lapse of restrictions applicable to Restricted Stock or
Restricted Stock Units or upon the issuance of any shares of Stock upon the
exercise of an Option. At the time of such vesting, lapse, or exercise, the
Grantee shall pay to the Company, the Subsidiary or the Service Provider, as the
case may be, any amount that the Company, the Subsidiary or the Service Provider
may reasonably determine to be necessary to satisfy such withholding obligation.
Subject to the prior approval of the Company, the Subsidiary or the Service
Provider, which may be withheld by the Company, the Subsidiary or the Service
Provider, as the case may be, in its sole discretion, the Grantee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company, the
Subsidiary or the Service Provider to withhold shares of Stock otherwise
issuable pursuant to the Grantee or (ii) by delivering to the Company, the
Subsidiary or the Service Provider shares of Stock already owned by the Grantee.
The shares of Stock so delivered or withheld shall have an aggregate Fair Market
Value equal to such withholding obligations. The Fair Market Value of the
shares of Stock used to satisfy such withholding obligation shall be determined
by the Company, the Subsidiary or the Service Provider as of the date that the
amount of tax to be withheld is to be determined. A Grantee who has made an
election pursuant to this SECTION 21 may satisfy his or her withholding
obligation only with shares of Stock that are not subject to any repurchase,
forfeiture, unfulfilled vesting, or other similar requirements.
22. CAPTIONS
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
20
<PAGE>
23. OTHER PROVISIONS
Each Grant awarded under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Committee,
in its sole discretion.
24. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include the
plural form, the masculine gender shall include the feminine gender, etc., as
the context requires.
25. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined to
be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
26. GOVERNING LAW
The validity and construction of this Plan and the instruments evidencing
the Grants awarded hereunder shall be governed by the laws of the State of
Delaware.
* * *
21
<PAGE>
Exhibit 5.1
October 9, 1998
Board of Directors
Central European Distribution Corporation
211 North Union Street, #100
Alexandria, Virginia 22314
Dear Gentlemen:
This firm has acted as counsel to Central European Distribution
Corporation (the "Company"), a Delaware corporation, in connection with its
registration statement on Form S-8, filed on or about the date hereof (the
"Registration Statement"), of 750,000 shares of common stock, par value $.01 per
share, of the Company (the "Shares"), issuable upon exercise of options or
otherwise under the Company's 1997 Stock Incentive Plan, as amended (the
"Plan"). This opinion letter is furnished to you at your request to enable you
to fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. ((S))
229.601(b)(5), in connection with such registration.
For purposes of this opinion letter, we have examined copies of the
following documents:
1. An executed copy of the Registration Statement.
2. A copy of the Plan, as certified by the secretary of the Company on
the date hereof as ten being complete, accurate and in effect.
3. The Certificate of Incorporation of the Company, as certified by
the Secretary of State of the State of Delaware on October 2,
1998 and by the Secretary of the Company on the date hereof as then
being complete, accurate and in effect.
4. The Bylaws of the Company, as certified by the Secretary of the
Company on the date hereof as then being complete, accurate and in
effect.
5. Resolutions of the Board of Directors of the Company adopted on
January 16, 1998, May 11, 1998 and October 1, 1998, as certified by
the Secretary of the Company on the date hereof as then being
complete, accurate and in effect.
6. The Consent of the stockholders of the Company adopted as of
January 16, 1998, as certified by the Secretary of the Company on
the date hereof as then being complete, accurate and in effect.
In our examination of the aforesaid documents, we have assumed the genuineness
of all signatures, the legal capacity of natural persons, the authenticity,
accuracy and completeness of all documents submitted to us as originals, and the
conformity with the original documents of all documents submitted to us as
certified, telecopied, photostatic, or reproduced copies. This opinion letter
is given, and all statements herein are made, in the context of the foregoing.
This opinion letter is based as to matters of law solely on the
General Corporation Law of the State of Delaware. We express no opinion herein
as to any other laws, statutes, regulations, or ordinances.
<PAGE>
October 9, 1998
Page 2
Based upon, subject to and limited by the foregoing, we are of the
opinion that the Shares, when issued and delivered in the manner and on the
terms contemplated in the Registration Statement and the Plan (with the Company
having received the consideration therefor, the form of which is in accordance
with applicable law, when such consideration is required to be received pursuant
to the Plan) will be validly issued, fully paid and nonassessable by the
Company.
We assume no obligation to advise you of any changes in the foregoing
subsequent to the delivery of this opinion letter. This opinion letter has been
prepared solely for your use in connection with the filing of the Registration
Statement on the date of this opinion letter, and should not be quoted in whole
or in part or otherwise be referred to, nor be filed with or furnished to any
governmental agency or other person or entity, without the prior written consent
of this firm.
We hereby consent to the filing of this opinion letter as Exhibit 5 to
the Registration Statement. In giving this consent, we do not thereby admit
that we are an "expert" within the meaning of the Securities Act of 1933, as
amended.
Very truly yours,
/s/ Hogan & Hartson L.L.P.
--------------------------
Hogan & Hartson L.L.P.
<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 1997 Stock Incentive
Plan, of our report dated March 20, 1998, with respect to the consolidated
financial statements of Central European Distribution Corporation as of December
31, 1997 and 1996 and for each of the three years in the period ended December
31, 1997 included in its Registration Statement (Form S-1 No. 333-42387), filed
with the Securities and Exchange Commission.
/s/ Ernst & Young Audit Sp. z o.o.
Warsaw, Poland
October 9, 1998
