-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QKnfmJMAdxRgf0odB4hyehZjz7i990AgVlcUusj1rIv0ENbZuqA0IL58861jP2W0 QG0k+TueSTZH/NnOkUZlaA== 0001021408-02-009725.txt : 20020723 0001021408-02-009725.hdr.sgml : 20020723 20020723165435 ACCESSION NUMBER: 0001021408-02-009725 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20020723 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRAL EUROPEAN DISTRIBUTION CORP CENTRAL INDEX KEY: 0001046880 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-BEER, WINE & DISTILLED ALCOHOLIC BEVERAGES [5180] IRS NUMBER: 541865271 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-89868 FILM NUMBER: 02708991 BUSINESS ADDRESS: STREET 1: PALM TOWER BUILDING STREET 2: 1343 MAIN STREET SUITE 301 CITY: SARASOTA STATE: FL ZIP: 34236 BUSINESS PHONE: 9413301558 MAIL ADDRESS: STREET 1: PALM TOWER BUILDING STREET 2: 1343 MAIN STREET SUITE 301 CITY: SARASOTA STATE: FL ZIP: 34236 S-3/A 1 ds3a.txt AMENDMENT #1 TO FORM S-3 As filed with the Securities and Exchange Commission on July 23, 2002 Registration No. 333-89868 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------- AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------- CENTRAL EUROPEAN DISTRIBUTION CORPORATION (Exact name of registrant as specified in its charter) Delaware 54-1865271 (State or other (I.R.S. Employer Identification jurisdiction of Number) incorporation or organization) 1343 Main Street, Suite 301 Sarasota, Florida 34236 (941) 330-1558 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) William V. Carey Chairman, President and Chief Executive Officer 1343 Main Street, Suite 301 Sarasota, Florida 34236 (941) 330-1558 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------- Copy to: Steven E. Ballew, Esq. Hogan & Hartson L.L.P. 555 Thirteenth Street, N.W. Washington, D.C. 20004-1109 (202) 637-5725 ------------------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] _______________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] _________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] ------------------------- CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------ Proposed Proposed Maximum Maximum Amount of Title of Class Amount to Aggregate Price Aggregate Registration of Securities Being Registered be per Common Offering Fee (1) Registered Share (1) Price (1) - ------------------------------------------------------------------------------------------------------------ Common Stock, $0.01 par value per 800,000 $15.555 $12,444,000 $1,145 share shares - ------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(c) based on the average of the high and low reported sales prices on the Nasdaq National Market Tier on June 3, 2002. Previously paid. ------------------------- The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. The information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement relating to these securities has been declared effective by the Securities and Exchange Commission. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject to Completion dated July 23, 2002 PROSPECTUS 800,000 Shares CENTRAL EUROPEAN DISTRIBUTION CORPORATION Common Stock ------------------ The selling stockholders named in this prospectus, and any of their pledgees, donees, transferees or other successors in interest, may offer and sell up to 800,000 shares of our common stock. We are registering the resale of the offered shares as required by the terms of our agreements with the selling stockholders. We issued these shares in connection with a private placement of the shares in March 2002. The registration of the offered shares does not necessarily mean that any of the shares will be offered or sold by the selling stockholders. Although we will incur expenses of approximately $35,500 in connection with the registration of these shares, we will not receive any cash proceeds if they are sold. Our common stock is quoted on the Nasdaq National Market under the symbol "CEDC." On July 19, 2002 the last reported sale price for our common stock on Nasdaq was $13.75. ------------------ Investing in CEDC common stock involves risks. See "Risk Factors" beginning on page 3 before purchasing the common stock. ------------------ Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. ------------------ The selling stockholders may from time to time offer and sell all or a portion of the offered shares in transactions on Nasdaq or any other national securities exchange or quotation service on which the offered shares are listed or quoted at the time of the sale, in the over-the-counter market, in negotiated transactions or otherwise, at prices then prevailing or related to the then-current market price or at negotiated prices. The offered shares may be sold directly or through agents or broker-dealers acting as principal or agent, or in block trades or pursuant to a distribution by one or more underwriters on a firm commitment or best-efforts basis. To the extent required, the names of any agents or broker-dealers and applicable commissions or discounts and any other required information with respect to any particular offer will be set forth in this prospectus under the caption "Plan of Distribution" or in any accompanying prospectus supplement. The selling stockholders reserve the right to accept or reject, in whole or in part, any proposed purchase of the offered shares to be made directly or through agents. One selling stockholder which is a registered broker-dealer is considered an "underwriter" within the meaning of the Securities Act of 1933. The other selling stockholders and any agents or broker-dealers participating in the distribution of the offered shares may be deemed to be "underwriters," and any profit on the sale of offered shares by all of the selling stockholders and any commissions received by any agents or broker-dealers may be deemed to be underwriting commissions or discounts under the Securities Act. ------------------ The date of this prospectus is July __, 2002. 1 PROSPECTUS SUMMARY This summary only highlights the more detailed information appearing elsewhere in this prospectus or incorporated herein by reference. As this is a summary, it may not contain all information that is important to you. You should read this entire prospectus carefully before deciding whether to invest in our common stock. This prospectus contains forward-looking statements. You should read the explanation of the qualifications and limitations on such forward-looking statements on page 10 of this prospectus. You should also carefully consider the various risk factors beginning on page 3 of this prospectus, which risk factors may cause our actual results to differ materially from those indicated by such forward-looking statements. You should not place undue reliance on our forward-looking statements. Unless the context otherwise requires, all references to "we," "us," "our Company," "CEDC," or the "Company" in this prospectus refer collectively to Central European Distribution Corporation, a Delaware corporation, and its subsidiaries considered as a single enterprise. About Central European Distribution Corporation We believe that we are the leading independent distributor of fine wines and spirits in Poland. The Company operates the largest nationwide next-day alcoholic beverage service in Poland through its 28 regional offices located in Poland's principal cities, including Warsaw, Krakow, Gdynia and Katowice Poznan, Bialystok, Rzeszow and Wroclaw. We currently distribute approximately 820 brands in three categories: beers, spirits and wines. The Company imports and distributes ten international beers, including, but not limited to Guinness, Corona, Foster's, Beck's Pilsner, Bitburger and Budweiser Budvar. The Company currently distributes approximately 190 spirit products, including leading international brands of scotch, single malt and other whiskeys, rums, bourbons, Polish vodkas, tequilas, gins, brandies, cognacs, vermouths and specialty liquors, such as Johnnie Walker, Smirnoff, Absolut, Finlandia, Bacardi and Ballanatines. CEDC also imports and distributes 548 wine products, including BPH Rothschild, Torres, Bolla, Concha y Toro, Penfolds, Sutter Home, Georges Duboeuf, Mondavi, Veuve Clicquot and Codorniu. In addition to our distribution agreements with various alcoholic beverage suppliers, we are the exclusive importer for Dunhill Cigars, General Cigar products and Evian water. Our Company distributes its products throughout Poland to approximately 13,000 outlets, including off-trade establishments, such as small businesses, medium size retail outlets, petrol stations, duty free, supermarkets and hypermarkets, and on-trade locations, such as bars, night clubs, hotels and restaurants, where such products are consumed. Our principal executive offices are located at 1343 Main Street, Suite 301, Sarasota, Florida 34236, and our telephone number is (941) 330-1558. We maintain a homepage on the Internet at www.ced-c.com. That web site is not a part of this prospectus. Set forth below is selected financial data with regard to adjustments in reported net income and net income per share as a result of changes in the method for accounting for goodwill and other intangibles that became effective January 1, 2002. The Company's audited financial statements are contained in documents incorporated herein by reference.
Year ended December 31, --------------------------------- 1999 2000 2001 ---- ---- ---- Reported net income $1,902 $ 985 $2,526 Goodwill amortization (net of tax effect) $ 96 $ 197 $ 315 ------ ------ ------ Adjusted net income $1,998 $1,182 $2,841 ====== ====== ====== Basic earnings per share of common stock Reported net income $ 0.47 $ 0.23 $ 0.58 Goodwill amortization (net of tax effect) $ 0.02 $ 0.04 $ 0.07 ------ ------ ------ Adjusted basic earnings per share of common stock $ 0.49 $ 0.27 $ 0.65 ====== ====== ====== Diluted earnings per share of common stock Reported net income $ 0.47 $ 0.23 $ 0.57 Goodwill amortization (net of tax effect) $ 0.02 $ 0.04 $ 0.07 ------ ------ ------ Adjusted diluted earnings per share of common stock $ 0.49 $ 0.27 $ 0.64 ====== ====== ======
The Offering This prospectus relates to up to 800,000 shares of our common stock that may be offered for sale by the selling stockholders. We are registering the shares of common stock covered by this prospectus in order to fulfill our contractual obligations to do so, which we undertook at the time of the original issuance of these shares. Registration of the shares of common stock does not necessarily mean that all or any portion of such stock will be offered for sale by the selling stockholders. We have agreed to bear the expenses of the registration of the common stock under federal and state securities law, but we will not receive any proceeds from the sale of any common stock offered under this prospectus. We have also agreed to update this prospectus as needed so that the selling stockholders may 2 use it until all the shares offered by this prospectus are sold or, if earlier, March 27, 2004. Plan of Distribution The selling stockholders may sell the shares of common stock through agents or dealers, directly to one or more individuals, institutional or other purchasers or through any combination of these methods of sale. The distribution of the shares of common stock may be effected in one or more transactions at market prices then prevailing at the time of sale, at prices related to such prevailing market prices, or at negotiated prices. See "Plan of Distribution." RISK FACTORS You should consider carefully the following risks before you decide to buy our common stock. If any of the following risks actually occur, our business, financial condition or results of operations would likely suffer. In that case, the trading price of our common stock could decline, and you may lose all or a part of the money you paid to buy our common stock. Risks Related to CEDC ... The failure to integrate smoothly the operations, management and other personnel of acquired companies could adversely affect out ability to maximize our business activities and financial performance. Our growth will depend in part on our ability to acquire additional distribution capacity and effectively integrate these acquisitions into our existing operations and systems of management and financial controls. Risks associated with acquisitions include, but are not limited to, integration of sales personnel, retention of key management, standardization of management and controls, harmonization of sales and marketing strategies and procedures and implementation of group financial reports and controls. We may not be able to successfully integrate the operations of any acquisition which could negatively impact our financial performance. Furthermore, since we have a history of maintaining the operational independence of the companies we acquire, there are risks that the managers of the subsidiaries, who were once the owners of their own companies, will not successfully implement new business strategies and management and cost-control systems. Our senior management which is resident in Warsaw may not be able to coordinate the business activities of the group's various subsidiaries in order to maximize the group's business potential as a nationwide distribution network. ... The inability to manage adequately exchange-rate risk could significantly affect the financial results of the Company and management's ability to make financial projections. Certain of our operating expenses and capital expenditures are, and are expected to continue to be, denominated in or indexed to U.S. Dollars or other hard currencies. By contrast, substantially all of our revenue is denominated in zloty. Any significant devaluation of the zloty against the U.S. Dollar that we are unable to offset through price adjustments will require us to use a larger portion of our revenue to service our U.S. Dollar-denominated obligations. We have entered into transactions to hedge the risk of exchange rate fluctuations. In 2001, these hedges decreased the fluctuations in our quarterly results, but resulted in a new expense item. It is uncertain whether the costs of the hedge transactions will be more of a burden to us than the losses that may result from the exposure to exchange-rate risk. It is also uncertain whether we will be able to continue to obtain hedging arrangements on commercially satisfactory terms. Accordingly, significant shifts in currency 3 exchange rates may have an adverse effect on our ability to service our U.S. Dollar-denominated obligations and, thus, on our financial condition and results of operations. The following table sets forth, for the periods indicated, the noon exchange rate (expressed in current zloty quoted by the National Bank of Poland). Such rates are set forth as zloty per U.S. Dollar. At July 18, 2002, such rate was PLN 4.0836 per $1.00. More up-to-date conversion ratios can be found on Yahoo.com and other available internet sites.
