CENTRAL EUROPEAN DISTRIBUTION CORPORATION
2,000,000 shares of Common Stock
Underwriting Agreement
July__, 1998
Xxxxx Xxxxxx & Co., Inc.
Fine Equities, Inc.
As Representatives of the
Several Underwriters listed on Schedule I hereto
Xxxxx Xxxxxx & Co., Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Central European Distribution Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell to Xxxxx Xxxxxx & Co., Inc. ("Xxxxx
Xxxxxx"), Fine Equities, Inc. ("Fine Equities") and each of the underwriters
named in Schedule I hereto (collectively, the "Underwriters") for whom Xxxxx
Xxxxxx and Fine Equities are acting as representatives (in such capacity, Xxxxx
Xxxxxx and Fine Equities shall hereinafter be referred to as "you" or the
"Representatives"), an aggregate of 2,000,000 shares (the "Firm Shares") of the
Company's common stock, par value $.01 per share (the "Common Stock"). The
respective amounts of the Firm Shares to be so purchased by the several
Underwriters are set forth opposite their names in Schedule I hereto. In
addition, the Company proposes to grant to the several Underwriters (or, at the
Representatives' option, to the Representatives individually) the option to
purchase an aggregate of up to 300,000 additional shares of Common Stock (the
"Option Shares"). Unless the context otherwise indicates, the Firm Shares and
the Options Shares are hereinafter collectively referred to as the "Shares."
You have advised the Company that you and the other Underwriters
desire to purchase, severally, the number of Firm Shares set forth opposite
their respective names in Schedule I hereto, plus their pro rata portion of the
Option Shares if you elect to exercise the aforementioned option in whole or in
part for the accounts of the several Underwriters, and that you have been
authorized by the Underwriters to execute this Agreement on their behalf. In
consideration of the mutual agreements contained herein and of the interests of
the parties in the transactions contemplated hereby, the parties hereto,
intending to be legally bound, agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, each of the Underwriters that:
(a) A registration statement (File No. 333-42387) on Form S-1
relating to the public offering of the Shares, including a form of
prospectus subject to completion, copies of which have heretofore been
delivered to you, has been prepared by the Company in conformity in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission under the Act and one or
more amendments to such registration statement may have been so filed.
After the execution of this Agreement, the Company will file with the
Commission either (i) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective
under the Act, a prospectus in the form most recently included in an
amendment to such registration statement (or, if no such amendment shall
have been filed, in such registration statement), with such changes or
insertions as are required by Rule 430A under the Act or permitted by Rule
424(b) and Rule 462(b) under the Act and as have been provided to and
approved by the Representatives prior to the execution of this Agreement,
or (ii) if such registration statement, as it may have been amended, has
not been declared by the Commission to be effective under the Act, an
amendment to such registration statement, including a form of prospectus, a
copy of which amendment has been furnished to and approved by the
Representatives prior to the execution of this Agreement.
As used in this Agreement, the term "Registration Statement"
means such registration statement, as amended at the time, including any
such amendment pursuant to Rule 462(b), when it was or is declared
effective, including all financial schedules and exhibits thereto and
including any information omitted therefrom pursuant to Rule 430A under the
Act and including the Prospectus (as hereinafter defined); the term
"Preliminary Prospectus" means each prospectus subject to completion filed
with such registration statement or any amendment thereto (including the
prospectus subject to completion, if any, included in the Registration
Statement or any amendment thereto at the time it was or is declared
effective); the term "Prospectus" means (A) the prospectus first filed with
the Commission pursuant to Rule 424(b) and Rule 462(b) (as applicable)
under the Act or (B) if no prospectus is required to be filed pursuant to
said Rule 424(b) and Rule 462(b), such term means the prospectus included
in the Registration Statement; except that if such registration statement
or prospectus is amended or such prospectus is supplemented, after the
effective date of such registration statement and prior to the Option
Closing Date (as defined in Section 3(b) hereof), the terms "Registration
Statement" and "Prospectus" shall mean such registration statement and
prospectus as so amended, and the term "Prospectus" shall mean the
prospectus as so supplemented, or both, as the case may be; and the term
"Term Sheet" means any term sheet that satisfies the requirements of Rule
434 under the Act. Any reference to the "date" of a Prospectus that
includes a Term Sheet shall mean the date of such Term Sheet.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. At the time the
Registration Statement becomes effective and at all times subsequent
thereto up to and on the Closing Date (as hereinafter defined) or the
Option Closing Date, as the case may be, (i) the Registration Statement and
Prospectus will in all material respects conform to the requirements of the
Act and the Rules and Regulations; and (ii) neither the Registration
Statement nor the Prospectus 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 statements therein not misleading; provided,
however, that the Company makes no representations, warranties or
agreements as to information contained in or omitted from the Registration
Statement or Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of the Underwriters
specifically for use in the preparation thereof. It is understood that the
statements set forth in the Prospectus on page 2 with respect to
stabilization, under the heading "Underwriting" and the identity of counsel
to the Underwriters under the heading "Legal Matters" constitute the only
information furnished in writing by or on behalf of the several
Underwriters for inclusion in the Registration Statement and Prospectus, as
the case may be.
(c) Each of the Company and Xxxxx Agri International Poland Sp. z
o. o., a limited liability company organized under the laws of Poland (the
"Subsidiary"), has been duly incorporated and is validly existing as a
corporation or limited liability company, as the case may be, in good
standing under the laws of the jurisdiction of its incorporation, with full
corporate power and authority to own its properties and conduct its
business as described in the Prospectus
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and is duly qualified to do business as a foreign corporation and is in
good standing in all other jurisdictions in which the nature of its
business or the character or location of its properties requires such
qualification, except where failure to so qualify will not materially
adversely affect the Company's or the Subsidiary's business, properties or
financial condition.
(d) The authorized, issued and outstanding capital stock of the
Company as of March 31, 1998 is as set forth in the Prospectus under
"Capitalization"; the shares of issued and outstanding capital stock of the
Company set forth thereunder have been duly authorized, validly issued and
are fully paid and non-assessable; except as set forth in the Prospectus,
no options, warrants, or other rights to purchase, agreements or other
obligations to issue, or agreements or other rights to convert any
obligation into, any shares of capital stock of the Company have been
granted or entered into by the Company; the capital stock conforms in all
material respects to all statements relating thereto contained in the
Registration Statement and Prospectus; and neither the filing of the
Registration Statement nor the offering or sale of the Shares as
contemplated by this Agreement gives rise to any registration rights or
other rights, other than those which have been waived or satisfied, for or
relating to the registration of any shares of Common Stock or other
securities of the Company.
(e) The Shares to be issued and sold by the Company have been
duly authorized, and when issued and delivered against payment therefor
pursuant to this Agreement, will be duly authorized, validly issued, fully
paid and non-assessable; and no preemptive rights of any security holder of
the Company exist with respect to any shares of Common Stock or the issue
and sale thereof.
The shares of Common Stock issuable upon exercise of the
Representatives' Warrants (as defined in Section 13 hereof) have been duly
authorized and reserved for issuance upon exercise of the Representatives'
Warrants and, when issued and delivered against payment therefor pursuant
to the terms and conditions set forth in a Warrant Agreement among the
Company and the Representatives (the "Warrant Agreement"), will be validly
issued, fully paid and non-assessable and free of preemptive rights and the
holders thereof will not be subject to personal liability solely by reason
of being such holders.
The Warrant Agreement, which will be substantially in the form
filed as an exhibit to the Registration Statement, has been duly
authorized; and when the Representatives' Warrants are delivered and paid
for pursuant to the Warrant Agreement, the Representatives' Warrants will
have been duly executed and delivered and will constitute the valid and
legally binding obligations of the Company, enforceable in accordance with
their terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and
the application of equitable principles in any action, legal or equitable).
(f) This Agreement and the Warrant Agreement have each been duly
and validly authorized, executed and delivered by the Company. The Company
has full power and lawful authority to authorize, issue and sell the Shares
to be sold by it hereunder on the terms and conditions set forth herein,
and no consent, approval, authorization or other order of any governmental
authority is required of the Company in connection with the authorization,
issue and sale of the Shares or the Representatives' Warrants, except such
as may be required under the Act or state securities laws.
