Document:

Unassociated Document

 

Central
European Media Enterprises Ltd.

4,700,000
Shares of Class A Common Stock

Underwriting
Agreement

April 28,
2005

J.P.
Morgan Securities Ltd.

125
London Wall

London
EC2Y 5AJ 

Lehman
Brothers Inc.

745
7th
Avenue

New York
NY 10019

ING Bank
N.V. London Branch

60 London
Wall

London,
EC2M 5TQ

Ladies
and Gentlemen:

Central
European Media Enterprises Ltd. a Company organized under the laws of Bermuda
(the “Company”), proposes to issue and sell to the several Underwriters listed
in Schedule 1 hereto (the “Underwriters”), for whom you are acting as
representative (the “Representative”), an aggregate of 4,700,000 shares of Class
A Common Stock, par value $0.08 per share, of the Company (the “Underwritten
Shares”) and, at the option of the Underwriters, up to an additional 705,000
shares of Class A Common Stock of the Company (the “Option Shares”). The
Underwritten Shares and the Option Shares are herein referred to as the
“Shares”. The shares of Class A Common Stock of the Company to be outstanding
after giving effect to the sale of the Shares are herein referred to as the
“Stock”. 

The
Company hereby confirms its agreement with the several Underwriters concerning
the purchase and sale of the Shares, as follows:

1.     Registration
Statement.   The Company has prepared and filed with the
Securities and Exchange Commission (the “Commission”) under the Securities Act
of 1933, as amended, and the rules and regulations of the Commission thereunder
(collectively, the “Securities Act”), a registration statement (File No.
333-123822) including a prospectus, relating to the Shares. Such registration
statement, as amended at the time it becomes effective, including the
information, if any, deemed pursuant to Rule 430A under the Securities Act to be
part of the registration statement at the time of its effectiveness (“Rule 430
Information”), is referred to herein as the “Registration Statement”; and as
used herein, the term “Preliminary Prospectus” means each prospectus included in
such registration statement (and any amendments thereto) before it becomes
effective, any prospectus filed with the Commission pursuant to Rule 424(a)
under the Securities Act and the prospectus included in the Registration
Statement at the time of its effectiveness that omits Rule 430A Information, and
the term “Prospectus” means the prospectus in the form first used to confirm
sales of the Shares. If the Company has filed an abbreviated registration
statement pursuant to Rule 462(b) under the Securities Act (the “Rule 462
Registration Statement”), then any reference herein to the term “Registration
Statement” shall be deemed to include such Rule 462 Registration Statement. Any
reference in this Agreement to the Registration Statement, any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the Securities Act, as of the effective date of the Registration Statement
or the date of such Preliminary Prospectus or the Prospectus, as the case may be
and any reference to “amend”, “amendment” or “supplement” with respect to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after such date under the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission thereunder (collectively, the “Exchange Act”) that are deemed to
be incorporated by reference therein. Capitalized terms used but not defined
herein shall have the meanings given to such terms in the Registration Statement
and the Prospectus.

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2.     Purchase
of the Shares by the Underwriters.   (a) The Company agrees to
issue and sell the Shares to the several Underwriters as provided in this
Agreement, and each Underwriter, on the basis of the representations, warranties
and agreements set forth herein and subject to the conditions set forth herein,
agrees, severally and not jointly, to purchase from the Company the respective
number of Underwritten Shares set forth opposite such Underwriter's name in
Schedule 1 hereto at a price per share the “Purchase Price” of
$42.889.

In
addition, the Company agrees to issue and sell the Option Shares to the several
Underwriters as provided in this Agreement, and the Underwriters, on the basis
of the representations, warranties and agreements set forth herein and subject
to the conditions set forth herein, shall have the option to purchase, severally
and not jointly, from the Company the Option Shares at the Purchase
Price.

If any
Option Shares are to be purchased, the number of Option Shares to be purchased
by each Underwriter shall be the number of Option Shares which bears the same
ratio to the aggregate number of Option Shares being purchased as the number of
Underwritten Shares set forth opposite the name of such Underwriter in Schedule
1 hereto (or such number increased as set forth in Section 9 hereof) bears to
the aggregate number of Underwritten Shares being purchased from the Company by
the several Underwriters, subject, however, to such adjustments to eliminate any
fractional Shares as the Representative in its sole discretion shall
make.

The
Underwriters may exercise the option to purchase the Option Shares at any time
in whole, or from time to time in part, on or before the thirtieth day following
the date of this Agreement, by written notice from the Representative to the
Company. Such notice shall set forth the aggregate number of Option Shares as to
which the option is being exercised and the date and time when the Option Shares
are to be delivered and paid for which may be the same date and time as the
Closing Date (as hereinafter defined) but shall not be earlier than the Closing
Date nor later than the tenth full business day (as hereinafter defined) after
the date of such notice (unless such time and date are postponed in accordance
with the provisions of Section 9 hereof). Any such notice shall be given at
least two Business Days prior to the date and time of delivery specified
therein. 

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(b) The
Company understands that the Underwriters intend to make a public offering of
the Shares as soon after the effectiveness of this Agreement as in the judgment
of the Representative is advisable, and initially to offer the Shares on the
terms set forth in the Prospectus. The Company acknowledges and agrees that the
Underwriters may offer and sell Shares to or through any affiliate of an
Underwriter and that any such affiliate may offer and sell Shares purchased by
it to or through any Underwriter.

(c) Payment
for the Shares shall be made by wire transfer in immediately available funds to
the account specified by the Company to the Representative in the case of the
Underwritten Shares, at the offices of Simpson Thacher & Bartlett LLP no
later than 10:00 a.m. New York City time on May 5, 2005, or at such other time
or place on the same or such other date, not later than the fifth business day
thereafter, as the Representative and the Company may agree upon in writing or,
in the case of the Option Shares, on the date and at the time and place
specified by the Representative in the written notice of the Underwriters’
election to purchase such Option Shares. The time and date of such payment for
the Underwritten Shares is referred to herein as the “Closing Date” and the time
and date for such payment for the Option Shares, if other than the Closing Date,
are herein referred to as the “Additional Closing Date”.

Payment
for the Shares to be purchased on the Closing Date or the Additional Closing
Date, as the case may be, shall be made against delivery to the Representative
for the respective accounts of the several Underwriters of the Shares to be
purchased on such date in definitive form registered in such names and in such
denominations as the Representative shall request in writing not later than two
full business days prior to the Closing Date or the Additional Closing Date, as
the case may be, with any transfer taxes payable in connection with the sale of
the Shares duly paid by the Company. The certificates for the Shares will be
made available for inspection and packaging by the Representative at the office
of J.P. Morgan Securities Ltd. set forth above not later than 1:00 P.M., New
York City time, on the business day prior to the Closing Date or the Additional
Closing Date, as the case may be.

For the
purposes of this Agreement, references to the Company and its subsidiaries shall
be deemed to include all companies in the TV Nova Group as defined in the
framework agreement among the Company, PPF, and certain other members of the TV
Nova Group dated as of December 13, 2004 (the “Framework Agreements”), even if
the closing of the acquisition happens or is deemed to happen on or after the
date hereof, Slovenska Televizna Spolocnost s.r.o and Markiza-Slovakia Splocnost
s.r.o.

3.  Representations
and Warranties of the Company. The Company represents and warrants to each
Underwriter that:

(a) Preliminary
Prospectus. No
order preventing or suspending the use of any Preliminary Prospectus has been
issued by the Commission, and each Preliminary Prospectus, at the time of filing
thereof, complied in all material respects with the Securities Act and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided that the Company makes no representation and warranty with
respect to any statements or omissions made in reliance upon and in conformity
with information relating to any Underwriter furnished to the Company in writing
by such Underwriter through the Representative expressly for use in any
Preliminary Prospectus.

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(b) Registration
Statement and Prospectus. The
Registration Statement has been declared effective by the Commission. No order
suspending the effectiveness of the Registration Statement has been issued by
the Commission and no proceeding for that purpose has been initiated or
threatened by the Commission; as of the applicable effective date of the
Registration Statement and any amendment thereto, the Registration Statement
complied and any amendment thereto will comply in all material respects with the
Securities Act, and the Registration Statement did not and any amendment thereto
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading; and as of the applicable filing date of the
Prospectus and any amendment or supplement thereto and as of the Closing Date
and as of the Additional Closing Date, as the case may be, the Prospectus will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided that the Company makes no representation and warranty with
respect to any statements or omissions made in reliance upon and in conformity
with information relating to any Underwriter furnished to the Company in writing
by such Underwriter through the Representative expressly for use in the
Registration Statement and the Prospectus and any amendment or supplement
thereto.

(c) Incorporated
Documents. The
documents incorporated by reference in the Prospectus, when they were filed with
the Commission conformed in all material respects to the requirements of the
Exchange Act of 1934, as amended, and the rules and regulation of the Commission
thereunder (collectively, the “Exchange Act”) and none of such documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
and any further documents so filed and incorporated by reference in the
Prospectus, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material respects to the
requirements of the Act or the Exchange Act, as applicable, and when filed will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.

(d) Financial
Statements. The
financial statements and the related notes thereto of the Company and its
consolidated subsidiaries included or incorporated by reference in the
Registration Statement and the Prospectus comply in all material respects with
the applicable requirements of the Securities Act and the Exchange Act, as
applicable, and present fairly the financial position of the Company and its
subsidiaries as of the dates indicated and the results of their operations and
the changes in their cash flows for the periods specified; such financial
statements have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods covered thereby,
and the supporting schedules included or incorporated by reference in the
Registration Statement present fairly the information required to be stated
therein; and the other financial information included or incorporated by
reference in the Registration Statement and the Prospectus has been derived from
the accounting records of the Company and its subsidiaries and presents fairly
the information shown thereby; and the pro forma
financial information and the related notes thereto included in the Registration
Statement and the Prospectus has been prepared in accordance with the applicable
requirements of the Securities Act and the assumptions underlying such
pro forma
financial information are reasonable and are set forth in the Registration
Statement and the Prospectus.

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(e) No
Material Adverse Change. Since
the date of the most recent financial statements of the Company included or
incorporated by reference in the Registration Statement and the Prospectus, (i)
there has not been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries, or any dividend or distribution of any kind
declared, set aside for payment, paid or made by the Company on any class of
capital stock, or any material adverse change in the business, properties,
financial position, results of operations shareholders’ equity, cashflows or
prospects of the Company and its subsidiaries taken as a whole; (ii) neither the
Company nor any of its subsidiaries has entered into any transaction or
agreement that is material to the Company and its subsidiaries taken as a whole
or incurred any liability or obligation, direct or contingent, that is material
to the Company and its subsidiaries taken as a whole and that would be required
to be filed as an Exhibit to the Registration Statement; and (iii) neither the
Company nor any of its subsidiaries has sustained any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor disturbance or dispute or
any action, order or decree of any court or arbitrator or governmental or
regulatory authority, except in each case as otherwise disclosed in the
Registration Statement and the Prospectus.

(f) Organization
and Good Standing. The
Company and each of its subsidiaries have been duly organized and are validly
existing and in good standing under the laws of their respective jurisdictions
of organization, are duly qualified to do business, and where applicable, are in
good standing in each jurisdiction in which their respective ownership or lease
of property or the conduct of their respective businesses requires such
qualification, and have all power and authority necessary to own or hold their
respective properties and to conduct the businesses in which they are engaged,
except where the failure to be so qualified or have such power or authority
would not, individually or in the aggregate, have a material adverse effect on
the business, properties, financial position, results of operations,
shareholders’ equity, cashflow or prospects of the Company and its subsidiaries
taken as a whole (a “Material Adverse Effect”). None of the Company or any of
its subsidiaries is in bankruptcy, liquidation or receivership or subject to any
similar proceeding except as described in the Prospectus. The Company does not
own or control, directly or indirectly, any corporation, association or other
entity other than the subsidiaries listed in Exhibit 21 to the Registration
Statement.