Year ended December 31, -------------------------------------- 1998 1999 2000 2001 ---- ---- ---- ---- Exchange rate at end of period ................. 3.50 4.15 4.14 3.98 Average exchange rate during period (1)......... 3.50 3.97 4.15 4.06 Highest exchange rate during period ............ 3.81 4.35 4.60 4.50 Lowest exchange rate during period ............. 3.41 3.41 4.07 3.91
- ------------------ (1) The average of the exchange rates on the last day of each month during the applicable period. ... The inability to maintain and expand senior management would threaten our ability to implement all of our business strategies. The management of future growth will require the ability to retain qualified management personnel and to attract and train new personnel. Senior leadership is necessary to develop the financial and cost controls, the information systems, and the marketing activities needed for us to prosper. Further, the successful integration of acquired companies requires substantial attention from our senior management team. Failure to successfully retain and hire needed personnel to manage our growth and development would have a material adverse effect on our ability to implement our business plan and grow our business. ... A significant number of our largely short-term and non-exclusive supply contracts may be unexpectedly terminated, which would materially and adversely affect the Company's ability to generate revenue and operate profitably. We distribute approximately 85% of the alcoholic beverages in our portfolio on a nonexclusive basis. Furthermore, most of our distribution agreements for these beverages have a term of approximately one year, although several of such agreements can be terminated by one party without cause on relatively short notice. For example, the distribution agreements with respect to domestic vodka (which accounted for approximately 76.4% of our net sales in 2001) can be terminated on one months notice. Any termination of a significant number of our supply contracts would adversely affect our ability to generate revenue and operate profitably. ... The non-renewal of a significant number of our principal supply contracts would materially and adversely affect our ability to generate revenue and operate profitably. In 2001, we had purchases of over 5% of net sales with the following suppliers: Polmos Bialystok (24.1%), Unicom Bols Group (14.9%), Polmos Poznan (11.0%), Polmos Zielona Gora (7.5%) and Guinness UDV (7.1%). We have one-year supply contracts with each of the named companies. The termination of our relationship with any of these entities could have a material adverse effect on our ability to generate revenue and operate profitably. ... The abrupt and unexpected termination of a significant number of the Company's exclusive supply contracts would likely depress net income significantly. We have exclusive rights to distribute in Poland certain alcoholic beverages which during 1999, 2000 and 2001 constituted approximately 15%, 18% and 13%, respectively, of our net sales. These beverages constitute many of the high-margin beverages we distribute. The distribution arrangements for these beverages generally have one to three year terms. If any of these exclusive relationships were terminated or not renewed, then our revenue and cash flows would likely be reduced. ... Any diminution in the value of goodwill and intangible assets placed on our consolidated financial statements as a result of acquisitions could adversely affect our financial position and market capitalization. Acquisitions may result in the recording of goodwill and intangibles on our consolidated financial statements. From January 1, 2002, goodwill is no longer amortized in accordance with SFAS 142. Under SFAS 142 goodwill and trademarks (the later being amortized over the economic life of the asset) are reviewed on an annual basis for possible impairment. Any write-off of these assets could have a negative impact on our market capitalization and financial condition. Risks Related to Growth Through Acquisitions ... The inability to finance future acquisitions on acceptable terms would undermine our basic business strategy of growing a Poland-wide network through acquisitions. Our ability to grow through the acquisition of additional companies will also be dependent upon the availability of capital to complete such acquisitions. We intend to finance acquisitions through a combination of our available cash resources, bank borrowings and, in appropriate circumstances, the further issuance of equity and/or debt securities. These financing resources may not be available to us on acceptable commercial terms when needed to fund an acquisition, if at all, which could prevent us from growing a Poland-wide distribution network. ... The absence of suitable acquisition targets would undermine our basic business strategy of growing a Poland-wide network through acquisitions. We may not identify suitable acquisition candidates that are available on terms acceptable to us. In addition, acquired businesses may not be profitable at the time of their acquisition and may not achieve or maintain profitability levels that justify the investment therein. Therefore, our acquisitions may not be accretive to shareholder value immediately following any acquisition, which would reduce our market capitalization. Risks Related to Investments in Poland and Emerging Markets ... The inability to predict and manage adequately inflation risk could significantly affect our financial results and management's ability to make financial projections. Since the fall of Communist rule in 1989, Poland has experienced high levels of inflation. The Polish government has adopted policies that slowed the annual rate of inflation from approximately 15% in 1997 to an average 3.6% for the year 2001. We may not be able to predict or manage fully inflation which has had, and may continue to have, an adverse effect on our financial condition and results of operations. ... Polish anti-monopoly regulations could threaten our basic business strategy of growing through acquisitions. Under the Polish Anti-Monopoly Act, acquisitions may be blocked or have conditions imposed upon them by the Polish Office for Protection of Competition and Consumers (the "Anti-Monopoly Office") if the Anti-Monopoly Office determines that the acquisition has a negative impact on the competitiveness of the Polish market. The current body of Polish anti-monopoly law is not well established and, therefore, it can be difficult to predict how the Anti-Monopoly Office will act on an application. Generally, companies that obtain control of 40% or more of their market may face greater scrutiny from the Anti-Monopoly Office than those that control a lesser share. Additionally, several types of reorganizations, mergers and acquisitions and undertakings between business entities, including acquisitions of stock, under circumstances specified in the Anti-Monopoly Act, require prior notification to the Anti-Monopoly Office. Sanctions for failure to notify include fines imposed on parties to the transaction and members of their governing bodies. The Anti-Monopoly Office may not approve any or all of our proposed acquisitions, which action would negatively impact our ability to institute our business plan and grow our business. ... Polish regulations regarding customs duties and quotas could price some of our high-margin products out of the market and/or so reduce availability as to make such products unprofitable to sell. Generally, the import of alcoholic beverages into Poland is subject to customs duties and the rates of the duties are set for particular types of products. The Minister of Economy is authorized to establish a schedule of quotas for alcoholic beverages for which the customs duties are substantially reduced. Customs quotas for alcoholic beverages are fixed annually, with the current quotas being applicable through December 31, 2002. There are no public guidelines on how the Minister of Economy has determined the current quotas or may determine future quotas. Any increase in customs duties or decrease in customs quotas for alcoholic beverages would reduce our revenue and negatively affect our cash flows. ... Increased Polish regulations of the alcoholic beverage industry could make it difficult for us to operate in the industry profitably. The importation and distribution of alcoholic beverages in Poland are subject to extensive regulation, requiring us to receive and renew various permits and licenses to import, warehouse, transport and sell alcoholic beverages. These permits and licenses often contain conditions with which we must comply in order to maintain the validity of such permits and licenses. Our import and sale of cigars are also subject to regulation. These various governmental regulations applicable to the alcoholic beverage industry may be changed so as to impose more stringent requirements on us. If we were to fail to be in compliance with applicable governmental regulations or the conditions of the licenses and permits we receive, such failure could cause our licenses and permits to be revoked and have a material adverse effect on our business, results of operations and financial condition. Further, the applicable Polish governmental authorities, in particular the Minister of Economy, have articulated only general standards for issuance, renewal and termination of the licenses and permits which we need to operate and, therefore, such governmental authorities retain considerable discretionary authority in making such decisions. The alcoholic beverage industry has become the subject of considerable societal and political attention generally in recent years due to increasing public concern over alcohol-related societal problems, including driving while intoxicated, underage drinking and health consequences from the abuse of alcohol. As a consequence of these concerns, the possibility exists for further regulation of the alcoholic beverage industry in Poland. If alcohol consumption in general were to come into disfavor among consumers in Poland, our business operations could be materially and adversely affected. ... Deterioration in the market reforms undertaken by the Polish government could make it more difficult for management to operate our Company and predict financial performance. Poland has undergone significant political and economic change since 1989. Political, economic, social and similar developments in Poland could in the future have a material adverse effect on our business and operations. In particular, changes in laws or regulations (or in the interpretations of existing laws or regulations), whether caused by changes in the government of Poland or otherwise, could materially adversely affect our business and operations. Currently there are no limitations on the repatriation of profits from Poland, for example, but there is no assurance that foreign exchange control restrictions or similar limitations will not be imposed in the future with regard to repatriation of earnings and investments from Poland. If such exchange control restrictions, or similar limitations are imposed, the ability of CEDC to receive dividends or other payments from its subsidiaries could be reduced, which would reduce our cash flows and liquidity. Emerging economies, such as Poland in which we operate, can be more volatile and perform differently than the United States due to increased risks of adverse political, regulatory, or economic developments. The value of our common stock may be adversely affected by such developments that will not affect other U.S. issuers without material operations in emerging markets. In general, investing in the securities of issuers with substantial operations in foreign markets such as Poland involves a higher degree of risk than investing in the securities of issuers with substantial operations in the United States and similar jurisdictions. The Polish market could be subject to greater social, economic, regulatory and political uncertainties than the United States which could have an adverse effect on the market value and liquidity of our common stock. ... Our stockholders could experience unusual expense and uncertainty in trying to enforce any judicial judgment against us. Our Company is organized under the laws of the State of Delaware. Therefore, our stockholders are able to affect service of process in the United States upon CEDC and may be able to affect service of process upon our directors. However, we are a holding company, all of the operating assets of which are located outside the United States. As a result, it may not be possible for investors to enforce against our assets judgments of United States courts predicated upon the civil liability provisions of United States laws. We have been advised by our counsel that there is doubt as to the enforceability in Poland, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated solely upon the laws of the United States. In addition, awards of punitive damages in actions brought in the United States or elsewhere may not be enforceable in Poland. Risks Related to this Offering ... The market price of our common stock will fluctuate and could fluctuate significantly. The market price of our common stock might be highly volatile. The following could cause the market price of our common stock to fluctuate substantially: . changes in our quarterly financial condition or operating results, . changes in general conditions in the economy, . changes in the financial markets, . changes in the alcoholic beverage industry, . changes in our announced financial estimates, . changes in financial estimates by securities analysts or differences between those estimates and our actual results, . the liquidity of the market for our common stock, . changes in policies regarding alcoholic beverages in Poland, . grants or exercises of stock options or securities convertible into the common stock, . news announcements, 7 . litigation involving us, . actions by governmental agencies or changes in regulations or . other developments affecting us or our competitors. The stock market might also experience significant price and volume fluctuations that might affect the market price of our common stock for reasons that are unrelated to our operating performance and that are beyond our control. The market price of our common stock might be lower because of shares eligible for future sale and shares reserved for future issuance upon the exercise of options. Future sales of substantial amounts of our common stock in the public market or the perception that such sales could occur could adversely affect the market price of our common stock. The number of outstanding shares of our common stock held by affiliates of CEDC is large relative to the trading volume of the common stock. We are unable to predict the effect that sales of our common stock may have on the then prevailing market price of our common stock. Any substantial sales of our common stock or even the possibility of such sales occurring may have an adverse effect on the market price of our common stock. As of May 31, 2002, we had outstanding options and warrants to purchase an aggregate of 713,750 shares of our common stock. We have also reserved up to an additional 41,250 shares of our common stock for issuance upon exercise of options that have not yet been granted under our stock option plan. Holders of these warrants and options are likely to exercise them when, in all likelihood, we could obtain additional capital on terms more favorable than those provided by the options and warrants. The market price of our common stock could fall as a result of the sale of any of these shares. RECENT DEVELOPMENTS On March 28, 2002, CEDC completed a private placement of 800,000 shares of its common stock at $10.50 per share, for gross proceeds of $8,400,000. Effective as of April 22, 2002 CEDC completed the acquisition of Damianex S.A., a Polish joint stock company, engaged in the business of distributing alcoholic beverages in Southeastern Poland. The acquisition price was $7,138,000 and the issuance of 152,996 shares of CEDC common stock. Further information, including historical and pro forma financial statements, are contained in our report on Form 8-K dated May 9, 2002 and on Form 8-K/A dated May 15, 2002. Effective as of April 24, 2002 CEDC completed the acquisition of AGIS S.A., a Polish joint stock company, engaged in the business of distributing alcoholic beverages in Northern Poland. The acquisition price was $4,567,978 and the issuance of 172,676 shares of CEDC common stock. Further information, including historical and pro forma financial statements, are contained in our report on Form 8-K dated May 9, 2002 and on Form 8-K/A dated June 3, 2002 FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS This prospectus and the documents incorporated into this prospectus by reference contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these