(g) The Company does not own, directly or indirectly, any capital
stock or other equity ownership or proprietary interests in any other
corporation, association, trust, partnership, joint venture or other entity
other than the Subsidiary. All of the outstanding shares of capital stock
of the Subsidiary have been duly authorized and validly issued, are fully
paid and
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nonassessable and free of any preemptive or similar rights, and are owned
by the Company, free and clear of any lien, adverse claim, security
agreement or other encumbrance and have been issued in compliance with all
applicable federal and state securities laws, and no options, warrants, or
other rights to purchase, agreements or other obligations to issue, or
agreements or other rights to convert any obligation into, any shares of
capital stock of the Subsidiary have been granted or entered into by the
Company or the Subsidiary;
(h) Except as described in the Prospectus, neither the Company
nor the Subsidiary is in violation, breach or default of or under, and
consummation of the transactions herein contemplated and the fulfillment of
the terms of this Agreement will not conflict with, or result in a breach
or violation of, any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of the Company or the
Subsidiary pursuant to the terms of any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company or the
Subsidiary is a party or by which the Company or the Subsidiary may be
bound or to which any of the property or assets of the Company or the
Subsidiary is subject, nor will such action result in any violation of the
provisions of the articles of incorporation or the by-laws (or other
organizational documents), as amended, of the Company or the Subsidiary, or
any statute or any order, rule or regulation applicable to the Company or
the Subsidiary of any court or of any regulatory authority or other
governmental body having jurisdiction over the Company or the Subsidiary,
except where such violation, breach, default or conflict would not have a
material adverse effect on the business, operations and financial condition
of the Company and the Subsidiary, taken as a whole (a "Material Adverse
Effect").
(i) Each of the Company and the Subsidiary has good and
marketable title to all properties and assets described in the Prospectus
as owned by it, free and clear of all liens, charges, encumbrances or
restrictions, except for such liens, charges, encumbrances or restrictions
which could not reasonably be expected to have a Material Adverse Effect;
all of the material leases and subleases under which the Company or the
Subsidiary is the lessor or sublessor of properties or assets or under
which the Company or the Subsidiary hold properties or assets as lessee or
sublessee as described in the Prospectus are in full force and effect, and,
except as described in the Prospectus, neither the Company nor the
Subsidiary is in default with respect to any of the terms or provisions of
any of such leases or subleases, except where such default could not
reasonably be expected to have a Material Adverse Effect, and no claim has
been asserted by anyone that is adverse to rights of the Company or the
Subsidiary as lessor, sublessor, lessee or sublessee under any of the
leases or subleases mentioned above, or affecting or questioning the right
of either the Company or the Subsidiary to continued possession of the
leased or subleased premises or assets under any such lease or sublease
except as described or referred to in the Prospectus and except for such
claims that could not reasonably be expected to have a Material Adverse
Effect; and the Company and the Subsidiary own or lease all such properties
described in the Prospectus as are necessary to their operations as now
conducted and, except as otherwise stated in the Prospectus, as proposed to
be conducted as set forth in the Prospectus.
(j) Ernst & Young Audit Sp. z o. o., Warsaw, Poland, who has
given its reports on certain financial statements filed and to be filed
with the Commission as a part of the Registration Statement are, to the
Company's knowledge, with respect to the Company, independent public
accountants as required by the Act and the Rules and Regulations.
(k) The financial statements, together with related notes, set
forth in the Prospectus (or if the Prospectus is not in existence, the most
recent Preliminary Prospectus) present fairly in all material respects the
financial position and results of operations and changes in stockholders'
equity and cash flow position of the Company on the basis stated in the
Registration Statement, at the respective dates and for the respective
periods to which they apply. Said statements and
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related notes have been prepared in accordance with United States generally
accepted accounting principles (except as disclosed in the notes to such
financial statements) applied on a basis which is consistent during the
periods involved. The information set forth under the captions "Dilution",
"Capitalization", and "Selected Financial Data" in the Prospectus fairly
present in all material respects, on the basis stated in the Prospectus,
the information included therein.
(l) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), neither the
Company nor the Subsidiary has incurred any liabilities or obligations,
direct or contingent, or entered into any transaction, which is material to
the business of the Company or the Subsidiary (considered as one
enterprise), and there has not been any change in the capital stock of, or
any incurrence of short-term or long-term debt by, the Company and the
Subsidiary or any issuance of options, warrants or other rights to purchase
the capital stock of the Company or the Subsidiary or any material adverse
change or any development involving, so far as the Company can now
reasonably foresee, a prospective adverse change in the condition
(financial or other), net worth, results of operations, business, key
personnel or properties of it which would be material to the business or
financial condition of the Company and the Subsidiary (considered as one
enterprise) and neither the Company nor the Subsidiary has become a party
to, and neither the business nor the property of the Company or the
Subsidiary has become the subject of, any litigation, which could
reasonably be considered to have a Material Adverse Effect.
(m) Except as set forth in the Prospectus, there is not now
pending or, to the knowledge of the Company, threatened, any action, suit
or proceeding to which the Company or the Subsidiary is a party before or
by any court or governmental agency or body, which might result in any
material adverse change in the condition (financial or other), business
prospects, net worth, or properties of the Company or the Subsidiary, nor
are there any actions, suits or proceedings related to environmental
matters or related to discrimination on the basis of age, sex, religion or
race, and no labor disputes involving the employees of the Company or the
Subsidiary exist or are threatened which might be expected to have a
Material Adverse Effect.
(n) Except as disclosed in the Prospectus, the Company and the
Subsidiary have filed all necessary income and franchise tax returns (or
extensions relating thereto) with all federal, state, local and foreign
governmental agencies and have paid all taxes shown as due thereon; and
there is no tax deficiency which has been or to the knowledge of the
Company or the Subsidiary might reasonably be expected to be asserted
against the Company or the Subsidiary.
(o) The Company and the Subsidiary have sufficient licenses,
permits and other governmental authorizations currently required for the
conduct of their business or the ownership of their properties as described
in the Prospectus and are complying therewith, except where failure to have
or comply with such licenses, permits or other governmental authorizations
could not reasonably be expected to have a Material Adverse Effect. To the
knowledge of the Company, none of the activities or business of the Company
or the Subsidiary are in violation of, or cause the Company or the
Subsidiary to violate, any law, rule, regulation or order of the United
States, Poland or any state, county or locality, or of any agency or body
of the United States, Poland or of any state, county or locality, the
violation of which would have a Material Adverse Effect.
(p) The Subsidiary owns or possesses the right to use all
patents, trademarks, trademark registrations, service marks, service xxxx
registrations, trade names, copyrights, licenses, inventions, trade secrets
and rights necessary for the conduct of the Company's and the Subsidiary's
business (considered as one enterprise), and neither the Company nor the
Subsidiary is aware of any claim to the contrary or any challenge by any
other person to the rights of the
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Company and the Subsidiary with respect to the foregoing. To the best of
the Company's knowledge, the Company's and the Subsidiary's businesses as
now conducted do not and will not infringe or conflict with, in any
material respect, patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses or other intellectual property or
franchise right of any other person. Except as described in the Prospectus,
no claim has been made against the Company or the Subsidiary alleging the
infringement by the Company or the Subsidiary of any patent, trademark,
service xxxx, trade name, copyright, trade secret, license in or other
intellectual property right or franchise right of any person.
(q) The Company and the Subsidiary are insured by insurers of
recognized financial responsibility against such losses and risks and in
such amounts as are customary in the businesses in which they are engaged;
and neither the Company nor the Subsidiary has any reason to believe that
it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue their respective businesses at a cost that
would not have a Material Adverse Effect.
(r) Neither the Company nor the Subsidiary has, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution in
violation of law, or (ii) made any payment to any state, federal or foreign
governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments or contributions
required or allowed by applicable law. The Company's and the Subsidiary's
internal accounting controls and procedures are sufficient to cause the
Company and the Subsidiary to comply in all material respects with the
Foreign Corrupt Practices Act of 1977, as amended.