(g) Capitalization. The
Company has a capitalization as set forth in the Prospectus under the heading
“Capitalization”; All of the outstanding shares of capital stock or other equity
interests of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and are not subject to any pre-emptive or similar
rights. Except as otherwise disclosed in the Prospectus all the outstanding
shares of capital stock or other equity interests of each direct and indirect
subsidiary of the Company are owned directly or indirectly by the Company, free
and clear of any lien, charge, encumbrance, security interest, restriction on
voting or transfer or any other claim of any third party (except for the share
pledges in connection with the offering of the notes by the Company, which
offering will be consummated substantially concurrent with the consummation of
the sale of the Underwritten Shares), except as otherwise disclosed in the
Prospectus have been duly and validly authorized and issued, are fully paid and
non-assessable and are not subject to any pre-emptive or similar rights; except
as described in or expressly contemplated by the Prospectus, there are no
outstanding rights (including, without limitation, pre-emptive rights), warrants
or options to acquire, or instruments convertible into or exchangeable for, any
shares of capital stock or other equity interest in the Company or any of its
subsidiaries, or any contract, commitment, agreement, understanding or
arrangement of any kind to which the Company or any of its subsidiaries is a
party relating to the issuance of any capital stock of the Company or any such
subsidiary, any such convertible or exchangeable securities or any such rights,
warrants or options; the capital stock of the Company conforms in all material
respects to the description thereof contained in the Registration Statement and
the Prospectus; and except as otherwise disclosed in the Prospectus all the
outstanding shares of capital stock or other equity interests of each subsidiary
of the Company have been duly and validly authorized and issued, are fully paid
and non-assessable and are owned directly or indirectly by the Company, free and
clear of any lien, charge, encumbrance, security interest, restriction on voting
or transfer or any other claim of any third party.

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(h) Due
Authorization. The
Company has full right, power and authority to execute and deliver this
Agreement and any other agreement or instrument entered into in respect of the
offering of the Shares (collectively, the “Transaction Documents”) and to
perform its obligations hereunder and thereunder; and all action required to be
taken for the due and proper authorization, execution and delivery of each of
the Transaction Documents and the consummation of the transactions contemplated
thereby has been duly and validly taken.

(i) Underwriting
Agreement. This
Agreement has been duly authorized, executed and delivered by the
Company.

(j) The
Shares. The
Shares have been duly authorized by the Company and, when issued and delivered
and paid for as provided herein, will be duly and validly issued and will be
fully paid and nonassessable and will conform to the descriptions thereof in the
Prospectus; and the issuance of the Shares is not subject to any preemptive or
similar rights.

(k) Descriptions
and Fair Summaries of the Transaction Documents. Each
Transaction Document conforms in all material respects to the description
thereof contained in the Registration Statement and the Prospectus. The
descriptions in the Prospectus of statutes, legal, governmental and regulatory
proceedings and contracts and other documents are accurate in all material
respects; the statements in the Prospectus under the headings “Material Bermuda
and United States federal income tax considerations”, and “Risk
factors3⁄4Risks
relating to the TV Nova Acquisition and the Krsak Agreement” fairly summarize
the matters therein described in all material respects.

(l) No
Violation or Default. Neither
the Company nor any of its subsidiaries is (i) in violation of its charter or
by-laws or similar organizational documents; (ii) in default, and no event has
occurred that, with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries is
subject; or (iii) in violation of any law or statute or any judgment, order,
rule or regulation of any court or arbitrator or governmental or regulatory
authority, except, in the case of clauses (ii) and (iii) above, for any such
default or violation that would not, individually or in the aggregate, have a
Material Adverse Effect.

(m) No
Conflicts. The
authorization, execution, delivery and performance by the Company of each of the
Transaction Documents to which it is a party, the issuance and sale of the
Shares and the consummation of the transactions contemplated by the Transaction
Documents will not (i) 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 property or
assets of the Company or any of its subsidiaries pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, (ii) result in any violation
of the provisions of the charter or by-laws or similar organizational documents
of the Company or any of its subsidiaries or (iii) result in the violation of
any law or statute or any judgment, order, rule or regulation of any court or
arbitrator or governmental or regulatory authority, except, in the case of
clauses (i) and (iii) above, for any such conflict, breach or violation that
would not, individually or in the aggregate, have a Material Adverse
Effect.

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(n) No
Consents Required. No
consent, approval, authorization, order, registration or qualification of or
with any court or arbitrator or governmental or regulatory authority is required
for the execution, delivery and performance by the Company of each of the
Transaction Documents to which each is a party, the issuance and sale of the
Shares and the consummation of the transactions contemplated by the Transaction
Documents, except for such consents, approvals, authorizations, orders and
registrations or qualifications as may be required under applicable securities
laws in connection with the purchase and distribution of the Shares by the
Underwriters.

(o) Legal
Proceedings. Except
as described in the Prospectus, there are no legal, governmental or regulatory
investigations, actions, suits or proceedings pending to which the Company or
any of its subsidiaries is or may be a party or to which any property of the
Company or any of its subsidiaries is or may be the subject that, individually
or in the aggregate, if determined adversely to the Company or any of its
subsidiaries, could reasonably be expected to have a Material Adverse Effect or
materially and adversely affect the ability of the Company to perform its
obligations under the Transaction Documents; and to the best knowledge of the
Company no such investigations, actions, suits or proceedings are threatened by
any governmental or regulatory authority or by others; and (i) there are no
current or pending legal, governmental or regulatory actions, suits or
proceedings that are required under the Securities Act to be described in the
Prospectus that are not so described and (ii) there are no statutes, regulations
or contracts or other documents that are required under the Securities Act to be
filed as exhibits to the Registration Statement or described in the Registration
Statement or the Prospectus that are not so filed or described.

(p) Independent
Accountants.
Deloitte & Touche LLP, who have certified certain financial statements of
the Company and its subsidiaries with the exception of the companies of the TV
Nova Group and KPMG Ceska Republika s.r.o. who have certified certain financial
statements of the TV Nova Group, are each independent public accountants with
respect to the Company and its subsidiaries as required by the Securities Act.
The audit report of Deloitte & Touche LLP on the audited financial
statements of the Company and its subsidiaries included in the Registration
Statement and the Prospectus does not contain any limitation or restriction on
the ability of the Underwriters to rely upon such report. The report of KPMG
Ceska Republika s.r.o. on the audited financial statements of the TV Nova Group
included in the Registration Statement and the Prospectus does not contain any
limitation or restriction on the ability of the Underwriters to rely upon such
report.

(q) Title
to Real and Personal Property. The
Company and its subsidiaries have good and marketable title in fee simple to, or
have valid rights to lease or otherwise use, all items of real and personal
property that are material to the respective businesses of the Company and its
subsidiaries, in each case free and clear of all liens, encumbrances, claims and
defects and imperfections of title except those that (i) do not materially
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries or (ii) could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse
Effect.

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(r) Title
to Intellectual Property. The
Company and its subsidiaries own or possess adequate rights to use all material
patents, patent applications, trademarks, service marks, trade names, trademark
registrations, service mark registrations, copyrights, licenses and know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) necessary for the conduct of
their respective businesses except where the failure to possess, or own such
rights would not have a Material Adverse Effect; and the conduct of their
respective businesses will not conflict in any material respect with any such
rights of others, and the Company and its subsidiaries have not received any
notice of any claim of infringement of or conflict with any such rights of
others and are unaware of any facts which would form a reasonable basis for any
such claim, except as to such conduct or infringement which would not have a
Material Adverse Effect.

(s) No
Undisclosed Relationships. No
relationship, direct or indirect, exists between or among the Company or any of
its subsidiaries, on the one hand, and the directors, officers, stockholders or
other affiliates of the Company or any of its subsidiaries, on the other, that
is required by the Securities Act to be described in the Registration Statement
and the Prospectus and that is not so described.

(t) Investment
Company Act. The
Company is not and, after giving effect to the offering and sale of the Shares
and the application of the proceeds thereof as described in the Prospectus, will
not be required to register as an “investment company” or an entity “controlled”
by an “investment company” within the meaning of the Investment Company Act of
1940, as amended, and the rules and regulations of the Commission thereunder
(collectively, “Investment Company Act”).

(u) Public
Utility Holding Company Act. Neither
the Company nor any of its subsidiaries is a “holding company” or a “subsidiary
company” of a holding company or an “affiliate” thereof within the meaning of
the Public Utility Holding Company Act of 1935, as amended.

(v) Taxes. Except
as could not reasonably be expected to have a Material Adverse Effect, the
Company and its subsidiaries have paid all national, state, local regional and
foreign taxes and filed all tax returns required to be paid or filed through the
date hereof; and except as otherwise disclosed in the Prospectus, there is no
tax deficiency that has been, or could reasonably be expected to be, asserted
against the Company or any of its subsidiaries or any of their respective
properties or assets.

(w) Licenses
and Permits. The
Company and its subsidiaries possess all licenses, certificates, permits and
other authorizations issued by, and have made all declarations and filings with,
the appropriate national, federal, regional, state, local or foreign
governmental or regulatory authorities that are necessary for the ownership or
lease of their respective properties or the conduct of their respective
businesses as described in the Registration Statement and the Prospectus, except
where the failure to possess or make the same would not, individually or in the
aggregate, have a Material Adverse Effect; and except as described in the
Prospectus, neither the Company nor any of its subsidiaries has received notice
of any revocation or modification of any such license, certificate, permit or
authorization or has any reason to believe that any such license, certificate,
permit or authorization will not be renewed in the ordinary course except where
receipt of such notice of any revocation or modification of any such license,
certificate, permit or authorization would not have a Material Adverse
Effect.

9

(x) No
Labor Disputes. No
labor disturbance by or dispute with employees of the Company or any of its
subsidiaries exists or, to the best knowledge of the Company, is threatened
which could, individually or in the aggregate, have a Material Adverse Effect;
to the best knowledge of the Company, no labor disturbance by or dispute with
employees or agents of suppliers or customers of the Company or any of its
subsidiaries is threatened which could, individually or in the aggregate, have a
Material Adverse Effect.

(y) Compliance
With Environmental Laws. The
Company and its subsidiaries (i) are in compliance with any and all applicable
federal, national and international, state, local and foreign laws, rules,
regulations, decisions and orders relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants (collectively, “Environmental Laws”); (ii) have received and are
in compliance with all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses
(collectively “Environmental Permits”); and (iii) have not received notice of
any actual or potential liability for the investigation or remediation of any
disposal or release of hazardous or toxic substances or wastes, pollutants or
contaminants, except in any such case for any such failure to comply, or failure
to receive required permits, licenses or approvals, or liability as would not,
individually or in the aggregate, have a Material Adverse Effect and the Company
and its subsidiaries are not aware of any pending investigation which might
reasonably be expected to lead to a claim of such liability, except any such
liability as would not, individually or in the aggregate, have a Material
Adverse Effect.

(z) Compliance
With Employee Arrangements. Except
as would not be reasonably expected to have a Material Adverse Effect, each
benefit and compensation plan, agreement, policy and arrangement that is
maintained, administered or contributed to by the Company or any of its
subsidiaries for current or former employees or directors of, or independent
contractors with respect to, the Company or any of its subsidiaries, or with
respect to which any of such entities could reasonably be expected to have any
current, future or contingent liability or responsibility, has been maintained
in compliance with its terms and the requirements of any applicable statutes,
orders, rules and regulations; the Company and each of its subsidiaries and each
of their respective affiliates have complied with all applicable statutes,
orders, rules and regulations in regard to such plans, agreements, policies and
arrangements.

(aa) Insurance. Except
as could not reasonably be expected to have a Material Adverse Effect, the
Company and its subsidiaries have insurance covering their respective
properties, operations, personnel and businesses, including business
interruption insurance, which insurance is in amounts and insures against such
losses and risks as are adequate to protect the Company and its subsidiaries and
their respective businesses; and except as could not reasonably be expected to
have a Material Adverse Effect, neither the Company nor any of its subsidiaries
has (i) received notice from any insurer or agent of such insurer that capital
improvements or other expenditures are required or necessary to be made in order
to continue such insurance or (ii) 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 at reasonable cost from similar insurers as may be
necessary to continue its business.

10

(bb) No
Unlawful Payments. Neither
the Company nor any of its subsidiaries nor, to the best knowledge of the
Company, any director, officer, agent, employee or other person associated with
or acting on behalf of the Company or any of its subsidiaries has (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977 or any applicable law or
regulation implementing the OECD convention on Combating Bribery of Foreign
Public Officials in International Business Transactions; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful
payment.

(cc) Money
Laundering. The
operations of the Company and its subsidiaries are and have been conducted at
all times in compliance with applicable financial record keeping and reporting
requirements of Bermuda and the European Union, so far as the Company is aware,
and any related or similar statutes, rules, regulations or guidelines, issued,
administered or enforced by any governmental agency (collectively, the “Money
Laundering Laws”), and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or any of its subsidiaries with respect to the Money Laundering Laws is pending
or, to the best knowledge of the Company, threatened.

(dd) No
Restrictions on Subsidiaries. Except
as would not be reasonably expected to have a Material Adverse Effect no
subsidiary of the Company is currently prohibited, directly or indirectly, under
any agreement or other instrument to which it is a party or is subject, from
paying any dividends to the Company, from making any other distribution on such
subsidiary’s capital stock, from repaying to the Company any intercompany loans
or advances to such subsidiary from the Company or from transferring any of such
subsidiary’s properties or assets to the Company or any other subsidiary of the
Company.