statements by forward-looking words such as "may," "could," "should," "would," "intend," "will," "expect," "anticipate," "believe," "estimate" or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial condition or state other forward-looking information. There may be events in the future that we are not able to predict accurately or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. We caution investors that our forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements. These differences may be the result of various factors, including those factors described in the section entitled "Risk Factors" on page 3 and other risk factors as may be detailed from time to time in CEDC's public announcements and filings with the Securities and Exchange Commission. SELLING STOCKHOLDERS A total of up to 800,000 shares of common stock may be sold by use of this prospectus. The shares of common stock offered by the prospectus were privately issued by us in March 2002 in private placements to "accredited investors," as defined by Rule 501 under the Securities Act or in the exemption from registration provided by Regulation S. Since the selling stockholders may sell all, some or none of the shares they beneficially own, CEDC cannot estimate the number of shares that will be sold by use of this prospectus or that will be owned by the selling stockholders upon completion of the offering. The table below sets forth information as of May 31, 2002 regarding the beneficial ownership of common stock by the selling stockholders. Number of Shares Owned Number of Shares ---------------- ---------------------- Name of Selling Stockholder Offered - --------------------------- ------- Michael A. Nicolais 40,000 40,000 Nicholas Fitzwilliams 10,000 10,000 Kingsbridge Capital 15,000 15,000 Quantico Partners, L.P. 50,000 50,000 Joseph E. Sheehan III 5,000 5,000 Joseph E. Sheehan 35,000 35,000 Senvest International LLC 5,000 5,000 Wanger International 160,000 160,000 Small Cap Advisor Wanger European Smaller Companies 40,000 40,000 Fund S 2 Partners, L.P. 35,000 35,000 Anglo Irish Bank (Suisse) S.A. 25,000 25,000 TCMP3 5,000 5,000 Cohanzick Partners, L.P. 25,000 25,000 Cohanzick High Yield Partners, L.P. 25,000 25,000 Oberweis Emerging Growth Portfolio 80,000 80,000 (UMBTRU) Radyr Investments Limited 90,000 90,000 Lancaster Investment 50,000 50,000 Partners, L.P. NV Pensioenverzekeringsmaatschappij DSM 30,000 30,000 Pemigewasset Partners L.P. 25,000 25,000 MicroCapital Fund, LTD 50,000 50,000 NO PROCEEDS TO THE COMPANY CEDC will not receive any of the proceeds from sales of shares by the selling stockholders. The costs and expenses incurred in connection with the registration under the Securities Act of the offered shares will be paid by CEDC. The selling stockholders will pay any brokerage fees and commissions, fees and disbursements of legal counsel for the selling stockholders, and share transfer and other taxes attributable to the sale of the offered shares. PLAN OF DISTRIBUTION The selling stockholders may from time to time, in one or more transactions, sell all or a portion of the offered shares on Nasdaq or any other national securities exchange or quotation service on which the offered shares are listed or quoted at the time of sale, in the over-the-counter market, in negotiated transactions, in underwritten transactions or otherwise, at prices then prevailing or related to the then current market price or at negotiated prices. The offering price of the offered shares from time to time will be determined by the selling stockholders and, at the time of determination, may be higher or lower than the market price of the common stock as quoted on Nasdaq. In connection with an underwritten offering, underwriters or agents may receive compensation in the form of discounts, concessions or commissions from the selling stockholders or from purchasers of offered shares for whom they may act as agents. Underwriters may sell offered shares to or through dealers, and the dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agents. Under agreements that may be entered into by CEDC, underwriters, dealers and agents who participate in the distribution of offered shares may be entitled to indemnification by CEDC against liabilities under the Securities Act or otherwise, or to contribution with respect to payments which the underwriters, dealers or agents may be required to make. The offered shares may be sold directly or through broker-dealers acting as principals or agents, or pursuant to a distribution by one or more underwriters on a firm commitment or best-efforts basis. Broker-dealers acting as principals or agents may receive compensation in the form of discounts, concessions or commissions from the selling stockholders or from purchasers of offered shares for whom they may act as agents. The methods by which the offered shares may be sold include: . ordinary brokerage transactions and transactions in which the broker solicits purchasers; . purchases by a broker-dealer as principal and resale by such broker-dealer for its account pursuant to this prospectus; . a cross or block trade in which the broker-dealer so engaged will attempt to sell the offered shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; . an exchange distribution in accordance with the rules of the NASD; . short sales or borrowings, returns and reborrowings of the shares pursuant to stock loan agreements to settle short sales; . privately-negotiated transactions; and . underwritten transactions. One selling stockholder, Senvest International LLC, which is offering for sale the 5,000 shares of our common stock which it beneficially owns, is considered an "underwriter" of those shares within the meaning of Securities Act. Four other selling stockholders are affiliates of broker-dealers but none is considered an underwriter based on the certification of each to us that it purchased the shares of our common stock offered hereby in the ordinary course of business and that at the time of the purchase, it had no agreements or understandings, directly or indirectly, with any person to distribute the shares being offered. Other selling stockholders and any dealers or agents participating in a distribution of the offered shares may be deemed to be underwriters, and any profit on the sale of the offered shares by the selling stockholders and any commissions received by such broker-dealers may be deemed to be underwriting commissions under the Securities Act. We cannot assure you that the selling stockholders will sell all or any portion of the common stock covered by this prospectus. We will supply the selling stockholders with reasonable quantities of copies of this prospectus. To the extent required by Rule 424 under the Securities Act in connection with any resale or redistribution by a selling stockholder, we fill file a prospectus supplement setting forth: . the aggregate number of shares to be sold; . the purchase price; . if applicable, the names of any underwriter, agent or broker-dealer; and . any applicable commissions, discounts, concessions, fees or other items constituting compensation to underwriters, agents or broker-dealer with respect to the particular transaction (which may exceed customary commissions or compensation). If a selling stockholder notifies us that a material arrangement has been entered into with a broker-dealer for the sale of shares through a block trade, special offering, exchange, distribution or secondary distribution or a purchase by a broker or dealer, the prospectus supplement will include any other facts that are material to the transaction. CEDC has agreed to pay all costs and expenses incurred in connection with the registration under the Securities Act of the 800,000 shares offered by the selling stockholders who acquired them in our recent private placement, including: . all registration and filing fees, . printing expenses, and . fees and disbursements of counsel and accountants for CEDC. The selling stockholders will pay any brokerage fees and commissions, fees and disbursements of legal counsel for the selling stockholders and stock transfer and other taxes attributable to the sale of the offered shares. CEDC also has agreed to indemnify the selling stockholders and their respective officers, directors and trustees and each person who controls, within the meaning of the Securities Act, a selling stockholder against losses, claims, damages, liabilities and expenses arising under the securities laws in connection with this offering. The selling stockholders have agreed to indemnify CEDC, its officers and each person who controls, within the meaning of the Securities Act, CEDC against any losses, claims, damages, liabilities and expenses arising under the securities laws in connection with this offering with respect to written information furnished to CEDC by the selling stockholders. ABOUT THIS PROSPECTUS We have filed with the Commission a registration statement on Form S-3, of which this prospectus is a part, under the Securities Act with respect to the offered shares. This prospectus does not contain all of the information set forth in the registration statement, portions of which we have omitted as permitted by the rules and regulations of the Commission. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete. You should refer to the copy of each contract or document filed as an exhibit to the registration statement for a complete description. WHERE YOU CAN FIND MORE INFORMATION CEDC is subject to the informational requirements of the Securities Exchange Act of 1934 and files annual, quarterly and special reports, proxy statements and other information with the Commission. You may read and copy any materials we file with the Commission at the Public Reference Room of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. In addition, we file many of our documents electronically with the Commission, and you may access those documents over the Internet. The address of the Commission's web site is http://www.sec.gov. Most of our filings with the Commission can also be accessed on the Company web-page at www.ced-c.com. Our common stock is quoted on the Nasdaq National Market under the symbol "CEDC." The Commission allows us to incorporate by reference the information we file with them in this prospectus. This helps us disclose certain information to you by referring you to the documents we file. The information we incorporate by reference is an important part of this prospectus. We incorporate by reference each of the documents listed below. (a) Our Annual Report on Form 10-K for the fiscal year ended December 31, 2001 filed with the Commission on March 15, 2002. (b) Our Current Report on Form 8-K filed with the Commission on January 10, 2002. (c) Our Current Report on Form 8-K filed with the Commission on February 21, 2002. (d) An amendment to our Annual Report on Form 10-K/A filed with the Commission on March 22, 2002. (e) Our Current Report on Form 8-K filed with the Commission on March 28, 2002. (f) Our Current Report on Form 8-K filed with the Commission on May 9, 2002. (g) Our Quarterly Report on Form 10-Q filed with the Commission on May 15, 2002. (h) An amendment to our May 9, 2002 Current Report on Form 8-K/A filed with the Commission on May 14, 2002. (i) An amendment to our May 9, 2002 Current Report on Form 8-K/A filed with the Commission on June 3, 2002. (j) An Amendment to our May 9, 2002 Current Report on Form 8-K/A filed with the Commission on , 2002. (k) The description of our common stock contained in our registration statement on Form 8-A filed with the SEC on May 21, 1998, including any amendment or report filed for the purpose of updating such description. In addition, all documents and reports, filed by us subsequent to the date hereof pursuant to Sections 13(a), 13(c), 14, and 15(d) of the Securities Exchange Act of 1934, as amended, prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities remaining unsold, shall be deemed to be incorporated by reference in this registration statement and to be a part hereof from the date of filing of such documents or reports. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this registration statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this registration statement. You may obtain copies of these documents, other than exhibits, free of charge by contacting James Archbold, CEDC's Vice President and Corporate Secretary, at our principal office, which is located at 1343 Main Street, Suite 301, Sarasota, Florida 34236, or by telephone at (941) 330-1558. You should rely only on the information incorporated by reference or provided in this prospectus or any prospectus supplement. We have not authorized anyone to provide you with different information. The selling stockholders are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this prospectus or any prospectus supplement is accurate as of any date other than the date on the front of this document. EXPERTS The Consolidated financial statements of Central European Distribution Corporation appearing in Central European Distribution Corporation's Annual Report (Form 10-K) for the year ended December 31, 2001 have been audited by Ernst & Young Audit Sp. z o.o., independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference upon such report given on the authority of such firm as experts in accounting and auditing. The financial statements of Damianex S.A. appearing in Central European Distribution Corporation's Current Report on Form 8-K/A dated May 15, 2002, have been audited by Ernst & Young audit Sp. z o.o., independent auditors, as set forth in their report included therein and incorporated herein by reference. Such financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing. The financial statements of AGIS S.A. appearing in Central European Distribution Corporation's Current Report on Form 8-K/A dated June 3, 2002, have been audited by Ernst & Young Audit Sp. z o.o., independent auditors, as set forth in their report included therein and incorporated herein by reference. Such financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing. LEGAL MATTERS Hogan & Hartson L.L.P., Washington, D.C., has passed upon the validity of the common stock offered pursuant to this prospectus. No dealer, salesperson or other individual has been authorized to give any information or to make any representations not contained in this prospectus in connection with the offering covered by this prospectus. If given or made, such information or representations must not be relied upon as having been authorized by CEDC or the selling stockholders. This prospectus does not constitute an offer to sell, or a solicitation of any offer to buy, the offered shares, in any jurisdiction where, or to any person to whom, it is unlawful to make any such offer or solicitation. Neither the delivery of this prospectus nor any offer or sale made hereunder shall, under any circumstances, create an implication that there has not been any change in the facts set forth in this prospectus or in the affairs of CEDC since the date hereof. -------------------- TABLE OF CONTENTS Page ---- Prospectus Summary ..................................................... 2 Risk Factors ........................................................... 3 Recent Developments .................................................... 8 Forward-Looking Statements in this Prospectus .......................... 8 Selling Stockholders ................................................... 9 No Proceeds to the Company ............................................. 10 Plan of Distribution ................................................... 11 About This Prospectus................................................... 12 Where You Can Find More Information .................................... 13 Experts ................................................................ 14 Legal Matters .......................................................... 14 800,000 Shares CENTRAL EUROPEAN DISTRIBUTION CORPORATION Common Stock ---------------------------------- PROSPECTUS ---------------------------------- July , 2002 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution The following table sets forth the estimated fees and expenses payable by CEDC in connection with the issuance and distribution of the securities being registered: Registration Fee .............................. $ 1,250 Printing and Duplicating Expenses.............. 4,250 Legal Fees and Expenses ....................... 20,000 Accounting Fees and Expenses .................. 5,000 Miscellaneous ................................. 5,000 ------- Total ..................................... $35,500 ======= Item 15. Indemnification of Directors and Officers Section 145 of the General Corporation Law of the State of Delaware sets forth certain circumstances under which directors, officers, employees and agents may be indemnified against liability that they may incur in their capacity as such. Section 6.3 of CEDC's Certificate of Incorporation provides for indemnification of CEDC's directors, officers, employees and agents under certain circumstances. Section 6.5 of CEDC's Bylaws, as amended, provides that CEDC may purchase and maintain insurance on behalf of directors, officers, employees or agents. CEDC has in effect a policy of liability insurance covering its directors and officers. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of CEDC pursuant to the foregoing provisions, or otherwise, CEDC has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by CEDC of expenses incurred or paid by a director, officer, or controlling person of CEDC in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, CEDC will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. Item 16. Exhibits Exhibit No. Description 3.1 Certificate of Incorporation (Filed as Exhibit 3.1 to the Registration Statement on Form SB-2, File No. 333-42387, with the Commission on December 17, 1997 [the "1997 Registration Statement"] and incorporated herein by reference). 3.2 Bylaws (Filed as Exhibit 3.2 to the 1997 Registration Statement and incorporated herein by reference). 4.1 Form of Common Stock Certificate (Filed as Exhibit 4.1 to the 1997 Registration Statement and incorporated herein by reference). 4.2 Warrant Agreement and Attached form of Representatives' Warrant (Filed as Exhibit 4.2 to Amendment No. 1 on Form S-1 to the 1997 Registration Statement with the Commission on April 17, 1998 and incorporated herein by reference). *5 Opinion of Hogan & Hartson L.L.P. as to the validity of the shares being registered. 10 1997 Stock Incentive Plan, as amended. *23.1 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5). *23.2 Consent of Ernst & Young Audit Sp. z o.o. *24 Power of Attorney (included on signature page). 99 Pro Forma Financial Statements. - ----------- * Previously filed. Item 17. Undertakings (a) The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in this registration statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in the periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such Securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrant hereby further undertakes that, for the purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities and Exchange Act of 1934) that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment No.1 to its Registration Statement on Form S-3, File No. 333-89868, to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Sarasota, state of Florida on July 23, 2002. CENTRAL EUROPEAN DISTRIBUTION CORPORATION By: /s/ William V. Carey ----------------------------------------------- William V. Carey Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the twenty-third day of July, 2002. Signature Title -------------------------- --------------------------------- Chairman, President and Chief Executive Officer and Director /s/ William V Carey (Principal Executive Officer) -------------------------- William V. Carey Vice President and Chief Financial Officer (Principal Financial Officer and /s/ Neil Crook Principal Accounting Officer) -------------------------- Neil Crook /s/ * Vice-Chairman of the Board -------------------------- Jeffrey Peterson /s/ * Director -------------------------- James Grossmann /s/ * Director -------------------------- Tony Housh /s/ * Director -------------------------- Jan W. Laskowski * By: /s/ William V. Carey ----------------------- Attorney-In-Fact EXHIBIT INDEX Exhibit No. Description 3.1 Certificate of Incorporation (Filed as Exhibit 3.1 to the Registration Statement on Form SB-2, File No. 333-42387, with the Commission on December 17, 1997 [the "1997 Registration Statement"] and incorporated herein by reference). 3.2 Bylaws (Filed as Exhibit 3.2 to the 1997 Registration Statement and incorporated herein by reference). 4.1 Form of Common Stock Certificate (Filed as Exhibit 4.1 to the 1997 Registration Statement and incorporated herein by reference). 4.2 Warrant Agreement and Attached form of Representatives' Warrant (Filed as Exhibit 4.2 to Amendment No. 1 on Form S-1 to the 1997 Registration Statement with the Commission on April 17, 1998 and incorporated herein by reference). *5 Opinion of Hogan & Hartson L.L.P. as to the validity of the shares being registered. 10 1997 Stock Incentive Plan, as amended. *23.1 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5). *23.2 Consent of Ernst & Young Audit Sp. z o.o. *24 Power of Attorney (included on signature page). 99 Pro Forma Financial Statements. ____________________ * Previously filed. - -------------------------------------------------------------------------------- Source: SEC Infoo www.secinfo.como Fran Finnegan & Company Inc.o 6/ EX-10 3 dex10.txt AMENDED 1997 STOCK INCENTIVE PLAN EXHIBIT 10 CENTRAL EUROPEAN DISTRIBUTION CORPORATION 1997 STOCK INCENTIVE PLAN AS AMENDED CENTRAL EUROPEAN DISTRIBUTION CORPORATION 1997 STOCK INCENTIVE PLAN AS AMENDED TABLE OF CONTENTS
Page ---- 1. PURPOSE ............................................................ 1 2. DEFINITIONS ........................................................ 1 3. ADMINISTRATION OF THE PLAN ......................................... 4 4. STOCK SUBJECT TO THE PLAN .......................................... 5 5. EFFECTIVE DATE AND TERM OF THE PLAN ................................ 6 6. DISCRETIONARY GRANTS ............................................... 6 7. GRANTS TO OUTSIDE DIRECTORS ........................................ 6 8. LIMITATIONS ON GRANTS .............................................. 7 9. AWARD AGREEMENT .................................................... 7 10. OPTION PRICE ....................................................... 7 11. VESTING, TERM AND EXERCISE OF OPTIONS .............................. 8 12. STOCK APPRECIATION RIGHTS (SARS) ................................... 10 13. TRANSFERABILITY OF OPTIONS ......................................... 12 14. RESTRICTED STOCK ................................................... 12 15. PARACHUTE LIMITATIONS .............................................. 15 16. REQUIREMENTS OF LAW ................................................ 16 17. AMENDMENT AND TERMINATION OF THE PLAN .............................. 17 18. EFFECT OF CHANGES IN CAPITALIZATION ................................ 17 19. DISCLAIMER OF RIGHTS ............................................... 19 20. NONEXCLUSIVITY OF THE PLAN ......................................... 20
-i- 21. WITHHOLDING TAXES .................................................. 20 22. CAPTIONS ........................................................... 20 23. OTHER PROVISIONS ................................................... 21 24. NUMBER AND GENDER .................................................. 21 25. SEVERABILITY ....................................................... 21 26. GOVERNING LAW ...................................................... 21
ii CENTRAL EUROPEAN DISTRIBUTION CORPORATION 1997 STOCK INCENTIVE PLAN AS AMENDED Central European Distribution Corporation, a Delaware corporation (the "Company"), sets forth herein the terms of its 1997 Stock Incentive Plan As Amended (the "Plan") as follows: 1. PURPOSE The Plan is intended to enhance the Company's ability to attract and retain highly qualified officers, key employees, outside directors, and other persons to advance the interests of the Company by providing such persons with stronger incentives to continue to serve the Company and its affiliates (as defined herein) and to expend maximum effort to improve the business results and earnings of the Company. The Plan is intended to accomplish this objective by providing to eligible persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. To this end, the Plan provides for the grant of stock options, stock appreciation rights, restricted stock and restricted stock units in accordance with the terms hereof. Stock options granted under the Plan may be non-qualified stock options or incentive stock options, as provided herein, except that stock options granted to outside directors shall in all cases be non-qualified stock options. 2. DEFINITIONS For purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply: 2.1 "affiliate" of, or person "affiliated" with, a person means any company or other trade or business that controls, is controlled by or is under common control with such person within the meaning of Rule 405 of Regulation C under the 1933 Act (as defined herein). 2.2 "Award Agreement" means the stock option agreement, stock appreciation rights agreement, restricted stock agreement, restricted stock unit agreement or other written agreement between the Company and a Grantee that evidences and sets out the terms and conditions of a Grant. 2.3 "Benefit Arrangement" shall have the meaning set forth in Section 15 hereof. 2.4 "Board" means the Board of Directors of the Company. 2.5 "Code" means the Internal Revenue Code of 1986, as now in effect or as hereafter amended. 2.6 "Committee" means a Committee of, and designated from time to time by resolution of, the Board, which shall consist of no fewer than two members of the Board, none of whom shall be an officer or other salaried employee of the Company or any affiliate, and each of whom shall qualify in all respects as a "non-employee director" within the meaning of Rule 16b-3 under the Exchange Act or any successor rule or regulation. Commencing on the Effective Date, and until such time as the Board shall determine otherwise, the Committee shall be the Compensation Committee of the Board. 2.7 "Company" means Central European Distribution Corporation. 2.8 "Effective Date" means November 27, 1997, the date on which the Plan was adopted by the Board. 2.9 "Exchange Act" means the Securities Exchange Act of 1934, as now in effect or as hereafter amended. 2.10 "Fair Market Value" means the value of a share of Stock, determined as follows: if on the Grant Date or other determination date the Stock is listed on an established national or regional stock exchange, is admitted to quotation on a Nasdaq market, or is publicly traded on an established securities market, the Fair Market Value of a share of Stock shall be the closing price of the Stock on such exchange or in such market (the highest such closing price if there is more than one such exchange or market) on the day before the Grant Date or such other determination date (or if there is no such reported closing price, the Fair Market Value shall be the mean between the highest bid and lowest asked prices or between the high and low sale prices on such trading day) or, if no sale of Stock is reported for such trading day, on the next preceding day on which any sale shall have been reported. If the Stock is not listed on such an exchange, quoted on such system or traded on such a market, Fair Market Value shall be the value of the Stock as determined by the Committee in good faith. 2.11 "Grant" means an award of an Option, Stock Appreciation Rights, Restricted Stock or Restricted Stock Units under the Plan. 2.12 "Grant Date" means (a) for Grants other than Grants to Outside Directors, the later of (i) the date as of which the Committee approves the Grant or (ii) the date as of which the Grantee and the Company or Service Provider enter into the relationship resulting in the Grantee's becoming eligible to receive a Grant, and (b) for Grants to Outside Directors, the date on which such Grant is made in accordance with Section 7 hereof. 2 2.13 "Grantee" means a person who receives or holds an Option, Stock Appreciation Rights, Restricted Stock or Restricted Stock Units under the Plan. 2.14 "Incentive Stock Option" means an "incentive stock option" within the meaning of Section 422 of the Code, or the corresponding provision of any subsequently enacted tax statute, as amended from time to time. 2.15 "Option" means an option to purchase one or more shares of Stock pursuant to the Plan. 2.16 "Option Period" means the period during which Options may be exercised as set forth in Section 11 hereof. 2.17 "Option Price" means the purchase price for each share of Stock subject to an Option or Stock Appreciation Rights. 2.18 "Other Agreement" shall have the meaning set forth in Section 15 hereof. 2.19 "Outside Director" means a member of the Board who is not an officer or employee of the Company. 2.20 "Plan" means the Central European Distribution Corporation 1997 Stock Incentive Plan. 2.21 "Reporting Person" means a person who is required to file reports under Section 16(a) of the Exchange Act. 2.22 "Restricted Period" means the period during which Restricted Stock or Restricted Stock Units are subject to restrictions or conditions pursuant to Section 14.2 hereof. 2.23 "Restricted Stock" means shares of Stock, awarded to a Grantee pursuant to Section 14 hereof, that are subject to restrictions and to a risk of forfeiture. 2.24 "Restricted Stock Unit" means a unit awarded to a Grantee pursuant to Section 14 hereof, which represents a conditional right to receive a share of Stock in the future, and which is subject to restrictions and to a risk of forfeiture. 2.25 "Securities Act" means the Securities Act of 1933, as now in effect or as hereafter amended. 2.26 "Service Provider" means a consultant or adviser to the Company, a manager of the Company's properties or affairs, or other similar service provider or 3 affiliate of the Company, and employees of any of the foregoing, as such persons may be designated from time to time by the Committee pursuant to Section 6 hereof. 2.27 "Stock" means the common stock, par value $0.01 per share, of the Company. 2.28 "Stock Appreciation Right" means a right granted pursuant to Section 15 hereof to receive a payment by the Company of an amount equal to the excess of the fair market value of the shares of Stock subject to such Grant, or portion thereof, so surrendered over the Option Price of such shares. 2.28 "Subsidiary" means any "subsidiary corporation" of the Company within the meaning of Section 425(f) of the Code. 2.29 "Termination Date" shall be the date upon which an Option shall terminate or expire, as set forth in Section 11.2 hereof. 3. ADMINISTRATION OF THE PLAN 3.1 General. The Plan shall be administered by the Board, which shall have the full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Option granted or any Award Agreement entered into hereunder. The Board shall have full power and authority to take all such other actions and determinations not inconsistent with the specific terms and provisions of the Plan, which the Board deems to be necessary or appropriate to the administration of the Plan, any Option granted hereunder or any Award Agreement entered into hereunder. The Board's interpretation and construction of any provision of the Plan, any Option granted hereunder or any Award Agreement entered into hereunder shall be final, binding and conclusive. 3.2 Committee. The Board, in its sole discretion, may provide that the role of the Committee shall be limited to making recommendations to the Board concerning any determinations to be made and actions to be taken by the Board pursuant to or with respect to the Plan, or the Board may delegate to the Committee such powers and authorities related to the administration of the Plan, as set forth in Section 3.1 above, as the Board shall determine, consistent with the Certificate of Incorporation and By-laws of the Corporation and applicable law. In the event that the Plan or any Option granted or Award Agreement entered into hereunder provides for any action to be taken by or determination to be made by the Board, such action may be taken by or such determination may be made by the Committee if the power and authority to do so has been delegated to the Committee by the Board as provided for in this Section. Unless otherwise expressly determined by the Board, any such action or determination by the Committee shall be final and conclusive. 4 3.3 Discretionary Grants. Subject to Section 3.4 hereof and to the other terms and conditions of the Plan, the Committee shall have full and final authority to designate Grantees, (i) to determine the type or types of Grant to be made to a Grantee, (ii) to determine the number of shares of Stock to be subject to a Grant, (iii) to establish the terms and conditions of each Grant (including, but not limited to, the exercise price of any Option, the nature and duration of any restriction or condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of a Grant or the shares of Stock subject thereto, and any terms or conditions that may be necessary to qualify Options as Incentive Stock Options), (iv) to prescribe the form of each Award Agreement evidencing a Grant, and (v) to amend, modify, or supplement the terms of any outstanding Grant. Such authority specifically includes the authority, in order to effectuate the purposes of the Plan but without amending the Plan, to modify Grants to eligible individuals who are foreign nationals or are individuals who are employed outside the United States to recognize differences in local law, tax policy, or custom. As a condition to any subsequent Grant, the Committee shall have the right, at its discretion, to require Grantees to return to the Company Grants previously awarded under the Plan. Subject to the terms and conditions of the Plan, any such new Grant shall be upon such terms and conditions as are specified by the Committee at the time the new Grant is made. 3.4 Grants to Outside Directors. With respect to Grants of Options to Outside Directors pursuant to Section 7 hereof, the Committee's responsibilities under the Plan shall be limited to taking all legal actions necessary to document the Options so granted, to interpret the Award Agreements evidencing such Options, to maintain appropriate records and reports regarding such Options, and to take all acts authorized by this Plan or otherwise reasonably necessary to effect the purposes hereof. 