(s) On the Closing Dates (hereinafter defined), all transfer or
other taxes (including franchise, capital stock or other tax, other than
income taxes, imposed by any jurisdiction), if any, which are required to
be paid by the Company in connection with the sale and transfer of the
Shares to the several Underwriters hereunder will have been fully paid or
provided for by the Company and all laws imposing such taxes will have been
fully complied with.
(t) All contracts and other documents of the Company and the
Subsidiary which are, under the Rules and Regulations, required to be filed
as exhibits to the Registration Statement have been so filed.
(u) Neither the Company nor the Subsidiary has taken or will
take, directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares hereby.
(v) Neither the Company nor the Subsidiary has entered into any
agreement pursuant to which any person is entitled, either directly or
indirectly, to compensation from the Company or the Subsidiary for services
as a finder in connection with the proposed public offering.
(w) Except as previously disclosed in writing by the Company to
the Representatives, to the best of the Company's knowledge, after due
inquiry, no officer, director or stockholder of the Company or the
Subsidiary has any affiliation or association with any member of the
National Association of Securities Dealers, Inc. (the "NASD").
(x) Neither the Company nor the Subsidiary is, nor upon receipt
of the proceeds from the sale of the Shares will be, an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder.
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(y) Neither the Company nor the Subsidiary has distributed, nor
will they distribute prior to the First Closing Date (as defined in Section
3(a) hereof), any offering material in connection with the offering and
sale of the Shares other than the Preliminary Prospectus, Prospectus, the
Registration Statement or the other materials permitted by the Act, if any.
(z) There are no business relationships or related-party
transactions of the nature described in Item 404 of Regulation S-K
involving the Company or the Subsidiary and any person described in such
Item that are required to be disclosed in the Prospectus and that have not
been so disclosed.
(aa) The Company and the Subsidiary have complied with all
provisions of Section 517.075 Florida Statutes relating to doing business
with the government of Cuba or with any person or affiliate located in
Cuba.
2. INTENTIONALLY LEFT BLANK.
3. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) Subject to the terms and conditions set forth herein, and on
the basis of the representations, warranties and agreements contained
herein, the Company shall sell to the Underwriters, and each such
Underwriter severally, and not jointly, shall purchase from the Company at
a price of $_____ per Share, at the place and time hereinafter specified,
the number of Firm Shares set forth opposite the name of such Underwriter
in Schedule I hereto.
Delivery of the Firm Shares against payment therefor shall take
place at the offices of Xxxxx Xxxxxx & Co., Inc., 000 Xxxxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 (or at such other place as may be designated by
agreement between you and the Company) at 10:00 a.m., New York City time,
on July __, 1998, or at such later time and date as you may reasonably
designate, such time and date of payment and delivery for the Firm Shares
being herein called the "First Closing Date."
(b) In addition, subject to the terms and conditions set forth
herein, and on the basis of the representations, warranties and agreements
contained herein, the Company hereby grants an option (the "Over-allotment
Option") to the several Underwriters (or, at the Representatives' option,
to the Representatives individually) to purchase from the Company at the
price per Share as set forth in subsection (a) above, all or any part of
the respective number of Option Shares determined as hereinafter provided.
The Over-allotment Option may be exercised within 30 days after the
effective date of the Registration Statement upon notice by the
Representatives to the Company advising as to the amount of Option Shares
as to which such option is being exercised, the names and denominations in
which the certificates for such Option Shares are to be registered and the
time and date when such certificates are to be delivered. Such time and
date (hereinafter, the "Option Closing Date") shall be reasonably
determined by the Representatives but shall not be earlier than two nor
later than five full business days after the exercise of the Over-allotment
Option, nor in any event prior to the First Closing Date. Delivery of the
Option Shares against payment therefor shall take place at the offices of
Xxxxx Xxxxxx & Co., Inc., 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
The number of Option Shares to be purchased by each Underwriter, if any,
shall bear the same percentage to the total number of Option Shares being
purchased by the several Underwriters pursuant to this subsection (b) as
the respective numbers of Firm Shares being purchased by such Underwriter
bears to the respective total numbers thereof, as adjusted, in each case by
the Representatives in such manner as the Representatives may deem
appropriate. The Over-allotment Option may be exercised only to cover
over-allotments in the
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sale by the Underwriters of Firm Shares referred to in subsection (a)
above. In the event the Company declares or pays a dividend or distribution
on its Common Stock, whether in the form of cash, shares of Common Stock or
any other consideration, prior to the Option Closing Date, such dividend or
distribution shall also be paid on the Option Shares on the Option Closing
Date.
(c) The Company will make the certificates for the Shares to be
purchased by the several Underwriters hereunder available to you for review
at least two full business days prior to the First Closing Date or the
Option Closing Date (which are collectively referred to herein as the
"Closing Dates"). The certificates shall be in such names and denominations
as you may request, at least two full business days prior to the Closing
Dates. Time shall be of the essence and delivery at the time and place
specified in this Agreement is a further condition to the obligations of
each Underwriter.
Definitive certificates in negotiable form for the Firm Shares to
be purchased by the Underwriters hereunder will be delivered by the Company
to you for the accounts of the several Underwriters against payment of the
respective purchase prices by the several Underwriters by wire transfer of
immediately available funds to the Company's account at __________, ABA No.
_______, Account No. _______ with regard to the Firm Shares to be purchased
from the Company.
In addition, in the event the Underwriters (or the
Representatives, individually) exercise the Over-allotment Option for all
or any portion of the Option Shares pursuant to the provisions of
subsection (b) above, payment for such Option Shares shall be made by
certified or bank cashier's checks in New York Clearing House funds payable
to or upon the order of the Company at the offices of Xxxxx Xxxxxx & Co.,
Inc., 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (or such other place
as may be designated by agreement between the Representatives and the
Company) at the time and date of delivery of such Option Shares as required
by the provisions of subsection (b) above, against receipt of the
certificates for such Option Shares by the Representatives for the
respective accounts of the several Underwriters registered in such names
and in such denominations as the Representatives may request.
It is understood that you, individually and not as
Representatives of the several Underwriters, may (but shall not be
obligated to) make any and all payments required pursuant to this Section 3
on behalf of any Underwriter or Underwriters whose check or checks shall
not have been received by the Representatives at the time of delivery of
the Shares to be purchased by such Underwriter or Underwriters. Any such
payment by you shall not relieve any such Underwriter or Underwriters of
any of its or their obligations hereunder. It is also understood that you
individually rather than all of the Underwriters may (but shall not be
obligated to) purchase the Option Shares referred to in subsection (b) of
this Section 3, but only to cover overallotments.
It is understood that the several Underwriters propose to offer
the Shares (including the Option Shares) to be purchased hereunder 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. The Company covenants and agrees with
the several Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective as promptly as possible. If
required, the Company will file the Prospectus or any Term Sheet that
constitutes a part thereof and any amendment or supplement thereto with the
Commission in the manner and within the time period required by Rules 434
and 424(b) under the Act. Upon notification from the Commission that the
Registration Statement has become
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effective, the Company will so advise the Representatives and will not at
any time, whether before or after the effective date, file the Prospectus,
Term Sheet or any amendment to the Registration Statement or supplement to
the Prospectus of which the Representatives shall not previously have been
advised and furnished with a copy or to which the Representatives or their
counsel shall have reasonably objected to in writing or which is not in
compliance with the Act and the Rules and Regulations. At any time prior to
the later of (A) the completion by all of the Underwriters of the
distribution of the Shares contemplated hereby (but in no event more than
nine months after the date on which the Registration Statement shall have
become or been declared effective) and (B) 25 days after the date on which
the Registration Statement shall have become or been declared effective,
the Company will prepare and file with the Commission, promptly upon the
Representatives' request, any amendments or supplements to the Registration
Statement or Prospectus which, in the opinion of counsel to the
Representatives, is necessary under the Act in connection with the
distribution of the Shares.
