<PAGE>
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-QSB
-----------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
-----------------------
Commission file number 0-26202
EASTBROKERS INTERNATIONAL INCORPORATED
(Exact name of small business issuer as specified in its charter)
-----------------------
DELAWARE 52-1807562
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15245SHADY GROVE ROAD, SUITE 340, ROCKVILLE, MARYLAND 20850 (Address
of principal executive offices) (Zip Code)
(301) 527-1110
(Registrant's telephone number, including area code)
CZECH INDUSTRIES, INC.
(Former name, if changed since last report)
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
Transitional Small Business Disclosure Format: Yes [ ] No [x]
The total number of shares of the registrant's Common Stock, $.05 par value,
outstanding on February 1, 1997, was 2,826,000.
===============================================================================
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EASTBROKERS INTERNATIONAL INCORPORATED
<TABLE>
<CAPTION>
Page
<S> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Historical Financial Statements
Consolidated Statements of Financial Condition ................. 2
Consolidated Statements of Operations
Quarter Ended December 31, 1996 ............................. 3
Nine Months Ended December 31, 1996 ......................... 3
Consolidated Statements of Cash Flows .......................... 4
Notes to Consolidated Financial Statements ..................... 6
Item 2. Management's Discussion and Analysis or Plan of Operation ..... 8
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders ........... 11
Item 5. Other Information ............................................. 11
Item 6. Exhibits and Reports on Form 8-K .............................. 12
Signature ............................................................. 13
</TABLE>
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EASTBROKERS INTERNATIONAL INCORPORATED
(A DELAWARE CORPORATION)
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1996
---------------- ----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 2,316,991 $ 5,011,917
Cash and securities segregated for regulatory
purposes or deposited with clearing organizations - 67,230
Securities purchased under agreements to resell - 2,126,603
Receivables
Customers 325,942 6,076,554
Broker dealers and other - 399,897
Affiliated companies - 43,486
Other 1,225,500 972,134
Securities owned, at value
Equities and other - 3,172,553
Buildings, furniture and equipment, at cost (net of
accumulated depreciation and amortization of
$604,374 and $682,224 respectively) 18,560,155 2,213,747
Deferred taxes 82,565 133,277
Investments held for resale 3,258,413 6,622,333
Investments in affiliated companies - 7,868,544
Goodwill - 1,255,242
Other assets 472,995 656,530
---------------- ----------------
Total Assets $ 26,242,561 $ 36,620,047
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings
Lines of credit $ - $ 1,782,442
Affiliated companies - 1,017,951
Other - 287,312
Payables
Customers - 9,547,745
Broker dealers and other - 360,164
Accounts payable and accrued expenses 134,320 443,930
Other liabilities and deferred amounts 66,158 895,464
---------------- ----------------
200,478 14,335,008
Long-term borrowings 2,099,658 2,374,228
---------------- ----------------
Total liabilities 2,300,136 16,709,236
---------------- ----------------
Minority interest in consolidated subsidiaries 9,353,228 1,903,306
---------------- ----------------
Stockholders' equity
Common stock; $.05 par value; 10,000,000 shares
authorized; 1,781,000 and 2,871,000 shares issued and
outstanding at December 31, 1995 and 1996, respectively 89,050 143,550
Paid-in capital 13,693,733 19,089,233
Retained earnings (accumulated deficit) 248,324 (1,402,174)
Unrealized gain/loss on available for sale investments - 435,177
Cumulative translation adjustment 558,090 (258,281)
---------------- ----------------
Total stockholders' equity 14,589,197 18,007,505
---------------- ----------------
Total Liabilities and Stockholders' Equity $ 26,242,561 $ 36,620,047
================ ================
</TABLE>
See notes to consolidated financial statements
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<PAGE>
EASTBROKERS INTERNATIONAL INCORPORATED
(A DELAWARE CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED FOR THE NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------------------ ------------------------------------
1995 1996 1995 1996
---------------- ---------------- ---------------- ----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues
Commissions $ - $ 226,950 $ - $ 226,950
Fees - 258,523 - 258,523
Interest and dividends - 220,045 - 340,082
Principal transactions, net - 1,131,539 637,417 1,361,113
Trading - 343,034 - 343,034
Investment - 788,505 637,417 1,018,079
Hotel room revenues 842,009 - 1,433,113 778,919
Hotel food and beverage revenues 526,873 - 660,616 314,797
Other 121,247 (68,400) 592,496 78,988
Equity in earnings of unconsolidated affiliates 87,072 (301,115) (301,115)
---------------- ---------------- ---------------- ----------------
Total revenues 1,577,201 1,467,542 3,323,642 3,058,257
---------------- ---------------- ---------------- ----------------
Costs and expenses
Cost of sales 244,010 - 275,048 111,801
Compensation and benefits 318,895 245,407 801,092 757,195
Interest 315,565 87,157 302,773 222,117
Brokerage, clearing, exchange fees and other - 378,716 - 655,031
Occupancy - 110,535 - 230,535
Office supplies and expenses - 97,722 - 166,901
Communications - 63,988 - 63,988
Advertising - 58,149 - 58,149
Legal fees - 55,419 - 55,419
Consulting fees - 58,099 - 58,099
Travel - 55,940 - 153,185
Education - 16,556 - 16,556
Automotive - 26,753 - 26,753
General and administrative 174,135 83,949 865,545 145,810
Depreciation and amortization 166,276 292,051 317,847 499,205
Loss on foreign currency transactions - (49,850) 161,571 (11,406)
---------------- ---------------- ---------------- ----------------
Total costs and expenses 1,218,881 1,580,591 2,723,876 3,209,338
---------------- ---------------- ---------------- ----------------
Income (loss) from continuing operations
before provision for income taxes and
minority interest in earnings of subsidiaries 358,320 (113,049) 599,766 (151,081)
Provision for income taxes (82,000) (50,501) (99,438) (50,501)
Minority interest in earnings of subsidiaries (132,900) (36,878) (199,782) (152,071)
---------------- ---------------- ---------------- ----------------
Income (loss) from continuing operations 143,420 (200,428) 300,546 (353,653)
Loss from discontinued operations - 74,220) - (74,220)
Loss on sale of discontinued operations - (1,323,083) - (1,323,083)
---------------- ---------------- ---------------- ----------------
Net income (loss) $ 143,420 $ (1,597,731) $ 300,546 $ (1,750,956)
================ ================ ================ ================
Weighted average number of shares outstanding 1,781,000 (1) 2,871,000 1,781,000 (1) 2,871,000
================ ================ ================ ================
Income (loss) from continuing operations
per share $ 0.0 $ (0.07) $ 0.1 $ (0.12)
================ ================ ================ ================
Net income (loss) per share $ 0.0 $ (0.56) $ 0.1 $ (0.61)
================ ================ ================ ================
</TABLE>
Note: The results of operations and cash flows of Eastbrokers AG are for the
period from the date of acquisition (August 1, 1996) through September 30,
1996. (See note 1.)
(1) Adjusted for 1 for 5 reverse stock split in September 1996
See notes to consolidated financial statements.
- 3 -
<PAGE>
EASTBROKERS INTERNATIONAL INCORPORATED
(A DELAWARE CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
DECEMBER 31,
------------------------------------
1995 1996
----------------- -----------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 300,546 $ (1,750,956)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Minority interest in earnings of subsidiaries 180,315 403,577
Gain on the sale of investments (706,869) -
Depreciation and amortization 337,795 494,144
Deferred taxes 69,117 82,565
Equity in earnings (loss) of unconsolidated affiliates (67,605) (427,810)
----------------- -----------------
113,299 (1,198,480)
Changes in operating assets and liabilities
Cash and securities segregated for regulatory purposes
or deposited with regulatory agencies - (34,801)
Securities purchased under agreements to resell - 4,331,950
Receivables
Customers 5,550 (2,199,261)
Brokers, dealers and others - 348,256
Affiliated companies - (3,388,705)
Other - 1,721,108
Securities owned, at value - (2,238,065)
Other assets (99,811) 352,868
Payables
Customers - 382,105
Brokers, dealers and others - (479,519)
Accounts payable and accrued expenses (159,504) (85,296)
----------------- -----------------
Net cash provided by (used in) operating activities (140,466) (2,487,840)
----------------- -----------------
Cash flows from investing activities
Net proceeds from (payments for)
Acquisition of net assets of Eastbrokers
Beteiligungs AG, net of cash acquired - (2,441,047)
Investment in Eastbrokers Beteiligungs AG - (1,105,667)
Investments in affiliates (6,467,388) (2,577,530)
Proceeds from the disposition of affiliate 2,662,609 -
Investments held for resale 2,368,380 1,188,254
Purchases of furniture and equipment (302,908) (236,081)
----------------- -----------------
Net cash provided by (used in) investing activities (1,739,307) (5,172,071)
----------------- -----------------
Cash flows from financing activities
Net proceeds from (payments for)
Net proceeds from public offering 11,155,336 -
Net proceeds from public offering - Eastbrokers Beteiligungs AG - 3,387,150
Common stock and warrants reacquired (450,000) -
Short-term financings - 1,013,156
Short-term borrowings from affiliated companies - 2,343,344
Other long-term debt (6,356,934) (224,844)
Contributions of minority interests 1,056,295 -
----------------- -----------------
Net cash provided by (used in) financing activities 5,404,697 6,518,806
----------------- -----------------
Foreign currency translation adjustment (1,558,199) 962,436
----------------- -----------------
Increase (decrease) in cash and cash equivalents 1,966,725 (178,669)
Cash and cash equivalents at beginning of period 350,266 5,190,586
----------------- -----------------
Cash and cash equivalents at end of period $ 2,316,991 $ 5,011,917
================= =================
</TABLE>
See notes to consolidated financial statements.