(ee) No
Broker's Fees. Neither
the Company nor any of its subsidiaries is a party to any contract, agreement or
understanding with any person (other than this Agreement, and the engagement
letter dated March 11, 2005 among certain of the Underwriters and the Company)
that would give rise to a valid claim against the Company or any of its
subsidiaries or any Underwriter for a brokerage commission, finder's fee or like
payment in connection with the offering and sale of the Shares.

(ff) No
Registration Rights. No
person has the right to require the Company or any of its subsidiaries to
register any securities for sale under the Securities Act by reason of the
filing of the Registration Statement with the Commission or the issuance and
sale of the Shares.

(gg) No
Stabilization. The
Company has not taken, directly or indirectly, any action designed to or that
could reasonably be expected to cause or result in any stabilization or
manipulation of the price of the Shares.

(hh) Business
With Cuba. The
Company has complied with all provisions of Section 517.075, Florida Statutes
(Chapter 92-198, Laws of Florida) relating to doing business with the Government
of Cuba or with any person or affiliate located in Cuba.

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(ii) Margin
Rules. Neither
the issuance, sale and delivery of the Shares nor the application of the
proceeds thereof by the Company as described in the Registration Statement and
the Prospectus will violate Regulation T, U or X of the Board of Governors of
the Federal Reserve System or any other regulation of such Board of
Governors.

(jj) Forward-Looking
Statements. No
forward-looking statement (within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act) contained in the Registration Statement
and the Prospectus has been made or reaffirmed without a reasonable basis or has
been disclosed other than in good faith. The statements and financial
information (including the assumptions described herein) included in the
Registration Statement and the Prospectus relating to financial and other
projections or incorporated by reference therein from the Company's Annual
Report on Form 10-K for the year ended December 31, 2004 (under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Future Trends") (the "Projections") (i) are within the coverage of
the safe harbor for forward looking statements set forth in Section 27A of the
Securities Act, Rule 175(b) under the Securities Act or Rule 3b-6 under the
Exchange Act, as applicable, (ii) were made by the Company with a reasonable
basis and in good faith and reflect the Company's good faith best estimate of
the matters described therein, and (iii) have been prepared in accordance with
Item 10 of Regulation S-K under the Securities Act; all assumptions material to
the Projections are set forth in the Prospectus; the assumptions used in the
preparation of the Projections are reasonable; and none of the Company or its
subsidiaries are aware of any business, economic or industry developments
inconsistent with the assumptions underlying the Projections.

(kk) Statistical
and Market Data. The
industry, statistical and market-related data included in the Prospectus is
based on or derived from sources that the Company and believes to be reliable
and accurate in all material respects.

(ll) Sarbanes
Oxley Act. I.
Except as otherwise disclosed in the Prospectus, the Company and each of its
subsidiaries other than the companies of the TV Nova Group and the Company’s
Slovakian and Croatian subsidiaries (i) make and keep accurate books and records
and (ii) maintain and has maintained effective internal control over financial
reporting as defined in Rule 13a-15 under the Exchange Act.

II.
Except as otherwise disclosed in the Prospectus, the Company has established and
maintains disclosure controls and procedures (as such term is defined in Rule
13a-15 under the Exchange Act), and such disclosure controls and procedures are
designed to ensure that the information required to be disclosed by the Company
in the reports they file or submit under the Exchange Act is accumulated and
communicated to the management of the Company, including their respective
principal executive officers and principal financial officers, as appropriate,
to allow timely decisions regarding required disclosure to be made;

III.
Accounting Controls Disclosure. Except as
otherwise disclosed in the Prospectus, since the date of the most recent balance
sheet of the Company and its consolidated subsidiaries reviewed or audited by
Deloitte & Touche LLP and the audit committee of the board of directors of
the Company, (i) the Company has not identified (A) any significant
deficiencies in the design or operation of internal controls that could
adversely affect the ability of the Company and each of its subsidiaries to
record, process, summarize and report financial data, or any material weaknesses
in internal controls, other than those disclosed in the Registration Statement
and the Prospectus and (B) any fraud, whether or not material, that involves
management or other employees who have a significant role in the internal
controls of the Company and each of its subsidiaries, and (ii) since that date,
there have been no significant changes in internal controls or in other factors
that could significantly affect internal controls, including any corrective
actions with regard to significant deficiencies and material
weaknesses.

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4.  Further
Agreements of the Company.   The Company covenants and agrees with
each Underwriter that:

(a) Effectiveness
of the Registration Statement. The
Company will use its reasonable best efforts to cause the Registration Statement
to become effective at the earliest possible time and, if required, will file
the final Prospectus with the Commission within the time periods specified by
Rule 424(b) and Rule 430A under the Securities Act and to file promptly all
reports and any definitive proxy or information statements required to be filed
by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of the Prospectus and for so long as
the delivery of a prospectus is required in connection with the offering or sale
of the Shares; and the Company will furnish copies of the Prospectus to the
Underwriters, on the business day next succeeding the date of this Agreement in
such quantities as the Representative may reasonably request.

(b) Delivery
of Copies. The
Company will deliver, without charge, (i) to the Representative, four signed
copies of the Registration Statement as originally filed and each amendment
thereto, in each case including all exhibits and consents filed therewith and
documents incorporated by reference therein; and (ii) to each Underwriter (A) a
conformed copy of the Registration Statement as originally filed and each
amendment thereto (without exhibits) and (B) during the Prospectus Delivery
Period, as many copies of the Prospectus (including all amendments and
supplements thereto and documents incorporated by reference therein) as the
Representative may reasonably request. As used herein, the term “Prospectus
Delivery Period” means such period of time after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters a
prospectus relating to the Shares is required by law to be delivered in
connection with sales of the Shares by any Underwriter or dealer.

(c) Amendments
or Supplements. Before
filing any amendment or supplement to the Registration Statement or the
Prospectus, whether before or after the time that the Registration Statement
becomes effective, the Company will furnish to the Representative and counsel
for the Underwriters a copy of the proposed amendment or supplement for review
and will not file any such proposed amendment or supplement to which the
Representative reasonably objects unless such amendment or supplement is
required to be made or distributed by applicable provisions of the U.S. federal
securities laws.

(d) Notice
to the Representative. The
Company will advise the Representative promptly, and confirm such advice in
writing, (i) when the Registration Statement has become effective; (ii) when any
amendment to the Registration Statement has been filed or becomes effective;
(iii) when any supplement to the Prospectus or any amendment to the Prospectus
has been filed; (iv) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or the
receipt of any comments from the Commission relating to the Registration
Statement or any other request by the Commission for any additional information;
(v) of the issuance by the Commission of any order suspending the effectiveness
of the Registration Statement or preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or the initiation or threatening of any
proceeding for that purpose; (vi) of the occurrence of any event within the
Prospectus Delivery Period as a result of which the Prospectus as then amended
or supplemented would include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances existing when the Prospectus is delivered to a
purchaser, not misleading; and (vii) of the receipt by the Company of any notice
with respect to any suspension of the qualification of the Shares for offer and
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose; and the Company will use its best efforts to prevent the issuance
of any such order suspending the effectiveness of the Registration Statement,
preventing or suspending the use of any Preliminary Prospectus or the Prospectus
or suspending any such qualification of the Shares and, if any such order is
issued, will use its best efforts to obtain as soon as possible the withdrawal
thereof.

13

(e) Ongoing
Compliance of the Prospectus. If
during the Prospectus Delivery Period, as set out in the Securities Act, (i) any
event shall occur or condition shall exist as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances
existing when the Prospectus is delivered to a purchaser, not misleading or (ii)
it is necessary to amend or supplement the Prospectus to comply with law, the
Company will promptly notify the Underwriters thereof and forthwith prepare and,
subject to paragraph (c) above, file with the Commission and furnish to the
Underwriters and to such dealers as the Representative may designate, such
amendments or supplements to the Prospectus as may be necessary so that the
statements in the Prospectus as so amended or supplemented will not, in the
light of the circumstances existing when the Prospectus is delivered to a
purchaser, be misleading or so that the Prospectus will comply with
law.

(f) Blue
Sky Compliance. The
Company will qualify the Shares for offer and sale under the securities or Blue
Sky laws of such jurisdictions as the Representative shall reasonably request
and will continue such qualifications in effect so long as required for
distribution of the Shares provided that
neither the Company nor any of the Guarantors shall be required to (i) qualify
as a foreign corporation or other entity or as a dealer in securities in any
such jurisdiction where it would not otherwise be required to so qualify, (ii)
file any general consent to service of process in any such jurisdiction or (iii)
subject itself to taxation in any such jurisdiction if it is not otherwise so
subject.

(g) Earning
Statement. The
Company will make generally available to its security holders and the
Representative as soon as practicable an earning statement that satisfies the
provisions of Section 11(a) of the Securities Act and Rule 158 of the Commission
promulgated thereunder covering a period of at least twelve months beginning
with the first fiscal quarter of the Company occurring after the “effective
date” (as defined in Rule 158) of the Registration Statement.

(h) Clear
Market. For a
period of 90 days after the date of the initial public offering of the Shares,
the Company will not (i) offer, pledge, announce the intention to sell, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, any shares of Stock or any
securities convertible into or exercisable or exchangeable for Stock or (ii)
enter into any swap or other agreement that transfers, in whole or in part, any
of the economic consequences of ownership of the Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Stock or such other securities, in cash or otherwise, without the prior
written consent of the Representative, other than the Shares to be sold
hereunder and any shares of Stock of the Company issued under the Company’s 1995
Amended Stock Option Plan.

14

(i) Use
of Proceeds. The
Company will apply the net proceeds from the sale of the Shares as described in
the Prospectus under the heading “Use of Proceeds”.

(j) No
Stabilization. The
Company will not take, directly or indirectly, any action designed to or that
could reasonably be expected to cause or result in any stabilization or
manipulation of the price of the Shares.

(k) Exchange
Listing. The
Company will use its best efforts to list for quotation the Shares on the
National Association of Securities Dealers Automated Quotations National Market
(the “Nasdaq National Market”).

5.  Conditions
of Underwriters' Obligations. The obligation of each Underwriter to purchase
the Underwritten Shares on the Closing Date or the Option Shares on the
Additional Closing Date, as the case may be as provided herein is subject to the
performance by the Company of its covenants and other obligations hereunder and
to the following additional conditions:

(a) Registration
Compliance; No Stop Order. The
Registration Statement (or if a post-effective amendment thereto is required to
be filed under the Securities Act, such post-effective amendment) shall have
become effective, and the Representative shall have received notice thereof, not
later than 5:00 P.M., New York City time, on the date hereof; no order
suspending the effectiveness of the Registration Statement shall be in effect,
and no proceeding for such purpose shall be pending before or to the Company’s
knowledge threatened by the Commission; the Prospectus shall have been timely
filed with the Commission under the Securities Act and in accordance with
Section 4(a) hereof; and all requests by the Commission for additional
information shall have been complied with to the reasonable satisfaction of the
Representative.

(b) Representations
and Warranties. The
representations and warranties of the Company contained herein shall be true and
correct on the date hereof and on and as of the Closing Date or the Additional
Closing Date, as the case may be; and the statements of the Company and its
officers made in any certificates delivered pursuant to this Agreement shall be
true and correct on and as of the Closing Date or the Additional Closing Date,
as the case may be and the Company has complied with all agreements and all
conditions to be performed or satisfied on their part hereunder at or prior to
the Closing Date.

(c) No
Downgrade.
Subsequent to the execution and delivery of this Agreement, (i) no downgrading,
which shall include imposing a condition on the Company retaining any rating
assigned to the Company, shall have occurred in the rating accorded to any
securities or preferred stock issued or guaranteed by the Company or any of the
Guarantors by Moody’s Investor Services, Inc. (“Moody’s”) or
Standard & Poors, a part of The McGraw-Hill Companies, Inc. (“S&P”) or
any other “internationally recognized statistical rating organization,” as such
term is defined by the Commission for purposes of Rule 436(g)(2) under the
Securities Act and (ii) no such organization shall have publicly announced that
it has under surveillance or review, or has changed its outlook with respect to,
its rating of any other debt securities or preferred stock issued or guaranteed
by the Company or any of its subsidiaries (other than an announcement with
positive implications of a possible upgrading).

15

(d) No
Material Adverse Change.
Subsequent to the execution and delivery of this Agreement, no event or
condition of a type described in Section 3(e) hereof shall have occurred or
shall exist, which event or condition is not described in the Prospectus
(excluding any amendment or supplement thereto) and the effect of which in the
sole judgment of the Representative makes it impracticable or inadvisable to
proceed with the offering, sale or delivery of the Shares on the Closing Date or
the Additional Closing Date, as the case may be, on the terms and in the manner
contemplated by this Agreement and the Prospectus.