As soon as the Company is advised thereof, the Company will
advise the Representatives, and confirm such advice in writing, (i) when
the Registration Statement or any post-effective amendment to the
Registration Statement is filed with the Commission, (ii) of the receipt of
any comments of the Commission, (iii) of the effectiveness of any post-
effective amendment to the Registration Statement, (iv) of the filing of
any supplement to the Prospectus or any amended Prospectus, (v) of any
request made by the Commission for amendment of the Registration Statement
or for supplementing of the Prospectus or for additional information with
respect thereto, (vi) of the issuance by the Commission or any state or
regulatory body of any stop order or other order or threat thereof
suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any Preliminary Prospectus, or (vii) of
the suspension of the qualification of the Shares for offering in any
jurisdiction, or of the institution of any proceedings for any of such
purposes. The Company will use its best efforts to prevent the issuance of
any such stop order or of any order preventing or suspending such use, and,
if any such order is issued, to obtain as soon as possible the lifting
thereof.
The Company has caused to be delivered to the Representatives
copies of each Preliminary Prospectus, and the Company has consented and
hereby consents to the use of such copies for the purposes permitted by the
Act. The Company authorizes the several Underwriters and dealers to use the
Prospectus in connection with the sale of the Shares for such period as in
the opinion of counsel to the several Underwriters the use thereof is
required to comply with the applicable provisions of the Act and the Rules
and Regulations. In case of the happening, at any time within such period
as a Prospectus is required under the Act to be delivered in connection
with sales by an underwriter or dealer of any event of which the Company
has knowledge and which materially affects the Company or the securities of
the Company, or which in the opinion of counsel for the Company should be
set forth in an amendment of the Registration Statement or a supplement to
the Prospectus in order to make the statements therein not then misleading,
in light of the circumstances existing at the time the Prospectus is
required to be delivered to a purchaser of the Shares or in case it shall
be necessary to amend or supplement the Prospectus to comply with federal
or state securities laws or with the Rules and Regulations, the Company
shall notify the Representatives promptly and forthwith prepare and furnish
to the Representatives copies of such amended Prospectus or of such
supplement to be attached to the Prospectus, in such quantities as the
Representatives may reasonably request, in order that the Prospectus, as so
amended or supplemented, will not contain any untrue statement of a
material fact or omit to state any material facts necessary in order to
make the statements in the Prospectus, in the light of the circumstances
under which they are made, not misleading. The preparation and furnishing
of any such amendment or supplement to the Registration Statement or
amended Prospectus or supplement to be attached to the Prospectus shall be
without expense to the Underwriters, except that in case any Underwriter is
required, in connection with the sale of the Shares, to deliver a
-9-
Prospectus nine months or more after the effective date of the Registration
Statement, the Company will upon request of and at the expense of such
Underwriter, amend or supplement the Registration Statement and Prospectus
and furnish the Underwriter with reasonable quantities of prospectuses
complying with Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and Regulations
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules and regulations thereunder in connection with the offering
and issuance of the Shares.
(b) The Company will furnish such proper information as may be
required and otherwise cooperate in qualifying the Shares for offering and
sale under the securities or "blue sky" laws relating to the offering for
sale in such jurisdictions as the Representatives may designate, provided
that the Company shall not be required to qualify as a foreign corporation
or dealer in securities or to execute a general consent of service of
process in any jurisdiction in any action other than one arising out of the
offering or sale of the Shares. The Company will, from time to time,
prepare and file such statements and reports as are or may be required to
continue such qualification in effect for so long a period as the
Representatives may reasonably request.
(c) If the sale of the Shares provided for herein is not
consummated for any reason caused by the Company, the Company shall pay all
costs and expenses incident to the performance of the Company's obligations
hereunder, including but not limited to, all of the expenses itemized in
Section 9, including the accountable expenses of the Representatives.
(d) The Company will use its best efforts to (i) cause a
Registration Statement on Form 8-A under the Exchange Act to be declared
effective concurrently with the completion of this offering and will notify
the Representatives in writing immediately upon the effectiveness of such
registration statement, and (ii) if requested by the Representatives, to
obtain and keep current a listing in the Standard & Poor's or Xxxxx'x
Industrial OTC Manual.
(e) For so long as the Company is a reporting company under
either Section 12(g) or 15(d) of the Exchange Act, the Company, at its
expense, will furnish to its stockholders an annual report (including
financial statements audited by independent public accountants), in
reasonable detail, and at its expense will furnish to the Representatives
during the period ending five (5) years from the date hereof (i) as soon as
practicable after the end of each fiscal year, a balance sheet of the
Company and any of its subsidiaries as at the end of such fiscal year,
together with statements of income, surplus and cash flow of the Company
and any of its subsidiaries for such fiscal year, all in reasonable detail
and accompanied by a copy of the certificate or report thereon of
independent accountants; (ii) as soon as practicable after the end of each
of the first three fiscal quarters of each fiscal year, consolidated
summary financial information of the Company for such quarter in reasonable
detail; (iii) as soon as they are available, a copy of all reports
(financial or other) mailed to security holders; (iv) as soon as they are
available, a copy of all non-confidential reports and financial statements
furnished to or filed with the Commission or any securities exchange or
automated quotation system on which any class of securities of the Company
is listed; and (v) such other information as the Representatives may from
time to time reasonably request.
(f) In the event the Company has an active subsidiary or
subsidiaries, such financial statements referred to in subsection (e) above
will be on a consolidated basis to the extent the accounts of the Company
and its subsidiary or subsidiaries are consolidated in reports furnished to
its stockholders generally.
-10-
(g) The Company will deliver to the Representatives at or before
the First Closing Date two signed copies of the Registration Statement,
including all financial statements and exhibits filed therewith, and of all
amendments thereto, and will deliver to the several Underwriters such
number of conformed copies of the Registration Statement, including such
financial statements but without exhibits, and of all amendments thereto,
as the several Underwriters may reasonably request. The Company will
deliver to the Underwriters or upon the order of the several Underwriters,
from time to time until the effective date of the Registration Statement,
as many copies of any Preliminary Prospectus filed with the Commission
prior to the effective date of the Registration Statement as such
Underwriters may reasonably request. The Company will deliver to the
several Underwriters on the effective date of the Registration Statement
and thereafter for so long as a Prospectus is required to be delivered
under the Act, from time to time, as many copies of the Prospectus, in
final form, or as thereafter amended or supplemented, as such Underwriters
may from time to time reasonably request. The Company, not later than 6:00
p.m., New York City time, on the business day following the date the
Registration Statement is declared effective, will deliver to the several
Underwriters, without charge, as many copies of the Prospectus and any
amendment or supplement thereto as such Underwriters may reasonably request
for purposes of confirming orders that are expected to settle on the First
Closing Date.
(h) The Company will make generally available to its security
holders and deliver to the Representatives as soon as it is practicable to
do so but in no event later than 90 days after the end of twelve months
after its current fiscal quarter, an earnings statement (which need not be
audited) covering a period of at least 12 consecutive months beginning
after the effective date of the Registration Statement, which shall satisfy
the requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the sale of the
Shares for the purposes set forth under "Use of Proceeds" in the
Prospectus.
(j) The Company will, promptly upon your request, prepare and
file with the Commission any amendments or supplements to the Registration
Statement, Preliminary Prospectus or Prospectus and take any other action,
which in the reasonable opinion of Xxxxx & XxXxxxxx, counsel to the several
Underwriters, may be reasonably necessary or advisable in connection with
the distribution of the Shares, and will use its best efforts to cause the
same to become effective as promptly as possible.
(k) The Company will reserve and keep available that maximum
number of its authorized but unissued shares of Common Stock which are
issuable upon exercise of the Representatives' Warrants.
(l) The Company will not for a period of 12 months from the First
Closing Date, and will deliver to the Representatives agreements to the
effect that for a period of 24 months from the First Closing Date (the
"Lock-Up Period"), no officer, director or existing stockholder or
optionholder of the Company (such officers, directors and stockholders
being herein referred to as the "Principal Stockholders") will, directly or
indirectly, offer, sell (including any short sale), grant any option for
the sale of, acquire any option to dispose of, transfer, pledge, assign,
hypothecate or otherwise dispose of any securities of the Company without
the prior written consent of Xxxxx Xxxxxx. In order to enforce this
covenant, the Company shall impose stop-transfer instructions with respect
to the securities owned by the Principal Stockholders until the end of such
period and an appropriate legend shall be marked on the face of stock
certificates representing all of such securities.