3.5 No Liability. No member of the Board or of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Grant or Award Agreement. 3.6 Applicability of Rule 16b-3. Those provisions of the Plan that make express reference to Rule 16b-3 under the Exchange Act shall apply only to Reporting Persons. 4. STOCK SUBJECT TO THE PLAN Subject to adjustment as provided in Section 17 hereof, the number of shares of Stock available for issuance under the Plan shall be 750,000. Stock issued or to be issued under the Plan shall be authorized but unissued shares. If any shares covered by a Grant are not purchased or are forfeited, or if a Grant otherwise terminates without delivery of any Stock subject thereto, then the number of shares 5 of Stock counted against the aggregate number of shares available under the Plan with respect to such Grant shall, to the extent of any such forfeiture or termination, again be available for making Grants under the Plan. 5. EFFECTIVE DATE AND TERM OF THE PLAN 5.1 Effective Date. The Plan shall be effective as of the Effective Date, subject to approval of the Plan within one year of the Effective Date, by a majority of the votes cast on the proposal at a meeting of shareholders, provided that the total votes cast represent a majority of all shares entitled to vote. Upon approval of the Plan by the shareholders of the Company as set forth above, all Grants made under the Plan on or after the Effective Date shall be fully effective as if the shareholders of the Company had approved the Plan on the Effective Date. If the shareholders fail to approve the Plan within one year after the Effective Date, any Grants made hereunder shall be null and void and of no effect. 5.2 Term. The Plan shall terminate on the tenth anniversary of the Effective Date. 6. DISCRETIONARY GRANTS 6.1 Company or Subsidiary Employees. Grants (including Grants of Incentive Stock Options) may be made under the Plan to any employee of the Company or of any Subsidiary, including any such employee who is an officer or director of the Company or of any Subsidiary, as the Committee shall determine and designate from time to time. 6.2 Service Providers. Grants may be made under the Plan to any Service Provider whose participation in the Plan is determined by the Committee to be in the best interests of the Company and is so designated by the Committee; provided, however, that Grants to Service Providers who are not employees of the Company or of any Subsidiary shall not be Incentive Stock Options. 6.3 Successive Grants. An eligible person may receive more than one Grant, subject to such restrictions as are provided herein. 7. GRANTS TO OUTSIDE DIRECTORS Each Outside Director who is initially elected to the Board on or after the Effective Date shall, upon the date of his or her initial election by the Board or the shareholders of the Company, automatically be awarded a Grant of an Option, which shall not be an Incentive Stock Option, to purchase 3,500 shares of Stock (which amount shall be subject to adjustment as provided in Section 17 hereof). 6 8. LIMITATIONS ON GRANTS 8.1 Limitation on Shares of Stock Subject to Grants. The maximum number of shares of Stock subject to Options that can be awarded under the Plan to any person eligible for a Grant under Section 6 hereof is 60,000 per year. The maximum number of shares of Restricted Stock that can be awarded under the Plan (including for this purpose any shares of Stock represented by Restricted Stock Units) to any person eligible for a Grant under Section 6 hereof is 60,000 per year. 8.2 Limitations on Incentive Stock Options. An Option shall constitute an Incentive Stock Option only (i) if the Grantee of such Option is an employee of the Company or any Subsidiary of the Company; (ii) to the extent specifically provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market Value (determined at the time the Option is granted) of the shares of Stock with respect to which all Incentive Stock Options held by such Grantee become exercisable for the first time during any calendar year (under the Plan and all other plans of the Grantee's employer and its affiliates) does not exceed $100,000. This limitation shall be applied by taking Options into account in the order in which they were granted. 9. AWARD AGREEMENT Each Grant pursuant to the Plan shall be evidenced by an Award Agreement, to be executed by the Company and by the Grantee, in such form or forms as the Committee shall from time to time determine. Award Agreements granted from time to time or at the same time need not contain similar provisions but shall be consistent with the terms of the Plan. Each Award Agreement evidencing a Grant of Options shall specify whether such Options are intended to be non-qualified stock options or Incentive Stock Options. 10. OPTION PRICE The Option Price of each Option shall be fixed by the Committee and stated in the Award Agreement evidencing such Option. The Option Price shall be the aggregate Fair Market Value on the Grant Date of the shares of Stock subject to the Option; provided, however, that in the event that a Grantee would otherwise be ineligible to receive an Incentive Stock Option by reason of the provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership of more than ten percent of the Company's outstanding Stock), the Option Price of an Option granted to such Grantee that is intended to be an Incentive Stock Option shall be not less than the greater of the par value of a share of Stock or 110 percent of the Fair Market Value of a share of Stock on the Grant Date. In no case shall the Option Price of any Option be less than the par value of a share of Stock. 7 11. VESTING, TERM AND EXERCISE OF OPTIONS 11.1 Vesting and Option Period. Each Option granted under the Plan shall be exercisable, in whole or in part, at any time and from time to time over a period commencing on or after the Grant Date and ending upon the expiration or termination of the Option, as the Committee shall determine and set forth in the Award Agreement relating to such Option; provided, however, that each Option granted to an Outside Director shall be exercisable, in whole or in part, at any time and from time to time over the period commencing on the Grant Date and ending upon the expiration or termination of the Option. Without limiting the foregoing, the Committee, subject to the terms and conditions of the Plan, may in its sole discretion provide that an Option granted to persons other than Outside Directors may not be exercised in whole or in part for a stated period or periods of time during which such Option is outstanding. For purposes of this Section 11.1, fractional numbers of shares of Stock subject to an Option shall be rounded down to the next nearest whole number. The period during which any Option shall be exercisable in accordance with the foregoing schedule shall constitute the "Option Period" with respect to such Option. 11.2 Term. Each Option granted under the Plan shall terminate, and all rights to purchase shares of Stock thereunder shall cease, upon the expiration of ten years from the date such Option is granted, or, with respect to Options granted to persons other than Outside Directors, under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Committee and stated in the Award Agreement relating to such Option (the "Termination Date"); provided, however, that in the event that the Grantee would otherwise be ineligible to receive an Incentive Stock Option by reason of the provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership of more than ten percent of the outstanding Stock), an Option granted to such Grantee that is intended to be an Incentive Stock Option shall not be exercisable after the expiration of five years from its Grant Date. 11.3 Acceleration. Any limitation on the exercise of an Option contained in any Award Agreement may be rescinded, modified or waived by the Committee, in its sole discretion, at any time and from time to time after the Grant Date of such Option, so as to accelerate the time at which the Option may be exercised. Notwithstanding any other provision of the Plan, no Option shall be exercisable in whole or in part prior to the date the Plan is approved by the shareholders of the Company as provided in Section 5.1 hereof. 11.4 Termination of Employment or Other Relationship. Upon the termination (i) of the employment of a Grantee with the Company or a Service Provider, (ii) of a Service Provider's relationship with the Company, or (iii) of an Outside Director's service to the Company, other than, in the case of individuals, by reason of death or "permanent and total disability" (within the meaning of 8 Section 22(e)(3) of the Code), any Option or portion thereof held by such Grantee that has not vested in accordance with the provisions of Section 11.1 hereof shall terminate immediately, and any Option or portion thereof that has vested in accordance with the provisions of Section 11.1 hereof but has not been exercised shall terminate at the close of business on the ninetieth day following the Grantee's termination of service, employment, or other relationship, unless the Committee, in its discretion, extends the period during which the Option may be exercised (which period may not be extended beyond the original term of the Option). Upon termination of an Option or portion thereof, the Grantee shall have no further right to purchase shares of Stock pursuant to such Option or portion thereof. Whether a leave of absence or leave on military or government service shall constitute a termination of employment for purposes of the Plan shall be determined by the Committee, which determination shall be final and conclusive. For purposes of the Plan, a termination of employment, service or other relationship shall not be deemed to occur if the Grantee is immediately thereafter employed with an affiliate of the Company or any other Service Provider, or is engaged as a Service Provider or an Outside Director of the Company. Whether a termination of a Service Provider's or an Outside Director's relationship with the Company shall have occurred shall be determined by the Committee, which determination shall be final and conclusive. 11.5 Rights in the Event of Death. If a Grantee dies while employed by the Company or a Service Provider, or while serving as a Service Provider or an Outside Director, all Options granted to such Grantee shall fully vest on the date of death, and the executors or administrators or legatees or distributees of such Grantee's estate shall have the right, at any time within two years after the date of such Grantee's death (or such longer period as the Committee, in its discretion, may determine prior to the expiration of such two-year period) and prior to termination of the Option pursuant to Section 11.2 above, to exercise any Option held by such Grantee at the date of such Grantee's death. 11.6 Rights in the Event of Disability. If a Grantee terminates employment with the Company or a Service Provider, or (if the Grantee is a Service Provider who is an individual or is an Outside Director) ceases to provide services to the Company, in either case by reason of the "permanent and total disability" (within the meaning of Section 22(e)(3) of the Code) of such Grantee, such Grantee's Options shall continue to vest, and shall be exercisable to the extent that they are vested, for a period of one year after such termination of employment or service (or such longer period as the Committee, in its discretion, may determine prior to the expiration of such one-year period), subject to earlier termination of the Option as provided in Section 11.2 above. Whether a termination of employment or service is to be considered by reason of "permanent and total disability" for purposes of the Plan shall be determined by the Committee, which determination shall be final and conclusive. 9 11.7 Limitations on Exercise of Option. Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in whole or in part, prior to the date the Plan is approved by the shareholders of the Company as provided herein, or after ten years following the date upon which the Option is granted, or after the occurrence of an event referred to in Section 17 hereof which results in termination of the Option. 11.8 Method of Exercise. An Option that is exercisable may be exercised by the Grantee's delivery to the Company of written notice of exercise on any business day, at the Company's principal office, addressed to the attention of the Committee. Such notice shall specify the number of shares of Stock with respect to which the Option is being exercised and shall be accompanied by payment in full of the Option Price of the shares for which the Option is being exercised. The minimum number of shares of Stock with respect to which an Option may be exercised, in whole or in part, at any time shall be the lesser of (i) 100 shares or such lesser number set forth in the applicable Award Agreement and (ii) the maximum number of shares available for purchase under the Option at the time of exercise. Payment of the Option Price for the shares purchased pursuant to the exercise of an Option shall be made in cash or in cash equivalents. An attempt to exercise any Option granted hereunder other than as set forth above shall be invalid and of no force and effect. Unless otherwise stated in the applicable Award Agreement, an individual holding or exercising an Option shall have none of the rights of a shareholder (for example, the right to receive cash or dividend payments or distributions attributable to the subject shares of Stock or to direct the voting of the subject shares of Stock ) until the shares of Stock covered thereby are fully paid and issued to him. Except as provided in Section 18 hereof, no adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date of such issuance. 11.9 Delivery of Stock Certificates. Promptly after the exercise of an Option by a Grantee and the payment in full of the Option Price, such Grantee shall be entitled to the issuance of a stock certificate or certificates evidencing his or her ownership of the shares of Stock subject to the Option. 12. STOCK APPRECIATION RIGHTS (SARs) 12.1 In General. Subject to the terms and conditions of the Plan, the Committee may, in its sole and absolute discretion, grant to a Grantee rights to receive payment by the Company of an amount equal to the excess of the fair market value of the shares of Stock subject to such Award Agreement, or portion thereof, so surrendered (determined in the manner described in Section 2.10 above as of the date the SARs are exercised) over the Option Price of such shares. Such payment may be made, as determined by the Committee in accordance with Sections 12.4 and 12.5 below and set forth in the Award Agreement, either in shares of Stock or in cash or in any combination thereof. All SARs shall be 10 evidenced by provisions in an Award Agreement, which provisions shall comply with and be subject to the terms and conditions set forth in this Section 12. 12.2 Grant. Each SAR shall relate to a specific number of shares of Stock. The number of SARs held by a Grantee shall be reduced by the number of SARs exercised for Stock or cash under the provisions of the Award Agreement. 12.3 Exercise. SARs that are exercisable hereunder and under the Award Agreement may be exercised by delivering to the Company on any business day, at its principal office, addressed to the attention of the Committee, written notice of exercise, which notice shall specify the number of SARs being exercised. The date upon which such written notice is received by the Company shall be the exercise date of the SARs. Except to the extent that SARs are exercised for cash as provided in Section 12.5 below, the individual exercising SARs shall receive, without payment therefor to the Company, the number of shares of Stock determined under Section 12.4 below. Promptly after the exercise of SARs, the individual exercising the SARs shall be entitled to the issuance of a Stock certificate or certificates evidencing ownership of such shares. An individual holding or exercising SARs shall have none of the rights of a shareholder with respect to any shares of Stock covered by the SARs until shares of Stock are issued to him or her, and, except as provided in Section 19 below, no adjustment shall be made for dividends or other rights for which the record date is prior to the date of such issuance. 