EXHIBIT 1(a)
500,000 UNITS
(Each Unit Consisting of One Share of
Series A Convertible Cumulative Redeemable Preferred Stock
and One Common Stock Purchase Warrant)
HUNGARIAN BROADCASTING CORP.
UNDERWRITING AGREEMENT
Dated: December , 1996
X.X. Xxxxxxx & Co., Inc.
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
The undersigned, Hungarian Broadcasting Corp., a Delaware corporation (the
"Company"), and the persons listed on Schedule A annexed hereto (the "Selling
Securityholders") hereby confirm their agreement with X.X. Xxxxxxx & Co., Inc.
(sometimes the "Underwriter" or "you") as follows:
1. Description of Securities. The Company has authorized by appropriate
corporate action, and proposes to issue and sell to you 400,000 Units and the
Selling Securityholders propose to sell you an aggregate of 100,000 Units, each
Unit consisting of one share of Series A Convertible Cumulative Redeemable
Preferred Stock and one Common Stock Purchase Warrant (said shares of Preferred
Stock and Warrants hereinafter referred to as "Shares" and "Warrants"). Each
Warrant shall be exercisable for one share of Common Stock. An additional
60,000 Units have been authorized by the Company to cover over-allotments as
provided in Section 3 below. The Units, Shares and Warrants shall hereinafter
sometimes be collectively referred to as the "Securities". The Units, Shares
and Warrants are more fully described in the Registration Statement and
Prospectus referred to hereinafter.
2. Representations and Warranties.
(a) The Company and each Selling Securityholder, jointly and severally,
represents and warrants to, and agrees with, you that:
(i) A registration statement on Form SB-2 with respect to the
Securities, including a preliminary prospectus, copies of which have heretofore
been delivered by the Company to you, has
been carefully prepared by the Company in conformity with the requirements of
the Securities Act of 1933, as amended, (hereinafter called the "Act") and the
Rules and Regulations of the Securities and Exchange Commission (hereinafter
called the "Commission") under such Act, and has been filed with the Commission
(File No. 333-13371). On or prior to the effective date of such registration
statement, one or more amendments to such registration statement (including a
final prospectus), copies of which have heretofore been or will be delivered to
you, will have been so prepared and filed in the form delivered to you. Such
registration statement (including all exhibits thereto) as amended as of the
effective date thereof and each related preliminary prospectus are herein
respectively referred to as the "Registration Statement", the "Preliminary
Prospectus" and the "Prospectus".
(ii) When the Registration Statement becomes effective (the
"Effective Date") and at all times subsequent thereto up to and at the Closing
Date (as defined in Section 3 hereof) and the Additional Closing Date (as
defined in Section 3 hereof), (i) the Registration Statement and the Prospectus
and any amendments or supplements thereto will contain all statements which are
required to be stated therein by the Act and the Rules and Regulations of the
Commission thereunder and will in all respects conform to the requirements of
the Act and such Rules and Regulations, (ii) neither the Registration Statement
nor the Prospectus nor any amendment or supplement thereto will include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
and (iii) all documents which are required to be filed as exhibits to the
Registration Statement will have been so filed; provided however, that the
Company and the Selling Securityholders make no representations or warranties as
to information contained in or omitted from the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by you or any
Underwriter expressly for use in the preparation thereof.
(iii) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware with
all corporate and other powers and authority necessary to carry on its
businesses, and it is qualified and in such jurisdictions in which the nature of
its business requires such qualification. The Company's subsidiaries have been
duly incorporated and are validly existing as corporations in good standing
under the laws of Hungary with all corporate powers and authority necessary to
carry on their business.
(iv) The consummation of the transactions herein contemplated will
not result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company is a party or by which it or any of
its
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properties is bound, or of its Certificate of Incorporation, or By-laws, or any
order, rule or regulation applicable to the Company or any of its properties, of
any court or other governmental body.
(v) The Company has full power and lawful authority to authorize,
issue and sell the Units, Shares, Warrants, and Underwriter's Unit Warrants (as
defined hereinafter) on the terms and conditions herein set forth, and has taken
all corporate action necessary therefor; no consent, approval, authorization or
other order of any regulatory authority is required for such authorization,
issue or sale, except as may be required under the Act or state securities or
blue sky laws. This Agreement has been duly authorized, executed and delivered
by the Company and is a valid and legally binding agreement of the Company
enforceable in accordance with its terms. The Warrant Agreement between the
Company and American Stock Transfer & Trust Company, dated December 20, 1995 and
as amended by agreement dated _________________, 1996, pursuant to which the
Warrants are being issued (the "Warrant Agreement"), has been duly authorized by
the Company and is a valid and legally binding obligation of the Company,
enforceable in accordance with its terms.
(vi) The Securities and the authorized capitalization of the Company
conform to the descriptions thereof contained in the Registration Statement and
Prospectus. The holders of the Warrants will, upon their exercise, be entitled
to purchase shares in accordance with the terms and conditions set forth in the
Warrant Agreement. The outstanding shares of capital stock are, and the shares
issuable pursuant to the public offering contemplated hereby and upon exercise
of any of the warrants referred to herein will upon such issuance be, duly
authorized, validly issued and fully paid and nonassessable, and the Company has
duly authorized and reserved for issuance upon exercise of said warrants such
number of shares of Common Stock as are initially issuable upon such exercise.
The Warrants, the Underwriter's Unit Warrants, and the warrants underlying the
Underwriter's Unit Warrants will, when issued and delivered in accordance with
the provisions of the Warrant Agreement, the Underwriter's Unit Warrants and
this Agreement, be valid and legally binding obligations of the Company
enforceable in accordance with their respective terms. There are no options,
warrants, rights of conversion, indebtedness or calls on equity of the Company
other than as disclosed in the Prospectus and Registration Statement.
(vii) Except as set forth or contemplated in the Registration
Statement and Prospectus, subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, the
Company has not incurred any material liabilities or obligations, direct or
contingent, or entered into any material transactions, not in the ordinary
course of business, and there has not been any material change in the capital
stock or funded debt of the Company, or any material
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adverse change in the condition (financial or other) or results of operations of
the Company.
(viii) The financial statements (audited and unaudited) set forth in
the Registration Statement and Prospectus fairly present the financial condition
of the Company and the results of its operations as of the dates and for the
periods therein specified; and said financial statements (including the related
notes and schedules) have been prepared in accordance with generally accepted
accounting principles which have been consistently applied throughout the
periods covered thereby. Such financial statements and the summaries thereof
included in the Registration Statement and the Prospectus conform in all
material respects to the requirements of the Rules and Regulations of the
Commission.
(ix) The accountants whose opinion or opinions is or are included in
the Registration Statement are independent public accountants within the meaning
of the Act and the Rules and Regulations of the Commission thereunder.