-11-
(m) Prior to completion of this offering, the Company will make
all filings required, including registration under the Exchange Act, to
obtain the listing of the Shares on the Nasdaq SmallCap Market, and will
effect and use its best efforts to maintain such listing (or listing on the
New York Stock Exchange or Nasdaq National Market) for at least five years
from the effective date of the Registration Statement.
(n) The Company represents that it has not taken and agrees that
he or it will not take, directly or indirectly, any action designed to or
which has constituted or which might reasonably be expected to cause or
result in the stabilization or manipulation of the price of the Shares or
to facilitate the sale or resale of the Shares.
(o) On the Closing Date and simultaneously with the delivery of
the Representatives' Warrants, the Company shall execute and deliver to you
the Warrant Agreement. The Warrant Agreement will be substantially in the
form of the Warrant Agreement filed as an exhibit to the Registration
Statement.
(p) During the twelve month period commencing on the date of this
Agreement, the Company will not, without the prior written consent of Xxxxx
Xxxxxx, grant options to purchase shares of Common Stock at an exercise
price less than the fair market value of the Common Stock on the date of
grant or sell or offer any securities of the Company.
(q) Xxxxxxx X. Xxxxx shall be Chairman of the Board, President
and Chief Executive Officer of the Company on the Closing Dates. The
Company has obtained key person life insurance in an amount of not less
than $2.5 million on the life of Xx. Xxxxx and will use its best efforts to
maintain such insurance during the three year period commencing from the
First Closing Date. In the event that Xx. Xxxxx'x employment with the
Company is terminated prior to such three year period, the Company will
obtain a comparable policy on the life of his successor for the balance of
such three year period.
(r) For a period of five years from the effective date of the
Registration Statement, the Company (i) at its expense, shall cause its
regularly engaged independent certified public accountants to read (but not
review or audit) the Company's financial statements for each of the first
three fiscal quarters prior to the announcement of quarterly financial
information, the filing of the Company's Quarterly Report on Form 10-Q and
the mailing of quarterly financial information to stockholders and (ii)
shall not change its accounting firm (other than to an accounting firm of
national standing) without the prior written consent of the
Representatives.
(s) For a period of five years from the First Closing Date (i)
each of the Representatives shall have the right, but not the obligation,
to (a) designate one director to the Board of Directors of the Company or
(b) designate one person to attend all meetings of the Board of Directors,
which persons will be entitled to receive all notices and other
correspondence as if such persons were members of the Board of Directors
and to be reimbursed for out-of-pocket expenses incurred in connection with
attendance of meeting of the Board of Directors, and (ii) the Company shall
engage a public relations firm reasonably acceptable to the
Representatives.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Shares which they have
respectively agreed to purchase hereunder are subject to the accuracy (as of the
date hereof, and as of the Closing Dates) of and compliance with the
representations and warranties of the Company set forth herein, to the
performance by the Company of its obligations hereunder, and to the satisfaction
(at or prior to the Closing Dates), of each of following conditions:
-12-
(a) The Registration Statement shall have become effective and
the Representatives shall have received notice thereof not later than 10:00
a.m., New York City time, on the date on which the amendment to the
Registration Statement originally filed with respect to the Shares or to
the Registration Statement, as the case may be, containing information
regarding the initial public offering price of the Shares has been filed
with the Commission, or such later time and date as shall have been agreed
to by the Representatives; if required, the Prospectus or any Term Sheet
that constitutes a part thereof and any amendment or supplement thereto
shall have been filed with the Commission in the manner and within the time
period required by Rule 434 and 424(b) under the Act; on or prior to the
Closing Dates, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
or a similar purpose shall have been instituted or shall be pending or, to
the Representatives' knowledge or to the knowledge of the Company, shall be
contemplated by the Commission; any request on the part of the Commission
for additional information shall have been complied with to the reasonable
satisfaction of Xxxxx & XxXxxxxx, counsel to the several Underwriters;
(b) At the First Closing Date, the Representatives shall have
received the opinion, addressed to the Underwriters, dated as of the First
Closing Date, of Xxxxx & Xxxxxxx LLP, Washington, D.C. and Warsaw, Poland,
counsel for the Company, substantially in the form attached hereto as
Annex A.
(c) All corporate proceedings and other legal matters relating to
this Agreement, the Warrant Agreement, the Registration Statement, the
Prospectus and other related matters shall be satisfactory to or approved
by Xxxxx & XxXxxxxx, counsel to the several Underwriters, and you shall
have received from such counsel a signed opinion, dated as of the First
Closing Date, together with copies thereof for each of the other
Underwriters, with respect to the validity of the issuance of the Shares,
the form of the Registration Statement and Prospectus (other than the
financial statements and other financial data contained therein), the
execution of this Agreement and other related matters as you may reasonably
require. The Company, and the Subsidiary shall have furnished to such
counsel for the several Underwriters such documents as they may reasonably
request for the purpose of enabling them to render such opinion.
(d) You shall have received a letter prior to the effective date
of the Registration Statement and again on and as of the First Closing Date
from Ernst & Young Audit Sp. z o. o., Warsaw, Poland, independent public
accountants for the Company, substantially in the form approved by you, and
including estimates of the Company's unaudited revenues and results of
operations for the period ending at the end of the month immediately
preceding the effective date, if available, and results of the comparable
period during the prior fiscal year.
(e) At the Closing Dates, (i) the representations and warranties
of the Company contained in this Agreement shall be true and correct with
the same effect as if made on and as of the Closing Dates, and the Company
and the Subsidiary shall have performed all of their respective obligations
hereunder and satisfied all the conditions on their part to be satisfied at
or prior to such Closing Date; (ii) the Registration Statement and the
Prospectus and any amendments or supplements thereto shall contain all
statements which are required to be stated therein in accordance with the
Act and the Rules and Regulations, and shall in all material respects
conform to the requirements thereof, and neither the Registration Statement
nor the Prospectus nor any amendment or supplement thereto shall contain
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; (iii) there shall have been, since the respective dates as
of which information is given, no material adverse change, or any
development involving a prospective material adverse change, in the
business, properties, condition (financial or otherwise), results of
operations, capital stock, long-term or short-term debt or general affairs
of the Company or the Subsidiary from that
-13-
set forth in the Registration Statement and the Prospectus, except changes
which the Registration Statement and Prospectus indicate might occur after
the effective date of the Registration Statement, and the Company and each
of the Subsidiary shall not have incurred any material liabilities or
entered into any agreement not in the ordinary course of business other
than as referred to in the Registration Statement and Prospectus;
(iv) except as set forth in the Prospectus, no action, suit or proceeding
at law or in equity shall be pending or, to the knowledge of the Company,
threatened against the Company or the Subsidiary which would be required
to be set forth in the Registration Statement, and no proceedings shall be
pending or, to the knowledge of the Company, threatened against the
Company or the Subsidiary before or by any commission, board or
administrative agency in the United States, Poland or elsewhere, wherein
an unfavorable decision, ruling or finding would be reasonably likely to
materially and adversely affect the business, property, condition
(financial or otherwise), results of operations or general affairs of the
Company or the Subsidiary, and (v) the Representatives shall have
received, at the First Closing Date, a certificate signed by each of the
Chief Executive Officer and the Chief Financial Officer of the Company,
dated as of the First Closing Date, evidencing compliance with the
provisions of this subsection (e).