- 4 -
<PAGE>
EASTBROKERS INTERNATIONAL INCORPORATED
(A DELAWARE CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
DECEMBER 31,
------------------------------------
1995 1996
----------------- -----------------
(UNAUDITED)
<S> <C> <C>
Supplemental disclosure of cash flow information
Cash paid for income taxes $ - $ -
================= =================
Cash paid for interest $ 302,773 $ 235,076
================= =================
Non-cash transactions
Common shares of CEZ and Vodni Stavby, Praha
received in the disposition of the Hotel Fortuna $ - $ 7,957,012
================= =================
Common shares of CEZ and Vodni stavby, Praha transferred
in lieu of cash payment for debt and accrued interest $ - $ 1,550,508
================= =================
Eastbrokers International shares issued for Eastbrokers Beteiligungs AG acquisition $ - $ 5,450,000
================= =================
</TABLE>
See notes to consolidated financial statements.
- 5 -
<PAGE>
EASTBROKERS INTERNATIONAL INCORPORATED
(A DELAWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION AND INTERIM REPORTING
The financial statements of Eastbrokers International Incorporated (the
"Company") for the quarter and nine months ended December 31, 1996 have
been prepared by the Company, are unaudited, and are subject to year-end
adjustments. These unaudited financial statements reflect all known
adjustments (which included only normal, recurring adjustments) which are,
in the opinion of management, necessary for a fair presentation of the
financial position, results of operations, and cash flows for the periods
presented in accordance with generally accepted accounting principles. The
results presented herein for the interim periods are not necessarily
indicative of the actual results to be expected for the fiscal year.
The notes accompanying the consolidated financial statements in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1995
and in the Company's Transitional Report on Form 10-KSB for the period
ended March 31, 1996, include accounting policies and additional
information pertinent to an understanding of these interim financial
statements.
For the quarter and nine months ended December 31, 1995, the accompanying
consolidated financial statements include the financial position, results
of operations and cash flows of the Company and its subsidiary, Hotel
Fortuna a.s., for the quarter and nine months ended December 31, 1995.
For the quarter and nine months ended December 31, 1996, the accompanying
consolidated financial statements include the financial position, results
of operations and cash flows of the Company for the quarter and nine months
ended December 31, 1996. The financial position of its subsidiary,
Eastbrokers Beteiligungs Aktiengesellschaft ("Eastbrokers AG") is as of
September 30, 1996. The results of operations and cash flows of Eastbrokers
AG are for the period from the date of acquisition (August 1, 1996) through
September 30, 1996. The results of operations and cash flows of its former
subsidiary, Hotel Fortuna a.s., are through the period prior to the
disposition.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Certain amounts in prior periods have been reclassified to conform to the
current presentation.
2. ACQUISITION OF EASTBROKERS BETEILIGUNGS AKTIENGESELLSCHAFT
On August, 1, 1996, the Company acquired 80 percent of the outstanding
stock of Eastbrokers AG through the issuance of 5,400,000 shares of the
Company (1,080,000 shares as adjusted for the reverse stock split effective
September 1996). The Company later acquired an additional 245,320 shares in
Eastbrokers AG increasing its ownership percentage to 83.62 percent. In a
separate transaction, the Company purchased an additional 74,900 shares for
cash, increasing its ownership percentage to 92.87%.
3. DISCONTINUED OPERATIONS
In October 1996, the Company agreed to sell its interest in the Hotel
Fortuna, a.s. ("Fortuna") for 100,000 shares of Ceske energeticke zavody
a.s. ("CEZ") and 86,570 shares of Vodni stavby Praha a.s. based on the then
current market prices for each stock. In November 1996, the sales
transaction was completed. As of the sale date, the Company revised its
estimate of the net realizable value of the shares received based on the
then current market prices for each stock. As a result, the Company
recognized a loss on the sale of discontinued operations of ($1,323,083).
An additional loss on discontinued operations of $74,220 was recognized for
operating expenses incurred through the sale date.
- 6 -
<PAGE>
EASTBROKERS INTERNATIONAL INCORPORATED
(A DELAWARE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
4. SUBSEQUENT EVENTS
By mid January 1997, the per share value of Ceske energeticke zavody a.s.
("CEZ") had returned to its October 1996 levels. As a result, the Company
began selling off its interest in CEZ to reduce its overall market exposure
in this stock.
- 7 -
<PAGE>
PART I -- FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Form 10-QSB for the quarterly period ended December 31, 1996, makes
reference to the Company's Current Report on Form 8-K dated August 1, 1996
("Report"). The Report, which is incorporated by reference herein, includes
information necessary or useful to an understanding of the Company's businesses
and financial statement presentations. The Report more fully describes the terms
and conditions of the Agreement between the Company and Eastbrokers Beteiligungs
Aktiengesellschaft ("Eastbrokers AG") a Vienna, Austria based investment banking
and stock brokerage firm. Such information relating to the Agreement between the
Company and Eastbrokers AG is not contained in this Form 10-QSB. The Report is
included as an exhibit in this Form 10-QSB and the Company will furnish a copy
of this Report upon request made directly to the Company's headquarters at 15245
Shady Grove Road, Suite 340, Rockville, Maryland 20850, telephone number (301)
527-1110 and facsimile number (301) 527-1112.
On August 1, 1996, the Company consummated its acquisition of Eastbrokers AG
reflecting its previously stated objective of seeking to invest into, merge with
or acquire one or more companies in growth oriented industries. Although the
Company's focus had been primarily in the Czech Republic, its original mission
was to pursue such investment opportunities throughout Eastern and Central
Europe. Eastbrokers AG is a holding company providing financial services in
Eastern and Central Europe through its network of subsidiaries. The acquisition
of Eastbrokers AG is intended to not only provide an earnings stream from its
core brokerage business, but also positions the Company to provide investment
banking and corporate finance services in an emerging market infrastructure and
growth industries.
During the quarter ended December 31, 1996, management continued its program of
augmenting mid-level personnel, leasing additional office space, and enhancing
the management information systems in several of our Eastern European offices.
Management also began preparations to offer certain services and products to
firms and individuals associated with the U.S. capital markets.
On November 5, 1996, the Company consummated the sale of its ownership interest
in the Hotel Fortuna a.s.. See Item 5 of this Form 10-QSB for information
regarding the disposition of the Hotel Fortuna a.s. stock. Upon review of the
market conditions facing the hotel industry in Prague, management determined
that it would be in the best interest of the Company to liquidate its investment
in the hotel. The Company intends to use the net proceeds generated from the
sale to expand operations.
As consideration for the Company's shares of the Hotel Fortuna a.s., the Company
received 100,000 shares of Common Stock of Ceske energeticke zavody a.s.,
nominal value 1,100 CZK ("CEZ"), a Czech utility company, and 86,570 shares of
Common Stock of Vodni stavby Praha a.s., nominal value 1,000 CZK ("VS"), a Czech
construction company. Both CEZ and VS are actively traded on the Prague Stock
Exchange's Main Market ("PSE"). At the time of this filing, the Company was in
the process of selling its interest in CEZ at the prevailing market prices to
reduce its overall market exposure in this stock and was continuing to hold its
shares of VS. At December 31, 1996, VS had a market value of 1,400 CZK per share
or approximately $2,180,000 USD at the then current exchange rates. Management
expects to hold this particular investment until such time as the per share
market value approximates the negotiated price. However, there can be no
assurance such a per share market value will occur.
On a date subsequent to obtaining the shares, the Company used 2,500 shares of
CEZ and 30,302 shares of VS to repay the balance of the principal and interest
due under a Note payable owed to Finn s.r.o. in the approximate amount of $2.1
million USD. Also, the Company sold 13,900 shares of VS at 1,800 CZK per share
for approximately $930,000 USD.
Also on November 6, 1996, the European Association of Securities Dealers (EASD)
approved for membership into its organization WMP Borsenmakler AG ("WMP"), a
partially owned subsidiary of the Company. The EASD operates EASDAQ, which is a
screen-based stock market that uses a multiple market-making system similar to
that used by NASDAQ in the United States. WMP provides market making services in
over 400 Austrian securities trading on the Vienna Stock Exchange, underwriting
services to issuers seeking to raise capital on the Vienna Stock Exchange, and
brokerage services to institutional clients investing in the Eastern European
stock markets. WMP intends to expand its market making, underwriting and
brokerage services to
- 8 -
<PAGE>
countries and companies serviced by the EASD and through EASDAQ.
On December 10, 1996, the Company held the 1996 Annual Meeting of Stockholders.
At this meeting, the Board of Directors of the Company submitted to the
shareholders three proposed amendments to the Company's Certificate of
Incorporation. Only one of these proposals passed, and the Certificate of
Incorporation was amended accordingly. The other two proposals did not pass
because the number of shares voted did not meet the required minimums. See Item
4 of this Form 10-QSB for a brief description of each matter voted upon, and the
number of votes cast for, against, and withheld, the number of abstentions, and
broker non-votes. The Board of Directors also submitted such proposals to the
stockholders to elect two new directors, approve the 1996 stock option plan and
ratify the appointment of the Company's independent auditors for the current
fiscal year.
