850,000 INITIAL SHARES
850,000 INITIAL WARRANTS
and up to 127,500 OVER-ALLOTMENT SHARES
and up to 127,500 OVER-ALLOTMENT WARRANTS
of
MICROLEAGUE MULTIMEDIA, INC.
UNDERWRITING AGREEMENT
May , 1996
First Colonial Securities Group, Inc.
10 Lake Center Executive Park
401 North Route 73 - Suite 202
Marlton, New Jersey 08053
Dear Sirs:
Microleague Multimedia, Inc., a Pennsylvania corporation
formerly known as Sports Associates, Inc. (the "Company"), proposes to issue and
sell, upon the terms and conditions herein contained, (i) an aggregate of
850,000 shares of the Company's common stock, $.01 par value (the "Common
Stock") (the "Initial Shares"); (ii) an aggregate of 850,000 Redeemable Common
Stock Purchase Warrants each of which entitles the holder to purchase one share
(each an "Initial Warrant Share") of the Company's Common Stock (the "Initial
Warrants"); (iii) up to an additional aggregate of 127,500 shares of Common
Stock (the "Over-allotment Shares"); and (iv) up to an additional aggregate of
127,500 Redeemable Common Stock Purchase Warrants each of which entitles the
holder to purchase one share (an "Over-allotment Warrant Share") of the
Company's Common Stock (the "Over-allotment Warrants") to First Colonial
Securities Group, Inc. as underwriter (in its capacity as such, the
"Underwriter").
The Initial Shares and the Over-allotment Shares are
sometimes hereinafter collectively referred to as the "Primary
Shares."
The Initial Warrant Shares and the Over-allotment Warrant
Shares are sometimes hereinafter collectively referred to as the "Warrant
Shares."
The Primary Shares and the Warrant Shares are sometimes
hereinafter collectively referred to as the "Shares."
The Initial Warrants and the Over-allotment Warrants are
sometimes hereinafter collectively referred to as the "Redeemable
Warrants."
The Shares and the Redeemable Warrants, together with the
Underwriter's Securities (as hereinafter defined) are sometimes hereinafter
collectively referred to as the "Company Securities."
Each Redeemable Warrant shall entitle the holder to
purchase, until the third anniversary of the date of the Prospectus (as
hereinafter defined) as first filed with the Commission (as hereinafter defined)
pursuant to Rule 424(b) (the "Redeemable Warrant Expiration Date"), one share of
Common Stock at a per share price equal to $________, which represents 110% of
the Offering Price Per Share (as hereinafter defined); provided, however, the
Company shall have the right to redeem all or any of the Redeemable Warrants at
a price of $.10 per Redeemable Warrant, at any time upon not less than
forty-five (45) days' prior written notice (the "Redemption Notice") to the
registered holder thereof, if the last reported sale price of the Common Stock
shall have been in excess of $ per share, which represents 140% of the Offering
Price Per Share, for not fewer than ten (10) of the fifteen (15) consecutive
trading days, ending on the third trading day prior to the date of the
Redemption Notice.
The Company wishes to confirm as follows its agreement with
you in connection with your purchase as Underwriter of the Primary Shares and
the Redeemable Warrants.
1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form SB-2 under the Act
(the "Registration Statement"), including a prospectus subject to completion
relating to the Company Securities.
The term "Registration Statement" as used in this
Underwriting Agreement (this "Agreement") means the registration statement
(including all financial schedules and exhibits and including any information
omitted therefrom pursuant to Rule 430A under the Act and included in the
Prospectus (as hereinafter defined)), as amended at the time it becomes
effective, or, if the registration statement became effective prior to the
execution of this Agreement, as supplemented or amended prior to the execution
of this Agreement. If it is contemplated, at the time this Agreement is
executed, that a post-effective amendment to the registration statement will be
filed and must be declared effective before the offering of the Primary Shares
and the Redeemable Warrants may commence, the term "Registration Statement" as
(2)
used in this Agreement means the registration statement as amended by any such
post-effective amendment.