(f) Upon exercise of the Over-allotment Option, the obligations
of the several Underwriters (or, at their option, the Representatives
individually) to purchase and pay for the Option Shares referred to therein
will be subject (as of the date hereof and as of the Option Closing Date)
to the following additional conditions:
(i) the Registration Statement shall remain effective at the
Option Closing Date, and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that purpose
shall have been instituted or shall be pending, or, to your knowledge
or the knowledge of the Company, shall be contemplated by the
Commission, and any reasonable request on the part of the Commission
for additional information shall have been complied with to the
satisfaction of Xxxxx & XxXxxxxx, counsel to the several Underwriters;
(ii) at the Option Closing Date, there shall have been
delivered to the Representatives the signed opinion of Xxxxx & Xxxxxxx
LLP, Washington, D.C., and Warsaw, Poland, counsel for the Company,
dated as of the Option Closing Date, in form and substance
satisfactory to Xxxxx & XxXxxxxx, counsel to the several Underwriters,
together with copies of such opinions for each of the other several
Underwriters, which opinion shall be substantially the same in scope
and substance as the opinion furnished to the Representatives at the
First Closing Date pursuant to Section 5(b) hereof, except that such
opinion, where appropriate, shall cover the Option Shares;
(iii) at the Option Closing Date, there shall have been
delivered to the Representatives a letter in form and substance
satisfactory to the Representatives from Ernst & Young Audit Sp. z o.
o., Warsaw, Poland, dated the Option Closing Date and addressed to the
Underwriters confirming the information in their letter referred to in
Section 5(d) hereof and stating that nothing has come to their
attention during the period from the ending date of their review
referred to in said letter to a date not more than five business days
prior to the Option Closing Date, which would require any change in
said letter if it were required to be dated the Option Closing Date;
(iv) at the Option Closing Date, there shall have been
delivered to the Representatives a certificate of the Chief Executive
Officer and Chief Financial Officer of the Company, dated the Option
Closing Date, in form and substance satisfactory to Xxxxx & XxXxxxxx,
counsel to the several Underwriters, substantially the same in scope
-14-
and substance as the certificate, furnished to you at the First
Closing Date pursuant to Section 5(e) hereof;
(v) all proceedings taken at or prior to the Option Closing
Date in connection with the sale and issuance of the Option Shares
shall be satisfactory in form and substance to the Representatives,
and the Representatives and Xxxxx & XxXxxxxx, counsel to the several
Underwriters, shall have been furnished with all such documents,
certificates and opinions as the Representatives may request in
connection with this transaction in order to evidence the accuracy and
completeness of any of the representations, warranties or statements
of the Company and the Subsidiary or their compliance with any of the
covenants or conditions contained herein.
(g) No action shall have been taken by the Commission or the
NASD, the effect of which would make it improper, at any time prior to the
Closing Date, for members of the NASD to execute transactions (as principal
or agent) in the Shares, and no proceedings for the taking of such action
shall have been instituted or shall be pending, or, to the knowledge of the
Representatives or the Company, shall be contemplated by the Commission or
the NASD. The Company and the Representatives represent that at the date
hereof they have no knowledge that any such action is in fact contemplated
by the Commission or the NASD. The Company and the Subsidiary shall have
advised the Representatives of any NASD affiliation of any of their
officers, directors, stockholders or other affiliates.
(h) If any of the conditions herein provided for in this Section
shall not have been fulfilled as of the date indicated, this Agreement and
all obligations of the several Underwriters under this Agreement may be
canceled at, or at any time prior to, each Closing Date by the
Representatives. Any such cancellation shall be without liability of the
Underwriters to the Company.
6. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The obligation of
the Company to sell and deliver the Shares in the manner provided in this
Agreement is subject to the condition that at the Closing Dates, no stop orders
suspending the effectiveness of the Registration Statement shall have been
issued under the Act or any proceedings therefor initiated or threatened by the
Commission. If such condition has been satisfied on the First Closing Date, but
is not satisfied after the First Closing Date and prior to the Option Closing
Date, then only the obligation of the Company to sell and deliver the Option
Shares upon any exercise of the Over-allotment Option hereof shall be affected.
7. INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless each
Underwriter, and each person, if any, who controls any Underwriter within
the meaning of the Act, against any and all losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of defense
and investigation and all attorneys' fees), to which such Underwriter or
such controlling person may become subject, under the Act or otherwise, and
shall reimburse, as incurred, such Underwriters and such controlling
persons for any legal or other expenses reasonably incurred in connection
with investigating, defending against or appearing as a third party witness
in connection with any losses, claims, damages or liabilities, 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 (i) the Registration Statement,
any Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto, (ii) any blue sky application or other document executed by the
Company or the Subsidiary specifically for that purpose or based upon
written information furnished by the Company or the Subsidiary filed in any
state or other
-15-
jurisdiction in order to qualify any or all of the Shares under the
securities laws thereof (any such application, document or information
being hereinafter called a "Blue Sky Application"), or arise out of or are
based upon the omission or alleged omission to state in the Registration
Statement, any Preliminary Prospectus, Prospectus, or any amendment or
supplement thereto, or in any Blue Sky Application, a material fact
required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that the Company will not be liable in
any such case to the extent, but only 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 reliance upon and in conformity with written information furnished to
the Company or the Subsidiary by or on behalf of the Underwriters
specifically for use in the preparation of the Registration Statement or
any such amendment or supplement thereof or any such Blue Sky Application
or any such preliminary Prospectus or the Prospectus or any such amendment
or supplement thereto. The obligations of the Company under this Section
7(a) will be in addition to any liability which the Company may otherwise
have.
(b) Each Underwriter, severally and not jointly, shall indemnify
and hold harmless the Company, each of the directors of the Company, each
nominee (if any) for any director named in the Prospectus, each of the
officers of the Company who have signed the Registration Statement, and
each other person, if any, who controls the Company within the meaning of
the Act to the same extent as the foregoing indemnity from the Company to
the several Underwriters, but only with respect to any loss, claim, damage,
liability or expense resulting from statements or omissions, or alleged
statements or omissions, if any, made in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto (i) in reliance upon and in conformity with written information
furnished to the Company by you or by any Underwriter through you expressly
for use in the preparation thereof and (ii) relating to the transactions
effected by the Underwriters in connection with the offer and sale of the
Shares contemplated hereby. The obligations of each Underwriter under this
Section 7(b) will be in addition to any liability which the Underwriters
may otherwise have.
(c) If any action, inquiry, investigation or proceeding is
brought against any person in respect of which indemnification may be
sought pursuant to Section 7(a) or (b) hereof, such person (hereinafter
called the "indemnified party") shall, promptly after notification of, or
receipt of service of process for, such action, inquiry, investigation or
proceeding, notify in writing the party or parties against whom
indemnification is to be sought (hereinafter called the indemnifying
party") of the institution of such action, inquiry, investigation or
proceeding. The indemnifying party, upon the request of the indemnified
party, shall assume the defense of such action, inquiry, investigation or
proceeding, including, without limitation, the employment of counsel
(reasonably satisfactory to such indemnified party) and payment of
expenses. No indemnification provided for in this Section 7 shall be
available to any indemnified party who shall fail to give such notice if
the indemnifying party does not have knowledge of such action, inquiry,
investigation or proceeding, to the extent that such indemnifying party has
been materially prejudiced by the failure to give such notice, but the
omission to so notify the indemnifying party shall not relieve the
indemnifying party otherwise than under this Section 7. Such indemnified
party or controlling person thereof shall have the right to employ its or
their own counsel in any such case, but the fees and expenses of such
counsel (other than reasonable costs of investigation) shall be at the
expense of such indemnified party unless the employment of such counsel
shall have been authorized in writing by the indemnifying party in
connection with the defense of such action. If such indemnified party
shall have been advised by counsel that there may be a conflict between the
positions of the indemnifying party or parties and of the indemnified party
or parties or that there may be legal defenses available to such
indemnified party or parties different from or in addition to those
available to the indemnifying party or parties, the indemnified party or
parties shall be entitled to select separate counsel to conduct the defense
to the extent determined by such counsel
-16-
to be necessary to protect the interests of the indemnified party or
parties, and the fees and expenses of such counsel shall be borne by the
indemnifying party (it being understood, however, that the indemnifying
party shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising
out of the same allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm for all indemnified
parties). Expenses covered by the indemnification in this Section 7 shall
be paid by the indemnifying party as they are incurred by the indemnified
party. Anything in this Section 7 to the contrary notwithstanding, the
indemnifying party shall not be liable for any settlement of any such claim
effected without its written consent, which shall not be unreasonably
withheld in light of all factors of importance to such indemnifying party.