(e) Officer's
Certificate. The
Representative shall have received on and as of the Closing Date or the
Additional Closing Date, as the case may be, a certificate of the chief
financial officer or chief accounting officer of the Company and one additional
senior executive officer of the Company who is satisfactory to the
Representative (i) confirming that such officers have carefully reviewed the
Registration Statement and the Prospectus and, to the best knowledge of such
officers, the representation set forth in Section 3(b) hereof is true and
correct, (ii) confirming that the other representations and warranties of the
Company in this Agreement are true and correct and that the Company has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to such Closing Date and (iii) to the effect set
forth in paragraphs (a), (c) and (d) above.

(f) Comfort
Letters. On the
date of this Agreement and on the Closing Date or the Additional Closing Date,
as the case may be, Deloitte & Touche LLP and KPMG Ceska Republika, s.r.o.
shall have furnished to the Representative, at the request of the Company,
letters, dated the respective dates of delivery thereof and addressed to the
Underwriters, in form and substance reasonably satisfactory to the
Representative, containing statements and information of the type customarily
included in accountants’ “comfort letters” to underwriters with respect to the
financial statements and certain financial information contained or incorporated
by reference in the Registration Statement and the Prospectus; provided, that
the letter delivered on the Closing Date or the Additional Closing Date, as the
case may be shall use a “cut-off” date no more than three business days prior to
such Closing Date or such Additional Closing Date, as the case may
be.

(g) Opinion
of Counsel for the Company. Each of
Katten Muchin Zavis Rosenman, U.S. counsel for the Company Conyers Dill &
Pearman, Bermuda counsel for the Company, and Daniel Penn, Esq., general counsel
to the Company, shall have furnished to the Representative, at the request of
the Company, their written opinion, dated the Closing Date or the Additional
Closing Date, as the case may be, and addressed to the Underwriters, in form and
substance reasonably satisfactory to the Representative. Such opinions of
counsel shall not contain any statement purporting to limit the liability of
such counsel with respect to such opinion or specify that any such liability
must be adjudicated by a court in the jurisdiction of such counsel or, to the
extent that the laws of the jurisdiction of such counsel provide for any
limitation or forum of adjudication, such opinion shall expressly waive such
provisions to the fullest extent permitted by applicable law.

(h) Opinion
of Counsel for the Underwriters. The
Representative shall have received on and as of the Closing Date or the
Additional Closing Date, as the case may be, an opinion of Simpson Thacher &
Bartlett LLP, counsel for the Underwriters, with respect to such matters as the
Representative may reasonably request, and such counsel shall have received such
documents and information as they may reasonably request to enable them to pass
upon such matters.

16

(i) No
Legal Impediment to Issuance. No
action shall have been taken and no statute, rule, regulation or order shall
have been enacted, adopted or issued by any federal, state or foreign
governmental or regulatory authority that would, as of the Closing Date or the
Additional Closing Date, as the case may be, prevent the issuance or sale of the
Shares; and no injunction or order of any federal, state or foreign court shall
have been issued that would, as of the Closing Date or the Additional Closing
Date, as the case may be, prevent the issuance or sale of the
Shares.

(j) Good
Standing. The
Representative shall have received on and as of the Closing Date or the
Additional Closing Date, as the case may be, satisfactory evidence of, where
applicable, the good standing of the Company and its subsidiaries listed in
Schedule 2 to this Agreement in their respective jurisdictions of organization
and their good standing as foreign entities in such other jurisdictions as the
Representative may reasonably request, in each case in writing or any standard
form of telecommunication from the appropriate Governmental Authorities of such
jurisdictions.

(k) Acquisition. On the
Closing Date, the Underwriters shall have received confirmation from the Company
that the acquisition of the TV Nova Group has been consummated on the terms and
in all material respects as contemplated by the Framework
Agreement.

(l) Exchange
Listing. The
Shares to be delivered on the Closing Date or Additional Closing Date, as the
case may be, shall have been approved for listing on NASDAQ.

(m) Lock-up
Agreements. The
“lock-up” agreements, each substantially in the form of Exhibit A hereto,
between you and certain officers and directors of the Company relating to sales
and certain other dispositions of shares of Stock or certain other securities,
delivered to you on or before the Closing Date, shall be full force and effect
on the Closing Date or Additional Closing Date, as the case may be.

(n) Transaction
Documents. On the
Closing Date, the Transaction Documents (in the form reasonably satisfactory to
the Representative) shall have been duly and validly executed and delivered by
the Company.

(o) Additional
Documents. On or
prior to the Closing Date or the Additional Closing Date, as the case may be,
the Company shall have furnished to the Representative such further certificates
and documents as the Representative may reasonably request.

All
opinions, letters, certificates and evidence mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Underwriters.

6.  Indemnification
and Contribution.  (a) Indemnification
of the Underwriters. The
Company agrees to indemnify and hold harmless each Underwriter, its affiliates,
directors and officers and each person, if any, who controls such Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, legal fees and other expenses
incurred in connection with any suit, action or proceeding or any claim
asserted, as such fees and expenses are incurred), joint or several, that arise
out of, or are based upon, any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus (or any
amendment or supplement thereto) or any Preliminary Prospectus, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except
insofar as such losses, claims, damages or liabilities arise out of, or are
based upon, any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with any information relating
to any Underwriter furnished to the Company in writing by such Underwriter
through the Representative expressly for use therein, it being understood and
agreed that the only such information furnished by any Underwriter consists of
the information described as such in subsection (b) below provided, that with
respect to any such untrue statement or alleged untrue statement in or omission
from any Preliminary Prospectus, the indemnity agreement contained in this
paragraph (a) shall not inure to the benefit of any Underwriter to the extent
that the sale to the person asserting of any such loss, claim, damage or
liability was an initial resale by such Underwriter and any such loss, claim,
damage or liability of or with respect to such Underwriter results from the fact
that both (i) to the extent required by applicable law, a copy of the Prospectus
was not sent or given to such person at or prior to the written confirmation of
the sale of such Shares to such person and (ii) the untrue statement in or
omission from such Preliminary Prospectus was corrected in the Prospectus and
the timely delivery of such corrected Prospectus would have constituted a
complete defense to the claim asserted by such person unless, in either case,
such failure to deliver the Prospectus was a result of non-compliance by the
Company with the provisions of Section 4(b) hereof, including the failure by the
Company to furnish the Underwriters copies of the corrected Prospectus in
requisite quantities and sufficiently in advance to permit delivery of such
corrected Prospectus to such person at or prior to the written confirmation of
the sale of the Shares.

 

17

 

(b) Indemnification
of the Company. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, its directors, its officers who signed the Registration Statement
and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent as
the indemnity set forth in paragraph (a) above, but only with respect to any
losses, claims, damages or liabilities that arise out of, or are based upon, any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with any information relating to such
Underwriter furnished to the Company in writing by such Underwriter through the
Representative expressly for use in the Registration Statement and the
Prospectus (or any amendment or supplement thereto) or any Preliminary
Prospectus, it being understood and agreed upon that the only such information
furnished by any Underwriter consists of the following information in the
Prospectus furnished on behalf of each Underwriter: the statements set forth in
the third, eighth, ninth, tenth, eleventh and twelfth paragraphs under the
heading “Underwriting”.

(c) Notice
and Procedures. If any
suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person
in respect of which indemnification may be sought pursuant to either paragraph
(a) or (b) above, such person (the “Indemnified Person”) shall promptly notify
the person against whom such indemnification may be sought (the “Indemnifying
Person”) in writing; provided that the
failure to notify the Indemnifying Person shall not relieve it from any
liability that it may have under this Section 6 except to the extent that it has
been materially prejudiced (through the forfeiture of substantive rights or
defenses) by such failure; and provided, further, that the failure to notify the
Indemnifying Person shall not relieve it from any liability that it may have to
an Indemnified Person otherwise than under this Section 6. If any such
proceeding shall be brought or asserted against an Indemnified Person and it
shall have notified the Indemnifying Person thereof, the Indemnifying Person
shall be entitled to participate in, and assume the defense of, such proceeding
with counsel reasonably satisfactory to the Indemnified Person and shall pay the
fees and expenses of such counsel related to such proceeding, as incurred. In
any such proceeding, any Indemnified Person shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Person unless (i) the Indemnifying Person and the
Indemnified Person shall have mutually agreed to the contrary; (ii) the
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person
shall have reasonably concluded that there may be legal defenses available to it
that are different from or in addition to those available to the Indemnifying
Person; or (iv) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood and agreed that the Indemnifying Person shall not, in connection with
any proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and expenses shall
be paid or reimbursed as they are incurred provided that the Indemnifying Person
shall be reimbursed for such fees and expenses if such Indemnified Person is not
found liable by final non-appealable judgment and the Indemnified Person has
actually received reimbursement for such fees and expenses from a third party.
Any such separate firm for any Underwriter, its affiliates, directors and
officers and any control persons of such Underwriter shall be designated in
writing by J.P. Morgan Securities Ltd. and any such separate firm for the
Company, its directors, its officers who signed the Registration Statement and
any control persons of the Company shall be designated in writing by the
Company. The Indemnifying Person shall not be liable for any settlement of any
proceeding effected without its written consent. Notwithstanding the foregoing
sentence, if at any time an Indemnified Person shall have requested that an
Indemnifying Person reimburse the Indemnified Person for fees and expenses of
counsel as contemplated by this paragraph, the Indemnifying Person shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by the
Indemnifying Person of such request and (ii) the Indemnifying Person shall not
have reimbursed the Indemnified Person in accordance with such request prior to
the date of such settlement. No Indemnifying Person shall, without the written
consent of the Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or has been
a party and indemnification has been sought hereunder by such Indemnified
Person, unless such settlement (x) includes an unconditional release of such
Indemnified Person, in form and substance reasonably satisfactory to such
Indemnified Person, from all liability on claims that are the subject matter of
such proceeding and (y) does not include any statement as to or any admission of
fault, culpability or a failure to act by or on behalf of any Indemnified
Person.

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(d) Contribution. If the
indemnification provided for in paragraphs (a) and (b) above is unavailable to
an Indemnified Person or insufficient in respect of any losses, claims, damages
or liabilities referred to therein, then each Indemnifying Person under such
paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other from the offering of the Shares or (ii)
if the allocation provided by clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) but also the relative fault of the Company on the one
hand and the Underwriters on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other shall be deemed
to be in the same respective proportions as the net proceeds (before deducting
expenses) received by the Company from the sale of the Shares and the total
underwriting discounts and commissions received by the Underwriters in
connection therewith, in each case as set forth in the table on the cover of the
Prospectus, bear to the aggregate offering price of the Shares. The relative
fault of the Company on the one hand and the Underwriters on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.

19

(e) Limitation
on Liability. The
Company and the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 6 were determined by pro rata allocation
(even if the Underwriters 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 paragraph (d) above. The amount paid or payable by
an Indemnified Person as a result of the losses, claims, damages and liabilities
referred to in paragraph (d) above shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
Indemnified Person in connection with any such action or claim. Notwithstanding
the provisions of this Section 6, in no event shall an Underwriter be required
to contribute any amount in excess of the amount by which the total underwriting
discounts and commissions received by such Underwriter with respect to the
offering of the Shares exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 6 are several in proportion to their respective
purchase obligations hereunder and not joint.

(f) Non-Exclusive
Remedies. The
remedies provided for in this Section 6 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any Indemnified
Person at law or in equity.

7.  Effectiveness
of Agreement.   This Agreement shall become effective upon the
later of (i) the execution and delivery hereof by the parties hereto and (ii)
receipt by the Company and the Representative of notice of the effectiveness of
the Registration Statement (or, if applicable, any post-effective amendment
thereto).

8.  Termination.  
This Agreement may be terminated in the absolute discretion of the
Representative, by notice to the Company, if after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on the New York Stock Exchange, the London
Stock Exchange or the over-the-counter market, (ii) trading of any securities
issued or guaranteed by the Company or any of the Guarantors shall have been
suspended on any exchange or in any over-the-counter market, (iii) a general
moratorium on commercial banking activities shall have been declared by U.S.
Federal or New York State authorities or by the competent governmental or
regulatory authorities in the United Kingdom, (iv) there shall have occurred any
outbreak or escalation of hostilities or acts of terrorism or any change in
financial markets or any calamity, crisis, or emergency either within or outside
the United States that, in the judgment of the Representative, is material and
adverse and makes it impracticable or inadvisable to proceed with the offering,
sale or delivery of the Notes on the terms and in the manner contemplated by
this Agreement and the Offering Memorandum or (v) exchange controls shall have
been imposed by the United States or the United Kingdom.