The term "Prospectus" as used in this Agreement means the
prospectus in the form included in the Registration Statement, or, if the
prospectus included in the Registration Statement omits information in reliance
on Rule 430A under the Act and such information is included in a prospectus
filed with the Commission pursuant to Rule 424(b) under the Act, the term
"Prospectus" as used in this Agreement means the prospectus in the form included
in the Registration Statement as supplemented by the addition of the Rule 430A
information contained in the prospectus filed with the Commission pursuant to
Rule 424(b).
The term "Prepricing Prospectus" as used in this Agreement
means the prospectus subject to completion in the form included in the
registration statement at the time of the initial filing of the registration
statement with the Commission, and as such prospectus shall have been amended
from time to time prior to the date of the Prospectus.
Any reference herein to the Registration Statement, any
Prepricing Prospectus or the Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein as of the date of the
Registration Statement, any Prepricing Prospectus or the Prospectus, as the case
may be.
As used herein, the term "Incorporated Documents" means the
documents which at the time are incorporated by reference in the Registration
Statement, any Prepricing Prospectus, the Prospectus or any amendment or
supplement thereto.
2. Agreements to Sell and Purchase. The Company hereby
agrees, subject to all the terms and conditions set forth herein, to issue and
sell to the Underwriter, and the Underwriter, upon the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions set forth herein, hereby agrees to
purchase from the Company, the Initial Shares and the Initial Warrants, at a
purchase price of $ per Initial Share (the "Purchase Price Per Share") and $0.09
per Initial Warrant (the "Purchase Price Per Warrant").
The Underwriter shall offer the Initial Shares to the public
at a purchase price of $ per Initial Share (the "Offering Price Per Share") and
shall offer the Initial Warrants to the public at a purchase price of $0.10 per
Initial Warrant (the "Offering Price Per Warrant"). An Initial Share and an
Initial Warrant may only be purchased under the Offering (as hereinafter
defined) together, provided however, each is separately transferable upon
issuance.
(3)
The Company also agrees, subject to all the terms and
conditions set forth herein, to issue and sell the Over-allotment Shares (or any
number thereof designated by the Underwriter) and the Over-allotment Warrants
(or any number thereof designated by the Underwriter) to the Underwriter, and,
upon the basis of the representations, warranties and agreements of the Company
herein contained and subject to all the terms and conditions set forth herein,
the Underwriter shall have the right and option to purchase all or any portion
of the Over-allotment Shares and the Over-allotment Warrants from the Company at
the Purchase Price Per Share or the Purchase Price Per Warrant, respectively
(the "over-allotment option"), which right and option may be exercised at any
time and from time to time prior to 9:00 PM, Philadelphia time, on the
forty-fifth (45th) day after the date of the Prospectus (or, if such 45th day
shall be a Saturday or Sunday or any other day on which the New York Stock
Exchange is not open for trading, on the next business day thereafter when the
New York Stock Exchange is open for trading). An Over-allotment Share and an
Over-allotment Warrant may be purchased separately, and each is separately
transferable immediately upon issuance.
The Underwriter agrees to offer the Over-allotment Shares
and the Over-allotment Warrants acquired by it as a result of the exercise of
the over-allotment option to the public as set forth in the Registration
Statement and the Prospectus. The Underwriter shall have no obligation to
purchase any Over-allotment Shares or any Over-allotment Warrants unless and
until (and then only to the extent) the over-allotment option is exercised.