8. CONTRIBUTION.
In order to provide for just and equitable contribution under the Act
in any case in which (i) any indemnified party makes any claim for
indemnification pursuant to Section 7 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 the express provisions of Section 7 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of any
Underwriter, then the Company and each person who controls the Company, on the
one hand, and any such Underwriter, on the other hand, shall contribute to the
amount paid or payable as a result of the aggregate losses, claims, damages or
liabilities to which they may be subject (which shall, for all purposes of this
Agreement, include, but not be limited to, all reasonable costs of defense and
investigation and all reasonable attorneys' fees) in either such case (after
contribution from others) in such proportions that all such Underwriters are
responsible pro rata in the aggregate for that portion of such losses, claims,
damages or liabilities represented by the percentage that the underwriting
discounts per Share appearing on the cover page of the Prospectus bears to the
public offering prices appearing thereon, and the Company shall be responsible
pro rata for the remaining portion determined by the proportion that the number
of Shares sold by the Company bears to the total number of Shares sold
hereunder; provided, however, that if such allocation is not permitted by
applicable law, then the relative fault of the Company and the Underwriters and
controlling persons, in the aggregate, in connection with the statements or
omissions which resulted in such damages and other relevant equitable
considerations, shall also be considered. The relative fault shall be determined
by reference to, among other things, whether in the case of an untrue statement
of a material fact or the omission to state a material fact, such statement or
omission relates to information supplied by the Company, the Subsidiary or the
Underwriters, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
Company and the Underwriters agree (a) that it would not be just and equitable
if the respective obligations of the Company and the Underwriters to contribute
pursuant to this Section 8 were to be determined by pro rata or per capita
allocation of the aggregate damages (even if the Underwriters in the aggregate
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in the first sentence of this Section 8, and (b) that the contribution of
each contributing Underwriter shall not be in excess of its proportionate share
(based on the ratio of the number of Shares purchased by such Underwriter to the
number of Shares purchased by all contributing Underwriters) of the portion of
such losses, claims, damages or liabilities for which the Underwriters are
responsible. 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 is not guilty of such fraudulent misrepresentation. As used in this
paragraph, the word "Company" includes any officer, director, or person who
controls the Company within the meaning of Section 15 of the Act. If the full
amount of the contribution specified in this paragraph is not permitted by law,
then any Underwriter and each person who controls any Underwriter shall be
entitled to contribution from the Company, its officers, directors and
controlling persons to the full extent permitted by law. The foregoing
contribution agreement shall in no way affect the contribution liabilities of
any persons having liability under Section 11 of the Act other than the Company
and the Underwriters. No contribution shall be requested with regard to the
settlement of any matter from any party who did not consent to such settlement;
provided, however, that such consent shall not be unreasonably withheld in light
of all factors of importance to such party.
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9. COSTS AND EXPENSES.
(a) Whether or not this Agreement becomes effective or the sale
of the Shares to the Underwriters is consummated, the Company will pay all
costs and expenses incident to the performance of this Agreement by the
Company including, but not limited to, the fees and expenses of counsel to
the Company and of the Company's accountants; the costs and expenses
incident to the preparation, printing, filing and distribution under the
Act of the Registration Statement (including the financial statements
therein and all amendments and exhibits thereto), Preliminary Prospectus
and the Prospectus, as amended or supplemented, or the Term Sheet; the fee
of the NASD in connection with the filing required by the NASD relating to
the offering of the Shares contemplated hereby; all expenses, including
reasonable fees and disbursements of counsel to the Underwriters, in
connection with the qualification of the Shares under the state securities
or blue sky laws which the Representatives shall designate; the cost of
printing and furnishing to the several Underwriters copies of the
Registration Statement, each Preliminary Prospectus, the Prospectus, this
Agreement, the Agreement Among Underwriters, Selling Agreement, Warrant
Agreement, Underwriters' Questionnaire, Underwriters' Power of Attorney and
the Blue Sky Memorandum; any fees relating to the listing of the Shares on
the Nasdaq SmallCap Market or any other securities exchange; the cost of
printing the certificates representing the Shares; the fees of the transfer
agent retained in connection with the sale of the Shares; the cost of
publication of at least three "tombstones" relating to the public offering
of the Shares (at least one of which shall be in national business
newspaper and one of which shall be in a major New York newspaper) and the
cost of preparing at least five hard cover "bound volumes" relating to such
offering in accordance with the Representatives' request. The Company shall
pay any and all taxes (including any transfer, franchise, capital stock or
other tax imposed by any jurisdiction) on sales to the Underwriters
hereunder. The Company will also pay all costs and expenses incident to the
furnishing of any amended Prospectus or of any supplement to be attached to
the Prospectus as called for in Section 4(a) of this Agreement, except as
otherwise set forth in said Section.
(b) In addition to the foregoing expenses, the Company shall at
the First Closing Date pay to the Representatives, in their individual
rather than representative capacity, a non-accountable expense allowance of
$300,000. In the event the transactions contemplated hereby are not
consummated by reason of any action by the Underwriters (except if such
prevention is based upon a breach by the Company or any Subsidiary of any
covenant, representation or warranty contained herein or because any other
condition to the Underwriters' obligations hereunder required to be
fulfilled by the Company or the Subsidiary is not fulfilled), the Company
shall be liable for only the amount of the Underwriters' actual out-of-
pocket expenses. In the event the transactions contemplated hereby are not
consummated by reason of any action of the Company or the Subsidiary or
because of a breach by the Company or the Subsidiary of any covenant,
representation or warranty herein, the Company shall be liable for the
actual out-of-pocket expenses of the Representatives, including legal fees.
(c) No person is entitled either directly or indirectly to
compensation from the Company, from the Underwriters or from any other
person for services as a finder in connection with the proposed offering,
and the Company agrees to indemnify and hold harmless the Underwriters
against any losses, claims, damages or liabilities, joint or several (which
shall, for all purposes of this Agreement, include, but not be limited to,
all costs of defense and investigation and all attorneys' fees), to which
the Underwriters or such other person may become subject insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon the claim of any person (other than an
employee of the party claiming an indemnity) or entity that he or it is
entitled to a finder's fee in connection with the proposed offering by
reason of such person's or entity's influence or prior contact with the
indemnifying party.
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10. SUBSTITUTION OF UNDERWRITERS.
If any Underwriter shall for any reason not permitted hereunder cancel
its obligations to purchase the Firm Shares hereunder, or shall fail to take up
and pay for the number of Firm Shares set forth opposite its name in Schedule I
hereto upon tender of such Firm Shares in accordance with the terms hereof,
then:
(a) If the aggregate number of Firm Shares which such Underwriter
or Underwriters agreed but failed to purchase does not exceed 10% of the
total number of Firm Shares, the other Underwriters shall be obligated
severally, in proportion to their respective commitments hereunder, to
purchase the Firm Shares which such defaulting Underwriter or Underwriters
agreed but failed to purchase.
(b) If any Underwriter or Underwriters so default and the agreed
number of Firm Shares with respect to which such default or defaults occurs
is more than 10% of the total number of Firm Shares, the remaining
Underwriters shall have the right to take up and pay for (in such
proportion as may be agreed upon among them) the Firm Shares which the
defaulting Underwriter or Underwriters agreed but failed to purchase. If
such remaining Underwriters do not, at the First Closing Date, take up and
pay for the Firm Shares which the defaulting Underwriter or Underwriters
agreed but failed to purchase, the time for delivery of the Firm Shares
shall be extended to the next business day to allow the several
Underwriters the privilege of substituting within twenty-four hours
(including non-business hours) another underwriter or underwriters
satisfactory to the Company. If no such underwriter or underwriters shall
have been substituted as aforesaid, within such twenty-four hour period,
the time of delivery of the Firm Shares may, at the option of the Company,
be again extended to the next following business day, if necessary, to
allow the Company the privilege of finding within twenty-four hours
(including non-business hours) another underwriter or underwriters to
purchase the Firm Shares which the defaulting Underwriter or Underwriters
agreed but failed to purchase. If it shall be arranged for the remaining
Underwriters or substituted Underwriters to take up the Firm Shares of the
defaulting Underwriter or Underwriters as provided in this Section, (i) the
Company or the Representatives shall have the right to postpone the time of
delivery for a period of not more than seven business days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and
the Company agrees promptly to file any amendments to the Registration
Statement or supplements to the Prospectus which may thereby be made
necessary and (ii) the respective numbers of Firm Shares to be purchased by
the remaining Underwriters or substituted Underwriters shall be taken as
the basis of the underwriting obligation for all purposes of this
Agreement.