In January 1997, a date subsequent to this report, the Company entered into
negotiations to purchase a broker dealer license and acquire office space in New
York City as the location for a North American office. During the next few
months, the Company will be incurring additional costs associated with the set
up and opening of this new office. At present, management expects the new office
to reach the break-even point approximately 10 months after opening.
The information contained in this Item contains forward looking statements.
Readers are cautioned not to place undue reliance on this information which
speaks only as of the date hereof. The matters referred to in such statements
could be effected by the risks and uncertainties involved in the Company's
business, including (without limitation) the effect of political, economic and
market conditions both domestically and in Eastern and Central Europe. Further,
the Company undertakes no obligation to release publicly any revisions to these
forward looking statements to reflect events occurring after the date hereof or
to reflect unanticipated events or developments.
Results of Operations. See Note 1 of the Notes to Consolidated Financial
Statements For the Nine Months Ended December 31, 1996, for an explanation of
the basis of presentation of the financial statements. For the three month
period ended December 31, 1996, the Company generated consolidated revenues in
the amount of $1,467,542, compared to $1,577,201 for the three month period
ended December 31, 1995. This decrease is a combination of the effects of the
disposition of the Hotel Fortuna a.s. and the acquisition of Eastbrokers AG on
August 1, 1996. These consolidated financial statements contain the revenues and
expenses of Eastbrokers AG for the period August 1, 1996 (date of acquisition)
through September 30, 1996. The change is revenues is also affected by the
change in the Company's fiscal year end. For the period ended December 31, 1995,
the Company's consolidated financial statements contained the hotel's revenues
and expenses for the quarter and six months ended December 31, 1995. For the
period ended December 31, 1996, the Company's consolidated financial statements
contain the hotel's revenues and expenses for the quarter through the date of
sale of the Company's interest. The revenues and expenses of the hotel for the
quarter ended September 30, 1996 are not reflected in the consolidated financial
statements due to the sale of the Company's interest in the Hotel Fortuna a.s.
This factor alone would have contributed to a significant decline in the
revenues reported this period as compared to the same period one year ago. The
bulk of the overall revenue decline was compensated by the acquisition of
Eastbrokers AG.
The Company incurred total consolidated costs and expenses of $1,580,591 for the
three month period ended December 31, 1996, compared to $1,218,881 for the three
month period ended September 30, 1995. Most of the increase is attributable to
the first consolidation of Eastbrokers AG's revenues and expense. Also,
unexpected costs associated with the Eastbrokers AG acquisition are having a
negative effect on earnings.
The Company incurred a consolidated net loss of $1,597,731 for the three month
period ended December 31, 1996, compared to a consolidated net income of
$143,420 for the three month period ended December 31, 1995. This dramatic shift
in earnings is attributable to lower than expected earnings from the hotel
through the sale date coupled with a loss on the sale of the hotel. Net earnings
from the hotel increased from $79,284 to $110,345 for the periods ended
September 30, 1995, and September 30, 1996, respectively.
During the quarter, the Company, acquired an additional 74,900 shares of
Eastbrokers AG capital stock from outside shareholders in a transaction valued
at approximately $1.1 million USD. As a result of this share purchase, the
Company now owns 92.87 percent of Eastbrokers AG.
Eastbrokers AG provided additional funds to increase its equity in the
Eastbrokers Warsaw unit and the Eastbrokers Budapest unit. The Eastbrokers
Warsaw and Budapest units are using the funds for working capital.
- 9 -
<PAGE>
On December 31, 1996, the Company had total current assets of $25,149,237 and
total current liabilities of $14,335,008, compared to $7,126,846 and $200,478,
respectively, on December 31, 1995. As of the date of this filing, the Company
believes that it has adequate liquidity to meet its current obligations.
However, no assurances can be made as to the Company's ability to meet its cash
requirements subsequent to any further business combinations.
- 10 -
<PAGE>
Part II -- OTHER INFORMATION
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 10, 1996, the Company held the 1996 Annual Meeting of
Stockholders of Czech Industries, Inc. ("Annual Meeting"). At this meeting,
the Company's Board of Directors submitted three proposed amendments to the
Company's Certificate of Incorporation to the stockholders. The Board of
Directors also submitted proposals to the stockholders to elect two new
directors, approve the 1996 stock option plan and ratify the appointment of
the Company's independent auditors for the current fiscal year. The holders
of 2,269,748 shares of stock entitled to vote, which constituted a quorum,
were present at the annual meeting in person or by proxy. As of the record
date, there were 2,871,000 shares issued and outstanding.
Proposal No. 1 - Election of Directors. Two nominees, Wolfgang Kossner and
August A. de Roode, were submitted to the stockholders. The nominations of
Messrs. Kossner and de Roode to serve as directors for a three year term
were approved by the stockholders., 2,250,520 voted for the proposal and
19,228 voted against the proposal with no votes abstained or unvoted.
Proposal No. 2 - Amendment to the Certificate of Incorporation to Change
the Name of the Corporation to Eastbrokers International Incorporated.
Amendment was approved by the stockholders. 2,256,681 voted in favor of the
proposal, 10,097 voted against the proposal, 2,970 abstained from voting
and 601,252 did not vote.
Proposal No. 3 - Amendment to the Certificate of Incorporation and By-laws
Regarding Stockholder Meetings. Amendment was not approved by the
stockholders. The required affirmative vote of sixty-six and two thirds
percent of the outstanding shares was not met. 1,509,488 voted in favor of
the proposal, 37,131 voted against the proposal, 3,575 abstained from
voting and 1,320,806 did not vote.
Proposal No. 4 - Amendment to the Certificate of Incorporation Regarding
Removal of a Member of the Board of Directors. Amendment was not approved
by the stockholders. The required affirmative vote of sixty-six and two
thirds percent of the outstanding shares was not met. 1,535,991 voted in
favor of the proposal, 12,003 voted against the proposal, 2,200 abstained
from voting and 1,320,806 did not vote.
Proposal No. 5 - Approval of the 1996 Stock Option Plan. The 1996 Stock
Option Plan was approved by the stockholders. 1,224,711 voted in favor of
the proposal, 146,698 voted against the proposal, 178,785 abstained from
voting and 1,320,806 did not vote.
Proposal No. 6 - Ratification of the Appointment of Auditors. The
appointment of the accounting firm of Pannell Kerr Forster PC was approved
by the stockholders. 2,177,162 voted in favor of the proposal, 83,724 voted
against the proposal, 8,862 abstained from voting and 601,252 did not vote.
An error was noted in the proxy statement sent with the Notice of Annual
Meeting. The proxy statement incorrectly listed Ing. Petr Bednarik as an
officer, director and owner of Stella Group a.s., a Prague based investment
company. The correct information should have listed Ing. Petr Bednarik as
an officer, director, and owner of Stratego Invest a.s., a Prague based
investment company. The Board of Directors would like to apologize for this
oversight and any misunderstanding or confusion it may have caused.
ITEM 5 -- OTHER INFORMATION
On October 1, 1996, the Company entered into an agreement with Y.S.E. a.s.
to dispose of the Company's controlling equity interest in the Hotel
Fortuna a.s. The Company had owned 251,000 shares of Common Stock of the
Hotel Fortuna a.s., which owns a 242 room hotel, restaurant and lounge
located in Prague, Czech Republic. The disposition in the Company's
interest in the Hotel Fortuna a.s. is deemed to be a disposition of a
significant amount of the Company's assets.
In return for its equity interest in the Hotel Fortuna a.s., the Company
received 100,000 shares of Common Stock of Ceske energeticke zavody a.s.,
nominal value 1,100 CZK ("CEZ"), a Czech utility company, and 86,570 shares
of Common Stock of Vodni stavby Praha a.s., nominal value 1,000 CZK ("VS"),
a Czech construction company. Both CEZ and VS are actively traded on the
Prague Stock Exchange's Main Market. The VS shares were transferred to the
Company on or about October 15, 1996, and the CEZ
- 11 -
<PAGE>
shares were transferred to the Company on or about November 5, 1996. The
Company transferred its shares of the Hotel Fortuna a.s. to Y.S.E. a.s. on
or about November 6, 1996.
The Company determined the value of the Hotel Fortuna a.s. shares by adding
the Company's historical cost basis in the hotel with the Company's
proportionate share of the hotel's earnings it received through June 30,
1996. Based on this computation, the Company valued its interest in the
hotel at approximately $9,400,000 USD. The Company valued the CEZ and VS
shares it was to receive as consideration by utilizing the then current
market values of the shares as quoted on the PSE on October 1, 1996, the
date of the execution of the contract. On October 1, 1996, the PSE quoted
prices of CEZ and VS were 1,040 CZK and 1,900 CZK per share, respectively.
Based on these October 1, 1996 quoted prices, the value of the
consideration to be received was approximately $9,800,000 USD.
On a date subsequent to obtaining the shares, the Company used 2,500 shares
of CEZ and 30,302 shares of VS to repay the balance of the principal and
interest due under a Note payable owed to Finn s.r.o. in the approximate
amount of $2.1 million USD. Also, the Company sold 13,900 shares of VS at
1,800 CZK per share for approximately $930,000 USD.
At the time of this filing, the Company was in the process of selling its
interest in CEZ at the prevailing market prices to reduce its overall
market exposure in this stock and was continuing to hold its shares of VS.
At December 31, 1996, VS has a market value of 1,400 CZK per share and the
Company's holdings is this stock were valued at approximately $2,180,000
USD at the then current exchange rates.