The Company hereby agrees to issue and sell to First
Colonial Securities Group, Inc., for its own account ("First Colonial"), on the
Closing Date (as hereinafter defined), for an aggregate price of $170, a warrant
(the "Underwriter's Warrant") to purchase (i) an aggregate of 85,000 shares of
Common Stock (the "First Colonial Shares") at a price per First Colonial Share
equal to $ , which represents 130% of the Offering Price Per Share; and (ii) an
aggregate of 85,000 redeemable Common Stock purchase warrants (the "First
Colonial Warrants") at a price per First Colonial Warrant equal to $0.13, which
represents 130% of the Offering Price Per Warrant. The Underwriter's Warrant,
the First Colonial Shares, the First Colonial Warrants and the shares of Common
Stock underlying the First Colonial Warrants are sometimes herein collectively
referred to as the "Underwriter's Securities".
The Underwriter's Warrant will be exercisable at any time
and from time to time on or after the first anniversary of the effective date of
the Registration Statement up to the fifth anniversary thereof, and shall be in
the form of EXHIBIT A attached hereto.
(4)
3. Terms of Public Offering. The Company has been advised by
the Underwriter that the Underwriter proposes to make a public offering of the
Initial Shares and the Initial Warrants (the "Offering") as soon after the
Registration Statement and this Agreement have become effective as in the
Underwriter's judgment is advisable, and initially to offer the Initial Shares
and the Initial Warrants upon the terms set forth in the Prospectus.
4. Delivery of and Payment for the Initial Shares and the
Initial Warrants. Delivery to the Underwriter of and payment for the Initial
Shares and the Initial Warrants (the "Closing") shall be made at the offices of
the Underwriter, 10 Lake Center Executive Park, 401 North Route 73 - Suite 202,
Marlton, New Jersey 08053 at 10:00 AM Philadelphia time, on May , 1996 (the
"Closing Date"). The place of closing for the Initial Shares and the Initial
Warrants and the Closing Date may be varied by written agreement between the
Underwriter and the Company.
Delivery to the Underwriter of and payment for any
Over-allotment Shares or any Over-allotment Warrants to be purchased by the
Underwriter shall be made at the foregoing offices of the Underwriter at such
time and on such date (the "Option Closing Date"), which may be the same as the
Closing Date but shall in no event be earlier than the Closing Date nor earlier
than three nor later than ten business days after the giving of a written notice
from the Underwriter to the Company of the Underwriter's determination to
purchase a number, specified in such notice, of Over-allotment Shares or
Over-allotment Warrants. The place of closing for any Over-allotment Shares or
Over-allotment Warrants and the Option Closing Date for such Over-allotment
Shares or Over-allotment Warrants may be varied by written agreement between the
Underwriter and the Company.
Certificates for the Initial Shares and the Initial Warrants
and any Over-allotment Shares and Over-allotment Warrants to be purchased
hereunder shall be registered in such names and in such denominations as the
Underwriter shall request prior to 1:00 PM, Philadelphia time, on the third
business day preceding the Closing Date or any Option Closing Date, as the case
may be. Such certificates shall be made available to the Underwriter in
Philadelphia for inspection and packaging not later than 9:30 AM, Philadelphia
time, on the business day next preceding the Closing Date or the Option Closing
Date, as the case may be. The certificates evidencing the Initial Shares and the
Initial Warrants and any Over-allotment Shares and Over-allotment Warrants to be
purchased hereunder shall be delivered to the Underwriter on the Closing Date or
the Option Closing Date, as the case may be, against payment of the purchase
price therefor by certified or official bank check or checks payable in next day
funds to the order of the Company.
(5)
5. Agreements of the Company. The Company agrees with
the Underwriter as follows:
(a) If, at the time this Agreement is executed and
delivered, it is necessary for the Registration Statement or a post-effective
amendment thereto to be declared effective before the offering of the Initial
Shares and the Initial Warrants may commence, the Company will use its best
efforts to cause the Registration Statement or such post-effective amendment to
become effective as soon as possible and will advise the Underwriter promptly
and, if requested by the Underwriter will confirm such advice in writing, when
the Registration Statement or such post-effective amendment has become
effective.