If in the event of a default by one or more Underwriters and the
remaining Underwriters shall not take up and pay for all the Firm Shares
agreed to be purchased by the defaulting Underwriters or substitute another
underwriter or underwriters as aforesaid, or the Company shall not find or
shall not elect to seek another underwriter or underwriters for such Firm
Shares as aforesaid, then this Agreement shall terminate.
If, following exercise of the Over-allotment Option, any
Underwriter or Underwriters shall for any reason not permitted hereunder
cancel their obligations to purchase Option Shares at the Option Closing
Date, or shall fail to take up and pay for the number or type of Option
Shares, which they become obligated to purchase at the Option Closing Date
upon tender of such Option Shares in accordance with the terms hereof, then
the remaining Underwriters or substituted Underwriters may take up and pay
for the Option Shares of the defaulting Underwriter or
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Underwriters in the manner provided in Section 10(b) hereof. If the
remaining Underwriters or substituted Underwriters shall not take up and
pay for all such Option Shares, the Underwriters shall be entitled to
purchase the number and type of Option Shares for which there is no default
or, at their election, the Over-allotment Option shall terminate and the
exercise thereof shall be of no effect.
As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section. In the event of
termination of this Agreement, there shall be no liability on the part of
any nondefaulting Underwriter to the Company, provided that the provisions
of this Section 10 shall not in any event affect the liability of any
defaulting Underwriter to the Company arising out of such default.
11. EFFECTIVE DATE.
This Agreement shall become effective upon its execution, except that
the Representatives may, at their option, delay such effectiveness until 11:00
a.m., New York City time on the first full business day following the effective
date of the Registration Statement, or at such earlier time after the effective
date of the Registration Statement as the Representatives in their discretion
shall first commence the initial public offering by the Underwriters of any of
the Shares. The time of the initial public offering shall mean the time of
release by the Representatives of the first newspaper advertisement with respect
to the Shares, or the time when the Shares are first generally offered by the
Representatives to dealers by letter or telegram, whichever shall first occur.
This Agreement may be terminated by the Representatives at any time before it
becomes effective as provided above, except that Sections 4(c), 7, 8, 9, 14, 15,
16 and 17 shall remain in effect notwithstanding such termination.
12. TERMINATION.
(a) This Agreement, except for Sections 4(c), 7, 8, 9, 14, 15, 16
and 17 hereof, may be terminated at any time prior to the First Closing
Date, and the Over-allotment Option, if exercised, may be canceled at any
time prior to the Option Closing Date, by you if in your judgment it is
impracticable to offer for sale or to enforce contracts made by the
Underwriters for the resale of the Shares agreed to be purchased hereunder
by reason of (i) the Company or the Subsidiary having sustained a material
loss, whether or not insured, by reason of fire, earthquake, flood,
accident or other calamity, or from any labor dispute or court or
government action, order or decree; (ii) trading in securities on the New
York Stock Exchange, the American Stock Exchange or the Nasdaq Stock Market
having been suspended or limited; (iii) material governmental restrictions
having been imposed on trading in securities generally (not in force and
effect on the date hereof); (iv) a banking moratorium having been declared
by federal or New York state authorities; (v) an outbreak of international
hostilities or other national or international calamity or crisis or change
in economic or political conditions having occurred; (vi) a pending or
threatened legal or governmental proceeding or action relating generally to
the Company's or the Subsidiary's business, or a notification having been
received by either the Company or the Subsidiary of the threat of any such
proceeding or action, which could materially adversely affect the Company
or the Subsidiary; (vii) the Company or the Subsidiary is merged or
consolidated into or acquired by another company or group or there exists a
binding legal commitment for the foregoing or any other material change of
ownership or control occurs; (viii) the passage by the Congress of the
United States, any governmental agency of Poland, or by any state
legislative body or federal or state agency or other domestic or foreign
authority of any act, rule or regulation, measure, or the adoption of any
orders, rules or regulations by any governmental body or any authoritative
accounting institute or board, or any governmental executive, which is
reasonably believed likely by the Representatives to have a material impact
on the business, financial condition or financial statements of the Company
or the market for the securities offered pursuant to the Prospectus; (ix)
any adverse change in the financial or securities markets beyond normal
market fluctuations having occurred since the date of this Agreement; or
(x) any material
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adverse change having occurred, since the respective dates of which
information is given in the Registration Statement and Prospectus, in the
earnings, business prospects or general condition of the Company or any of
its Subsidiary, financial or otherwise, whether or not arising in the
ordinary course of business.
(b) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 12 or
in Section 11, the Company shall be promptly notified by you, by telephone
or telegram, confirmed by letter.
13. REPRESENTATIVES' WARRANTS.
At or before the First Closing Date, the Company will sell to the
Representatives (for their own account and not as co-Representatives of the
several Underwriters), or their designees, for a consideration of $200, and upon
the terms and conditions set forth in the form of the Warrant Agreement annexed
as an exhibit to the Registration Statement, warrants (the "Representatives'
Warrants") to purchase an aggregate of 200,000 Shares. In the event of conflict
in the terms of this Agreement and the Warrant Agreement, the language of the
Warrant Agreement shall control.
14. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations, warranties
and other statements of the Company and the undertakings set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of the Underwriters, the Company or any
of its officers or directors or any controlling person and will survive delivery
of and payment of the Shares and the termination of this Agreement.
15. NOTICE.
Any communications specifically required hereunder to be in writing,
if sent to the Underwriters, will be mailed, delivered and confirmed to them at
Xxxxx Xxxxxx & Co., Inc., 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and at
Fine Equities, Inc., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, with a copy in
each case sent to Xxxxx & XxXxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
attention: Xxxxxxx X. Xxxx, Esq., or if sent to the Company, will be mailed,
delivered and confirmed to it at 000 Xxxxx Xxxxx Xxxxxx, #000, Xxxxxxxxxx,
Xxxxxxxx 00000, with a copy sent to Xxxxx & Xxxxxxx LLP, Columbia Square, 000
00xx Xxxxxx, XX, Xxxxxxxxxx, X.X. 00000, attention: Xxxxxx X. Xxxxxx, Esq.
16. PARTIES IN INTEREST.
The Agreement herein set forth is made solely for the benefit of the
several Underwriters, the Company, and, to the extent expressed, the Principal
Stockholders, any person controlling the Company or any of the several
Underwriters, and directors of the Company, nominees for directors (if any)
named in the Prospectus, its officers who have signed the Registration
Statement, and their respective executors, administrators, successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" shall not include any
purchaser, as such purchaser, from any of the several Underwriters of the
Shares. All of the obligations of the Underwriters hereunder are several and
not joint.
17. APPLICABLE LAW.
This Agreement will be governed by, and construed in accordance with,
the laws of the State of New York applicable to agreements made and to be
entirely performed within New York.
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this agreement, whereupon it will become a
binding agreement between the Company and the several Underwriters in accordance
with its terms.
Very truly yours,
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
By:
-------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chairman and Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
Xxxxx Xxxxxx & Co., Inc.
Fine Equities, Inc.
As Representatives of the Several
Underwriters listed on Schedule I hereto
By: Xxxxx Xxxxxx & Co., Inc.
By:
-------------------------------
Name:
Title:
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SCHEDULE I
Underwriter Number of Firm Shares to be Purchased
Xxxxx Xxxxxx & Co., Inc.
Fine Equities, Inc.
Total Shares 2,000,000
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