(x) Except as set forth in the Prospectus, there is not pending any
action, suit or other proceeding to which the Company is a party or of which any
property of the Company is the subject, before or by any court or other
governmental body, which might result in any material adverse change in the
condition, business or prospects of the Company, or might materially adversely
affect the assets of the Company; and except as indicated in the Prospectus, no
such proceeding is known by the Company to be threatened or contemplated.
(xi) The Company and the Selling Securityholders know of no claim
for services, either in the nature of a finder's fee, brokerage fee or
otherwise, with respect to the financing contemplated hereby, whether or not
heretofore satisfied, for which they or the Underwriter, or any of them, may be
responsible, other than as expressly disclosed in the Prospectus.
(xii) The business and operations of the Company and the ownership
thereof, except as may be disclosed in the Prospectus, comply with all statutes,
ordinances, laws, rules and regulations applicable thereto, the non-compliance
with which could reasonably be expected to have a material, adverse effect on
the Company or its condition (financial or other), business, prospects, net
worth or results of operations; the Company possesses, and is operating in
compliance with the terms, provisions and conditions of, all certificates,
licenses, permits, consents, waivers, approvals, franchises and concessions
required to conduct its business as now conducted, the non-compliance with which
could reasonably be expected to have a material adverse effect on the Company or
its condition (financial or other), business, prospects, net worth or results of
operations; each such certificate, license, permit,
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consent, waiver, approval, franchise and concession is valid and in full force
and effect and there is no proceeding pending or threatened (or to the best of
the knowledge of the Company and the Selling Securityholders, any basis
therefor) which may lead to the revocation, termination, suspension or
nonrenewal of any such certificate, license, permit, consent, waiver, approval,
franchise or concession.
(xiii) On the Effective Date of the Registration Statement and
immediately prior to the sale of the Securities, the outstanding capital stock
of the Company will consist of no more than 2,583,600 shares of Common Stock,
par value $.01 per share, and 100,000 shares of Series A Convertible Cumulative
Redeemable Preferred Stock and there shall be no warrants or options to purchase
shares of Stock of the Company except as set forth in the Prospectus.
(b) Each of the Selling Securityholders, severally and not jointly,
represents and warrants to the Underwriter that:
(i) Such Selling Securityholder (A) has the power and authority to
execute and deliver this Agreement and a Power of Attorney Agreement
(hereinafter defined) on the terms and conditions set forth herein and therein;
(B) is, and when the Registration Statement shall become effective and at the
Closing Time will be, the owner of the Units to be sold by such Selling
Securityholder to the Underwriter pursuant to the terms hereof, in each case
free and clear of all liens, charges, encumbrances and restrictions; (C) has
paid to the Company the full purchase price required to be paid for such Units;
and (D) has, and when the Registration Statement shall become effective and at
the Closing Time will have, the power and authority to convey good and valid
title to such Units, in each case free and clear of all liens, charges,
encumbrances and restrictions.
(ii) Such Selling Securityholder has executed an agreement and power
of attorney (the "Power of Attorney Agreement") with ___________________ and
__________________ as attorneys-in-fact, and has delivered to such attorney-in-
fact, pursuant to the Power of Attorney Agreement, certificates in negotiable
form for the Units to be sold by such Selling Securityholder. Copies of each
Power of Attorney Agreement have been delivered to you. Such certificates and
the Units represented thereby are subject to the rights of the Underwriter
hereunder and, to such extent, the Power of Attorney granted by such Selling
Securityholder to such attorney-in-fact is irrevocable and shall not be
terminated by law or upon the occurrence of any event. If any such event shall
occur, with or without notice to such attorneys-in-fact, such attorneys-in-fact
shall deliver such certificates in accordance with the terms and provisions of
this Agreement as if such event had not occurred.
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(iii) The Power of Attorney Agreement has been duly authorized,
executed and delivered by such Selling Securityholder, and this Agreement has
been duly authorized, executed and delivered by such Selling Securityholder or
by his or her attorney-in-fact pursuant to the Power of Attorney Agreement. The
Power of Attorney Agreement and this Agreement each constitute valid and binding
agreements of such Selling Securityholder enforceable in accordance with their
respective terms (except as rights to indemnification may be limited by
applicable law).
(iv) Neither the execution and delivery or performance of this
Agreement or the Power of Attorney Agreement or the consummation of the
transactions herein or therein contemplated nor the compliance with the terms
hereof or thereof by such Selling Securityholder will conflict with, or result
in a breach of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, guaranty, purchase agreement or other
agreement or instrument to which such Selling Securityholder or any of such
Selling Securityholder's property is bound, or under any statute or under any
order, rule or regulation applicable to such Selling Securityholder or any of
such Selling Securityholder's property of any court or other governmental
agency; and no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by such Selling
Securityholder of the transactions on such Selling Securityholder's part herein
or therein contemplated, except such as may be required under the Act or under
state securities or blue sky laws.
(v) On the Closing Date, all stock transfer or other taxes (other
than income taxes) which are required to be paid in connection with the sale and
transfer of the Shares to be sold by the Selling Securityholders to the
Underwriter hereunder will have been fully paid or provided for by the Selling
Securityholders and all laws imposing such taxes will have been fully complied
with.
(vi) Such Selling Securityholder has not, and at the Closing Time
will not have, taken, directly or indirectly, any action to cause or result in,
or which has constituted, or might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Securities to facilitate the
sale or the resale of any of the Units.
3. Purchase, Sale and Delivery of Shares. Subject to the terms and
conditions of this Agreement, and on the basis of the representations,
warranties and agreements herein contained, (A) the Company hereby agrees to
sell to the Underwriter, and the Underwriter agrees to purchase from the
Company, at purchase prices of $______ per Unit, and (B) each of the Selling
Securityholders agree, severally and not jointly, to sell to the Underwriter the
number of Units set forth opposite the name of such Selling Securityholder on
Schedule A hereof, and the Underwriter agrees to purchase from the Selling
Securityholders, such Units at and for a
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price of $______ per Unit.
The Company and the Selling Securityholders will deliver the Units to you
at your office, or such other place as you may designate, against payment to the
Company and the Selling Securityholders for the Units by wire transfer or by
certified or official bank check or checks payable in New York Clearing House
funds to the order of the Company and the attorneys-in-fact of the Selling
Securityholders. The Units so to be delivered will be in definitive, fully
registered form in such authorized denominations and registered in such names as
you request by notice to the Company and the Selling Securityholders given not
later than 5:00 P.M., New York City time, on the second business day next
preceding the Closing Date. The date and the time of such delivery and payment
shall be 11:00 A.M., New York City time, on ____________, 1996 (or such other
time and date as you and the Company and the Selling Securityholders may agree
upon). The time and date of such payment and delivery is herein sometimes
referred to as the "Closing Date".