(b) The Company will advise the Underwriter
promptly and, if requested by the Underwriter, will confirm such advice in
writing: (i) of any request by the Commission for amendment of or a supplement
to the Registration Statement, any Prepricing Prospectus or the Prospectus or
for additional information; (ii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of the
suspension of qualification of any Company Securities for offering or sale in
any jurisdiction or the initiation of any proceeding for such purpose and (iii)
within the period of time referred to in paragraph (f) below, of any change in
the Company's condition (financial or other), business, prospects, properties,
net worth or results of operations, or of the happening of any event which makes
any statement made in the Registration Statement or the Prospectus (as then
amended or supplemented) untrue or which requires the making of any additions to
or changes in the Registration Statement or the Prospectus (as then amended or
supplemented) in order to state a material fact required by the Act or the
regulations thereunder 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, or of the necessity to amend or supplement the Prospectus
(as then amended or supplemented) to comply with the Act or any other law. If at
any time the Commission shall issue any stop order suspending the effectiveness
of the Registration Statement, the Company shall use its best efforts to obtain
the withdrawal of such order at the earliest possible time.
(c) The Company will furnish to each of the
Underwriter and counsel for the Underwriter, without charge, one signed copy of
the registration statement as originally filed with the Commission and of each
amendment thereto, including financial statements and all exhibits thereto.
(d) The Company will not (i) file any amendment to
the Registration Statement or make any amendment or supplement to the Prospectus
of which the Underwriter shall not previously have been advised or to which the
Underwriter shall reasonably object after being so advised or (ii) as long as,
(6)
in the opinion of counsel for the Underwriter, a prospectus is required to be
delivered in connection with sales by the Underwriter or any dealer, file any
information, documents or reports pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), without delivering a copy of such
information, documents or reports to the Underwriter prior to or concurrently
with such filing.
(e) Prior to the execution and delivery of this
Agreement the Company has delivered, and hereby covenants and agrees in the
future to deliver, to the Underwriter, without charge, in such quantities as the
Underwriter has requested or may hereafter reasonably request, copies of each
form of the Prepricing Prospectus. The Company consents to the use, in
accordance with the provisions of the Act and with the securities or Blue Sky
laws of the jurisdictions in which any of the Company Securities are offered by
the Underwriter and by dealers, prior to the date of the Prospectus, of each
Prepricing Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of
this Agreement as possible and thereafter from time to time for such period of
time as in the opinion of counsel for the Underwriter a prospectus is required
by the Act to be delivered in connection with sales by any Underwriter or
dealer, the Company hereby covenants and agrees expeditiously to deliver to each
Underwriter and each dealer, without charge, as many copies of the Prospectus
(and of any amendment or supplement thereto) as the Underwriter may reasonably
request. The Company consents to the use of the Prospectus (and of any amendment
or supplement thereto) in accordance with the provisions of the Act and with the
securities or Blue Sky laws of the jurisdictions in which any of the Company
Securities are offered by the Underwriter and by all dealers to whom any of the
Company Securities may be sold, both in connection with the offering and sale of
the Company Securities and for such period of time thereafter as the Prospectus
is required by the Act to be delivered in connection with sales by the
Underwriter or any dealer. If during such period of time any event shall occur
that in the judgment of the Company or in the opinion of counsel for the
Underwriter is required to be set forth in the Prospectus (as then amended or
supplemented) or should be set forth therein in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the Prospectus to
comply with the Act or any other law, the Company will immediately prepare and,
subject to the provisions of paragraph (d) above, file with the Commission an
appropriate supplement or amendment thereto, and hereby covenants and agrees
expeditiously to furnish to each Underwriter and each dealer, without charge, as
many copies of the Prospectus (as so amended or supplemented) as the Underwriter
may reasonably request. In the event that the Company and the Underwriter agree
that the Prospectus should be amended or supplemented, the Company, if requested
(7)
by the Underwriter, will promptly issue a press release announcing or disclosing
the matters to be covered by the proposed amendment or supplement.