As noted in Note 3 of the Notes to Consolidated Financial Statements, the
Company has recognized a loss on the sale of discontinued operations of
($1,323,083) and a loss on discontinued operations of $74,220 for operating
expenses incurred through the date of sale of its interest in the Hotel
Fortuna a.s.
The Stock Purchase Agreement for the purchase of Eastbrokers AG contains
certain covenants relating to the sale of the Hotel Fortuna a.s. that may
require an adjustment of the purchase price. These potential adjustments,
if enforced, would require the Company to issue additional shares of common
stock to the principals of Eastbrokers AG based on a formula contained in
the Stock Purchase Agreement. The principals of Eastbrokers AG have agreed
to waive any purchase price adjustment that might have been required under
the terms of this agreement.
The transaction between the Company and Y.S.E. a.s. was arranged by
Stratego Invest a.s., a broker-dealer and financial consulting company
organized under the laws of the Czech Republic. Ing. Petr Bednarik, a
director and shareholder of the Company, is the Chairperson of the
Supervisory Board and a beneficial owner of Stratego Invest a.s. For
providing services related to the transaction, Stratego Invest a.s. was to
have received a commission fee of 1,000,000 CZK (approximately $37,000
USD). Stratego Invest a.s. has agreed to waive its commission related to
this transaction.
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits required by Item 601 of Regulation S-B
Exhibit No. Description
(3)(i) Certificate of Incorporation of Czech Industries, Inc., as
amended
(10.1) Stock Sale/Purchase Agreement
(10.2) 1996 Stock Option Plan
(27.1) Financial Data Schedule (Electronic Filing Only).
(27.2) Item 2 of Current Report on Form 8-K dated August 1, 1996.*
* Incorporated by reference from Current Report on Form 8-K dated
August 1, 1996 (File No. 0-26202).
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EASTBROKERS INTERNATIONAL INCORPORATED
(Registrant)
By /s/ Martin A. Sumichrast
----------------------------------------------
Martin A. Sumichrast
Chief Financial Officer, Executive Vice-President
Dated: February 13, 1997
- 13 -
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
PAGE
----
Exhibit No. Description
----------- ---------------
<S> <C> <C>
(3)(i) Certificate of Incorporation of Czech Industries, Inc., as amended. 15
(10.1) Stock Sale/Purchase Agreement 23
(10.2) 1996 Stock Option Plan 25
(27.1) Financial Data Schedule (Electronic Filing Only).
(27.2) Item 2 of Current Report on Form 8-K dated August 1, 1996.*
</TABLE>
* Incorporated by reference from Current Report on Form 8-K dated
August 1, 1996 (File No. 0-26202).
- 14 -
EXHIBIT NO. (3)(i)
CERTIFICATE OF INCORPORATION
OF
THE CZECH FUND
I, the undersigned, in order to form a corporation for the purposes
hereinafter stated and under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, certify as follows:
FIRST: The name of the corporation is
THE CZECH FUND
SECOND: The registered office of the corporation is to be located at 1209
Orange Street, County of New Castle, Wilmington, DE 19801. The name of its
registered agent at that address is The Corporation Trust Company.
THIRD: The purposes of the corporation are:
To furnish, perform and conduct services, undertakings, projects and
assignments of all kinds related to or useful in connection with corporation,
commercial, business, real estate, medical, sports, entertainment, energy,
management, insurance, investments, mortgages, securities, mergers and
acquisitions.
To create, purchase, finance, invest in, lend to, own, control, operate,
manage, engage in conduct or otherwise acquire, take any other interest in, deal
with, and dispose of corporations, businesses, joint ventures, undertakings and
projects of very description in the United States and any other country; and to
furnish services and assistance of all kinds to and on behalf of other
corporations, persons and entities, including managerial, planning, advisory,
financial, investment, technical, administrative, consulting, manufacturing,
marketing, promotional, distributive, research and reporting and reporting
services on a state, national, and international scale.
The corporation shall have the power to do any and all acts and things
necessary or useful to its business and purposes, and shall have the general,
specific and incidental powers and privileges granted to it by statute,
including, but not limited to:
To enter into and perform contracts; to acquire and exploit patents,
trademarks, rights of all kinds and related and other interests; to acquire,
use, deal in and with, encumber and dispose of real and personal property
without limitation, including obligations and securities; to borrow and lend
money for its corporate purposes; to invest and reinvest its funds, and to take,
hold and deal with real and personal property as security for the payment of
funds loaned or invested or otherwise; to vary any investment or employment of
capital of the corporation from time to time; to create or participate with
other corporations and entities for the performance of all undertakings as
partner, joint venturer, or otherwise, and to share or delegate control
therewith or thereto.
To pay pensions and establish and carry out pension, profit sharing, stock
option, stock purchase, stock bonus, retirement, benefit, incentive or
commission plans, trusts and provisions for any or all of the directors,
officers and employees of its subsidiaries; and to provide insurance for its
benefit on the life of any of its directors, officers or employees, or on the
life of any stockholder for the purpose of acquiring at his death shares of its
stock owned by such stockholder.
To invest in, merge or consolidate with any corporation in such manner as
may be permitted by law, to aid in any manner any corporation whose stocks,
bonds or other obligations are held or in any manner guaranteed by this
corporation or in which this corporation is in any way interested; to do any
other act or thing for the preservation, protection, improvement or enhancement
of the value of any such stock, bonds or other securities and while owner
thereof to exercise all the rights, powers and privileges of ownership and any
voting powers
- 15 -
<PAGE>
thereon; and to guarantee the indebtedness of others and the payment of
dividends upon the stock the principle and/or interests of any bonds or other
securities, and the performance of any contracts.
To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes, the attainment of any of the objects, or
the furtherance of any of the powers hereinbefore set forth either alone or in
association with other corporations, firms, partnerships or individuals; to do
every other act and thing incidental or appurtenant to, growing out of, or
connected with the aforesaid business or powers to the extent permitted by the
laws of Delaware under which this corporation is organized, and to do all such
acts and things, conduct business, have one or more offices, and exercise its
corporate powers in any and all places without limitation.
FOURTH: 1) The total number of shares of common stock which this
corporation is authorized to issue is twenty-five million (25,000,000) shares,
$.01 par value.
2) The corporation is hereby empowered to issue from time to time its
authorized shares and securities, options, warrants, and other rights
convertible thereinto for such lawful consideration, whether money or otherwise,
as the Board of Directors shall determine. Any shares issued for which the
consideration so fixed has been paid or delivered shall be fully paid stock and
the holder of such shares shall not be liable for any further call or assessment
or any other payment thereon, provided that the actual value of such
consideration is not less than the par value of the shares so issued.
3) The stockholders of the corporation do not have any preemptive or
preferential right to subscribe to or purchase unissued shares of any class of
stock of the corporation whether such shares are now or hereafter authorized, or
any Treasury shares to be sold by the corporation.
Transferability of the shares of the corporation is restricted in the
following manner:
The price to be paid for the shares which shall be set forth in the written
offers and notices prescribed above, shall be the fair market value thereof, or,
if there is no established market value, the book value thereof ("book value"
being the appraised value of all corporate assets and liabilities as of the date
of the last balance sheet), or at a price not exceeding the amount offered in
writing by a bona fide offer to purchase said shares, whichever shall be higher.
These terms shall be binding upon all stockholders of record, their heirs,
representatives, executors, administrators and assigns, and shall include
transfers by will, gift, intestacy and all third parties, or otherwise.
All offers and notices, if mailed, shall be deemed to have been delivered
on the day mailed postage prepaid, addressed to the shareholders of the
corporation, as above, according to the books of the corporation, and the shares
shall be transferable, other than to the corporation's shareholders in the
manner required herein, only upon proof of the compliance herewith.
FIFTH: The corporation is to have perpetual existence.
SIXTH : The private property of the stockholders shall not be subject to
the payment of corporate debts to any extent whatever, and they shall not be
personally liable for the payment of the corporation's debts except as they may
be liable by reason of their own conduct or acts.
SEVENTH: The following provisions are inserted for the management of the
business and the conduct of affairs of the corporation, and for further
definition, limitation and regulation of the powers of the corporation and of
its directors and stockholders.
1) The number of directors comprising the Board of Directors of the
corporation shall be such as from time to time shall not be fixed by or in the
manner provided in the By-Laws, but shall not be less than one. Election of
directors need not be by ballot unless the By-Laws so provide.
- 16 -
<PAGE>
2) The Board of Directors shall have the power, unless and to the extent
that the Board may from time to time by resolution relinquish or modify the
power, without the asset or vote of the shareholders:
a) To make, alter, amend, change, add to or repeal the By-Laws of the
corporation; to fix and vary the amount of capital of the corporation
to be reserved for any proper purpose; to authorize and cause to be
executed mortgages and liens upon all or any part of the property of
the corporation; to determine the use and disposition of any surplus
or net profits, and to fix the times for the declaration and payment
of dividends
3) The Board of Directors in its discretion may submit any contract or act
for approval or ratification at any annual meeting of the stockholders or at any
meeting of the stockholders called for the purpose of considering any act or
contract. Any contract or act that shall be approved or ratified by the vote of
the holders of a majority of the stock represented in person or by proxy at such
meeting and entitled to vote (provided that a lawful quorum of stockholders be
there represented in person or by proxy) shall be as valid and as binding upon
the corporation and its stockholders as though it had been approved or ratified
by every stockholder of the corporation, whether or not the contract or act
would otherwise be open to legal attack because of a director's interest or for
any other reason.