The Company and the Selling Securityholders agree to make the Units
available to you for the purpose of expediting the checking and packaging of the
Units, at the office at which they are to be delivered, not later than 2:00
P.M., New York City time, on the business day next preceding the Closing Date.
The Company hereby grants to you the right, exercisable within 45 days from
the date hereof, to purchase from the Company up to 60,000 additional Units (the
"Additional Units") at a purchase price of $_______ per Unit, for the purpose of
covering over-allotments in the sale of the Underwriter of the Units. You may
exercise your right to purchase Additional Units by giving written notice of
such exercise to the Company.
Such notice shall set forth the aggregate number of Additional Units as to
which such right is being exercised, the names in which Additional Units are to
be registered, the denominations in which Additional Units are to be issued and
the date and time, as determined by you, when the Additional Units are to be
delivered (such date and time being herein sometimes referred to as the
"Additional Closing Date"); provided, however, that the Additional Closing Date
-----------------
shall not be earlier than the Closing Date. The Additional Closing Date may be
on the Closing Date; if not, it shall be no earlier than the third business day
after the date on which the right shall have been exercised nor later than the
twelfth business day after the date on which the right shall have been
exercised.
The Company will deliver the Additional Units to you at your office, or
such other place as you may designate, against payment to the Company for the
Additional Units by wire transfer or by certified or official bank check or
checks payable in New York
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Clearing House funds to the order of the Company. The Additional Units so to be
delivered will be in definitive, fully registered form in such authorized
denominations and registered in such names as you request by notice to the
Company given not later than 5:00 P.M., New York City time, on the second
business day next preceding the Additional Closing Date.
The Company agrees to make the Additional Units available to you for the
purpose of expediting the checking and packaging of the Units, at the office at
which they are to be delivered, not later than 2:00 P.M., New York City time, on
the business day next preceding the Additional Closing Date.
It is understood that the Underwriter proposes to offer the Units for sale
to the public upon the terms and conditions set forth in the Registration
Statement, after the Registration Statement becomes effective.
4. Covenants of the Company.
(a) The Company further covenants and agrees with you that:
(i) The Company will use its best efforts to cause the Registration
Statement to become effective and will not at any time, whether before or after
the effective date, file any amendment to the Registration Statement or
supplement to the Prospectus of which you shall not previously have been advised
and furnished with a copy or to which you shall have reasonably objected in
writing or which is not in compliance with the Act, or the Rules and Regulations
of the Commission thereunder.
(ii) The Company will notify you immediately and confirm in writing
(A) when the Registration Statement and any post-effective amendment thereto
becomes effective, (B) of the issuance of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any Preliminary Prospectus or of the Prospectus or of the
initiation of any proceedings for such purposes, and (C) of the receipt of any
comments (in writing or orally) from the Commission in respect of the
Registration Statement or requesting the amendment, post-effective amendment or
supplementation of the Registration Statement or Prospectus or for additional
information. If the Commission shall enter a stop order or any order preventing
or suspending the use of any Preliminary Prospectus or of the Prospectus at any
time, or shall initiate any proceedings for such purposes, the Company will make
every reasonable effort to prevent the issuance of such order and, if issued, to
obtain the withdrawal thereof. The Company will provide you with copies of all
written communications received by it from the Commission and any other
regulatory agency with respect to the Registration Statement, and every
amendment and post-effective amendment thereto and copies of all replies thereto
by the Company, its counsel and its
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accountants.
(iii) Within the time during which a prospectus relating to the
Units, Shares and Warrants (or the exercise of any Warrants) is required to be
delivered under the Act, the Company will comply so far as it is able with all
requirements imposed upon it by the Act, as now and hereafter amended, and by
the Rules and Regulations of the Commission thereunder, from time to time in
force, so far as necessary to permit the continuance of sales of or dealings in
the Units, Shares and Warrants (or the shares of stock to be acquired upon the
conversion of Preferred Stock and the exercise of the Warrants) as contemplated
by the provisions hereof and the Prospectus; and if during such period any event
occurs as a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
then existing, not misleading, or if during such period it is necessary to amend
or supplement the Prospectus to comply with the Act, the Company will promptly
notify you and will amend or supplement the Prospectus (in form reasonably
satisfactory to your counsel and at the expense of the Company) so as to correct
such statement or omission or effect such compliance.
(iv) The Company will cooperate with you and will take all necessary
action, and furnish to whomever you may direct such proper information, as may
be lawfully required in qualifying the Securities for offering and sale under
the securities or blue sky laws of such states as you may designate, and in
continuing such qualifications in effect so long as required for the
distribution of Securities by you; provided that the Company shall not be
obligated to qualify as a foreign corporation to do business under the laws of
any such state, consent to general service of process in such state or otherwise
to submit to any requirements which it reasonably deems unduly burdensome.
(v) The Company will pay any and all fees, taxes and expenses
incident to the performance of its obligations under this Underwriting
Agreement, including expenses and taxes incident to the issuance and delivery to
you of the Securities and Additional Securities, if any, to be sold to the
Underwriter pursuant to Section 3 hereof; all fees and disbursements of counsel
and accountants for the Company; expenses and filing fees incident to the
preparation, printing, delivery, shipment and filing with the Commission, the
National Association of Securities Dealers, Inc., and state blue sky authorities
of the Registration Statement and all exhibits thereto and the Prospectus, and
any amendments or supplements thereto, including fees of blue sky counsel (to be
designated by the Underwriter and who may be counsel to the Underwriter)
incident to the qualification for sale of the Securities and Additional
Securities, if any, under blue sky laws. The Company and the Selling
Securityholders will further pay you for your expenses incurred in connection
with this offering, on a
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non-accountable basis, an amount equal to 3% of the public offering price of the
Units sold hereunder, including any Units sold pursuant to the overallotment
option, such reimbursement and payment to be made to you on closing, and may be
deducted by you from the amount due to the Company and the Selling
Securityholders for purchase of the Units pursuant to Section 3 hereof. In the
event that the offering is not consummated, the Representative will be
reimbursed only for its actual, accountable, out-of-pocket expenses.
(vi) The Company will apply the net proceeds from the sale of the
Units substantially as set forth under the caption "Use of Proceeds" in the
Prospectus.
(vii) The Company will deliver to you as promptly as practicable
three signed copies of the Registration Statement and all amendments thereto,
including all exhibits therewith or incorporated therein by reference, and
signed consents, certificates and opinions of accountants and of any other
persons named in the Registration Statement as having prepared, certified or
reviewed any part thereof, and will deliver to you such number of unsigned
copies of the Registration Statement and exhibits, and of all amendments
thereto, as you may reasonably request. The Company will deliver to you or upon
your order, from time to time until the effective date of the Registration
Statement, as many copies of the Preliminary Prospectus as you may reasonably
request. The Company will deliver to you or upon your order, on the effective
date of the Registration Statement and thereafter, subject to the provisions of
Section 4(a)(iii) hereof, from time to time, as many copies of the Prospectus in
final form or as thereafter amended or supplemented, as you may reasonably
request. The Company will deliver to you, promptly after closing, three (3)
bound volumes of all of the documents, papers, exhibits, correspondence and
records forming the materials involved in this public offering.