12.4 Number of Shares of Stock. The number of shares of Stock which shall be issued pursuant to the exercise of SARs shall be determined by dividing (i) the total number of SARs being exercised, multiplied by the amount by which the fair market value (determined in the manner described in Section 2.10 above) of a share of Stock on the exercise date exceeds the Option Price of the shares of Stock subject to the Award Agreement by (ii) the fair market value (determined in the manner described in Section 2.10 above) of a share of Stock on the exercise date of the SARs; provided, however, that no fractional share shall be issued on exercise of SARs, and that cash shall be paid by the Company to the individual exercising SARs in lieu of any such fractional share. 11 12.5 Exercise of SARs for Cash. The Committee shall have sole discretion to determine whether, and shall set forth in the Award Agreement the circumstances under which, payment in respect of SARs granted to any Grantee shall be made in shares of Stock, or in cash, or in a combination thereof. Promptly after the exercise of an SAR for cash, the individual exercising the SAR shall receive in respect of said SAR an amount of money equal to the difference between the fair market value (determined in the manner described in Section 2.10 above) of a share of Stock on the exercise date and the Option Price. 12.6 Limitations. SARs shall be exercisable at such times and under such terms and conditions as the Committee, in its sole and absolute discretion, shall determine and set forth in the Award Agreements; provided, however, that an SAR may be exercised only at such times and by such individuals as the Award Agreement provides; and provided, further, that an SAR may be exercised only at such times as the fair market value (determined in the manner described in Section 2.10 above) of a share of Stock on the exercise date exceeds the Option Price. Adjustments in the number, kind, or Option Price of shares of Stock for which Awards are granted pursuant to Section 19 below shall be made as necessary to the related SARs held by each Grantee. Any amendment, suspension or termination of the Plan pursuant to Section 18 below shall be deemed an amendment, suspension or termination of SARs to the same extent. 13. TRANSFERABILITY OF OPTIONS During the lifetime of an Optionee, only such Optionee (or, in the event of legal incapacity or incompetency, the guardian or legal representative of the Optionee) may exercise the Option, except as otherwise specifically permitted by this Section 13. No Option shall be assignable or transferable other than by will or in accordance with the laws of descent and distribution; provided, however, to the extent permitted under the applicable Award Agreement, and to the extent the transfer is in compliance with any applicable restrictions on transfers, an Optionee may transfer a non-qualified stock option to a family member of the Optionee (defined as an individual who is related to the Optionee by blood or adoption), to a trust established and maintained for the benefit of the Optionee or a family member of the Optionee (as determined under applicable state law and the Code) or to a partnership in which family members are the only partners, provided that (x) there may be no consideration for any such transfer, and (y) subsequent transfers of transferred Options are prohibited except those in accordance with this Section 13 or by will or the laws of descent and distribution. 14. RESTRICTED STOCK 14.1 Grant of Restricted Stock or Restricted Stock Units. The Committee may from time to time grant Restricted Stock or Restricted Stock Units to persons 12 eligible to receive such Grants as set forth in Section 6 hereof, subject to such restrictions, conditions and other terms as the Committee may determine. 14.2 Restrictions. At the time a Grant of Restricted Stock or Restricted Stock Units is made, the Committee shall establish a period of time (the "Restricted Period") applicable to such Restricted Stock or Restricted Stock Units. Each Grant of Restricted Stock or Restricted Stock Units may be subject to a different Restricted Period. The Committee may, in its sole discretion, at the time a Grant of Restricted Stock or Restricted Stock Units is made, prescribe restrictions in addition to or other than the expiration of the Restricted Period, including the satisfaction of corporate or individual performance objectives, which may be applicable to all or any portion of the Restricted Stock or Restricted Stock Units. Such performance objectives shall be established in writing by the Committee prior to the ninetieth day of the year in which the Grant is made and while the outcome is substantially uncertain. Performance objectives shall be based on Stock price, market share, sales, earnings per share, return on equity or costs. Performance objectives may include positive results, maintaining the status quo or limiting economic losses. The Committee also may, in its sole discretion, shorten or terminate the Restricted Period or waive any other restrictions applicable to all or a portion of the Restricted Stock or Restricted Stock Units. Neither Restricted Stock nor Restricted Stock Units may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restricted Period or prior to the satisfaction of any other restrictions prescribed by the Committee with respect to such Restricted Stock or Restricted Stock Units. 14.3 Restricted Stock Certificates. The Company shall issue, in the name of each Grantee to whom Restricted Stock has been granted, stock certificates representing the total number of shares of Restricted Stock granted to the Grantee, as soon as reasonably practicable after the Grant Date. The Secretary of the Company shall hold such certificates for the Grantee's benefit until such time as the Restricted Stock is forfeited to the Company, or the restrictions lapse. 14.4 Rights of Holders of Restricted Stock. Unless the Committee otherwise provides in an Award Agreement, holders of Restricted Stock shall have the right to vote such Stock and the right to receive any dividends declared or paid with respect to such Stock. The Committee may provide that any dividends paid on Restricted Stock must be reinvested in shares of Stock, which may or may not be subject to the same vesting conditions and restrictions applicable to such Restricted Stock. All distributions, if any, received by a Grantee with respect to Restricted Stock as a result of any stock split, stock dividend, combination of shares, or other similar transaction shall be subject to the restrictions applicable to the original Grant. 14.5 Rights of Holders of Restricted Stock Units. Unless the Committee otherwise provides in an Award Agreement, holders of Restricted Stock Units shall have no rights as stockholders of the Company. The Committee may provide in an 13 Award Agreement evidencing a Grant of Restricted Stock Units that the holder of such Restricted Stock Units shall be entitled to receive, upon the Company's payment of a cash dividend on its outstanding Stock, a cash payment for each Restricted Stock Unit held equal to the per-share dividend paid on the Stock. Such Award Agreement may also provide that such cash payment will be deemed reinvested in additional Restricted Stock Units at a price per unit equal to the Fair Market Value of a share of Stock on the date that such dividend is paid. 14.6 Termination of Employment or Other Relationship. Upon the termination of the employment of a Grantee with the Company or a Service Provider, or of a Service Provider's relationship with the Company, in either case other than, in the case of individuals, by reason of death or "permanent and total disability" (within the meaning of Section 22(e)(3) of the Code), any Restricted Stock or Restricted Stock Units held by such Grantee that has not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited, unless the Committee, in its discretion, determines otherwise. Upon forfeiture of Restricted Stock or Restricted Stock Units, the Grantee shall have no further rights with respect to such Grant, including but not limited to any right to vote Restricted Stock or any right to receive dividends with respect to shares of Restricted Stock or Restricted Stock Units. Whether a leave of absence or leave on military or government service shall constitute a termination of employment for purposes of the Plan shall be determined by the Committee, which determination shall be final and conclusive. For purposes of the Plan, a termination of employment, service or other relationship shall not be deemed to occur if the Grantee is immediately thereafter employed with the Company or any other Service Provider, or is engaged as a Service Provider. Whether a termination of a Service Provider's relationship with the Company shall have occurred shall be determined by the Committee, which determination shall be final and conclusive. 14.7 Rights in the Event of Death. If a Grantee dies while employed by the Company or a Service Provider or while serving as a Service Provider, all Restricted Stock or Restricted Stock Units granted to such Grantee shall fully vest on the date of death, and the shares of Stock represented thereby shall be deliverable in accordance with the terms of the Plan to the executors, administrators, legatees or distributees of the Grantee's estate. 14.8 Rights in the Event of Disability. If a Grantee terminates employment with the Company or a Service Provider, or (if the Grantee is a Service Provider who is an individual) ceases to provide services to the Company, in either case by reason of the "permanent and total disability" (within the meaning of Section 22(e)(3) of the Code) of such Grantee, such Grantee's Restricted Stock or Restricted Stock Units shall continue to vest in accordance with the applicable Award Agreement for a period of one year after such termination of employment or service (or such longer period as the Committee, in its discretion, may determine 14 prior to the expiration of such one-year period), subject to the earlier forfeiture of such Restricted Stock or Restricted Stock Units in accordance with the terms of the applicable Award Agreement. Whether a termination of employment or service is to be considered by reason of "permanent and total disability" for purposes of the Plan shall be determined by the Committee, which determination shall be final and conclusive. 14.9 Delivery of Stock and Payment Therefor. Upon the expiration or termination of the Restricted Period and the satisfaction of any other conditions prescribed by the Committee, the restrictions applicable to shares of Restricted Stock or Restricted Stock Units shall lapse, and, upon payment by the Grantee to the Company, in cash or by check, of the aggregate par value of the shares of Stock represented by such Restricted Stock or Restricted Stock Units, a stock certificate for such shares shall be delivered, free of all such restrictions, to the Grantee or the Grantee's beneficiary or estate, as the case may be. 15. PARACHUTE LIMITATIONS Notwithstanding any other provision of this Plan or of any other agreement, contract, or understanding heretofore or hereafter entered into by a Grantee with the Company or any Subsidiary, except an agreement, contract, or understanding hereafter entered into that expressly modifies or excludes application of this paragraph (an "Other Agreement"), and notwithstanding any formal or informal plan or other arrangement for the direct or indirect provision of compensation to the Grantee (including groups or classes of participants or beneficiaries of which the Grantee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for the Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified individual," as defined in Section 280G(c) of the Code, any Option, Restricted Stock or Restricted Stock Unit held by that Grantee and any right to receive any payment or other benefit under this Plan shall not become exercisable or vested (i) to the extent that such right to exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits to or for the Grantee under this Plan, all Other Agreements, and all Benefit Arrangements, would cause any payment or benefit to the Grantee under this Plan to be considered a "parachute payment" within the meaning of Section 280G(b)(2) of the Code as then in effect (a "Parachute Payment") and (ii) if, as a result of receiving a Parachute Payment, the aggregate after-tax amounts received by the Grantee from the Company under this Plan, all Other Agreements, and all Benefit Arrangements would be less than the maximum after-tax amount that could be received by the Grantee without causing any such payment or benefit to be considered a Parachute Payment. In the event that the receipt of any such right to exercise, vesting, payment, or benefit under this Plan, in conjunction with all other rights, payments, or benefits to or for the Grantee under any Other Agreement or any Benefit Arrangement would cause the Grantee to be considered to have received a Parachute Payment under this Plan that would have the effect of decreasing the 15 after-tax amount received by the Grantee as described in clause (ii) of the preceding sentence, then the Grantee shall have the right, in the Grantee's sole discretion, to designate those rights, payments, or benefits under this Plan, any Other Agreements, and any Benefit Arrangements that should be reduced or eliminated so as to avoid having the payment or benefit to the Grantee under this Plan be deemed to be a Parachute Payment. 16. REQUIREMENTS OF LAW 16.1 General. The Company shall not be required to sell or issue any shares of Stock under any Grant if the sale or issuance of such shares would constitute a violation by the Grantee, any other individual exercising an Option, or the Company of any provision of any law or regulation of any governmental authority, including without limitation any United States federal or state securities laws or regulations. If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of any shares subject to a Grant upon any securities exchange or under any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance or purchase of shares hereunder, no shares of Stock may be issued or sold to the Grantee or any other individual exercising an Option pursuant to such Grant unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of the Grant. Specifically, in connection with the Securities Act, upon the exercise of any Option or the delivery of any shares of Restricted Stock or Stock underlying Restricted Stock Units, unless a registration statement under such Act is in effect with respect to the shares of Stock covered by such Grant, the Company shall not be required to sell or issue such shares unless the Committee has received evidence satisfactory to it that the Grantee or any other individual exercising an Option may acquire such shares pursuant to an exemption from registration under the Securities Act. Any determination in this connection by the Committee shall be final, binding, and conclusive. The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act. The Company shall not be obligated to take any affirmative action in order to cause the exercise of an Option or the issuance of shares of Stock pursuant to the Plan to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the requirement that an Option shall not be exercisable until the shares of Stock covered by such Option are registered or are exempt from registration, the exercise of such Option (under circumstances in which the laws of such jurisdiction apply) shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption. 16.2 Rule 16b-3. It is the intent of the Company that Grants pursuant to the Plan and the exercise of Options granted hereunder will qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any provision 16 of the Plan or action by the Committee does not comply with the requirements of Rule 16b-3, it shall be deemed inoperative to the extent permitted by law and deemed advisable by the Committee, and shall not affect the validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to modify this Plan in any respect necessary to satisfy the requirements of, or to take advantage of any features of, the revised exemption or its replacement. 