20

9.  Defaulting
Underwriter.   (b) If, on
the Closing Date or the Additional Closing Date, as the case may be, any
Underwriter defaults on its obligation to purchase the Shares that it has agreed
to purchase hereunder on such date, the non-defaulting Underwriters may in their
discretion arrange for the purchase of such Shares by other persons satisfactory
to the Company on the terms contained in this Agreement. If, within 36 hours
after any such default by any Underwriter, the non-defaulting Underwriters do
not arrange for the purchase of such Shares, then the Company shall be entitled
to a further period of 36 hours within which to procure other persons
satisfactory to the non-defaulting Underwriters to purchase such Shares on such
terms. If other persons become obligated or agree to purchase the Shares of a
defaulting Underwriter, either the non defaulting Underwriters or the Company
may postpone the Closing Date or the Additional Closing Date, as the case may
be, for up to five full business days in order to effect any changes that in the
opinion of counsel for the Company or counsel for the Underwriters may be
necessary in the Registration Statement and the Prospectus or in any other
document or arrangement, and the Company agrees to promptly prepare any
amendment or supplement to the Registration Statement and the Prospectus that
effects any such changes. As used in this Agreement, the term “Underwriter”
includes, for all purposes of this Agreement unless the context otherwise
requires, any person not listed in Schedule 1 hereto that, pursuant to this
Section 9, purchases Shares that a defaulting Underwriter agreed but failed to
purchase.

(b) If, after
giving effect to any arrangements for the purchase of the Shares of a defaulting
Underwriter or Underwriters by the non-defaulting Underwriters and the Company
as provided in paragraph (a) above, the aggregate number of Shares that remain
unpurchased on the Closing Date or the Additional Closing Date, as the case may
be does not exceed one-eleventh of the aggregate number of Shares to be
purchased on such date, then the Company shall have the right to require each
non-defaulting Underwriter to purchase the number of Shares that such
Underwriter agreed to purchase hereunder on such date plus such Underwriter’s
pro rata share (based on the number of Shares that such Underwriter agreed to
purchase on such date) of the Shares of such defaulting Underwriter or
Underwriters for which such arrangements have not been made.

(c) If, after
giving effect to any arrangements for the purchase of the Shares of a defaulting
Underwriter or Underwriters by the non-defaulting Underwriters and the Company
as provided in paragraph (a) above, the aggregate number of Shares that remain
unpurchased on the Closing Date or the Additional Closing Date, as the case may
be, exceeds one-eleventh of the aggregate amount of Shares to be purchased on
such date, or if the Company shall not exercise the right described in paragraph
(b) above, then this Agreement or, with respect to any Additional Closing Date,
the obligation of the Underwriters to purchase Shares on the Additional Closing
Date, as the case may be shall terminate without liability on the part of the
non-defaulting Underwriters. Any termination of this Agreement pursuant to this
Section 9 shall be without liability on the part of the Company, except that the
Company will continue to be liable for the payment of expenses as set forth in
Section 10 hereof and except that the provisions of Section 6 hereof shall not
terminate and shall remain in effect.

21

(d) Nothing
contained herein shall relieve a defaulting Underwriter of any liability it may
have to the Company or any non-defaulting Underwriter for damages caused by its
default.

10.  Payment
of Expenses.   (c) Whether
or not the transactions contemplated by this Agreement are consummated or this
Agreement is terminated, the Company will pay or cause to be paid all costs and
expenses incident to the performance of its obligations hereunder, including
without limitation, (i) the costs incident to the authorization, issuance, sale,
preparation and delivery of the Shares and any taxes payable in that connection;
(ii) the costs incident to the preparation, printing and filing under the
Securities Act of the Registration Statement, the Preliminary Prospectus and the
Prospectus (including all exhibits, amendments and supplements thereto) and the
distribution thereof; (iii) the costs of reproducing and distributing each of
the Transaction Documents; (iv) the fees and expenses of the Company's counsel
and independent accountants; (v) the fees and expenses incurred in connection
with the registration or qualification and determination of eligibility for
investment of the Shares under the laws of such jurisdictions as the
Representative may designate and the preparation, printing and distribution of a
Blue Sky Memorandum (including the related fees and expenses of counsel for the
Underwriters); (vi) the cost of preparing stock certificates; (vii) the costs
and charges of any transfer agent and any registrar; (viii) all expenses and
application fees incurred in connection with any filing with, and clearance of
the offering by, the National Association of Securities Dealers, Inc.; (ix) all
expenses incurred by the Company in connection with any “road show” presentation
to potential investors; and (x) all expenses and application fees related to the
listing of the Shares on the NASDAQ Market.

(b) If (i)
this Agreement is terminated pursuant to Section 8, (ii) the Company for any
reason fails to tender the Shares for delivery to the Underwriters or (iii) the
Underwriters decline to purchase the Shares for any reason permitted under this
Agreement, the Company agrees to reimburse the Underwriters for all
out-of-pocket costs and expenses (and in case of (ii) and (iii) including the
fees and expenses of their counsel) reasonably incurred by the Underwriters in
connection with this Agreement and the offering contemplated
hereby.

11.  Persons
Entitled to Benefit of Agreement.   This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and the officers and directors and any controlling persons referred
to in Section 6 hereof. Nothing in this Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein. No
purchaser of Shares from any Underwriter shall be deemed to be a successor
merely by reason of such purchase.

12.  Survival.  
The respective indemnities, rights of contribution, representations, warranties
and agreements of the Company and the Underwriters contained in this Agreement
or made by or on behalf of the Company or the Underwriters pursuant to this
Agreement or any certificate delivered pursuant hereto shall survive the
delivery of and payment for the Shares and shall remain in full force and
effect, regardless of any termination of this Agreement or any investigation
made by or on behalf of the Company or the Underwriters.

22

13.  Certain
Defined Terms.   For purposes of this Agreement, (a) except where
otherwise expressly provided, the term "affiliate" has the meaning set forth in
Rule 405 under the Securities Act; (b) the term "business day" means any day
other than a day on which banks are permitted or required to be closed in New
York City; and (c) the term "subsidiary" has the meaning set forth in Rule 405
under the Securities Act. 

14.  Miscellaneous.  
(d) Authority
of the Representative. Any
action by the Underwriters, except any action in relation to the lock up
agreements entered in to by the Company’s directors and executive officers,
hereunder may be taken by J.P. Morgan Securities Ltd. on behalf of the
Underwriters, and any such action taken by J.P. Morgan Securities Ltd. shall be
binding upon the Underwriters. 

(b) Notices. All
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed or transmitted and confirmed by any
standard form of telecommunication. Notices to the Underwriters shall be given
to the Representative J.P. Morgan Securities Ltd., 10 Aldermanbury, London EC2V
7RF (fax: +44 (0) 207 325 8168; Attention: Equity Capital Markets
Syndicate Desk); with a copy to Simpson Thacher & Bartlett LLP, CityPoint,
One Ropemaker Street, London EC2Y 9HU, England (fax: +44 (0) 207 275
6502, Attention: Walter Looney, Esq.) Notices to the Company shall be given to
it in care of CME Development Corporation, 8th Floor,
Aldwych House, 71-91 Aldwych, London WC2B 4HN, England, (fax: +44 (0) 207 430
5403; Attention: Daniel Penn, Esq.); with a copy to Katten Muchin Zavis
Rosenman, 575 Madison Avenue, New York, NY 10022, USA (fax: +1 212 940 8776;
Attention: Robert L. Kohl, Esq.)

(c) Submission
to Jurisdiction. The
Company irrevocably submits to the non-exclusive jurisdiction of any U.S.
Federal or New York State court in the Borough of Manhattan in the City, County
and State of New York, United States of America, in any legal suit, action or
proceeding based on or arising under this Agreement and agrees that all claims
in respect of such suit or proceeding may be determined in any such court. The
Company irrevocably waives the defense of an inconvenient forum or objections to
personal jurisdiction with respect to the maintenance of such legal suit, action
or proceeding. To the extent permitted by law, the Company hereby waives any
objections to the enforcement by any competent court in Bermuda of any judgment
validly obtained in any such court in New York on the basis of any such legal
suit, action or proceeding. The Company has appointed CT Corporation System (the
“Authorized
Agent”) as its
authorized agent upon whom process may be served in any such legal suit, action
or proceeding. Such appointment shall be irrevocable. The Authorized Agent has
agreed to act as said agent for service of process and the Company agrees to
take any and all action, including the filing of any and all documents and
instruments, that may be necessary to continue such appointment in full force
and effect as aforesaid. The Company further agrees that service of process upon
the Authorized Agent and written notice of said service to the Company shall be
deemed in every respect effective service of process upon the Company in any
such legal suit, action or proceeding. Nothing herein shall affect the right of
any Initial Purchaser or any person controlling any Initial Purchaser to serve
process in any other manner permitted by law. The provisions of this Section
13(b) are intended to be effective upon the execution of this Agreement without
any further action by the Company and the introduction of a true copy of this
Agreement into evidence shall be conclusive and final evidence as to such
matters.

23

(d) Waiver
of Immunity. To the
extent the Company or any of its properties, assets or revenues may have or may
hereafter become entitled to, or has attributed to it, any right of immunity, on
the grounds of sovereignty or otherwise, from any legal action, suit or
proceeding, from the giving of any relief in any such legal action, suit or
proceeding, from set-off or counterclaim, from the competent jurisdiction of any
court, from service of process, from attachment upon or prior to judgment, from
attachment in aid of execution of judgment, or from execution of judgment, or
other legal process or proceeding for the giving of any relief or for the
enforcement of any judgment, in any competent jurisdiction in which proceedings
may at any time be commenced, with respect to its obligations, liabilities or
any other matter under or arising out of or in connection with this Agreement,
any of the Transaction Documents or any of the transactions contemplated hereby
or thereby, the Company hereby irrevocably and unconditionally waives, and
agrees not to plead or claim, any such immunity and consent to such relief and
enforcement.

(e) Currency. Any
payment on account of an amount that is payable to the Underwriters in a
particular currency (the “Required
Currency”) that
is paid to or for the account of the Underwriters in lawful currency of any
other jurisdiction (the “Other
Currency”),
whether as a result of any judgment or order or the enforcement thereof or the
liquidation of the Company or for any other reason shall constitute a discharge
of the obligation of such obligor only to the extent of the amount of the
Required Currency which the recipient could purchase in the New York or London
foreign exchange markets with the amount of the Other Currency in accordance
with normal banking procedures at the rate of exchange prevailing on the first
day (other than a Saturday or Sunday) on which banks in New York or London are
generally open for business following receipt of the payment first referred to
above. If the amount of the Required Currency that could be so purchased (net of
all premiums and costs of exchange payable in connection with the conversion) is
less than the amount of the Required Currency originally due to the recipient,
then the Company shall jointly and severally indemnify and hold harmless the
recipient from and against all loss or damage arising out of or as a result of
such deficiency. This indemnity shall constitute an obligation separate and
independent from the other obligations of the Company, shall give rise to a
separate and independent cause of action, shall apply irrespective of any
indulgence granted by any person owed such obligation from time to time and
shall continue in full force and effect notwithstanding any judgment or order
for a liquidated sum in respect of an amount due hereunder or any judgment or
order.

(f) Governing
Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York.

(g) Counterparts. This
Agreement may be signed in counterparts (which may include counterparts
delivered by any standard form of telecommunication), each of which shall be an
original and all of which together shall constitute one and the same
instrument.

(h) Amendments
or Waivers. No
amendment or waiver of any provision of this Agreement, nor any consent or
approval to any departure therefrom, shall in any event be effective unless the
same shall be in writing and signed by the parties hereto.

(i) Headings. The
headings herein are included for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of, this
Agreement.

24

If the
foregoing is in accordance with your understanding, please indicate your
acceptance of this Agreement by signing in the space provided
below.

	 	
      Very
      truly yours,

	 	 
	 	
      Central
      European Media Enterprises Ltd

	 	 
	 	 
	 	
      By:
      _______________________

	 	
            
      Title:

	 	 
	 	 
	
      Accepted:
      April 28, 2005
	 
	 	 
	
      J.P.
      MORGAN SECURITIES LTD.
	 
	 	 
	
      By:
      ___________________________
	 
	
            
      Authorized
      Signatory
	 
	 	 
	 	 
	 	 
	
      LEHMAN
      BROTHERS INC.
	 