4) No contract or transaction between this corporation and one or more of
its directors or officers or between this corporation and any other corporation,
partnership, association or other organization in which one or more of its
directors or officers are directors or officers or have a financial interest
shall be void or voidable solely for this reason or solely because the director
or officer is present at or participates in the meeting of the board or
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if the contract or
transaction is fair as to the corporation or if the material facts relating
thereto are disclosed to or are known by the directors or shareholders, and are
approved thereby pursuant to Section 144 of Title 8 of the Delaware Code.
5) In addition to the powers and authorities hereinbefore or by statute
expressly conferred upon them, the Board of Directors is hereby empowered to
exercise all such powers and to do all such acts and things as may be exercised
or done by the corporation, subject to the provisions of the statutes of
Delaware, of this certificate, and to any By-Laws from time made by the
stockholders, and provided that no By-Laws so made shall invalidate any prior
act of the board which would have been valid if such By-Law had not been made.
EIGHTH: The corporation shall, to the fullest extent permitted by Section
145 of the Delaware General Corporation Law as amended from time to time,
indemnify all persons whom it may indemnify pursuant thereto. To the fullest
extent permitted by the Delaware General Corporation Law as the same exists or
may hereafter be amended, a director of the corporation shall not be liable to
the corporation or its stockholders for monetary damages for the breach of
fiduciary duty as a director.
NINTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them, any court of equitable
jurisdiction within the State of Delaware may, in the application in a summary
way of this corporation of any receiver or receivers appointed for this
corporation under the provisions of Section 291 of Title 8 of the Delaware Code
or on the application of the trustees in dissolution or of any receiver or
receivers appointed for this corporation under the provisions of Section 279 of
Title 8 of the Delaware Code, order a meeting of the creditors or class of
creditors or of the stockholders or class of stockholders of this corporation,
as the case may be, to be summoned in such manner as the said courts directs. If
a majority in number representing three-fourths in value of the creditors or
class of creditors or of the stockholders or class of stockholders, as the case
may be, agree to any compromise or arrangement or to any reorganization of this
corporation as a consequence of such compromise or arrangement, said compromise,
arrangement, or reorganization shall, if sanctioned by the court to which the
said application has been made, be binding on all the creditors or class of
creditors or on all the stockholders or class of stockholders, as the case may
be, and also on this corporation.
- 17 -
<PAGE>
TENTH: The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.
ELEVENTH: The name and address of the incorporator is:
Martin A. Sumichrast
1919 Pennsylvania Avenue, N.W.
Suite 600
Washington, D.C. 20006
TWELFTH: The name and address of each person who is to serve as a director
until the first annual meeting of stockholders or until his or their successors
are elected and qualified shall be as follows:
Martin A. Sumichrast
1919 Pennsylvania Avenue, N.W.
Suite 600
Washington, D.C. 20006
Executed this 20th day of January 1993.
- 18 -
<PAGE>
AMENDMENT #1 TO THE CERTIFICATE OF INCORPORATION OF THE CZECH FUND
Effective as of November 28, 1994 :
The Certificate of Incorporation of the Corporation is hereby amended by
striking our Article "FIRST" thereof and by substituting in lieu of said Article
the following new Article:
"FIRST. The name of the Corporation is CZECH INDUSTRIES, INC."
The Certificate of Incorporation of the Corporation is hereby amended by
striking out Article "FOURTH" thereof and by substituting in lieu of said
article the following new Article
FOURTH: 1) The total number shares of common stock which this corporation
is authorized to issue is twenty-five million (25,000,000) shares, $.01 par
value.
Upon the effective time of the Certificate of Amendment to the
Corporation's Certificate of Incorporation whereby Article FOURTH is
amended to include the within paragraph, each 1.2094 issued and outstanding
shares of Common Stock of the Corporation shall thereby be combined into
one (1) share of validly issued, fully paid and non-assessable share of
Common Stock having a par value per share of $.01. Each person at that time
holding of record any issued and outstanding shares of Common Stock shall
receive upon surrender to the Corporation's transfer agent a stock
certificate or certificates to evidence and represent the number of shares
of post-reverse split Common Stock to which such stockholder is entitled
after giving effect to the reverse split; provided, however, that the
Corporation shall not issue fractional shares of Common Stock in connection
with this reverse stock split, but, in lieu thereof shall round up any such
fractional share to the nearest whole share for any holder who would
otherwise be entitled to receive fractional shares, except for the
provisions hereof, upon surrender of certificates representing those shares
to the Corporation's transfer agent. The ownership of such fractional
interests shall not entitle the holder thereof to any voting, dividend or
other right, except the right to receive payment therefor as described
above.
2) The corporation is hereby empowered to issue from time to time its
authorized shares and securities, options, warrants, and other rights
convertible thereinto for such lawful consideration, whether money or
otherwise, as the Board of Directors shall determine. Any shares issued for
which the consideration so fixed has been paid or delivered shall be fully
paid stock and the holder of such shares shall not be liable for any
further call or assessment or any other payment thereon, provided that the
actual value of such consideration is not less than the par value of the
shares so issued.
3) The stockholders of the corporation do not have any preemptive or
preferential right to subscribe to or purchase unissued shares of any class
of stock of the corporation whether such shares are now or hereafter
authorized, or any Treasury shares to be sold by the corporation.
- 19 -
<PAGE>
AMENDMENT #2 TO THE CERTIFICATE OF INCORPORATION OF CZECH INDUSTRIES, INC.
Effective as of March 2, 1995:
The Certificate of Incorporation of the Corporation is hereby amended by
striking out clause 1) of Article FOURTH thereof and by substituting in lieu of
said clause the following new clause:
"1) The total number of shares of common stock which this corporation is
authorized to issue is fifty million (50,000,000) shares, $.01 par value."
The Certificate of Incorporation of the Corporation is hereby amended by
striking clause 1) of Article SEVENTH thereof and by substituting in lieu of
said clause the following new clause:
"1) (a) The number of directors constituting the entire Board shall be as
fixed from time to time by vote of a majority of the entire Board;
provided, however, that the number of directors shall not be reduced so as
to shorten the term of any director at the time in office.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in numbers as the then total number of directors constituting the
entire Board permits with the term of office of one class expiring each
year. At the initial election of directors in accordance with this
provision, directors of the second class shall be elected to hold office
for a term expiring at the second succeeding annual meeting and directors
of the third class shall be elected to hold office for a term expiring at
the third succeeding annual meeting. Any vacancies in the Board of
Directors for any reason, and any directorships resulting from any increase
in the number of directors, may be filled by the Board of Directors, acting
by a majority of the directors then in office, although less than a quorum,
and any directors so chosen shall hold office until the next election of
the class for which such directors shall have been chosen and until their
successors shall be elected and qualified. At each annual meeting of
stockholders the successors to the class of directors whose term shall then
expire shall be elected to hold office for a term expiring at the third
succeeding annual meeting.
(c) Notwithstanding any other provisions of this Certificate of
Incorporation or the By-Laws of the Corporation (and notwithstanding that a
lesser percentage may be specified by law, this Certificate of
Incorporation or otherwise), any director or the entire Board of Directors
may be removed at any time but only for cause and only by the affirmative
vote of sixty-six and two third percent (66 2/3%) or more of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors."
The Certificate of Incorporation of the Corporation is hereby amended by adding
a new clause 6) to Article SEVENTH as follows:
"6) Meetings of the stockholders may be held at such place, either within
or without the State of Delaware as the By-Laws may provide. Special
meetings of stockholders for any purpose may be held at the call only of
the President, the Secretary or by resolution of the directors. No action
required or permitted to be taken at any annual or special meeting of
stockholders of the Corporation may be taken without a meeting except upon
the written consent of holders of 100% of the shares of the capital stock
of the Corporation entitled to vote upon such action. In addition to any
requirements of law and any other provisions of the Certificate of
Incorporation (and notwithstanding that a lesser percentage may be
specified by law, this Certificate of Incorporation or otherwise), the
affirmative vote of sixty-six and two-third percent (66 2/3%) of the votes
entitled to be cast by all holders of outstanding capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend, alter or repeal or
adopt any provision inconsistent with this paragraph."
- 20 -
<PAGE>
AMENDMENT #3 TO THE CERTIFICATE OF INCORPORATION OF CZECH INDUSTRIES, INC.
Effective September 10, 1996
The Certificate of Incorporation of Czech Industries, Inc. (the "Corporation")
is hereby amended by striking out the First Clause of Article "FOURTH" thereof
and by substituting in lieu of said Clause the following:
"1) The total number of shares of common stock which this corporation is
authorized to issue is 10,000,000 shares, par value $.05 each.
As of the effective time of this amendment to the Certificate of
Incorporation of the corporation, each of five (5) issued and outstanding
shares of Common Stock of the corporation shall be combined into one (1)
share of validly issued, fully paid and non assessable common stock of the
corporation. No scrip or fractional shares shall be issued by reason of
this amendment."
- 21 -
<PAGE>
AMENDMENT #4 TO THE CERTIFICATE OF INCORPORATION OF CZECH INDUSTRIES, INC.