(viii) The Company will make generally available to its security
holders, as soon as it is practicable to do so (but in no event later than
fifteen months after the effective date of the Registration Statement), an
earnings statement of the Company (which need not be audited) covering a period
of at least twelve months beginning not later than the first day of the fiscal
quarter next succeeding such effective date which shall satisfy the provisions
of Section 11(a) of the Act.
(ix) For a period of at least five years from the date hereof, the
Company will supply to the Representative, (A) as soon as practicable after the
end of each fiscal year, a balance sheet and statement of operations of the
Company and its consolidated subsidiaries (if any) as at the end of and for each
such year, all in reasonable detail and certified by independent certified
public accountants, (B) as soon as practicable after the end of each of
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the first three quarters of each fiscal year, an unaudited statement of
operations of the Company and its consolidated subsidiaries (if any) for such
period, (C) copies of such financial statements and reports as the Company may,
from time to time, furnish generally to holders of any class of its stock, (D)
copies of each report which it shall be required to file with the Commission,
any blue sky authority or any securities exchange at the same time as such
reports are filed and (E) copies of the daily stock transfer sheets of the
Company.
(x) Simultaneously with the purchase and payment by the Underwriter
for the Units on the Closing Date, the Company shall sell, at a price of $0.001
per warrant, and issue and deliver to the Underwriter or to dealers in the
selling group, or to officers or partners of the Underwriter or dealers in the
selling group, 50,000 warrants, in form and substance satisfactory to your
counsel, to purchase 50,000 Units identical to the Units being sold to the
public hereunder at an exercise price of $_______ per Unit ("Underwriter's Unit
Warrants"). The Underwriter's Unit Warrants will be exercisable for a period of
five years commencing on the Effective Date, and will not be transferable for a
period of one year from the Effective Date except to Selected Dealers and
officers and partners of the Underwriter and Selected Dealers. The Underwriter's
Unit Warrants shall have been registered under the Registration Statement and
the holders of a majority of such Underwriter's Unit Stock Warrants or the
securities which may have been issued thereunder shall have the right, at any
one time, to require the Company to prepare and file a post-effective amendment
to the Registration Statement (or a new registration statement, if then required
under the Act) covering all or any portion of the Underwriter's Unit Warrants
and their underlying securities to permit the public sale thereof after twelve
months from the Effective Date. In connection therewith, the Company shall be
obligated to prepare and file such post-effective amendment (or such new
registration statement) under the Act promptly upon the receipt of the request
of the holders of a majority of the Underwriter's Unit Warrants or securities
issued thereunder, and the Company shall be further obligated to use its best
efforts to have such post-effective amendment (or such new registration
statement) rendered effective under the Act, as it may from time to time be
amended hereafter, and Rules and Regulations promulgated thereunder, as soon as
practicable after the filing date of any such post-effective amendment or such
new registration statement, and the Company shall also be required to take such
action as may be necessary to maintain such post-effective amendment or such new
registration statement effective under the Act for the period, not in excess of
nine months, required to sell such Underwriter's Unit Warrants and their
underlying securities in compliance with the Act and Rules and Regulations
promulgated thereunder, and the Company shall be required to provide the
accounting necessary for the filing of any such post-effective amendment or such
new registration statement, plus any amendments or supplements thereto.
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In addition to, and not in lieu of, the obligations of the Company hereinabove
recited in this subsection, the Company hereby further covenants and agrees that
if, the Company shall prepare and file a post-effective amendment to the
Registration Statement or a new registration statement under the Act or
notification pursuant to Regulation A under the Act either of which is to become
effective at any time after the expiration of twelve months from the Effective
Date with respect to the public offering of any equity or debt securities of the
Company now or hereafter authorized, the Company will include in such post-
effective amendment or new registration statement or such notification such
number of the Underwriter's Unit Warrants and their underlying securities as
requested by the holders of the Underwriter's Unit Warrants or securities issued
thereunder, and neither you nor such holders shall be under any obligation to
bear any of the expenses or professional fees and disbursements to be incurred
by the Company in connection with the preparation and filing of such post-
effective amendment, or new registration statement or such notification. With
respect to any post-effective amendment, or new registration statement, or
notification filed by the Company pursuant to this subsection, the selling
securityholders offering any Underwriter's Unit Warrants and their underlying
securities thereunder shall be entitled to the benefits of indemnification by
the Company in like manner and to the same extent as the Company indemnifies the
Underwriter pursuant to Section 6(a) hereof.
(xi) The Company will not, without the prior written consent of the
Underwriter, for a period of six months after the effective date of the
Registration Statement, sell any securities of the Company or sell or grant
options, warrants or rights with respect to any securities of the Company, or
permit or cause a public offering of any securities of the Company except in
accordance with the provisions of the Registration Statement.
(xii) At the Closing, the Company shall enter into a consulting
agreement ("Consulting Agreement") retaining the Underwriter as financial
consultant to the Company for a two-year period commencing as of December 20,
1977, at a fee of $50,000 per year, the total amount of which shall be paid at
the Closing. The Company and the Underwriter shall also enter into an agreement
which will extend the Mergers and Acquisitions Agreement between the Company and
the Underwriter until December __, 2001.
(xiii) The Company shall cooperate with the Underwriter in making
available to its representatives such information as it may request in making an
investigation of the Company and its affairs.
(xiv) Until such time as the securities of the Company are listed on
the New York Stock Exchange or the American Stock Exchange (not including The
Emerging Growth Company List) but in no event more than three years from the
effective date, the Company
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shall retain Compliance Management Company or a similar company, to prepare a
post registration blue sky market survey for the Underwriter for distribution to
market makers. Such survey shall be provided to the Underwriter annually with
the first survey delivered to it promptly after the completion of the public
offering hereunder. The cost of the first year's survey will not exceed $4,000.
In lieu of the foregoing, the Company may cause its legal counsel to provide the
Underwriter with a survey to be updated at least annually.
(xv) At all times, so long as any of the warrants referred to
herein are outstanding, the Company will have reserved authorized but unissued
shares of stock and underlying warrants, available for immediate issuance in
amounts necessary for the exercise of all warrants then outstanding. The Company
agrees to qualify the Units for listing on the NASDAQ System Small-Cap Issues on
the Effective Date and will take all necessary and appropriate action so that
the Units continue to be listed for trading in the NASDAQ System Small-Cap
Issues for at least five years from the Effective Date provided the Company
otherwise complies with the prevailing maintenance requirements of NASDAQ System
Small-Cap. In addition, at such time as the Company qualifies for listing its
securities on the National Market System of NASDAQ, the Company will take all
steps necessary to have the Company's Securities listed on the National Market
System of NASDAQ in lieu of listing as Small-Cap Issues. The Company shall
comply with all periodic reporting and proxy solicitation requirements imposed
by the Commission pursuant to the 1934 Act, and shall promptly furnish you with
copies of all material filed with the Commission pursuant to the 1934 Act or
otherwise furnished to shareholders of the Company.
