EXHIBIT 1
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
2,500,000 shares of Common Stock
Underwriting Agreement
_____, 1998
▇▇▇▇▇ ▇▇▇▇▇▇ & Co., Inc.
Fine Equities, Inc.
As Representatives of the
Several Underwriters listed on Schedule I hereto
% ▇▇▇▇▇ ▇▇▇▇▇▇ & Co., Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Central European Distribution Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell to ▇▇▇▇▇ ▇▇▇▇▇▇ & Co., Inc. ("▇▇▇▇▇
▇▇▇▇▇▇"), Fine Equities, Inc. ("Fine Equities") and each of the underwriters
named in Schedule I hereto (collectively, the "Underwriters") for whom ▇▇▇▇▇
▇▇▇▇▇▇ and Fine Equities are acting as representatives (in such capacity, ▇▇▇▇▇
▇▇▇▇▇▇ and Fine Equities shall hereinafter be referred to as "you" or the
"Representatives"), an aggregate of 2,500,000 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 375,000 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-_____) 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 ▇▇▇▇▇ Agri International Poland Sp.
z o. o., a corporation organized under the laws of Poland (the
"Subsidiary"), has been duly incorporated and is validly existing as a
corporation 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 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 December 31, 1997 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
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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 in connection with
such authorization, execution and delivery or 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 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
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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 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, or 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
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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 imminent
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 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
▇▇▇▇ 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
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 ▇▇▇▇, 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,
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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 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.
(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-B
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,
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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 ▇▇▇▇▇ ▇▇▇▇▇▇ & Co., Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (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 _____, 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 end 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 ▇▇▇▇▇ ▇▇▇▇▇▇ & Co., Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. 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 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 certified or bank cashier's checks in New York Clearing House
funds, payable to the order of the Company 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 ▇▇▇▇▇
▇▇▇▇▇▇ & Co., Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (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
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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 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 Representatives' opinion, may be necessary
or advisable 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
-8-
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 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 ▇▇▇▇▇'▇ 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
-9-
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.
(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 ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
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, 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
-10-
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 ▇▇▇▇▇ ▇▇▇▇▇▇. 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.
(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 National Market, and
will effect and use its best efforts to maintain such listing (or
listing on the New York Stock Exchange) 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 ▇▇▇▇▇ ▇▇▇▇▇▇, 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) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 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 ▇▇. ▇▇▇▇▇ 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 ▇▇. ▇▇▇▇▇'▇
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.
-11-
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:
(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 ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, 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 ▇▇▇▇▇ & ▇▇▇▇▇▇▇ 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 ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, 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 revenues and results
of operations for the period ending at the end of the month
immediately preceding the effective date 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
-12-
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 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 ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to
the several Underwriters;
(ii) at the Option Closing Date, there shall have been
delivered to the Representatives the signed opinion of ▇▇▇▇▇ &
▇▇▇▇▇▇▇ LLP, Washington, D.C., and Warsaw, Poland, counsel for
the Company, dated as of the Option Closing Date, in form and
substance satisfactory to ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, 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 ▇▇▇▇▇ &
-13-
▇▇▇▇▇▇▇▇, counsel to the several Underwriters, substantially the
same in scope 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 ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
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 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;
-14-
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 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.
-15-
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.
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,
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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 National 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.
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
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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 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.
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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 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 $250, 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 250,000 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.
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Any communications specifically required hereunder to be in writing,
if sent to the Underwriters, will be mailed, delivered and confirmed to them at
▇▇▇▇▇ ▇▇▇▇▇▇ & Co., Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and at
Fine Equities, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, with a copy in
each case sent to ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq., or if sent to the Company, will be mailed,
delivered and confirmed to it at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy sent to ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, Columbia Square, ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, 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.
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: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman and Chief Executive Officer
The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.
▇▇▇▇▇ ▇▇▇▇▇▇ & Co., Inc.
Fine Equities, Inc.
As Representatives of the Several
Underwriters listed on Schedule I hereto
By: ▇▇▇▇▇ ▇▇▇▇▇▇ & Co., Inc.
By: __________________________________
Name:
Title:
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SCHEDULE I
Underwriter Number of Firm Shares to be Purchased
-------------------------------- ------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ & Co., Inc.
Fine Equities, Inc.
Total Shares 2,500,000
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