Effective December 10, 1996
IT IS HEREBY CERTIFIED THAT:
1. The Certificate of Incorporation of Czech Industries, Inc. (the
"Corporation") is hereby amended by striking out Article "FIRST" thereof
and by substituting in lieu of said Article the following new Article:
"FIRST: The name of the corporation is:
EASTBROKERS INTERNATIONAL INCORPORATED"
2. That said amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware by the
affirmative vote of the holders of a majority of the stock entitled to vote
thereon at the 1996 annual meeting of the stockholders of the corporation
held on December 10, 1996.
- 22 -
EXHIBIT 10.1
STOCK SALE/PURCHASE AGREEMENT
This Stock Sale/Purchase Agreement (hereinafter "Agreement") is dated October 1,
1996, by and between YSE a.s., Slezska 32, 122 00 Praha 2, Czech Republic
(hereinafter "YSE"), represented by Ing. Petr Kulhanek, General Manager, and
Czech Industries, Inc., 15245 Shady Grove Road, Suite 340, Rockville, MD 20850,
U.S.A. (hereinafter "CI"), represented by Peter Schmid, President.
ARTICLE I
Subject of Agreement
1. CI agrees to sell, and YSE agrees to buy, 251,000 (two hundred fifty-one
thousand) shares of the stock of Hotel Fortuna, a.s. Praha, SIN
770940000274 (hereinafter "Hotel Fortuna") which represents the full
controlling interest of CI in Hotel Fortuna;
2. YSE agrees to sell, and CI agrees to buy, 100,000 (one hundred thousand)
ordinary shares of common stock of Ceske energeticke zavody, a.s. utility
company (hereinafter "CEZ"), ISIN CS0008441952;
3. YSE agrees to sell, and CI agrees to buy, 86,570 (eighty-six thousand five
hundred seventy) shares of common stock of the Vodni stavby Praha, a.s.
construction company (hereinafter "VS"), ISIN CS0005020957.
ARTICLE II
Prices and Settlement
1. CI and YSE agree that the total price for the controlling interest in the
Hotel Fortuna is 268,483,000 Kc (two hundred sixty-eight million four
hundred eighty-three thousand Czech korunas), which brings the price to
1,069.60 Kc per one share;
2. YSE and CI agree that the trading price for the CEZ stock is 1,040 Kc (one
thousand forty Czech korunas) per share, bringing the total for the VS
package to 104,000,000 Kc (one hundred four million Czech Korunas);
3. YSE and CI agree that the trading price for the VS stock be set at 1,900 Kc
(one thousand nine hundred Czech korunas) per share, the total for the VS
package being 164,483,000 Kc (one hundred sixty-four million four hundred
eighty-three thousand Czech korunas);
4. In the context of all the factors and circumstances of the understanding,
CI and YSE have agreed that the values of the packages brought into the
deal by the two companies are equal, and that the deal can be fairly
consummated without a need for additional financial, or monetary,
compensation.
ARTICLE III
Transfer of Shares
1. CI admits that the CEZ shares are subject of a pledge till October 31,
1996, and therefore YSE cannot transfer the CEZ shares immediately. YSE
agrees to transfer CEZ shares after their release directly to a CI account
in SCP, or to another account stated in writing by CI. The CEZ shares
transfer will be done by November 5, 1996 at the latest. YSE herein
announces its full ability to cover all financial obligations toward the
Bank for the release of CEZ shares by October 31, 1996;
- 23 -
<PAGE>
1. YSE agrees to transfer the VS shares to the account stated in writing by CI
on October 17, 1996 at the latest;
2. CI agrees to transfer Hotel Fortuna shares to SCP account No. 100031334769
as soon as the 100,000 CEZ shares mentioned in par. 1 above have been
transferred, it means on November 5, 1996;
3. CI understands that the transfer of VS and CEZ shares will be done for the
YSE by the company Stratego Invest, a.s., a member of the Prague Stock
Exchange.
ARTICLE IV
Miscellaneous
1. CI will make, through its Prague Eastbrokers a.s. subsidiary, its best
efforts to help YSE sell the stock of the following companies:
CSAD Cernosice CS0008203055
YSE Profit CZ0009075206
REAS CS0008450953
2. All the deals mentioned above will be confirmed by standard Czech
securities transfer documents ("Konfirmace obchodu");
3. This agreement is executed in two copies for both parties concerned.
Signed in Prague and Vienna, on October 1, 1996
For YSE: For CI:
Ing. Petr Kulhanek Peter Schmid
General Manager President
- 24 -
Exhibit 10.2
CZECH INDUSTRIES, INC.
1996 STOCK OPTION PLAN
SECTION 1. Purpose. The purpose of the Czech Industries, Inc. 1996 Stock Option
Plan is to advance the interests of Czech Industries, Inc. (the "Company") by
enabling officers, employees, directors and consultants of the Company and its
Affiliates to participate in the Company's future and to enable the Company to
attract and retain such persons by offering them proprietary interests in the
Company.
SECTION 2. Definitions. For purposes of the Plan, the following terms are
defined as set forth below:
a. "Affiliate" means a corporation or other entity controlled directly,
or indirectly through one or more intermediaries, by the Company and
designated by the Committee as such.
b. "Award" means an award granted to a Participant in the form of a Stock
Appreciation Right, Stock Option, or Restricted Stock, or any
combination of the foregoing.
c. "Board" means the Board of Directors of the Company.
d. "Cause" shall have the meaning set forth in Section 8.
e. "Change in Control" shall have the meaning set forth in Section 11.
f. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
g. "Commission" means the Securities and Exchange Commission or any
successor agency.
h. "Committee" means the Committee referred to in Section 5.
i. "Common Stock" means common stock, $.05 per share par value, of the
Company.
j. "Company" means Czech Industries, Inc., a Delaware corporation.
k. "Disability" means permanent and total disability as determined under
procedures established by the Committee for purposes of the Plan.
l. "Non-Employee Director" shall mean a director who qualifies as such
under Rule 16b-3(b)(3), as promulgated under the Exchange Act, or as
such term is defined under any successor rule adopted by the
Commission.
m. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
n. "Fair Market Value" means the average, as of any given date, between
the highest and lowest reported closing bid and asked prices of the
Stock on NASDAQ or the closing sale price as of any given date if the
Stock is listed on a national securities exchange or the NASDAQ
National Market System. If there is no regular public trading-market
for such Stock under circumstances specified above, the Fair Market
Value of the Stock shall be determined by the Committee in good faith.
- 25 -
<PAGE>
o. "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of
Section 422 of the Code.
p. "Non-qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
q. "Normal Retirement" means retirement from active employment with the
Company or an Affiliate at or after age 65 or at such other age as may
be specified by the Committee.
r. "Participant" means an employee, director or consultant of the Company
or of an Affiliate to whom an Award has been granted which has not
terminated, expired or been fully exercised.
s. "Plan" means the Czech Industries, Inc. 1996 Stock Option Plan, as set
forth herein and as hereinafter amended from time to time.
t. "Restricted Period" means the period of time, which may be a single
period or multiple periods, during which Restricted Stock awarded to a
Participant remains subject to the restrictions imposed on such Stock,
as determined by the Committee.
u. "Restrictions" means the restrictions and conditions imposed on
Restricted Stock awarded to a Participant, as determined by the
Committee, which must be satisfied in order for the Restricted Stock
to vest, in whole or in part, in the Participant.
v. "Restricted Stock" means an Award of Stock on which are imposed
Restriction Period(s) and Restrictions whereby the Participant's
rights to full enjoyment of the Stock are conditioned upon the future
performance of substantial services by any individual or are otherwise
subject to a "substantial risk of forfeiture" within the meaning of
Section 83 of the Code, as amended.
w. "Restricted Stock Agreement" means a written agreement between a
Participant and the Company evidencing an award of Restricted Stock.
x. "Restricted Stock Award Date" means the date on which the Committee
awarded Restricted Shares to the Participant.
y. "Retirement" means Normal Retirement or early retirement if a defined
benefit or 401(K) retirement plan of the Company provides for same.
z. "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission
granted under Section 16(b) of the Exchange Act, as amended from time
to time.
aa. "Stock" means the Common Stock.
bb. "Stock Appreciation Right" means a right granted under Section 9.
cc. "Stock Option" or "Option" means an option granted under Section 8.
dd. "Termination of Employment" means the termination of the Participant's
employment with the Company and any Affiliate. A Participant employed
by an Affiliate shall also be deemed to incur a Termination of
Employment if the Affiliate ceases to be an Affiliate and the
Participant does not immediately thereafter become an employee of the
Company or another Affiliate.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
- 26 -
<PAGE>
SECTION 3. Effective Date.
The effective date of the Plan shall be the date upon which the Plan is
approved by the stockholders of the Company.
SECTION 4. Stock Subject to Plan.
The total number of shares of Stock reserved and available for distribution
pursuant to Awards under the Plan shall be 400,000 shares of Stock. Such shares
may consist, in whole or in part, of authorized and unissued shares or treasury
shares.
If any shares of Stock that have been Optioned cease to be subject to a
Stock Option, if any shares of Stock that are subject to any Award are forfeited
or if any Award otherwise terminates without a distribution being made to the
Participant in the form of Stock, such shares shall again be available for
distribution in connection with Awards under the Plan. In addition, any stock
purchased by a Participant upon exercise of an Option under the Plan which is
subsequently repurchased by the Company pursuant to the terms of such Option may
again be the subject of an Option under the Plan.