	 	 
	 	 
	
      By:
      ___________________________
	 
	
            
      Authorized Signatory 
	 
	 	 
	 	 
	 	 
	
      ING
      BANK N.V., LONDON BRANCH
	 
	 	 
	 	 
	
      By:
      ___________________________
	 
	
            
      Authorized Signatory 
	 

 

 

Schedule
1

 

	Underwriter
	Number
      of Shares

	 	 
	
      J.P.
      Morgan Securities Ltd..
	
      1,882,350

	
      Lehman
      Brothers International (Europe) 
	
      1,464,050

	
      ING
      Bank N.V., London Branch
	
      836,600

	
      Think
      Equity Partners LLC
	
                         
      517,000

	
      Total
	
      
      4,700,000

 

 

Schedule
2

Subsidiaries
of the Company

 

	
      Company

       
	
      Jurisdiction
      of Organization

	
      Media
      Pro International S.A.
	
      Romania

	
      Media
      Vision S.R.L.
	
      Romania

	
      MPI
      Romania B.V.
	
      Netherlands

	
      Pro
      TV S.A.
	
      Romania

	
      Radio
      Pro S.R.L.
	
      Romania

	
      International
      Media Services Ltd.
	
      Bermuda

	
      Innova
      Film GmbH
	
      Germany

	
      Enterprise
      “Inter-Media”
	
      Ukraine

	
      TV
      Media Planet Ltd.
	
      Cyprus

	
      Broadcasting
      Company “Studio 1+1”
	
      Ukraine

	
      Slovenska
      Televizna Spolocnost s.r.o.
	
      Slovak
      Republic

	
      Markiza-Slovakia,
      Spol. S.r.o.
	
      Slovak
      Republic

	
      Gamatex
      s.r.o.
	
      Slovak
      Republic

	
      ADAM
      a.s.
	
      Slovak
      Republic

	
      MM
      TV 1 d.o.o.
	
      Slovenia

	
      Produkcija
      Plus d.o.o.
	
      Slovenia

	
      POP
      TV d.o.o.
	
      Slovenia

	
      Kanal
      A d.o.o.
	
      Slovenia

	
      MTC
      Holding d.o.o.
	
      Slovenia

	
      Nova
      TV d.d.
	
      Croatia

	
      Operativna
      Kompanija d.o.o.
	
      Croatia

	
      Media
      House d.o.o.
	
      Croatia

	
      CME
      Media Enterprises B.V.
	
      Netherlands

	
      CME
      Czech Republic B.V.
	
      Netherlands

	
      CME
      Czech Republic II B.V.
	
      Netherlands

	
      CME
      Germany B.V.
	
      Netherlands

	
      CME
      Hungary B.V.
	
      Netherlands

	
      CME
      Poland B.V.
	
      Netherlands

	
      CME
      Romania B.V.
	
      Netherlands

	
      CME
      Ukraine Holding GmbH
	
      Austria

	
      CME
      Cyprus Holding Ltd.
	
      Cyprus

	
      CME
      Germany GmbH
	
      Germany

	
      CME
      Development Corporation
	
      USA

	
      Central
      European Media Enterprises N.V.
	
      Netherlands
      Antilles

	
      Central
      European Media Enterprises II B.V.
	
      Netherlands
      Antilles

 

  

 

EXHIBIT A

FORM OF
LOCK-UP AGREEMENT

May
[·],
2005

	
      J.P.
      Morgan Securities Ltd.
	 
	125 London
    Wall	 
	London EC2Y
    5AJ	 
	 	 
	Lehman Brothers
      Inc.	 
	745 Seventh
      Avenue	 
	New York, NY
      10019	 
	 	 
	ING Bank N.V. London
      Branch	 
	60 London
Wall	 
	London, EC2M
    5TQ	 
	 	 
	As Representatives of
      the several 	 
	Underwriters listed in
      Schedule I 	 
	to the Underwriting
      Agreement 	 
	referred to
    below	 

 

	
                     
      Re:
	
      Central
      European Media Enterprises Ltd.
      --- Public Offering

 

Ladies
and Gentlemen:

The
undersigned understands that you, as representatives of the several Underwriters
(the “Representatives”) propose to enter into an Underwriting Agreement (the
"Underwriting Agreement") with Central
European Media Enterprises Ltd., a Bermuda
corporation (the "Company"), providing for the public offering (the "Public
Offering") by the
several Underwriters named in Schedule I to the Underwriting Agreement (the
"Underwriters"), of Class A Common Stock, of the Company (the "Securities").
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Underwriting Agreement.

In
consideration of the Underwriters' agreement to purchase and make the Public
Offering of the Securities, and for other good and valuable consideration
receipt of which is hereby acknowledged, the undersigned hereby agrees that,
without the prior written consent of the Representatives (which may not be
unreasonably withheld), the undersigned will not, during the period ending 90
days after the date of the prospectus relating to the Public Offering (the
"Prospectus"), (1) offer, pledge, announce the intention to sell, contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Class A Common Stock,
$0.08 per share
par value, or Class B Common Stock, $0.08 per share
par value, of the Company (the "Common Stock") or any securities convertible
into or exercisable or exchangeable for Common Stock (including without
limitation, Common Stock which may be deemed to be beneficially owned by the
undersigned in accordance with the rules and regulations of the Securities and
Exchange Commission and securities which may be issued upon exercise of a stock
option or warrant) or (2) enter into any swap or other agreement that transfers,
in whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. In addition, the undersigned agrees that, without the prior written
consent of the Representatives, it will not, during the period ending
90 days
after the date of the Prospectus, make any demand for or exercise any right with
respect to, the registration of any shares of Common Stock or any security
convertible into or exercisable or exchangeable for Common Stock. 

  

 

EXHIBIT A

 

Notwithstanding
the foregoing, the undersigned may transfer Common Stock (i) without the prior
written consent of the Representatives pursuant to the laws of descent and
distribution, provided that the distributee or heir agrees to be bound in
writing by the restrictions set forth herein, or (ii) to any trust for the
direct or indirect benefit of the undersigned or the immediate family of the
undersigned, provided that the trustee of the trust agrees to be bound in
writing by the restrictions set forth herein, and provided further that any such
transfer shall not involve a disposition for value. For purposes of this Letter
Agreement, "immediate family" shall mean any relationship by blood, marriage or
adoption, not more remote than first cousin.

In
furtherance of the foregoing, the Company, and any duly appointed transfer agent
for the registration or transfer of the securities described herein, are hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this Letter Agreement. 

The
undersigned hereby represents and warrants that the undersigned has full power
and authority to enter into this Letter Agreement. All authority herein
conferred or agreed to be conferred and any obligations of the undersigned shall
be binding upon the successors, assigns, heirs or personal representatives of
the undersigned.

The
undersigned understands that, if the Underwriting Agreement does not become
effective, or if the Underwriting Agreement (other than the provisions thereof
which survive termination) shall terminate or be terminated prior to payment for
and delivery of the Common Stock to be sold thereunder, the undersigned shall be
released form all obligations under this Letter Agreement.

The
undersigned understands that the Underwriters are entering into the Underwriting
Agreement and proceeding with the Public Offering in reliance upon this Letter
Agreement.

 

  

 

EXHIBIT A

    This lock-up
agreement shall be governed by and construed in accordance with the laws of the
State of New York, without regard to the conflict of laws principles
thereof.

	 	
      Very
      truly yours,

	 	 
	 	
      [NAME
      OF STOCKHOLDER]

	 	 
	 	 
	 	 
	 	
      By:
      _______________________

	 	
            
      Name:

	 	
            
      Title:THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NEITHER THIS NOTE
NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAS BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER
ANY APPLICABLE STATE SECURITIES LAWS.  NEITHER THIS NOTE NOR THE SECURITIES
ISSUABLE UPON CONVERSION OF THIS NOTE MAY BE SOLD OR OTHERWISE TRANSFERRED OR
PLEDGED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE
REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS.

NO. ____                                                             $__________

                          HOUSTON AMERICAN ENERGY CORP.

               8.0% SUBORDINATED CONVERTIBLE NOTE DUE MAY 1, 2010

     Section 1.     General.

          FOR VALUE RECEIVED, Houston American Energy Corp., a Delaware
corporation (the "COMPANY"), hereby promises to pay to the order of_____________
_____________________, or its registered assigns (the "INVESTOR"), the principal
sum of ____________________________ DOLLARS AND ZERO CENTS ($_________), or such
lesser amount as shall then equal the outstanding principal amount hereof,
together with interest thereon at a rate equal to 8% (the "Interest Rate") per
annum, simple interest computed on the basis of the actual number of days
elapsed and a year of 360 days comprised of twelve 30 day months.  Unless
earlier redeemed in accordance with Section 2 or converted in accordance with
Section 5, all unpaid principal, together with any then unpaid and accrued
interest and other amounts payable hereunder, shall be due and payable on the
earlier of (i) May 1, 2010 (the "MATURITY DATE"); or (ii) when such amounts
become due and payable as a result of, and following, an Event of Default in
accordance with Section 3.  All payments required to be made hereunder, if any,
shall be made in such coin or currency of the United States of America as at the
time of payment shall be legal tender therein for the payment of public and
private debts.  Interest shall accrue on the unpaid balance of the principal
amount of this Note (without any compounding) from and including the date hereof
to, but excluding, the date on which the principal amount of this Note is paid
in full (or converted in accordance with Section 5 hereof) and shall be payable
on April 20 and October 20 of each year until the outstanding principal amount
hereof shall be paid in full, with the first such payment of interest being due
October 20, 2005.

          This is one of a duly authorized issue of notes (this note being
referred to as the "NOTE" and, collectively, all similar notes issued by the
Company pursuant to the Note Offering being referred to as the "NOTES") of the
Company in an anticipated aggregate principal amount of up to US$2,500,000 (the
"NOTE OFFERING").  Nothing herein shall restrict the ability of the Company to
either increase or decrease the aggregate principal amount of Notes offered in
the Note Offering.

                                        1
<PAGE>
     SECTION 2.     REDEMPTION.

          (a)     Redemption at Option of the Company.  At any time after May 1,
2007 and prior to the Maturity Date, the Company, at its sole election, may
redeem this Note, in whole or in part, upon giving at least two business days
prior written notice of intent to redeem, by paying to the Investor an amount
equal to (i) for redemptions occurring after May 1, 2007 and before January 1,
2008, 103% of the portion of this Note being redeemed, plus accrued and unpaid
interest on the portion of the Note being redeemed, (ii) for redemptions
occurring during calendar year 2008, 102% of the portion of this Note being
redeemed, plus accrued and unpaid interest on the portion of the Note being
redeemed, (iii) for redemptions occurring during calendar year 2009, 101% of the
portion of this Note being redeemed, plus accrued and unpaid interest on the
portion of the Note being redeemed, and (iv) for redemptions occurring during
calendar year 2010, 100% of the portion of this Note being redeemed, plus
accrued and unpaid interest on the portion of the Note being redeemed.  Except
as set forth above, the Company shall have no right to prepay the Note, in whole
or in part, prior to the Maturity Date.

          (b)     Redemption at Option of the Investor.  Prior to the Maturity
Date, the Investor, at its sole election, may require the Company to redeem this
Note (an "INVESTOR REDEMPTION"), in whole or in part, by providing written
notice to the Company (an "INVESTOR REDEMPTION NOTICE") of its election to cause
the Company to redeem this Note and the portion of the Note to be redeemed.  The
Company shall redeem the portion of the Note for which an Investor Redemption
Notice is provided by paying to the Investor, within ten business days following
receipt of such Investor Redemption Notice, an amount equal to 100% of the
portion of the Note to be redeemed, plus accrued and unpaid interest on the
portion of the Note to be redeemed; provided, however, that an Investor
Redemption Notice shall only be effective and the Company shall only be required
to carry out an Investor Redemption following the occurrence of one or more of
the following "DESIGNATED EVENTS":

               (i)    the acquisition by any person, including any syndicate or
     group deemed to be a "person" under Section 13(d)(3) of the Exchange Act,
     of beneficial ownership, directly or indirectly, through a purchase, merger
     or other acquisition transaction or series of purchases, mergers or other
     acquisition transactions of shares of the Company's capital stock entitling
     that person to exercise 50% or more of the total voting power of all shares
     of the Company's capital stock entitled to vote generally in elections of
     directors, other than any acquisition by (A) the Company, (B) any of the
     Company's subsidiaries, (C) any of the Company's employee benefit plans,
     (D) John F. Terwilliger or (E) any holders of Notes; or

               (ii)    one or more persons file a Statement on Schedule TO or a
     Statement on Schedule 13D (or any successors thereto) stating that they
     have become and actually are beneficial owners of voting stock representing
     more than 80%, in the aggregate, of the voting power of all of the
     Company's classes of voting stock entitled to vote generally in the
     election of the members of the Company's board of directors; or

               (iii)   the consolidation or merger of the Company with or into
     any other person, any merger of another person into the Company, or any
     conveyance, transfer, sale, lease or other disposition of all or
     substantially all of the Company's properties and assets to another person,
     other than:

                                        2
<PAGE>
                    (A)   any transaction: (i) that does not result in any
          reclassification, conversion, exchange or cancellation of outstanding
          shares of the Company's capital stock; and (ii) pursuant to which
          holders of the Company's capital stock immediately prior to such
          transaction have the right to exercise, directly or indirectly, 50% or
          more of the total voting power of all shares of the Company's capital
          stock entitled to vote generally in elections of directors of the
          continuing or surviving person immediately after giving effect to such
          issuance; or

                    (B)   any merger solely for the purpose of changing the
          Company's jurisdiction of incorporation and resulting in a
          reclassification, conversion or exchange of outstanding shares of
          common stock solely into shares of common stock of the surviving
          entity.