(xvi) The Company will register its Units and Shares pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended, not later than
the Effective Date.
(xvii) The Company will pay the fees and expenses (but not transfer
taxes, if any) of the Company's stock transfer agents, warrant agents, and
registrars (if any), without charge to stockholders and warrantholders, for not
less than five years after the effective date of the Registration Statement.
(xviii) The Underwriter shall receive a fee of 10% of the proceeds as
and when received by the Company from time to time upon the exercise of any
Warrants after one year from the Effective Date, provided that such fee shall be
paid only in accordance with the rules of the NASD and any applicable securities
laws and rules and regulations. The Underwriter will not be eligible to receive
the aforementioned warrant exercise fee as a result of transactions of the
following nature: (i) the exercise of Warrants when the market price of the
Company's Common Stock is lower than the exercise price; (ii) the exercise of
Warrants held in any discretionary account; (iii) the exercise of Warrants
where
13
documents disclosing the compensation arrangements (e.g., the Prospectus) have
not been provided to the warrantholder; (iv) the exercise of Warrants in
unsolicited transactions; and (v) the exercise of any Warrants during the one
year period commencing on the Effective Date, and further provided that no
broker shall be paid a fee unless such broker is designated in writing by the
customer as the soliciting broker. In addition, it will be a condition to the
receipt by the Underwriter of such fee that it shall not, in the ten days
immediately preceding the solicitation of the exercise or the date of such
exercise, have bid for or purchased the Common Stock of the Company (or any
securities of the Company convertible into or exchangeable for such Common
Stock, including the Warrants) or otherwise have engaged in any activity that
would be prohibited by Rule 10b-6 under the Securities Exchange Act of 1934, as
amended, by one participating in a distribution of the Company's securities
whether as underwriter or otherwise. The Company will not solicit warrant
exercises except through the Underwriter.
(xix) The Company continues to be listed in the appropriate Standard
& Poor's manual in order to comply with the requirements of the so-called
"standard manuals exemption" of various blue sky authorities with respect to the
Securities.
(b) Each of Selling Securityholders, severally and not jointly, covenants
and agrees with the Underwriter that:
(i) During the 180 days commencing on the date hereof, such Selling
Securityholder will not, directly or indirectly, take any action designed to or
which will constitute or which might reasonably be expected to cause or result
in the stabilization of the price of the Units to facilitate the sale or the
resale of any of the Units.
(ii) If, subsequent to the date hereof, such Selling Securityholder
shall believe or have any reasonable grounds to believe that the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, or that any of the representations
and warranties of the Company or such Selling Securityholder contained herein or
in any certificate or document contemplated under this Agreement to be delivered
to you are false, such Selling Securityholder will immediately notify you to
such effect.
(iii) Such Selling Securityholder will not, without your prior
written consent, sell, contract to sell or otherwise dispose of any Securities
owned or held of record in its name, except the sale of Units to the Underwriter
pursuant to this Agreement, for a
14
period of 180 days after the Effective Date.
(iv) Such Selling Securityholder will furnish the certificates
referred to in subsections (h) and (i) of Section 9 hereof.
(v) Such Selling Securityholder will pay you for your expenses
incurred in connection with the offering, on a non-accountable basis, an amount
equal to 3% of the public offering price of the Units sold on behalf of such
Selling Securityholder.
5. Conditions of Underwriter's Obligations. The Underwriter's obliga-
tions to purchase and pay for the Units, as provided herein, shall be subject to
the accuracy, as of the date hereof and as of the Closing Date (as if made on
the Closing Date), of the representations and warranties of the Company and the
Selling Securityholders herein, to the accuracy of statements made in each
certificate delivered pursuant to the provisions hereof, to the performance by
the Company and the Selling Securityholders of their obligations hereunder, and
to the following additional conditions:
(a) The Registration Statement shall have become effective not later than
5:00 P.M., New York City time, on the day following the date of this Agreement,
unless a later time and date be agreed to by you; and no stop order suspending
the effectiveness of the Registration Statement, or order preventing or
suspending the use of any Preliminary Prospectus or of the Prospectus, shall
have been issued and no proceedings for such purpose shall have been instituted
or be pending or, to the knowledge of the Company or you, shall be contemplated
by the Commission; and any request of the Commission for additional information
(to be included in the Registration Statement or the Prospectus or otherwise)
shall have been complied with to the satisfaction of the Underwriter's Counsel.
(b) On the Closing Date the Underwriter shall have received an opinion of
Xxxxx & Xxxxx, counsel for the Company, dated the Closing Date, to the effect
that:
(i) The Company has full corporate power and authority to enter
into this Agreement and this Agreement has been duly authorized, executed and
delivered by the Company and duly executed and delivered by each Selling
Securityholder or his or her duly authorized attorneys-in-fact and constitutes a
valid and binding obligation of the Company and each Selling Securityholder
enforceable in accordance with its terms, subject to bankruptcy, insolvency or
similar laws governing the rights of creditors generally and to the discretion
of courts in granting equitable remedies, except insofar as rights to indemnity
or contribution hereunder may be limited by Federal securities laws. Each Power
of Attorney Agreement has been duly authorized, executed and delivered
15
by each Selling Securityholder and constitutes a valid, binding and legally
enforceable obligation of each Selling Securityholder in accordance with its
terms, subject to bankruptcy, insolvency or similar laws governing the rights of
creditors generally and to the discretion of courts in granting equitable
remedies and validly grants the power of attorney to ______________________ and
______________________ intended to be granted thereby.
(ii) The Warrant Agreement, as amended, the Consulting Agreement and
the Amendment to the Mergers and Acquisitions Agreement have been duly
authorized, executed and delivered by the Company and constitute the legal,
valid and binding obligations of the Company enforceable in accordance with
their terms (except insofar as enforcement of the indemnification provisions
thereof may be limited by applicable federal securities laws or principles of
public policy and subject to bankruptcy, insolvency, moratorium, reorganization
and similar laws affecting creditors' rights generally and to general principles
of equity). The Company has full corporate power and authority to said
agreements and to sell, issue and deliver the Units, Shares, Warrants,
Underwriter's Unit Warrants and the securities underlying all warrants;
(iii) The Company has authorized and outstanding capital stock as set
forth under "Capitalization" in the Prospectus; all of the Company's outstanding
shares of capital stock have been duly authorized and validly issued, and are
fully paid and nonassessable; all of the Units, Shares, Warrants, Underwriter's
Unit Warrants sold pursuant to this Agreement have been duly authorized, validly
issued and delivered and are fully paid and nonassessable, and conform to the
descriptions thereof in the Prospectus and such descriptions conform to the
rights duly set forth in the Certificate of Incorporation of the Company, the
Warrant Agreement, the Underwriter's Unit Warrants and this Agreement; the
Warrants, the Underwriter's Unit Warrants, are, and the warrants underlying the
Underwriter's Unit Warrants will, when issued in accordance with the provisions
of the Warrant Agreement, the Underwriter's Unit Warrants, and this Agreement
be, valid and legally binding obligations of the Company in accordance with
their respective terms (subject to bankruptcy, insolvency, moratorium,
fraudulent conveyance, reorganization and similar laws affecting creditors'
rights generally and to general principles of equity); the securities underlying
the Warrants and the Underwriter's Unit Warrants have been validly authorized
and reserved for issuance, and any shares when issued in accordance with the
terms of the Warrants or Underwriter's Unit Warrants, as the case may be, will
be validly issued and will be fully paid and non-assessable; the holders of the
Units, Shares, Warrants and Underwriter's Unit Warrants, and the securities
underlying the Warrants and the Underwriter's Unit Warrants are not, and will
not be, subject to any personal liability for liabilities of the Company by
reason of being holders thereof; and none of such securities which have been
issued, have been issued in violation of the preemptive rights or
16
any other rights of any stockholder of the Company and no stockholder of the
Company has any preemptive right to subscribe for or to purchase any of such
Units, Shares, Warrants, Underwriter's Unit Warrants, or securities underlying
the Warrants, and the Underwriter's Unit Warrants;
(iv) The Company has been duly incorporated and is validly existing
and in good standing under the laws of the State of Delaware, has full corporate
power and authority to conduct its business as presently conducted and as
described in the Prospectus and to own its properties and is duly qualified to
do business and is in good standing in each jurisdiction wherein the property
owned or leased, or the conduct of business, by it makes such qualification
necessary (except where failure to so qualify would not have a material adverse
effect on the Company). The Company's subsidiaries have been duly incorporated
and are validly existing as corporations in good standing under the laws of
Hungary and have corporate powers and authority necessary to carry on their
business;
(v) The Registration Statement has become effective under the
Securities Act and, to the best of the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceeding for that purpose has been instituted or is pending or contemplated
by the Commission;
(vi) The Registration Statement and the Prospectus, and any
amendment or supplement thereto, comply as to form in all material respects with
the requirements of the Securities Act and the Rules (except that such counsel
need express no opinion as to the financial statements and schedules and
financial data included therein or omitted therefrom);
(vii) Such counsel has assisted in the preparation of the
Registration Statement and the Prospectus and no fact has come to the attention
of such counsel which leads such counsel to believe that, either as of the
Effective Date or the date of the opinion, (A) either the Registration Statement
or the Prospectus or any amendment or supplement thereto (except for the
financial statements and schedules and financial data included therein or
omitted therefrom, as to which such counsel need express no opinion) contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (B) there is any material legal, governmental or administrative
proceeding pending, threatened or contemplated to which the Company is or may
become a party or to which any of its property is or may become subject, or any
basis for any legal, governmental or administrative proceeding, required to be
described in the Prospectus under the Act which is not described as required, or
(C) there is any contract or document of a character required to be described in
the
17
Registration Statement or the Prospectus, or to be filed as an exhibit to the
Registration Statement, under the Act which is not described or filed as
required.
(viii) The execution, delivery and performance of this Agreement by
the Company and the Selling Securityholders and the Power of Attorney Agreements
by the Selling Securityholders, and the consummation of the transactions
contemplated therein do not and will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
the Articles of Incorporation or By-Laws of the Company or any indenture,
mortgage, deed of trust, note agreement or other agreement or instrument known
to such counsel to which the Company or any Selling Securityholder is a party or
by which they are bound or to which any of their property is subject, or any
Federal, state or other statute, law, rule or regulation, or any judgment, order
or decree of any court or governmental agency or body known to such counsel
having jurisdiction over the Company or any Selling Securityholder or any of
their property;
(ix) No consent, approval, authorization or order of, or declaration
or filing with, any government, governmental instrumentality or court, is
required for the valid consummation by the Company or the Selling
Securityholders of the transactions contemplated by this Agreement, except such
as may be required under the Securities Act or any state securities or "blue
sky" laws in connection with the purchase, sale and distribution of the Units;
and
(x) To the best of such counsel's knowledge, the Company possesses
all material permits, certificates of compliance, approvals, licenses, waivers,
consents and other rights from governmental authorities which are requisite for
the material conduct of its business as presently conducted and as described in
the Prospectus (except such as in the aggregate would not materially affect the
business or operations of the Company), for the consummation of the transactions
contemplated in this Agreement and for the offering contemplated by the
Prospectus, and each such permit, certificate of compliance, approval, license,
waiver, consent and right is valid and in full force and effect.
(xi) Such opinion shall be to such further effect with respect to
other legal matters relating to this Agreement and the sale of the Units
hereunder as counsel for the Underwriter may reasonably request. In rendering
the opinions set forth above, such counsel may rely upon certificates of the
Selling Securityholders, officers of the Company and public officials as to
matters of fact, and may rely as to all matters of law other than the laws of
the United States or the corporate laws of the State of Delaware upon opinions
of counsel satisfactory to you, in which case the opinion shall state that they
have no reason to believe that you and they are not entitled to so rely.
Additionally, in
18
rendering such opinion, counsel shall not be required to opine upon the
availability of equitable remedies, including but not limited to, the remedies
of specific performance and injunctive relief.