(g) The Company will cooperate with the Underwriter
and with counsel for the Underwriter in connection with the registration or
qualification of the Company Securities for offering and sale by the Underwriter
and by dealers under the securities or Blue Sky laws of such jurisdictions as
the Underwriter may designate and will file such consents to service of process
or other documents necessary or appropriate in order to effect such registration
or qualification; provided that in no event shall the Company be obligated to
qualify to do business in any jurisdiction where it is not now so qualified or
to take any action which would subject it to service of process in suits, other
than those arising out of the offering or sale of the Company Securities in any
jurisdiction where it is not now so subject. The Company shall comply with all
requirements to which it is subject under the Act, the Exchange Act and any
applicable state laws, and all rules and regulations promulgated thereunder. The
Company shall provide notice to the Underwriter of the effectiveness of any such
registration or qualification.
(h) The Company will make generally available to
its security holders a consolidated earnings statement, which need not be
audited, covering a period of at least twelve months beginning after the
effective date of the Registration Statement, as soon as practicable after the
end of such period, which consolidated earnings statement shall satisfy the
provisions of Section 11(a) of the Act.
(i) During the period of time from the date hereof
to the fifth anniversary hereof, the Company will furnish to the Underwriter (i)
as soon as available, a copy of each report or other document (including but not
limited to all registration statements, listing applications, proxy statements
and press releases) of the Company mailed to shareholders or filed with the
Commission, and (ii) from time to time, such other information concerning the
Company as the Underwriter may reasonably request.
(j) If this Agreement shall terminate or shall be
terminated after execution and delivery for any reason, each party shall bear
its own expenses incurred in connection with the Offering. This provision shall
not require the Underwriter to return any fees or expenses already paid or
reimbursed to it prior to the date of any such termination.
(k) The Company will apply the net proceeds from
the sale of the Primary Shares and the Redeemable Warrants to be sold by it
hereunder substantially in accordance with the description set forth under the
caption "Use of Proceeds" in the Prospectus.
(8)
(l) If Rule 430A of the Act is employed, the
Company will timely file the Prospectus pursuant to Rule 424(b) under the Act
and will advise the Underwriter of the time and manner of such filing.
(m) Without the prior written consent of the
Underwriter, prior to the expiration of eighteen months after the effective date
of the Registration Statement (the "lock-up period") the Company will not offer,
sell, contract to sell or otherwise dispose of any Common Stock (or any
securities convertible into or exercisable or exchangeable for Common Stock or
of which Common Stock is a part) or grant any options or warrants to purchase
Common Stock (or any securities convertible into or exercisable or exchangeable
for Common Stock or of which Common Stock is a part), except for (i) the sale of
the Primary Shares and the Redeemable Warrants to the Underwriter, and the sale
of the Underwriter's Warrant to the Underwriter pursuant to this Agreement, (ii)
grants of options pursuant to the Company's existing or currently proposed stock
option plans described in the Prospectus, (iii) issuances of Common Stock upon
exercise of options and warrants (including the "Bridge Warrants") described in
the Prospectus as being outstanding or subsequently issued in accordance with
the foregoing clauses (i) and (ii), (iv) issuances of Warrant Shares issuable
upon exercise of the Redeemable Warrants, as contemplated by the Prospectus and
this Agreement, (v) issuances of the First Colonial Shares or the First Colonial
Warrants upon exercise of the Underwriter's Warrant, and the issuance of shares
of Common Stock underlying the First Colonial Warrants upon exercise of the
First Colonial Warrants, as contemplated by the Prospectus and the Agreement;
and (vi) the sale of Common Stock (or any securities convertible into or
exchangeable for Common Stock or of which Common Stock is a part) of the Company
or options or warrants to acquire Common Stock or such securities issued by the
Company in a private placement exempt from registration under Section 4(2) of
the Act. The Company has caused or will cause each of its current directors and
executive officers and each shareholder of the Company immediately prior to the
date of the Prospectus to furnish a letter or letters, in form and substance
satisfactory to the Underwriter, pursuant to which each such person shall agree
not to offer, sell, contract to sell or otherwise dispose of any Common Stock
(or any securities convertible into or exercisable or exchangeable for Common
Stock or of which Common Stock is a part) for a period of eighteen months after
the effective date of the Registration Statement (i.e. during the lock-up
period) without the prior written consent of the Underwriter.