     Section 3.     Defaults.

     The occurrence of any of the following shall constitute an "EVENT OF
DEFAULT" under this Note:

          (a)     The Company shall fail to pay (i) when due any principal or
     interest payment hereof on the due date hereunder or (ii) any other payment
     required under the terms of this Note on the date due and such payment
     shall not have been made within five (5) days of Company's receipt of
     Investor's written notice to Company of such failure to pay; or

          (b)     The Company shall fail to observe or perform any other
     covenant, obligation, condition or agreement contained in this Note (other
     than those specified in Section 3(a)) and such failure shall continue for
     ten (10) days after written notice thereof is delivered to the Company; or

          (c)     Any representation, warranty, certificate, or other statement
     (financial or otherwise) made or furnished by or on behalf of the Company
     to the Investor in writing in connection with this Note, or as an
     inducement to the Investor to purchase this Note, shall be false,
     incorrect, incomplete or misleading in any material respect when made or
     furnished; or

          (d)     The Company shall (i) fail to make any payment when due under
     the terms of any bond, debenture, note or other evidence of indebtedness to
     be paid by the Company (excluding this Note, which default is addressed by
     Section 3(a) above, but including any other evidence of indebtedness of the
     Company to the Investor) and such failure shall continue beyond any period
     of grace provided with respect thereto, or (ii) default in the observance
     or performance of any other agreement, term or condition contained in any
     such bond, debenture, note or other evidence of indebtedness, and the
     effect of such failure or default is to cause, or permit the holder thereof
     to cause, indebtedness in an aggregate amount of One Million Dollars
     ($1,000,000) or more to become due prior to its stated date of maturity; or

                                        3
<PAGE>
          (e)     The Company shall (i) apply for or consent to the appointment
     of a receiver, trustee, liquidator or custodian of itself or of all or a
     substantial part of its property, (ii) be unable, or admit in writing its
     inability, to pay its debts generally as they mature, (iii) make a general
     assignment for the benefit of its or any of its creditors, (iv) be
     dissolved or liquidated in full or in part (v) commence a voluntary case or
     other proceeding seeking liquidation, reorganization or other relief with
     respect to itself or its debts under any bankruptcy, insolvency or other
     similar law now or hereafter in effect or consent to any such relief or to
     the appointment of or taking possession of its property by any official in
     an involuntary case or other proceeding commenced against it, or (vi) take
     any action for the purpose of effecting any of the foregoing; or

          (f)     Proceedings for the appointment of a receiver, trustee,
     liquidator or custodian of the Company or of all or a substantial part of
     the property thereof, or an involuntary case or other proceedings seeking
     liquidation, reorganization or other relief with respect to the Company or
     the debts thereof under any bankruptcy, insolvency or other similar law now
     or hereafter in effect shall be commenced and an order for relief entered
     or such proceeding shall not be dismissed or discharged within thirty (30)
     days of commencement; or

          (g)     One or more judgments for the payment of money in an amount in
     excess of One Million Five Hundred Thousand Dollars ($1,500,000) in the
     aggregate, outstanding at any one time, shall be rendered against the
     Company and the same shall remain undischarged for a period of thirty (30)
     days during which execution shall not be effectively stayed, or any
     judgment, writ, assessment, warrant of attachment, or execution or similar
     process shall be issued or levied against a substantial part of the
     property of the Company and such judgment, writ, or similar process shall
     not be released, stayed, vacated or otherwise dismissed within thirty (30)
     days after issue or levy.

     Section 4.     Rights Of Investor Upon Default.

          Upon the occurrence or existence of any Event of Default (other than
an Event of Default referred to in Sections 3(f) or 3(g) hereof) and at any time
thereafter during the continuance of such Event of Default, the Investor may, by
written notice to the Company, declare all outstanding amounts payable by the
Company hereunder to be immediately due and payable without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein to the contrary notwithstanding.  Upon the
occurrence or existence of any Event of Default described in Sections 3(f) or
3(g) hereof, immediately and without notice, all outstanding amounts payable by
the Company hereunder shall automatically become immediately due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein to the contrary
notwithstanding.  In addition to the foregoing remedies, upon the occurrence or
existence of any Event of Default, the Investor may exercise any other right,
power or remedy permitted to it by law, either by suit in equity or by action at
law, or both.

                                        4
<PAGE>
     Section 5.     Conversion.

          (a)     Investor Conversion.  At any time, and from time to time, the
Investor may, at its sole and exclusive option, convert all or any part of the
principal (but not interest) outstanding under this Note into fully paid and
nonassessable shares of common stock (the "Common Stock") of the Company at a
conversion price per share of Common Stock equal to $1.00, subject to adjustment
as provided in Section 6 hereof (the "Conversion Price").

          (b)     Automatic Conversion.  The entire principal outstanding under
this Note (but not interest) shall be automatically converted into shares of
Common Stock, at the Conversion Price upon the closing of an underwritten public
offering (a "PUBLIC OFFERING") of Common Stock in which (i) gross proceeds to
the Company are equal to or greater than $5 million and (ii) the price-per-share
of the Common Stock sold in the Public Offering is equal to or greater than 150%
of the then applicable Conversion Price.

          (c)     Company Conversion.  At any time after May 1, 2006 and prior
to the Maturity Date, the Company may, at its sole option and effective upon the
date (the "COMPANY CONVERSION DATE") on which written notice (the "COMPANY
CONVERSION NOTICE") of conversion is sent to the Investor, cause all or part of
the principal outstanding under this Note (but not interest) to be converted
into shares of Common Stock, at the Conversion Price, provided that the Market
Price (as defined below) of the Common Stock on the Company Conversion Date, and
for at least 20 of the 30 trading days ending on the Company Conversion Date, is
in excess of 200% of the then applicable Conversion Price.  For purposes hereof,
"MARKET PRICE" shall mean the closing sale price of the Common Stock (or if no
closing sale price is reported, the average of the closing bid and closing ask
prices or, if more than one in either case, the average of the average closing
bid and average closing ask prices) on such date as reported in composite
transactions for the principal United States securities exchange on which the
common stock is traded or, if the common stock is not listed on a United States
national or regional securities exchange, as reported by the Nasdaq System or by
the National Quotation Bureau Incorporated.  In the absence of such a quotation,
the Company's board of directors will determine the closing sale price on the
basis it considers appropriate.

          (d)     MECHANICS AND EFFECT OF CONVERSION .  No fractional shares of
Common Stock shall be issued upon conversion of this Note.  Upon the conversion
of the entire principal outstanding under this Note, in lieu of the Company
issuing any fractional shares to the Investor in cash, the Company shall pay to
the Investor the amount of outstanding principal that is not so converted.  On
partial conversion of this Note, the Company shall issue to the Investor (i) the
shares of Common Stock into which a portion of this Note is converted and (ii) a
new subordinated convertible promissory note having identical terms to this
Note, except that the principal amount thereof shall equal the difference
between (A) the principal amount of this Note immediately prior to such
conversion minus (B) the portion of such principal amount converted into Common
Stock.  Upon conversion of this Note pursuant to this Section 5, the Investor
shall surrender this Note, duly endorsed, at the principal office of the
Company.  At its expense, the Company shall, as soon as practicable thereafter,
issue and deliver to the Investor at such principal office a certificate or
certificates for the number of shares of Common Stock, to which the Investor
shall be entitled upon such conversion (bearing such legends as are required by
applicable state and federal securities laws in the opinion of counsel to the
Company), together

                                        5
<PAGE>
with any other securities and property to which the Investor is entitled upon
such conversion under the terms of this Note.

          (e)     Reservation Of Stock Issuable Upon Conversion.  The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of capital stock of the Company, solely for the purpose of effecting the
conversion of this Note, such number of its shares of capital stock of the
Company as shall from time to time be sufficient to effect the conversion of
this Note; and if at any time the number of authorized but unissued shares of
capital stock of the Company shall not be sufficient to effect the conversion of
this Note, the Company hereby covenants and agrees to take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of capital stock to such number of shares as shall be
sufficient for such purpose.

          (f)     Payment Of Expenses And Taxes On Conversion.  The Company
shall pay all expenses, taxes and other charges payable in connection with the
preparation, execution, issuance and delivery of stock certificates and new
promissory notes pursuant to this Section 5 hereof, except that, in the event
such stock certificates or new promissory notes shall be registered in a name or
names other than the name of the holder of this Note, funds sufficient to pay
all stock transfer fees, which shall be payable upon the execution and delivery
of such stock certificate or certificates or new promissory notes, shall be paid
by the holder hereof to the Company at the time of delivering this Note to the
Company upon conversion.

     Section 6.     Conversion Price Adjustments.

          (a)     Adjustment For Stock Splits And Combinations.  If the Company
shall at any time or from time to time after the date of original issuance of
this Note (the "Date of Original Issue") effect a stock split or subdivision of
the outstanding Common Stock, the Conversion Price in effect immediately before
that subdivision shall be proportionately decreased, and, conversely, if the
Company shall at any time or from time to time after the Date of Original Issue
combine the outstanding shares of Common Stock (including by way of reverse
stock split)into a smaller number of shares, the Conversion Price in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this Section 6(a) shall become effective at the close of
business on the date the stock split, subdivision or combination becomes
effective.

          (b)     Adjustment For Common Stock Dividends And Distributions.
If the Company at any time or from time to time after the Date of Original Issue
issues, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable solely in
additional shares of Common Stock, the Conversion Price that is then in effect
shall be decreased as of the time of such issuance or, in the event such record
date is fixed, as of the close of business on such record date, by multiplying
the Conversion Price by a fraction (i) the numerator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date, and (ii) the
denominator of which is the sum of the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date plus the number of shares of Common Stock
issuable in payment of such dividend or distribution; provided, however, that if
such record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on

                                        6
<PAGE>
the date fixed therefor, the Conversion Price shall be recomputed accordingly as
of the close of business on such record date and thereafter the Conversion Price
shall be adjusted pursuant to this Section 6(b) to reflect the actual payment of
such dividend or distribution.

          (c)     Adjustments For Other Dividends And Distributions.  If the
Company at any time or from time to time after the Date of Original Issue
issues, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Company other than shares of Common Stock or in other property, in each such
event provision shall be made so that the Investor shall receive upon conversion
hereof, in addition to the number of shares of Common Stock receivable hereupon,
the amount of securities of the Company or other property which such Investor
would have received had this Note been converted into Common Stock on the date
of such event and had it thereafter, during the period from the date of such
event to and including the conversion date, retained such securities or other
property receivable by it as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 6 with respect to
the rights of the Investor or with respect to such other securities or other
property by their terms. As used herein, the term "other property" does not
include cash.

          (d)     Adjustment For Reclassification, Exchange And Substitution.
If at any time or from time to time after the Date of Original Issue, the Common
Stock issuable upon the conversion of this Note is changed into the same or a
different number of shares of any class or series of stock, whether by
recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section 6), then
in any such event the Investor shall have the right thereafter to convert this
Note into the kind and amount of stock and other securities and property
receivable upon such recapitalization, reclassification or other change by
holders of the number of shares of Common Stock into which this Note could have
been converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof.

          (e)     Sale Of Shares Below Market Price.

               (i)     If at any time or from time to time after the Date of
     Original Issue and before the Maturity Date, the Company issues or sells,
     or is deemed by the provisions of clause (iii) of this Section 6(e) to have
     issued or sold, Additional Shares of Common Stock (as hereinafter defined),
     other than a subdivision or combination of shares of Common Stock or as a
     dividend or other distribution of Common Stock as provided for elsewhere in
     this Section 6, for an Effective Price (as hereinafter defined) less than
     the Conversion Price, as adjusted hereunder (such lower price, the "BASE
     CONVERSION PRICE"), then and in each such case the then existing Conversion
     Price shall be reduced as of the close of business on the date of such
     issue or sale to a price equal to 100% of the Base Conversion Price.