(c) At the time this Agreement is executed by the parties hereto and on
the Closing Date (and on the Additional Closing Date, if any), the Underwriter
shall have received from Coopers and Xxxxxxx, a letter dated as of each such
date, to the effect that:
(i) They are independent accountants with respect to the Company
within the meaning of the Act and the applicable published Rules and Regulations
thereunder;
(ii) In their opinion, the financial statements (including the
schedules, if any) in the Registration Statement examined by such firm, comply
as to form in all material respects with the applicable accounting requirements
of the Act and the published Rules and Regulations thereunder with respect to
registration statements on Form SB-2;
(iii) On the basis of procedures (but not an examination in
accordance with generally accepted auditing standards) consisting of reading the
minutes of meetings of the stockholders and the Board of Directors of the
Company since the date of the latest audited balance sheet as set forth in the
minute books through a specified date not more than five business days prior to
the date of the letter, reading the unaudited interim financial statements (if
any), including the schedules (if any), of the Company included in the
Registration Statement and making inquiries of certain officials of the Company
who have responsibility for financial and accounting matters regarding the
specific items for which representations are requested below, nothing has come
to their attention as a result of the foregoing procedures that caused them to
believe that (A) the unaudited financial statements (if any), including the
schedules (if any), of the Company included in the Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the published Rules and Regulations thereunder; (B)
said financial statements, including the schedules (if any), are not presented
fairly, in conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited financial statements;
(C) during the period from the date of the latest balance sheet covered by their
report(s) included in the Registration Statement to a specific date not more
than five business days prior to the date of the letter, there has been any
change in the capital stock or long-term debt of the Company as compared with
the amounts shown in the balance sheet included in the Registration Statement,
except as set forth in or contemplated by the Registration Statement; or (D) for
the period from the date of the last balance sheet contained in the Prospectus
to a specified date not more than five days prior to the date of such letter,
there has been any decrease, except as described in such letter and
19
previously discussed with you, in consolidated gross revenues, net income,
consolidated assets or total stockholders' equity as compared with the amounts
shown on such balance sheet, except for such changes or decreases which the
Registration Statement discloses have occurred or may occur; and
(iv) In addition to the examination referred to in their report
included in the Registration Statement and the limited procedures referred to in
clause (iii) above, they have carried out certain specified procedures, not
constituting an examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information which are included in the Registration Statement and Prospectus and
which are specified by you, and have found such amounts, percentages and
financial information to be in agreement with the relevant accounting and
financial records of the Company and its subsidiaries identified in such letter.
(d) The Representative shall have received a certificate or certificates,
dated the Closing Date and the Additional Closing Date, executed by at least two
officers of the Company, including the Chairman of the Board or the President
and the principal financial or accounting officer of the Company, to the effect
that:
(i) No stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for that purpose have been
instituted or are pending or contemplated under the Act;
(ii) Neither the Registration Statement nor the Prospectus nor any
amendment or supplement thereto contains any untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading; and since the effective date of
the Registration Statement, there has occurred no event required to be set forth
in an amended or supplemented Prospectus which has not been so set forth;
(iii) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, the Company has not incurred any material liabilities or
obligations, direct or contingent, or entered into any material transaction, not
in the ordinary course of business, and there has not been any material change
in the capital stock or funded debt of the Company, or any material adverse
change in the condition (financial or other) or results of operations of the
Company;
(iv) There are no legal proceedings pending or threatened against
the Company of a character affecting the validity of this Agreement or required
to be disclosed in the Prospectus which are not disclosed therein; there are no
transactions or contracts which
20
are required to be summarized therein which are not so summarized; and there are
no material contracts or documents required to be filed as exhibits to the
Registration Statement which are not so filed;
(v) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company has not
sustained any material loss or damage to its properties, whether or not insured;
and
(vi) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the date of the letter;
and the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the date of
the letter.
(e) The Selling Securityholders shall have performed all of the covenants
contained herein and in any certificate or document contemplated under this
Agreement to be delivered to you and required to be performed by the Selling
Securityholders at or prior to the Closing Date, and you shall have received at
the Closing Date a certificate of the Selling Securityholders, dated as of the
Closing Date, to the effect that the representations and warranties of the
Selling Securityholders contained in this Agreement and in each such certificate
and document are true and correct in all respects on and as of the date of such
certificate as if made on and as of such date, and each of the covenants and
conditions required to be performed or complied with by the Selling
Securityholders on or prior to the date of such certificate has been duly,
timely and fully performed or complied with.
(f) The Company and each of the Selling Securityholders shall have
furnished to you such certificates, in addition to those specifically mentioned
herein, as you may have reasonably required in a timely manner as to the
accuracy and completeness, at the Closing Date, of any statement in the
Registration Statement or the Prospectus; as to the accuracy, at the Closing
Date, of the representations and warranties of the Company and the Selling
Securityholders herein and in each certificate and document contemplated under
this Agreement to be delivered to you; as to the performance by the Company and
the Selling Securityholders of their respective obligations hereunder and under
each such certificate and document; or as to the fulfillment of the conditions
concurrent and precedent to your obligations hereunder.
(g) All corporate proceedings and related matters in connection with the
organization of the Company and the qualification, authorization, issuance, sale
and delivery of the Securities shall be satisfactory to Xxxxx X. Xxxxx, Esq.,
counsel for the Underwriter, and such counsel shall have been furnished with
such papers and information as he may reasonably have requested in this
connection.
21
(h) Certain holders of outstanding securities of the Company shall have
agreed not to sell or transfer their securities under Rule 144 under the Act or
otherwise for certain periods of time following the Effective Date of the
offering, as set forth in the Prospectus, without the prior written consent of
the Underwriter.
(i) All such opinions, letters, certificates and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to the Underwriter and to its counsel.
(j) If any condition to the Underwriter's obligations hereunder to be
satisfied at or prior to the Closing Date is not so satisfied, the Underwriter
may terminate this Agreement without liability on its part or on the part of the
Company, except for the expenses to be paid or reimbursed by the Company
pursuant to Section 4(a)(v) of this Agreement and except for any liability under
Sections 6 and 7 of this Agreement.
6. Indemnification. (a) The Company and each of the Selling
Securityholders, jointly and severally, agree to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of the Act against any losses, claims, damages or liabilities, joint or
several, to which it or such controlling person may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or in any blue sky application or other document executed by
the Company or a Selling Securityholder specifically for that purpose or based
upon written information furnished by the Company or a Selling Securityholder
filed in any state or other jurisdiction in order to qualify any or all of the
Securities under the securities laws thereof, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
will reimburse it and each such controlling person for any legal or other
expenses reasonably incurred by it or such controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company and the Selling Securityholders will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
such Preliminary Prospectus, the Prospectus or such amendment or supplement, or
in such blue sky application or such other document, in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
specifically for use in the preparation thereof; and provided, further, that the
Company and the Selling
22
Securityholders will not be liable under this indemnity agreement, insofar as it
relates to any Preliminary Prospectus, to the extent that any such loss, claim,
damage, liability or action results from the fact that the Underwriter sold
Securities to a person to whom there was not sent or given, at or prior to the
written confirmation of such sales, a copy of the Prospectus (or of the
Prospectus as then amended or supplemented if the Company had previously
furnished copies thereof to you). This indemnity agreement will be in addition
to any liability which the Company and the Selling Securityholders may otherwise
have. The obligations of each Selling Securityholder to indemnify the
Underwriter and aforesaid controlling persons hereunder shall be limited to the
product of the number of Units sold by such Selling Securityholder and the
initial public offering price set forth on the cover page of the Prospectus.