In the event of any merger, reorganization, consolidation, recapitalization
(including but not limited to the issuance of Stock or any securities
convertible into Stock in exchange for securities of the Company), stock
dividend, stock split or reverse stock split, extraordinary distribution with
respect to the Stock or other similar change in corporate structure affecting
the Stock, such substitution or adjustments shall be made in the aggregate
number of shares reserved for issuance under the Plan, in the number and Option
price of shares subject to outstanding Stock Options and Stock Appreciation
Rights, and in the number of shares subject to other outstanding Awards granted
under the Plan as may be determined to be appropriate by the Committee, in its
sole discretion; provided, however, that the number of shares subject to any
Award shall always be a whole number. Such adjusted Option price shall also be
used to determine the amount payable by the Company upon the exercise of any
Stock Appreciation Right associated with any Stock Option.
SECTION 5. Administration.
The Plan shall be administered by the Stock Award Committee ("Committee")
of the Board or such other committee of the Board, composed of not less than two
directors all of whom shall be Non-Employee Directors unless otherwise
determined by the Board. Each member of the Committee shall be appointed by and
serve at the pleasure of the Board. If at any time no Committee shall be in
place, the functions of the Committee specified in the Plan shall be exercised
by the Board.
The Committee shall have plenary authority to grant Awards to officers,
employees, and consultants of the Company or an Affiliate. Among other things,
the Committee shall have the authority, subject to the terms of the Plan:
(a) to select the officers, employees, directors and consultants to whom
Awards may from time to time be granted;
(b) to determine whether and to what extent Incentive Stock Options,
Non-qualified Stock Options, Stock Appreciation Rights and Restricted
Stock, or any combination thereof are to be granted hereunder;
(c) to determine the number of shares of Stock to be covered by each Award
granted hereunder;
(d) to determine the terms and conditions of any Award granted hereunder
(including, but not limited to, the Option price, any vesting
restrictions or limitation, any repurchase rights in favor of the
Company and any vesting acceleration or forfeiture waiver regarding
any Award and the shares of Stock relating thereto, based on such
factors as the Committee shall determine);
- 27 -
<PAGE>
(e) to adjust the terms and conditions, at any time or from time to time,
of any Award, including with respect to performance goals and
measurements applicable to performance-based Awards pursuant to the
terms of the Plan;
(f) to determine under what circumstances an Award may be settled in cash
or Stock;
(g) if appropriate, to determine Fair Market Value; and
(h) to substitute new Stock Options for previously granted Stock Options,
including previously granted Stock Options having higher Option
prices.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office,
except that the members thereof may authorize any one or more of their number or
any officer of the Company to execute and deliver documents on behalf of the
Committee.
Any determination made by the Committee pursuant to the provisions of the
Plan with respect to any Award shall be made in its sole discretion at the time
of the grant of the Award or, unless in contravention of any express term of the
Plan, at any time thereafter. All decisions made by the Committee pursuant to
the provisions of the Plan shall be final and binding on all persons, including
the Company and Participants.
SECTION 6. Eligibility.
Officers, employees, directors and consultants of the Company and its
Affiliates who are responsible for or contribute to the management, growth and
profitability of the business of the Company and its Affiliates are eligible to
be granted Awards under the Plan. Any person who files with the Committee, in a
form satisfactory to the Committee, a written waiver of eligibility to receive
any Award under the Plan shall not be eligible to receive an Award under the
Plan for the duration of the waiver.
SECTION 7. Duration of the Plan.
The Plan shall terminate ten (10) years from the effective date specified
in Section 3 of the Plan, unless terminated earlier pursuant to Section 12
hereto, and no Awards may be granted thereafter.
SECTION 8. Stock Options.
Stock options granted under the Plan may be of two types: Incentive Stock
options and Non-qualified Stock Options. Any Stock Option granted under the Plan
shall be in such form as the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-qualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights). Incentive Stock Options
may be granted only to employees of the Company and its subsidiaries (within the
meaning of Section 424(f) of the Code). To the extent that any Stock Option is
not designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option, it shall constitute a Non-qualified Stock
Option.
Stock Options shall be evidenced by Option agreements, the terms and
provisions of which may differ. An Option agreement shall indicate on its face
whether it is an agreement for an Incentive Stock Option or a Non-qualified
Stock Option. The grant of a Stock Option shall occur on the date the Committee
by resolution selects an
- 28 -
<PAGE>
individual to be a participant in any grant of a Stock Option, determines the
number of shares of Stock to be subject to such Stock Option to be granted to
such individual and specifies the terms and provisions of the Option agreement.
The Company shall notify a Participant of any grant of a Stock Option, and a
written Option agreement or agreements shall be duly executed and delivered by
the Company to the Participant, which among other things, will make appropriate
arrangements with respect to the Company's tax withholding obligations. Such
agreement or agreements shall become effective upon execution by the
participant.
Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted, amended or altered nor
shall any discretion or authority granted under the Plan be exercised so as to
disqualify the Plan under Section 422 of the Code or, without the consent of the
optionee affected, to disqualify any Incentive Stock Option under such Section
422.
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions as the
Committee shall deem desirable:
(a) Option Price. The Option price per share of Stock purchasable under an
Option shall be determined by the Committee and set forth in the
Option agreement, and shall not be less than the Fair Market Value of
the Stock subject to the Option on the date of grant in the case of
Incentive Stock Options and not less than 50% of the Fair Market Value
of the Stock subject to the Option on the date of grant in the case of
Non-Qualified Stock Options.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more
than 10 years after the date of grant; and no Non-Qualified Stock
Option shall be exercisable more than 10 years and one day after the
date the Stock Option is granted.
(c) Exercisability. Subject to Section 12, Stock Options shall otherwise
be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. If the Committee
provides that any Stock Option is exercisable only in installments,
the Committee may at any time waive such installment exercise
provisions, in whole or in part, based on such factors as the
Committee may determine. In addition, the Committee may at any time
accelerate the exercisability of any Stock Option.
(d) Methods of Exercise. Subject to the provisions of this Section 8,
Stock Options may be exercised, in whole or in part, at any time
during the Option period by giving written notice of exercise to the
Company specifying the number of shares of Stock subject to the Stock
Option to be purchased.
Such notice shall be accompanied by payment in full of the purchase price
by certified or bank check or such other instrument as the Company may accept.
If approved by the Committee, payment in full or in part may also be made in the
form of unrestricted Stock already owned by the optionee of the same class as
the Stock subject to the Stock Option provided, however, that, in the case of an
Incentive Stock Option, the right to make a payment in the form of already owned
shares of Stock of the same class as the Stock subject to the Stock option shall
be authorized only at the time the Stock Option is granted.
An optionee shall have all of the rights of a stockholder of the Company
holding the class or series of Stock that is subject to such Stock Option
(including, if applicable, the right to vote the shares and the right to receive
dividends), when the optionee has given written notice of exercise, and has paid
in full for such shares. In the discretion of the Committee, payment for any
Stock subject to an option may also be made by delivering a properly executed
exercise notice to the Company together with a copy of irrevocable instructions
to a broker to deliver promptly to the Company the amount of sale or loan
proceeds to pay the purchase price. To facilitate the foregoing, the Company may
enter into agreements for coordinated procedures with one or more brokerage
firms. The value of previously owned Stock exchanged in full or partial payment
for the shares purchased upon the exercise of an Option shall be equal to the
aggregate Fair Market Value of such shares on the date of the exercise of such
Option.
- 29 -
<PAGE>
(e) Non-transferability of Options. Except as may otherwise be determined
by the Committee, no Stock Option shall be transferable by the
optionee other than by will or by the laws of descent and
distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee or by the guardian or legal
representative of the optionee, it being understood that the terms
"holder" and "optionee" include the guardian and legal representative
of the optionee named in the Option agreement and any person to whom
an Option is transferred by will or the laws of descent and
distribution.
(f) Termination by Death. If an optionee's employment terminates by reason
of death, any Stock Option held by such optionee may thereafter be
exercised, to the extent then exercisable or on such accelerated basis
as the Committee may determine, for a period of one year and one day
(or such other period as the Committee may specify) from the date of
such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter.
(g) Termination by Reason of Disability. If any optionee's employment
terminates by reason of Disability, any Stock Option held by such
optionee may thereafter be exercised by the optionee, to the extent it
was exercisable at the time of termination or on such accelerated
basis as the Committee may determine, for a period or one year and one
day (or such shorter period as the Committee may specify at grant)
from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period
in the shorter; provided, however, that if the optionee dies within
such one year and one day period (or such shorter period ending upon
the expiration of the stated term of the Stock Option), any
unexercised Stock Option held by such optionee shall, notwithstanding
the expiration of such one year and one day period, continue to be
exercisable to the extent to which it was exercisable at the time of
death for a period of one year and one day from the date of such death
or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of
employment by reason of disability, if an Incentive Stock Option is
exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter
be treated as a Non-qualified Stock Option.
(h) Other Termination. Unless otherwise determined by the Committee and
subject to the provisions of Section 11 of the Plan, if an optionee
incurs a Termination of Employment for any reason other than death or
Disability, any Stock Option held by such optionee shall thereupon
terminate, except that such Stock Option, to the extent then
exercisable, may be exercised for the lesser of three months and one
day from the date of such Termination of Employment or the balance of
such Stock Option's term if such Termination of Employment of the
optionee is involuntary and without Cause. Unless otherwise determined
by the Committee, for the purposes of the Plan "Cause" shall have the
same meaning as that set forth in any employment or severance
agreement, in effect between the Company and the Participant.