17. AMENDMENT AND TERMINATION OF THE PLAN The Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to any shares of Stock as to which Grants have not been made; provided, however, that the Board shall not, without approval of the Company's shareholders, amend the Plan such that it does not comply with the Code. The Company may retain the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee on account of the Grantee taking actions in "competition with the Company," as defined in the applicable Award Agreement. Furthermore, the Company may annul a Grant if the Grantee is an employee of the Company or an affiliate and is terminated "for cause" as defined in the applicable Award Agreement. Except as permitted under this Section 17 or Section 18 hereof, no amendment, suspension, or termination of the Plan shall, without the consent of the Grantee, alter or impair rights or obligations under any Grant theretofore awarded under the Plan. 18. EFFECT OF CHANGES IN CAPITALIZATION 18.1 Changes in Stock. If the number of outstanding shares of Stock is increased or decreased or the shares of Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company on account of any recapitalization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such shares effected without receipt of consideration by the Company occurring after the Effective Date, the number and kinds of shares for which Grants of Options, Restricted Stock and Restricted Stock Units may be made under the Plan shall be adjusted proportionately and accordingly by the Company. In addition, the number and kind of shares for which Grants are outstanding shall be adjusted proportionately and accordingly so that the proportionate interest of the Grantee immediately following such event shall, to the extent practicable, be the same as immediately before such event. Any such adjustment in outstanding Options shall not change the aggregate Option Price payable with respect to shares that are subject to the unexercised portion of the Option outstanding but shall include a corresponding proportionate adjustment in the Option Price per share. 18.2 Reorganization in Which the Company Is the Surviving Entity and in Which No Change of Control Occurs. Subject to Section 18.3 hereof, if the 17 Company shall be the surviving entity in any reorganization, merger, or consolidation of the Company with one or more other entities, any Option theretofore granted pursuant to the Plan shall pertain to and apply to the securities to which a holder of the number of shares of Stock subject to such Option would have been entitled immediately following such reorganization, merger, or consolidation, with a corresponding proportionate adjustment of the Option Price per share so that the aggregate Option Price thereafter shall be the same as the aggregate Option Price of the shares remaining subject to the Option immediately prior to such reorganization, merger, or consolidation. Subject to any contrary language in an Award Agreement evidencing a Grant of Restricted Stock, any restrictions applicable to such Restricted Stock shall apply as well to any replacement shares received by the Grantee as a result of the reorganization, merger or consolidation. 18.3 Dissolutions, Sale of Assets, Etc. Upon the dissolution or liquidation of the Company or upon a merger, consolidation, or reorganization of the Company with one or more other entities in which the Company is not the surviving entity, or upon a sale of substantially all of the assets of the Company to another entity, or upon any transaction (including, without limitation, a merger or reorganization in which the Company is the surviving entity) that results in any person or entity (or person or entities acting as a group or otherwise in concert) owning eighty percent or more of the combined voting power of all classes of securities of the Company, (i) all outstanding shares of Restricted Stock and Restricted Stock Units shall be deemed to have vested, and all restrictions and conditions applicable to such shares of Restricted Stock and Restricted Stock Units shall be deemed to have lapsed, immediately prior to the occurrence of such event, and (ii) all Options outstanding hereunder shall become immediately exercisable for a period of fifteen days immediately prior to the scheduled consummation of the event, except to the extent provision is made in writing in connection with such transaction for the continuation of the Plan or the assumption of such Options, Restricted Stock and Restricted Stock Units theretofore granted, or for the substitution for such Options, Restricted Stock and Restricted Stock Units of new options, restricted stock and restricted stock units covering the stock of a successor Company, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kinds of shares or units and exercise prices, in which event the Plan and Options, Restricted Stock and Restricted Stock Units theretofore granted shall continue in the manner and under the terms so provided. Any exercise of an Option during such fifteen-day period shall be conditioned upon the consummation of the event and shall be effective only immediately before the consummation of the event. Upon consummation of any such event, the Plan and all outstanding but unexercised Options shall terminate, except to the extent the Plan is continued or of the assumption of or substitution for such Options theretofore granted. The Committee shall send written notice of an event that will result in such a termination to all individuals who hold Options not later than the time at which the Company gives notice thereof to its shareholders. 18 18.4 Adjustments. Adjustments under this Section 18 related to shares of Stock or securities of the Company shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. No fractional shares or other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share. 18.5 No Limitations on Company. The making of Grants pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its business or assets. 19. DISCLAIMER OF RIGHTS No provision in the Plan or in any Grant or Award Agreement shall be construed to confer upon any individual the right to remain in the employ or service of the Company or any affiliate, or to interfere in any way with any contractual or other right or authority of the Company or any Service Provider either to increase or decrease the compensation or other payments to any individual at any time, or to terminate any employment or other relationship between any individual and the Company or a Service Provider. No provision in the Plan or in any Grant awarded or Award. Agreement entered into pursuant to the Plan shall be construed to confer upon any individual the right to remain in the service of the Company as a director (including as an Outside Director), or shall interfere with or restrict in any way the rights of the Company's shareholders to remove any director pursuant to the provisions of the Delaware General Corporation Law, as from time to time amended. In addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the applicable Award Agreement, no Grant awarded under the Plan shall be affected by any change of duties or position of the Optionee (including a transfer to or from the Company or a Service Provider), so long as such Grantee continues to be a director, officer, consultant, employee, or independent contractor (as the case may be) of the Company or a Service Provider. The obligation of the Company to pay any benefits pursuant to this Plan shall be interpreted as a contractual obligation to pay only those amounts described herein, in the manner and under the conditions prescribed herein. The Plan shall in no way be interpreted to require the Company to transfer any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for payment to any participant or beneficiary under the terms of the Plan. No Grantee shall have any of the rights of a shareholder with respect to the shares of Stock subject to an Option except to the extent the certificates for such shares of Stock shall have been issued upon the exercise of the Option. 19 20. NONEXCLUSIVITY OF THE PLAN Neither the adoption of the Plan nor the submission of the Plan to the shareholders of the Company for approval shall be construed as creating any limitations upon the right and authority of the Board to adopt such other incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or specifically to a particular individual or particular individuals) as the Board in its discretion determines desirable, including, without limitation, the granting of stock options otherwise than under the Plan. 21. WITHHOLDING TAXES The Company, a Subsidiary or a Service Provider, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Grantee any taxes of any kind required by applicable law to be withheld with respect to the vesting of or other lapse of restrictions applicable to Restricted Stock or Restricted Stock Units or upon the issuance of any shares of Stock upon the exercise of an Option. At the time of such vesting, lapse, or exercise, the Grantee shall pay to the Company, the Subsidiary or the Service Provider, as the case may be, any amount that the Company, the Subsidiary or the Service Provider may reasonably determine to be necessary to satisfy such withholding obligation. Subject to the prior approval of the Company, the Subsidiary or the Service Provider, which may be withheld by the Company, the Subsidiary or the Service Provider, as the case may be, in its sole discretion, the Grantee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company, the Subsidiary or the Service Provider to withhold shares of Stock otherwise issuable pursuant to the Grantee or (ii) by delivering to the Company, the Subsidiary or the Service Provider shares of Stock already owned by the Grantee. The shares of Stock so delivered or withheld shall have an aggregate Fair Market Value equal to such withholding obligations. The Fair Market Value of the shares of Stock used to satisfy such withholding obligation shall be determined by the Company, the Subsidiary or the Service Provider as of the date that the amount of tax to be withheld is to be determined. A Grantee who has made an election pursuant to this Section 21 may satisfy his or her withholding obligation only with shares of Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements. 22. CAPTIONS The use of captions in this Plan or any Award Agreement is for the convenience of reference only and shall not affect the meaning of any provision of the Plan or such Award Agreement. 20 23. OTHER PROVISIONS Each Grant awarded under the Plan may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Committee, in its sole discretion. 24. NUMBER AND GENDER With respect to words used in this Plan, the singular form shall include the plural form, the masculine gender shall include the feminine gender, etc., as the context requires. 25. SEVERABILITY If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction. 26. GOVERNING LAW The validity and construction of this Plan and the instruments evidencing the Grants awarded hereunder shall be governed by the laws of the State of Delaware. * * * The Plan was duly adopted and approved by the Board of Directors of the Company as of the 27th day of November, 1997. /s/ Jeffrey Peterson ----------------------------- Secretary of the Company The Plan was duly approved by the shareholders of the Company on the 16th day of January, 1998. /s/ Jeffrey Peterson ---------------------------- Secretary of the Company 21 EX-99 4 dex99.txt PRO FORMA FINANCIAL STATEMENTS Exhibit 99 Pro Forma Financial Statements Central European Distribution Corporation Pro Forma Combined Condensed Financial Information The un-audited pro forma condensed combined balance sheet information set forth below for Central European Distribution (CEDC), AGIS S.A. (purchased on April 24, 2002) and Damianex S.A. (purchased on April 22, 2002) is presented as if these acquisitions had been completed on March 31, 2002. The un-audited condensed combined income statement for 2001 assumes the acquisitions were completed on January 1, 2001. The un-audited condensed combined income statement for the three-month period ended March 31, 2002 assumes the acquisitions were completed on January 1, 2002. The data is subject to the assumptions and adjustments in the accompanying notes to the pro forma balance sheets and income statements. CEDC has accounted for the acquisitions of Damianex S.A. and AGIS S.A. as purchases in accordance with SFAS 141. Pro forma financial information for CEDC and Damianex S.A. as of December 31, 2001 has been included in an 8K report filed with the Securities and Exchange Commission. The pro forma information does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and therefore should be read in conjunction with the historical financial statements of CEDC included in its Annual 2001 Report on Form 10K, and its first quarter 2002 Report on Form 10Q and the historical financial statements of Damaniex S.A. included in the Form 8-K which are on file with the Securities and Exchange Commission and the historical financial statements of AGIS S.A. for 2000 and 2001, included herein. The pro forma adjustments do not reflect operating efficiencies and cost savings that may be achievable with respect to the newly acquired companies. The pro forma adjustments do not include any adjustments to the historical operating data for future changes in selling prices, or operating efficiencies, which may arise. A final determination of required purchase accounting adjustments, including the allocation of the purchase price to the assets acquired and liabilities assumed based on their respective estimated fair values, will be made after completion of the escrow period on August 31, 2002 (applicable to the Damianex acquisition), upon final adjustments of the AGIS S.A. purchase price related to old AGIS accounts receivable and upon receipt of independent valuations for both acquisitions. Accordingly, the purchase accounting adjustment(s) and the following pro forma condensed combined balance sheet and income statement information may be revised. CEDC currently knows of no events that would require a substantial change to the preliminary purchase price allocation. The pro forma financial information is presented for illustrative purposes only and is not intended to be indicative of the financial position and operating results that would have occurred if the acquisitions had been consummated in accordance with the assumptions set forth below nor is it intended to be a forecast of future operating results or financial position. Central European Distribution Corporation Unaudited Pro Forma Condensed Combined Balance Sheet Information March 31, 2002 Amounts in columns expressed in thousands of USD
Total Damianex AGIS S.A, Pro Forma Historical CEDC Historical Historical S.A. Pro Forma CEDC with (A1) Damianex S.A. AGIS S.A. (A3) Pro Forma Adjust- AGIS S.A. and (A5) Adjustments ments DAMIANEX S.A. ---------------- ------------------------------------------------------------ --------------- ASSETS Current Assets Cash and cash equivalents $ 9,707 $ 451 $ 219 D 2,500 D 1,800 $ 2,392 B2 (7,455) B1 (4,830) Accounts receivable, net 28,888 6,497 6,755 42,140 Inventories 12,083 4,550 3,495 20,128 Deferred income taxes and other current assets 2,777 230 134 C2 190 C1 160 3,491 ----------- ---------------------------------------------------------- ------------- 53,455 11,728 10,603 (4,765) (2,870) 68,151 Property, plant and equipment, net 3,309 1,497 572 C2 368 5,746 Intangible assets, net 2,872 - - 2,872 Goodwill, net 9,687 - - C2 6,258 C1 6,427 22,372 Deferred income taxes and other assets 1,437 180 - 1,617 ----------- ---------------------------------------------------------- ------------- Total Assets $70,760 $13,405 $11,175 $ 1,861 $ 3,557 $ 100,758 =========== ========================================================== ============= LIABILITIES AND STOCKHOLDERS' EQUITY Trade accounts payable $25,844 $ 4,385 $ 6,207 C2 740 C1 1,412 $ 38,588 Bank loans and overdraft facilities 7,426 4,704 2,726 14,856 Income and other taxes payable 974 413 198 F1 (42) 1,543 Other accrued liabilities 1,422 204 110 F1 150 1,886 Current portion of debt and capital leases 2,356 - - 2,356 ----------- ---------------------------------------------------------- ------------- 38,022 9,706 9,241 740 1,520 59,229 Non-current deferred taxes C2 92 92 Long-term portion of debt and capital leases 3,451 - D 2,500 D 1,800 7,751 Temporary equity B2 2,228 2,228 Stockholders' Equity Common stock 55 1,739 229 E (1,739) E (229) 57 B1 2 Additional paid-in-capital 23,356 - - B1 2,169 25,525 Retained earnings 7,943 1,992 1,807 E (1,992) E (1,807) 7,943 Accumulated other comprehensive income (loss) (1,917) (32) (102) E 32 E 102 (1,917) Less Treasury shares (150) - - - (150) ----------- ---------------------------------------------------------- ------------- 29,287 3,699 1,934 (3,699) 237 31,458 ----------- ---------------------------------------------------------- ------------- Total Liabilities and Stockholders' Equity $70,760 $13,405 $11,175 $ 1,861 $ 3,557 $ 100,758 =========== ========================================================== =============
Central European Distribution Corporation Unaudited Pro Forma Condensed Combined Income Statement Information For the three month period ended March 31, 2002 Amounts in columns expressed in thousands of USD (except per share data)