(n) Except as stated in this Agreement and in the
Prepricing Prospectus and Prospectus, the Company has not taken, nor will it
take, directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of the
(9)
Common Stock, to facilitate the sale or resale of any of the Primary Shares or
the Redeemable Warrants or Warrant Shares, or for any other reason.
(o) The Company shall cause the Common Stock and
the Redeemable Warrants to be listed on the Nasdaq SmallCap Market, and shall
use its best efforts to maintain such listings while the Common Stock or the
Redeemable Warrants are outstanding. The Company shall obtain CUSIP numbers for
the Common Stock, the Redeemable Warrants and the Underwriter's Warrant prior to
the initial day of trading of any of such securities, and will not release any
such securities for trading without the prior written approval of the
Underwriter.
(p) Prior to the later of the Closing Date or the
Option Closing Date, the Company will not issue, directly or indirectly, without
the prior written consent of the Underwriter, any press release or other
communication or hold any press conference with respect to the Company, its
activities, or the offering or sale of securities contemplated by this
Agreement, except as may be required by applicable law and after consultation
with the Underwriter.
(q) The Company shall use its best efforts to do
and perform all things required to be done and performed under this Agreement by
the Company prior to or after the Closing Date or Option Closing Date, as the
case may be, and to satisfy all conditions precedent on the part of the Company
to the delivery of the Company Securities.
6. Further Agreements of the Company. The Company
further agrees with the Underwriter as follows:
(a) The Company will pay the Underwriter at the
Closing a non-accountable expense allowance of $________, representing three
percent (3%) of the aggregate proceeds of the Offering. The Underwriter hereby
acknowledges prior receipt of $40,000 from the Company which shall be credited
toward the aforesaid non-accountable expense allowance.
(b) The Company agrees to engage First Colonial as
the Company's exclusive warrant solicitation agent if and when the Company seeks
to redeem the Redeemable Warrants, and the Company agrees to pay First Colonial
at such time, a fee equal to four percent (4%) of the gross proceeds received by
the Company upon exercise of the Redeemable Warrants following the Redemption
Notice. However, First Colonial shall not receive a fee related to the
redemption of the Redeemable Warrants if (1) the market price of the Common
Stock is lower than the exercise price of the Redeemable Warrant; or (2) the
Redeemable Warrant is held in a discretionary account at the time of exercise,
except where prior specific written approval for exercise is received from the
customer; or (3) the arrangements whereby compensation is to be paid are not
(10)
disclosed (a) in the prospectus or offering circular by which the Redeemable
Warrants are offered to the public, if such arrangements are contemplated or any
agreement exists as to such arrangements at that time, and (b) in the prospectus
or offering circular provided to securityholders at the time of exercise; or (4)
the exercise of the Redeemable Warrant is not solicited by First Colonial or a
related person, provided however, that any request for exercise will be presumed
to be unsolicited unless the customer states in writing that the transaction was
solicited and designates in writing the broker/dealer to receive compensation
for the exercise.
(c) The Company agrees to engage First Colonial as
its exclusive financial advisor to provide customary and usual financial
services for a period of one year following the Closing Date, for a fee of
$30,000, payable in advance on the Closing Date, pursuant to the terms of a
Financial Advisory Services Agreement to be entered into on or before the date
of this Agreement.