Otherwise, it shall mean (1) the conviction of the optionee for
committing a felony under Federal law or the law of the state in which
such action occurred, (2) dishonesty in the course of fulfilling the
optionee's employment duties or (3) willful and deliberate failure on
the part of the optionee to perform his employment duties in any
material respect.
(i) Cashing Out of Option. On receipt of written notice of exercise, the
Committee may, in its sole discretion, elect to cash out all or part
of any Stock Option to be exercised by paying the optionee an amount,
in cash or Stock, equal to the excess of the Fair Market Value of the
Stock that is the subject of the Option over the Option price times
the number of shares of Stock subject to the option on the effective
date of such cash out.
SECTION 9. Stock Appreciation Rights.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the
Plan. In the case of a Non-qualified Stock Option, such rights may be
granted either at or after the time of grant of such Stock Option. In
the case of an Incentive Stock Option, such rights may be granted only
at the time of grant of such Stock Option. A Stock
- 30 -
<PAGE>
Appreciation Right shall terminate and no longer be exercisable upon
the termination or exercise of the related Stock Option.
A Stock Appreciation Right may be exercised by an optionee in accordance
with Section 9(b) by surrendering the applicable portion of the related Stock
Option in accordance with procedures established by the Committee. Upon such
exercise and surrender, the optionee shall be entitled to receive on amount
determined in the manner prescribed in Section 9(b). Stock Options which have
been so surrendered shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions as shall be determined by the Committee,
including the following:
(i) Stock Appreciation Rights shall be exercisable only at such time
or times and to the extent that the Stock Options to which they
relate are exercisable in accordance with the provisions of
Section 8 and this Section 9 or as may otherwise be determined by
the Committee.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash, shares of Stock
or both equal in value to the excess of the Fair Market Value of
one share of Stock over the option price per share specified in
the related Stock Option multiplied by the number of shares in
respect of which the Stock Appreciation Right shall have been
exercised, with the Committee having the right, in its sole
discretion, to determine the form of payment.
(iii)Stock Appreciation Rights shall be transferable only when and to
the extent that the underlying Stock Option would be transferable
under Section 8(e).
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option
or part thereof to which such Stock Appreciation Right is related
shall be deemed to have been exercised for the purpose of
determining the number of shares of Stock available for issuance
under the Plan in accordance with Section 5 of the Plan, but only
to the extent of the number of shares resulting from dividing the
value of the Stock Appreciation Right at the time of exercise by
the Fair Market Value of one share of Stock determined in
accordance with this Section 9.
SECTION 10. Terms of Restricted Stock Awards.
Subject to and consistent with the provisions of the Plan, with respect to
each Award of Restricted Stock to a Participant, the Committee shall determine:
(a) the terms and conditions of the Restricted Stock Agreement between the
Company and the Participant evidencing the Award;
(b) the Restricted Period for all or a portion of the Award;
(c) the Restrictions applicable to the Award, including, but not limited
to, continuous employment with the Company for a specified term or the
attainment of specific corporate, divisional or individual performance
standards or goals, which Restricted Period and Restrictions may
differ with respect to each Participant;
(d) whether the Participant shall receive the dividends and other
distributions paid with respect to an award of the Restricted Stock as
declared and paid to the holders of Stock during the Restricted Period
or shall be withheld by the Company for the account of the Participant
until the Restricted Periods have expired or the Restrictions have
been satisfied, and whether interest shall be paid on such dividends
and other distributions withheld, and if so, the rate of interest to
be paid;
- 31 -
<PAGE>
(e) the percentage of the Award which shall vest in the Participant in the
event of death, Disability or Retirement prior to the expiration of
the Restricted Period or the satisfaction of the Restrictions
applicable to an award of Restricted Stock; and
(f) notwithstanding the Restricted Period and the Restrictions imposed on
the Restricted Shares, as set forth in a Restricted Stock Agreement,
whether to shorten the Restricted Period or waive any Restrictions, if
the Committee concludes that it is in the best interests of the
Company to do so.
Upon an award of Restricted Stock to a Participant, the stock certificate
representing the Restricted Stock shall be issued and transferred to and in the
name of the Participant, whereupon the Participant shall become a stockholder of
the Company with respect to such Restricted Stock and shall be entitled to vote
the Stock. Such stock certificates shall be held in custody by the Company,
together with stock powers executed by the Participant in favor of the Company,
until the Restricted Period expires and the Restrictions imposed on the
Restricted Stock are satisfied.
SECTION 11. Change of Control.
(a) Upon the occurrence of an event of "Change of Control", as defined
below and subject to such additional conditions and restrictions as
the Committee may determine at the time of the granting of the Award:
(i) any and all outstanding Options shall become immediately
exercisable;
(ii) the Restricted Period and Restrictions imposed on the Restricted
Stock shall lapse, and the Restricted Stock shall vest in the
Participant to the extent determined by the Committee; and
(iii)within ten business days after the occurrence of a Change of
Control, the certificates representing the Restricted Stock so
vested, without any restrictions or legend thereon, other than as
required by law, shall be delivered to the Participant, and any
dividends and distributions paid with respect to the Restricted
Stock which were escrowed during the Restricted Period and the
earnings thereon shall be paid to the Participant.
(b) A "Change of Control" shall occur when, in addition to the occurrence
of such other events as the Committee may determine at the time of the
grant of the Award, one or more of the following events occurs
following the effective date of the Plan:
(i) any "Person" (which term, when used in this Section 11, shall
mean one or more persons acting as a partnership, limited
partnership, syndicate or other group for the purpose of
acquiring, holding or disposing of securities of the issuer or
shall have such other meaning assigned to it in a successor
provision to Section 13(d) of the Exchange Act) is or becomes
without the approval of a majority of the Continuing Directors
(as defined below) the "Beneficial Owner" (which term, when used
in this Section 11, shall include any person who, directly or
indirectly, through any contract, arrangement, understanding,
relationship or otherwise has or shares (i) voting power which
includes the power to vote or to direct the voting of such
security; and/or (ii) investment power which includes the power
to dispose or to direct the disposition of such security, or such
other meaning assigned to it in a successor provision to Rule
13d-3 promulgated under the Exchange Act), directly or
indirectly, of Voting Stock (as defined below) representing
twenty percent (20%) or more of the votes entitled to be cast by
the holders of all then outstanding Shares of the Company; or
(ii) the stockholders of the Company approve a definitive agreement or
plan to merge or consolidate the Company with or into another
corporation, or to sell, or otherwise dispose of, all or
substantially all of the Company's property and assets, or to
liquidate the Company or the business of the Company for which
the Participant's services are principally performed is
- 32 -
<PAGE>
disposed of by the Company pursuant to a sale of assets
(including stock of a subsidiary of the Company), a merger or
consolidation or otherwise; or
(iii)the individuals who are Continuing Directors of the Company cease
without the approval of a majority of the Continuing Directors
for any reason to constitute at least a majority of the Board of
the Company.
The term "Continuing Director" means (i) any member of the Board who is a
member of the Board on October 1, 1996, or (ii) any person who subsequently
becomes a member of the Board whose nomination for election or election to the
Board is recommended or approved by a two-thirds majority of the Continuing
Directors. The term "Voting Stock" means all capital stock of the Company which
by its terms may be voted on all matters submitted to stockholders of the
Company generally.
SECTION 12. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would (i) impair the rights of
an Award theretofore granted without the Participant's consent, except such an
amendment made to cause the Plan to qualify for the exemption provided by Rule
16b-3, or (ii) disqualify the Plan from the exemption provided by Rule 16b-3. In
addition, no such amendment shall be made without the approval of the Company's
stockholders to the extent such approval is required by law or agreement.
The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights of any holder without the holder's consent except such an
amendment made to cause the Plan or Award to qualify for the exemption provided
by Rule 16b-3. The Committee may also substitute new Stock Options for
previously granted Stock Options, including previously granted Stock Options
having higher option prices.
Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax and accounting rules, as
well as other developments and to grant Awards which qualify for beneficial
treatment under such rules without shareholder approval.
SECTION 13. General Provisions.
(a) Nothing contained in the Plan shall prevent the Company or an
Affiliate from adopting other or additional compensation arrangements
for its employees.
(b) The Plan shall not confer upon any employee any right to continued
employment nor shall it interfere in any way with the right of the
Company or an Affiliate to terminate the employment of any employee at
any time.
(c) No later than the date as of which an amount first becomes includible
in the gross income of the Participant for Federal income tax purposes
with respect to any Award under the Plan, the Participant shall pay to
the Company, or make arrangements satisfactory to the Company
regarding the payment of, any Federal, state, local or foreign taxes
of any kind required by law to be withheld with respect to such
amount. Unless otherwise determined by the Company, withholding
obligations may be settled with Stock, including Stock that is part of
the Award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such
payment or arrangements, and the Company and its Affiliates shall, to
the extent permitted by law, have the right to deduct any such taxes
from any payment otherwise due to the participant.
(d) The Committee shall establish such procedures as it deems appropriate
for a Participant to designate a beneficiary to whom any amounts
payable in the event of the participant's death are to be paid.
(e) Agreements entered into by the Company and Participants relating to
Awards under the Plan, in such
- 33 -
<PAGE>
form as may be approved by the Committee from time to time, to the
extent consistent with or permitted by the Plan shall control with
respect to the terms and conditions of the subject Award. If any
provisions of the Plan or any agreement entered into pursuant to the
Plan shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions of the Plan or
the subject agreement.
(f) The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of
Delaware.
- 34 -
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0
0
<COMMON> 143,550
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</TABLE>