               (ii)     For the purpose of making any adjustment required under
     this Section 6(e):

                                        7
<PAGE>
                    (A)     "Additional Shares Of Common Stock" means all shares
               of Common Stock issued by the Company, whether or not
               subsequently reacquired or retired by the Company, or capital
               stock of the Company issued upon the exercise or conversion of
               Convertible Securities, other than shares of Common Stock issued
               or issuable:

                    (1)  Convertible Securities outstanding as of the Date
                         of Original Issue; or

                    (2)  to employees, officers or directors of the
                         Company, pursuant to stock purchase or stock option
                         plans or other arrangements that are approved by the
                         Company's Board of Directors and issued pursuant to a
                         registration on, and in strict conformity with the
                         eligibility requirements of, Form S-8; or

                    (3)  to consultants of the Company, pursuant to stock
                         purchase or stock option plans or other arrangements
                         that are approved by the Company's Board of Directors
                         and issued pursuant to a registration on, and in strict
                         conformity with the eligibility requirements of, Form
                         S-8; or

                    (B)     "Aggregate Consideration Received" by the Company
               for any issue or sale of securities shall (1) to the extent it
               consists of cash, be computed at the gross amount of cash
               received by the Company before deduction of any underwriting or
               similar commissions, compensation or concessions paid or allowed
               by the Company in connection with such issue or sale and without
               deduction of any expenses payable by the Company, (2) to the
               extent it consists of property other than cash, be computed at
               the fair value of that property as determined in good faith by
               the Board of Directors of the Company, and (3) if Additional
               Shares of Common Stock or Convertible Securities are issued or
               sold together with other stock or securities or other assets of
               the Company for a consideration which covers both, be computed as
               the portion of the consideration so received that may be
               reasonably determined in good faith by the Board of Directors of
               the Company to be allocable to such Additional Shares of Common
               Stock or Convertible Securities.

                    (C)     "Convertible Securities" means stock or other
               securities (including options, warrants and other rights) of the
               Company ultimately convertible into or exercisable for shares of
               Common Stock.

                    (D)     "Effective Price" of Additional Shares of Common
               Stock means the quotient determined by dividing the total number
               of Additional Shares of Common Stock issued or sold, or deemed to
               have been issued or sold by the Company under this Section 6(e),
               into the Aggregate Consideration Received, or deemed to have been
               received by the

                                        8
<PAGE>
               Company for such issue under this Section 6(e), for such
               Additional Shares of Common Stock.

               (iii)     For the purpose of making any adjustment to the
     Conversion Price required under this Section 6(e), if the Company issues or
     sells any Convertible Securities and if the Effective Price of the shares
     of Common Stock issuable upon conversion of the Convertible Securities is
     less than the Conversion Price, the Company shall be deemed to have issued
     at the time of the issuance of such Convertible Securities that number of
     Additional Shares of Common Stock equal to the maximum number of shares of
     Common Stock issuable upon conversion thereof and to have received as
     consideration for the issuance of such shares an amount equal to the total
     amount of the consideration, if any, received by the Company for the
     issuance of such Convertible Securities, plus the minimum amounts of
     consideration, if any, payable to the Company (other than by cancellation
     of liabilities or obligations evidenced by such Convertible Securities)
     upon the conversion thereof; provided that:

               (A)     if the minimum amounts of such consideration cannot be
          ascertained, but are a function of antidilution or similar protective
          clauses, the Company shall be deemed to have received the minimum
          amounts of consideration without reference to such clauses;

               (B)     if the minimum amount of consideration payable to the
          Company upon the conversion of Convertible Securities is reduced over
          time or on the occurrence or non-occurrence of specified events other
          than by reason of antidilution adjustments, the Effective Price shall
          be recalculated using the figure to which such minimum amount of
          consideration is reduced;

               (C)     if the minimum amount of consideration payable to the
          Company upon the conversion of Convertible Securities is subsequently
          increased, the Effective Price shall be again recalculated using the
          increased minimum amount of consideration payable to the Company upon
          the conversion of Convertible Securities; and

               (D)     no further adjustment of the Conversion Price, adjusted
          or subject to adjustment upon the issuance of such Convertible
          Securities, shall be made as a result of the actual issuance of shares
          of Common Stock on the conversion of any such Convertible Securities,
          unless the actual Aggregate Consideration Received is different than
          that previously deemed to be received prior to such issuance. If the
          conversion privilege represented by any such Convertible Securities
          shall expire without having been exercised, the Conversion Price
          adjusted upon the issuance of such Convertible Securities shall be
          readjusted to the Conversion Price which would have been in effect had
          an adjustment been made on the basis that the only shares of Common
          Stock so issued were the shares of Common Stock, if any, actually
          issued or sold on the exercise of such rights of conversion of such
          Convertible Securities, and such shares of Common Stock, if any, were
          issued or sold for the consideration received for issuing or selling
          the Convertible Securities actually converted, plus the consideration,
          if any, actually received by the Company (other than by cancellation
          of liabilities or obligations evidenced by

                                        9
<PAGE>
          such Convertible Securities) on the conversion of such Convertible
          Securities, provided that such readjustment shall not apply to prior
          conversions of this Note.

          (f)     Certificate Of Adjustment.  In each case of an adjustment or
readjustment of the Conversion Price for the number of shares of Common Stock or
other securities issuable upon conversion of this Note, the Company, at its own
expense, shall cause its Treasurer to compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to the Investor at the Investor's address as shown in the
Company's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based. No adjustment in the Conversion Price shall be required
to be made unless it would result in an increase or decrease of at least one
cent, but any adjustments not made because of this sentence shall be carried
forward and taken into account in any subsequent adjustment otherwise required
hereunder.

          (g)     Notices Of Record Date.  Upon (i) the establishment by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger or consolidation of the Company with or into any other Company, or any
transfer of all or substantially all the assets of the Company to any other
person or any voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company shall mail to the Investor at least 20 days prior to
the record date specified therein a notice specifying (A) the date on which any
such record is to be taken for the purpose of such dividend or distribution and
a description of such dividend or distribution, (B) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up is expected to become effective, and (C) the date, if
any, that is to be fixed as to when the holders of record of Common Stock (or
other securities), shall be entitled to exchange their shares of Common Stock
(or other securities), for securities or other property deliverable upon such
reorganization, reclassification transfer, consolidation, merger, dissolution,
liquidation or winding up.

          (h)     No Impairment.  The Company shall not amend its Articles of
Incorporation or participate in any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action for the purpose of avoiding or seeking to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but shall at all times in good faith assist in carrying out all such
action as may be reasonably necessary or appropriate in order to protect the
conversion rights of the Investor against dilution or other impairment as
provided herein.

     Section 7.     Ranking.

          This Note is a subordinated unsecured general obligation of the
Company. The Note ranks junior in right of payment to all of the Company's other
existing and future senior unsecured indebtedness and will be senior in right of
payment only to future indebtedness of the Company that expressly makes, by the
terms thereof, such indebtedness subordinate to this Note. This Note is
effectively subordinated to any of the Company's existing and future secured
indebtedness to the extent of the assets securing such indebtedness.

                                       10
<PAGE>
     Section 8.     Defenses.

          The obligations of the Company under this Note shall not be subject to
reduction, limitation, impairment, termination, defense, set-off, counterclaim
or recoupment for any reason.

     Section 9.     Exchange or Replacement of Notes.

          (a)     The Investor may, at its option, in person or by duly
authorized attorney, surrender this Note for exchange, at the principal business
office of the Company, and receive in exchange therefore, a new Note in the same
principal amount as the unpaid principal amount of this Note and bearing
interest at the same annual rate as this Note, each such new Note to be dated as
of the date of this Note and to be in such principal amount as remains unpaid
and payable to such person or persons, or order, as the Investor may designate
in writing.

          (b)     Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction, or mutilation of this Note and (in the case of
loss, theft or destruction) of an indemnity reasonably satisfactory to it, and
upon surrender and cancellation of this Note, if mutilated, the Company will
deliver a new Note of like tenor in lieu of this Note.  Any Note delivered in
accordance with the provisions of this Section 9 shall be dated as of the date
of this Note.

     Section 10.     Attorneys' and Collection Fees.

          Should the indebtedness evidenced by this Note or any part hereof be
collected at law or in equity or in bankruptcy, receivership or other court
proceedings, the Company agrees to pay, in addition to the principal and
interest due and payable hereon, all costs of collection, including reasonable
attorneys' fees and expenses, incurred by the Investor in collecting or
enforcing this Note.

     Section 11.     Waivers.

          The Company hereby waives presentment, demand for payment, notice of
dishonor, notice of protest and all other notices or demands in connection with
the delivery, acceptance, performance or default of this Note.  No delay by the
Investor in exercising any power or right hereunder shall operate as a waiver of
any power or right, nor shall any single or partial exercise of any power or
right preclude other or further exercise thereof, or the exercise thereof, or
the exercise of any other power or right hereunder or otherwise; and no waiver
whatsoever or modification of the terms hereof shall be valid unless set forth
in writing by the Investor and then only to the extent set forth therein.

     Section 12.     Amendments.

          This Note may not be amended without the express written consent of
both the Company and the Investor.

                                       11
<PAGE>
     Section 13.     Governing Law.

          This Note is made and delivered in, and shall be governed by and
construed in accordance with the laws of the State of Texas (without giving
effect to principles of conflicts of laws of the State of Texas or any other
state).  Any action to enforce the terms of this Note shall be exclusively
brought in the state and/or federal courts in Harris County, Texas.

     Section 14.     Successors and Assigns.

          The rights and obligations of the Company and the Investor under this
Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.  Notwithstanding the foregoing,
neither this Note nor any of the rights, interests or obligations hereunder may
be assigned, by operation of law or otherwise, in whole or in part, by the
Company, without the prior written consent of the Investor

     Section 15.     Notices.

          All notices, requests, demands and other communications to any party
hereunder shall be in writing (including facsimile or similar writing) and shall
be given to such party at its address or facsimile number set forth below or
such other address or facsimile number as such party may hereafter specify by
notice to the other parties listed below:

          (a)     If to the Company:     Houston American Energy Corp.
                                         801 Travis, Suite 2020
                                         Houston, Texas 77002
                                         Attention:     John Terwilliger
                                         Telephone:     713-222-6966
                                         Facsimile:     713-222-6440

          (b)     If to the Investor:    At the address shown on the signature
                                         page

Each such notice, request or other communication shall be effective (i) upon
receipt (provided, however, that notices received on a Saturday, Sunday or legal
holiday or after 5:00 p.m. on any other day will be deemed to have been received
on the next business day), if given by legible facsimile transmission with proof
from sender of confirmation of receipt, or (ii) if given by any other means,
when delivered at the address specified in this Section 14.

     Section 16.     No Rights of Stockholders.

          Except as otherwise provided herein, this Note shall not entitle the
Investor to any of the rights of a stockholder of the Company, including without
limitation, the right to vote, to receive dividends and other distributions, or
to receive any notice of, or to attend, meetings of stockholders or any other
proceedings of the Company, unless and to the extent converted into shares of
Common Stock in accordance with the terms hereof.

                                       12
<PAGE>
     Section 17.     Entire Agreement.

          This Note, the Note Purchase Agreement and the Registration Rights
Agreement constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereto and thereof.

     Section 18.     Headings.

          The headings used in this Note are used for convenience only and are
not to be considered in construing or interpreting this Note.

     IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by
its duly authorized officer as of the date indicated below.

                                        HOUSTON AMERICAN ENERGY CORP.
Date:     _____________, 2005

                                        By:     _____________________________
                                        Name:     John Terwilliger
                                        Title:     President

Note No.            _____________________
Amount:             $____________________
Investor Name:      _____________________
Address:            _____________________
                    _____________________
Telephone:          _____________________
Facsimile:          _____________________

                                       13
<PAGE>
                                     ANNEX A

                                CONVERSION NOTICE

(To  be  Executed  by  the  Registered  Holder
in  order  to  Convert  the  Note)

The  undersigned  hereby  irrevocably elects to convert the above Note No. _____
into  shares  of  Common  Stock, $0.001 par value per share, of Houston American
Energy  Corp.  according to the provisions hereof, as of the date written below.

Conversion calculations:           _____________________________________________
                                   Date of Conversion Notice

                                   _____________________________________________
                                   Principal Amount of Note to be Converted

                                   _____________________________________________
                                   Conversion Price

                                   _____________________________________________
                                   Number of Shares to be Issued Upon
                                   Conversion

                                   _____________________________________________
                                   Signature

                                   _____________________________________________
                                   Name

                                   _____________________________________________
                                   Address

                                       14

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