(b) The Underwriter will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the Registration Statement,
and each person, if any, who controls the Company within the meaning of the Act,
and each of the Selling Securityholders to the same extent as the foregoing
indemnity from the Company and the Selling Securityholders to the Underwriter,
against any losses, claims, damages or liabilities, joint or several, to which
the Company or any such director, officer or controlling person or Selling
Securityholder may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or in any blue sky
application or other document executed by the Company specifically for that
purpose filed in any state or other jurisdiction in order to qualify any or all
of the Securities under the securities laws thereof, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in the Registration Statement, such Preliminary Prospectus, the Prospectus or
such amendment or supplement, or in such blue sky application or such other
document, in reliance upon and in conformity with written information furnished
to the Company by the Underwriter specifically for use in the preparation
thereof; and will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer or controlling person or any such
Selling Securityholder in connection with investigating or defending any such
loss, claim, damage, liability or action. This indemnity agreement will be in
addition to any liability which the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
23
Section of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying party
under this Section 6, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 6. In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party, similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall be liable for any
settlement of any action effected without its written consent.
7. Contribution. (a) In order to provide for just and equitable
contribution under the Act in any case in which (i) the Underwriter (or any
person who controls the Underwriter within the meaning of the Act) makes claim
for indemnification pursuant to Paragraph 6(a) hereof but it is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that Paragraph 6(a) provides for indemnification in
such case or (ii) contribution under the Act may be required on the part of the
Underwriter or any such controlling person in circumstances for which
indemnification is provided under Paragraph 6(b), then, and in each case, the
Company, the Selling Securityholders and the Underwriter shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Underwriter is
responsible for an aggregate of 10% (being the amount of the Underwriter's
commission) and the Company and the Selling Securityholders are responsible for
the remaining portion; provided, however, that, in any such case, no person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
(b) Promptly after receipt by any party to this Agreement of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party (the
"contributing party"), notify the contributing party of the commencement
thereof; but the omission so to notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
24
contribution under the Act. In case any such action, suit or proceeding is
brought against any party, and such party notifies a contributing party of the
commencement thereof, the contributing party will be entitled to participate
therein with the notifying party and any other contributing party will be
entitled to participate therein with the notifying party and any other
contributing party similarly notified.
8. Representations and Indemnities to Survive Delivery. All
representations and warranties of the Company contained herein and in the
certificate or certificates delivered pursuant to Section 5(d) hereof, and the
indemnity and contribution agreements contained in Sections 6 and 7 hereof,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Underwriter or any controlling person,
or by or on behalf of the Company or any officer, director or controlling
person, or of any termination of this Agreement, and shall survive delivery of
and payment for the Units.
9. Effective Date of this Agreement and Termination Thereof. (a) This
Agreement shall become effective at 9:00 A.M., New York City time, on the first
full business day after the Registration Statement has become effective, or at
such earlier time after the Registration Statement has become effective as you
in your discretion shall first release the Units for sale to the public. For
the purposes of this Section 9, the Units shall be deemed to have been released
for sale to the public upon release by you of the publication of a newspaper
advertisement relating to the Units or upon release by you of telegrams or
facsimile transmissions offering the Units for sale, whichever shall first
occur. You or the Company may prevent this Agreement from becoming effective
without liability of any party to any other party, except as noted below, by
giving the notice hereinafter specified at or before the time this Agreement
becomes effective; provided however, that the provisions of this Section,
Section 4(a)(v), Section 6 and Section 7 shall at all times be effective.
(b) You shall have the right to terminate this Agreement by giving the
notice hereinafter specified at any time at or prior to the Closing Date if (i)
the Company or the Selling Securityholders shall have failed, refused or been
unable, at or prior to the Closing Date, to perform any agreement on their part
to be performed hereunder, or because any other condition precedent to the
Underwriter's obligations hereunder required to be fulfilled by the Company and
the Selling Securityholders have not fulfilled, or if (ii) trading on the New
York Stock Exchange shall have been generally suspended, or minimum or maximum
prices for trading shall have been generally fixed, or maximum ranges for prices
for securities shall have been generally required by the New York Stock Exchange
or by order of the Commission or any other governmental authority having
jurisdiction, or if there has been a substantial adverse change in general
market or economic conditions, or if a
25
banking moratorium shall have been declared by Federal or New York authorities,
or if an outbreak of hostilities or other national or international calamity of
such nature as to disorganize the securities markets in the United States shall
have occurred since the execution hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 9, you shall notify the
Company and the Selling Securityholders promptly by telephone or telegram,
confirmed by letter. If the Company elects to prevent this Agreement from
becoming effective, the Company shall notify you promptly by telephone or
telegram, confirmed by letter.
10. Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and if sent to the Underwriter shall
be mailed, delivered or telegraphed and confirmed to you as Representative at 0
Xxxxxxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or if sent to the Company, shall
be mailed, delivered or telegraphed and confirmed to it at 000 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 marked to the attention of the President.
11. Parties. This Agreement shall inure to the benefit of and be binding
upon you, the Company, the Selling Securityholders, and their respective
successors and assigns. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person or corporation, other than the
parties hereto and their respective successors and assigns and the controlling
persons and the officers and directors referred to in Section 6 hereof, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective successors and assigns, and
said controlling persons and said officers and directors, and for the benefit of
no other person or corporation. No purchaser of any of the Units from the
Underwriter shall be construed a successor or assign by reason merely of such
purchase.
12. Information Furnished by Underwriter. The statements set forth in the
last paragraph on the cover page, in the stabilization legend, under the caption
"Underwriting" and the statements regarding counsel for the Underwriter under
the caption "Legal Matters" in any Preliminary Prospectus and in the Prospectus
and in blue sky reports of sales, if any, constitute the written information
furnished by or on behalf of the Underwriter referred to in Sections 2(b), 6(a)
and 6(b) hereof.
13. Miscellaneous. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York, and the
Company and the Selling Securityholders hereby consent and will submit to the
jurisdiction of the courts of
26
the State of New York and of any federal court sitting in the City of New York
with respect to controversies arising under this Agreement.
If the foregoing correctly sets forth the understanding between the Company
and the Selling Securityholders and the Underwriter, please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute a
binding agreement between the Company, the Selling Securityholders and each of
the Underwriter.
Very truly yours,
HUNGARIAN BROADCASTING CORP.
By:
---------------------------------
Selling Securityholders
By:
---------------------------------
, Attorney-in-fact for
the Selling Securityholders
Accepted as of the date first above written:
X.X. XXXXXXX & CO., INC.
By:
-----------------------------
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SCHEDULE A
SELLING SECURITYHOLDERS
-----------------------
Number of
Name Units
---- -----
Xxxx Xxxxxx 10,000
Xxxxxxxx Xxxxxxxxxxx 10,000
Xxxx Xxxxx 10,000
Xxxx Xxxxxx 20,000
Xxxxx Xxxxxxxxx 10,000
Xxxxxxx Xxxxxxx 20,000
Xxxx Xxxxxxxx 20,000
-------
Total 100,000
-------
28