Total Pro Forma Historical Historical Historical DAMIANEX AGIS S.A. CEDC with CEDC Damianex AGIS S.A S.A. Pro Forma AGIS S.A. (A1) (A5) (A3) Pro Forma Adjustments and Damianex Adjustments S.A. ----------- ------------- ------------ ----------------- ---------------- -------------- Net sales $42,650 $17,554 $ 16,374 $ 76,578 Cost of goods sold, excluding depreciation and amortization 36,771 15,565 15,614 67,950 ---------- ----------- ---------- ---------------- ------------- ----------- 5,879 1,989 760 8,628 Selling, general and administrative expenses, F1 (15) excluding depreciation 3,920 1,451 555 5,965 F1 54 Bad debt expense 384 14 137 535 Depreciation of tangible fixed assets 234 68 52 F2 2 F1 (6) 350 Amortization of intangible assets 43 - - 43 ---------- ----------- ---------- ----------------- ------------ ----------- Operating income 1,298 456 16 (2) (33) 1,735 Non-operating income (expense) Interest expense (237) (147) (132) D (30) D (19) (565) Other income (expense), net 20 44 200 F1 (150) 114 ---------- ----------- ---------- ----------------- ----------- ----------- Income before income taxes 1,081 353 84 (32) (202) 1,284 Income tax (expense) benefit (299) (88) (57) G 9 G 57 (378) ---------- ----------- ---------- ----------------- ----------- ----------- Net income $ 782 $ 265 $ 27 $ (23) $(145) $ 906 ========== =========== ========== ================= =========== =========== Net income per share of common stock, basic $ 0.17 $ 0.17 ========== =========== Net income per share of common stock, diluted $ 0.16 $ 0.16 ========== ===========
Central European Distribution Corporation Unaudited Pro Forma Condensed Combined Income Statement Information For the year ended December 31, 2001 Amounts in columns expressed in thousands of USD (except per share data)
Total Pro Forma Historical Historical Historical DAMIANEX AGIS S.A. CEDC with CEDC Damianex AGIS S.A (A4) S.A. Pro Forma AGIS S.A. (A2) S.A (A6) Pro Forma Adjustments and DAMIANEX Adjustments S.A. -------------- ----------- ------------- -------------- ------------- ------------- Net sales $ 178,236 $78,977 $75,449 $332,662 Cost of goods sold, excluding depreciation and amortization 154,622 70,262 69,649 294,533 ------------ ----------- ------------ ------------ 23,614 8,715 5,800 38,129 Selling, general and administrative expenses, 16,445 6,008 2,703 F (41) 25,331 excluding depreciation F1 216 Bad debt expense 711 218 106 1,035 Depreciation of tangible fixed assets 841 258 165 F2 10 F1 (16) 1,258 Amortization of intangible assets 762 - - 762 ------------ ----------- ------------ ------------ ------------- ------------ Operating income 4,855 2,231 2,826 (10) (159) 9,743 Non-operating income (expense) Interest expense (1,345) (555) (665) D (106) D (77) (2,748) Other income (expense), net 148 55 (14) - 189 ------------ ----------- ------------ ------------ ------------- ------------ Income before income taxes 3,658 1,731 2,147 (116) (236) 7,184 Income tax (expense) benefit (1,132) (520) (650) G 33 G 66 (2,203) ------------ ----------- ------------ ------------ ------------- ------------ Net income $ 2,526 $1,211 $1,497 $(83) $(170) $4,981 ============ =========== ============ ============ ============= ============ Net income per share of common stock , basic $ 0.58 $0.93 ============ ============ Net income per share of common stock, diluted $ 0.57 $0.89 ============ ============
Central European Distribution Corporation Notes to the Unaudited Pro Forma Condensed Combined Financial Information (Amounts in columns expressed in thousands of USD) A. THESE COLUMNS REPRESENT THE HISTORICAL BALANCE SHEETS AND RESULTS OF OPERATIONS AS FOLLOWS: (1)-CEDC - consolidated financial position and operating results as of and for the three month period end March 31, 2002 (2)-CEDC - consolidated operating results for the year ended December 31, 2001 (3)-AGIS S.A. - historical financial position and operating results as of and for the three month period ended March 31, 2002 (4)-AGIS S.A. - historical operating results for the year ended December 31, 2001 (5)-Damianex S.A. - historical financial position and operating results as of and for the three month period ended March 31, 2002 (6)-Damianex S.A. - historical operating results for the year ended December 31, 2001 B. ACQUISTIONS (1). AGIS S.A. On April 24, 2002, the CEDC group purchased the outstanding shares of AGIS S.A. Total consideration for the acquisition consisted of the following: Cash consideration to stockholders $ 4,568 *172,676 shares of CEDC common stock 2,171 Acquisition costs (estimated) 262 ------------ $ 7,001 ============ * CEDC's common stock was valued at the average stock price a few days before and after the purchase price was agreed and announced. The shares issued are not registered and may not be sold without the consent of CEDC for six months subsequent to the acquisition date. Central European Distribution Corporation Notes to the Unaudited Pro Forma Condensed Combined Financial Information (Amounts in columns expressed in thousands of USD) (2). DAMIANEX S.A. On April 22, 2002, the CEDC group purchased the outstanding shares of Damianex S.A. Total consideration for the acquisition consisted of the following: Cash consideration to stockholders $7,138 *152,996 shares of CEDC common stock 1,781 Value of put option on 152,996 shares 447 Acquisition costs (estimated) 317 ----------- $ 9,683 =========== * CEDC's common stock was valued at the average stock price a few days before and after the purchase price was agreed The shares issued are not registered and may not be sold without the consent of CEDC for one year subsequent to the acquisition date. The sellers were granted an option to sell the acquired CEDC stock ("Put Option") back to the Company at a price of $12.00 per share during the period from April 23, 2003 to April 29, 2003. If the put lapses, the shares will be transferred to equity. If the shares are purchased by the Company they will be treated as treasury shares. These shares have been disclosed in the pro forma condensed combined balance sheet as temporary equity above stockholders' equity. Prior to the exercise option period (April 23, 2003 to April 29, 2003) these shares will be considered in the calculation of diluted earnings per share (unless they are anti-dilutive). The put options have been valued at approximately $447,000 by an independent appraiser. As part of the Agreement, approximately $3,200,000 was transferred to an escrow account. The funds in the escrow account will be paid to the sellers when CEDC receives approval from the Polish Government in regards to the ownership of the real estate element of the transaction (estimated to be approximately 3 months). If approval is not received, the real estate will be separated from the Company and sold to a mutually agreed upon third party for a mutually agreed price. As part of the sale of the real estate, a lease agreement would be established for a period of three to five years with the buyers which shall not exceed the market price applicable in the region. If the real estate is not sold within six months from the day the Polish Government informs the parties of its refusal, the funds in the escrow account will be transferred back to CEDC with 50% of the interest earned on the escrowed amount. Central European Distribution Corporation Notes to the Unaudited Pro Forma Condensed Combined Financial Information (Amounts in columns expressed in thousands of USD) C. DETERMINATION OF GOODWILL (1) AGIS S.A. In connection with the preparation of the pro forma condensed combined balance sheet information at March 31, 2002, the book values of certain assets were adjusted to estimated fair values as follows: Cost of acquisition $ 7,001 Historical net book value at March 31, 2002 *(522) **Other current assets (160) ---------- *** Other current liabilities 108 ---------- Preliminary goodwill $ 6,427 ========== * Assuming the AGIS acquisition was finalized on March 31, 2002, the historical net book of $1,934,000 has been reduced to reflect a dividend declared in April 2002 in regards to prior year earnings for the amount of approximately $1,412,000. ** Assuming the acquisition was finalized on March 31, 2002, the goodwill was adjusted to reflect the estimated acquired goodwill determined as of April 24, 2002. *** This amount relates to the elimination of deferred income (net of taxes) in regards to the sale of real estate. The $108,000 deferred gain will never be recognized in the consolidated financial statements of CEDC as it is pre-acquisition. Prior to the finalization of the business combination agreement all the real estate (land and buildings) and certain vehicles were sold to the former shareholders. CEDC believes fair market value of the remaining assets is equal to their carrying values, this will be confirmed upon finalization of the appraisal of business combination assets. (2) DAMIANEX S.A. The book values of certain assets of the Damianex S.A. acquisition were adjusted to estimated fair values as follows (assuming the Polish Government approves the real estate element of the transaction): Cost of acquisition $ 9,683 Historical net book value at March 31, 2002 *2,959 To increase land to estimated fair value ***165 To increase buildings to estimated fair value ***203 To record deferred taxes on increase of book values of land and buildings ***(92) Other current assets **190 --------- ----------- Preliminary goodwill $ 6,258 =========== * Assuming the Damianex acquisition was finalized on March 31, 2002, the historical net book has been reduced to reflect a dividend declared in April 2002 in the amount of $740,000. ** Assuming the acquisition was finalized on March 31, 2002, the goodwill was adjusted to reflect the estimated acquired goodwill determined as of April 22, 2002. *** Assuming the Polish Government approves the real estate element of the transaction. Central European Distribution Corporation Notes to the Unaudited Pro Forma Condensed Combined Financial Information Amounts in columns expressed in thousands of USD DETERMINATION OF GOODWILL (cont'd) In accordance with SFAS 142, goodwill is no longer amortized. The allocation of the excess purchase price to goodwill may be revised when the Company receives the independent valuations in regards to the acquisitions (Damianex S.A. and AGIS S.A.) of the tangible and intangible business assets acquired and upon completion of the escrow period for the Damianex S.A. acquisition and final determination of the purchase price for AGIS for the effects of old accounts receivable. CEDC does not expect material adjustments from the completion of this process. D. FINANCING OF ACQUISITIONS The Company secured additional long-term borrowings of approximately $4,300,000 to finance the acquisitions. The interest rate on the additional borrowings is LIBOR plus 2%. The average LIBOR plus 2% rate for 2001 and for the three month period ended March 31, 2002 was approximately 4.25%. The Company allocated $1,800,000 and $2,500,000 of additional borrowing for the purchases of AGIS S.A. and Damianex S.A., respectively. The additional interest expense for AGIS S.A. in regards to the pro forma condensed combined income statement information is approximately $77,000 and $19,000 for the year end December 31, 2001 and for the three month period ended March 31, 2002. The additional interest expense for Damianex S.A. in regards to the pro forma condensed combined income statement information is approximately $106,000 and $30,000 for the year ended December 31, 2001 and for the three month period ended March 31, 2002. The loan is repayable in quarterly installments commencing during the second quarter of 2003. On March 28, 2002, CEDC finalized the private placement of 800,000 shares of the Company's common stock. The Company received approximate net proceeds of $7,543,000 from this private placement, of which $7,543,000 was used as follows: Acquisition of Damaniex S.A. $4,638 Acquisition of AGIS S.A. 2,768 Other 137 --------------- $7,543 =============== Because the private placement was completed on March 28, 2002, it has been included in the "historical CEDC" column. The effect is in cash ($7,543,000), Stockholders Equity Common Stock ($8,000) and additional paid in capital ($7,535,000). E. ELIMINATION OF ACQUIRED COMPANIES SHAREHOLDERS' EQUITY ACCOUNTS
AGIS S.A. Damianex S.A. March 31, 2002 March 31, 2002 Common Stock $ 229 $1,739 Retained earnings 1,807 1,992 Accumulated other comprehensive loss, (net of tax) (102) (32) -------------------- ------------------ $1,934 $3,699 ==================== ==================
F. PROFORMA EXPENSE ADJUSTMENTS (1). CEDC did not acquire any of the AGIS buildings. As a result CEDC entered into lease agreements with the former shareholders of AGIS to lease the buildings for an unspecified period. This pro forma entry reflects the elimination with respect to the depreciation of the buildings and the addition of rent expense on the lease referred to above. Depreciation in the amount of $16,000 and $6,000 has been reduced for the year ended December 31, 2001 and the three month period ended March 31, 2002 respectively. Rent expense of $216,000 and $54,000 has been recognized for the year ended December 31, 2001 and for the three month period ended March 31, 2002, respectively. Additionally, the $150,000 profit made on the sale of the real estate prior to acquisition has been eliminated as it is a direct consequence of the acquisition. An adjustment of $42,000 regarding the associated tax charge has also been made. Additionally, real estate taxes and maintenance costs applicable to the buildings were eliminated, the expenses eliminated were $41,000 and $15,000 for the year ended December 31, 2001 and three month period ended March 31, 2002, respectively. (2). Damianex S.A. - The increase in the fair market values of the acquired buildings subsequently increased the depreciation expense for the year ended 2001 and for the three month period ended March 31, 2002. The depreciation expense was calculated based on the estimated average remaining life of buildings (approximately 20 years) which is approximately 5%. The additional depreciation expense for the year ended December 31, 2001 and for the three month period ended March 31, 2002 is approximately $10,000 and $2,000. G. PRO FORMA INCOME TAX ADJUSTMENTS
AGIS S.A. Damianex S.A. Three month period Three month period ended March 31, 2002 ended March 31, 2002 Interest expense $ 19 $ 30 Rent expense 54 - Real estate tax and repairs and maintenance (15) - Deferred profit on sale of real estate 150 Depreciation (6) 2 -------------------- -------------------- Additional tax deductible expenditures 202 32 Tax rate for period 28% 28% -------------------- -------------------- Total pro forma tax expense $ 57 $ 9 ==================== ====================
9 Central European Distribution Corporation Notes to the Unaudited Pro Forma Condensed Combined Financial Information Amounts in columns expressed in thousands of USD (except per share data)
AGIS S.A. Damianex S.A. Year ended December 31, Year ended December 2001 31, 2001 Interest expense $ 77 $ 106 Rent expense 216 - Real estate tax and repairs and maintenance (41) - Depreciation (16) 10 ---------------------- ------------------- Additional tax deductible expenditures 236 116 Tax rate for period 28% 28% ---------------------- ------------------- Total pro forma tax expense $ 66 $ 33 ====================== ===================
Goodwill is not tax deductible. H. PERSONNEL REDUCTIONS CEDC's management does not presently anticipate any significant personnel reductions as a result of the acquisitions. I. PRO FORMA NET INCOME PER SHARE INFORMATION Pro forma net income per share information considers the effects of shares issued in connection with the transaction as though they were outstanding during the periods presented. The shares used for these calculations were as follows:
Periods ended Year end Three month period ended December 31, 2001 March 31, 2002 -------------------------- ------------------------------ Historical Pro forma Historical Pro forma Basic 4,359 *5,332 4,508 *5,481 Dilutive 4,447 **5,583 4,845 ***5,818
* Includes the following: ** The pro forma diluted earnings per share are calculated using the pro forma shares indicated above. The pro forma diluted earnings per share calculation includes the 163,000 incremental shares as a result of applying the reverse treasury stock method to the 152,996 common shares with attached put options issued in connection with the Damianex acquisition. The result of this is anti-dilutive. 10 Central European Distribution Corporation Notes to the Unaudited Pro Forma Condensed Combined Financial Information Amounts in columns expressed in thousands of USD (except per share data) ***The 152,996 common shares classified as temporary equity for the three-month period ended March 31, 2002. 11 -----END PRIVACY-ENHANCED MESSAGE-----