7. Representations and Warranties of the Company. The
Company represents and warrants to the Underwriter that:
(a) Each Prepricing Prospectus included as part of
the registration statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant to Rule 424 under the Act, complied when
so filed in all material respects with the provisions of the Act. The Commission
has not issued any order preventing or suspending the use of any Prepricing
Prospectus.
(b) The Company meets the requirements for use of
Form SB-2 under the Act. The Registration Statement in the form in which it
became or becomes effective and also in such form as it may be when any
post-effective amendment thereto shall become effective and the Prospectus and
any supplement or amendment thereto when filed with the Commission under Rule
424(b) under the Act, complied or will comply in all material respects, with the
provisions of the Act and did not or will not at any such times contain an
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 light of the
circumstances under which they were made, not misleading, except that this
representation and warranty does not apply to statements in or omissions from
the Registration Statement made in reliance upon and in conformity with
information relating to the Underwriter furnished to the Company in writing by
the Underwriter expressly for use therein.
(c) The Company has filed in a timely manner with
the Commission each document (including without limitation each Incorporated
Document) required to be filed by it pursuant to the Act or the Exchange Act,
each such document at the time it was filed (or, if any amendment with respect
(11)
to any such document was filed, when such amendment was filed) conformed in all
material respects to the requirements of the Act or the Exchange Act, as the
case may be, and none of such documents contained an 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 light of the circumstances under
which they were made, not misleading. As of the date of this Agreement, no
filings are required or have been made by the Company under the Exchange Act.
(d) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania with full corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify does not and will not have a material adverse effect on the condition
(financial or other), business, prospects, properties, net worth or results of
operations of the Company or any Subsidiary (as hereinafter defined) (a
"Material Adverse Effect"), and no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority, qualification, license or eligibility.
(e) All the Company's subsidiaries (as defined in
the Act or as set forth on Schedule I attached hereto) are referred to herein
individually as a "Subsidiary" and collectively as the "Subsidiaries." Each
Subsidiary is a corporation duly organized, validly existing and in good
standing in the jurisdiction of its incorporation (as set forth on Schedule I),
with full corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration Statement and the
Prospectus, and is duly registered and qualified to conduct its business and is
in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify or be in good
standing does not and will not have a Material Adverse Effect, and no proceeding
has been instituted in any such jurisdiction revoking, limiting or curtailing,
or seeking to revoke, limit or curtail, such power and authority, qualification,
license or eligibility. The Company is the sole owner of all of the issued and
outstanding capital stock of each Subsidiary.
All of the outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable, and are wholly owned by the Company directly or indirectly
through one of the other Subsidiaries, free and clear of any lien, adverse
(12)
claim, security interest, equity or other encumbrance, and there are no (i)
existing preemptive rights under any Subsidiary's Certificate or Articles of
Incorporation or applicable law or (ii) similar rights that entitle or will
entitle any person other than the Company to acquire any shares of or any other
interest in any Subsidiary. No Subsidiary is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on such Subsidiary's capital stock, from repaying to the Company
any loans or advances to such Subsidiary from the Company or from transferring
any of such Subsidiary's property or assets to the Company or any other
Subsidiary of the Company. The Company owns no shares of Common Stock in any
corporation other than in the Subsidiaries. The Company has no Subsidiaries
except as set forth on Schedule I. The Company has no investments in and holds
no equity or other securities of, and has not loaned any money to, any
corporation, partnership, or other organization except for its ownership of its
Subsidiaries.
(f) The Company has authorized, issued and outstanding
capital stock as set forth under the caption "Capitalization" in the Prospectus.
The authorized capital stock of the Company conforms to the description thereof
in the Registration Statement and the Prospectus. All the outstanding shares of
capital stock of the Company have been duly authorized and validly issued, are
fully paid and nonassessable and are free of any preemptive or similar rights
and were issued and sold in compliance with all applicable Federal and state
securities and Blue Sky laws.
The Primary Shares and the Redeemable Warrants to be issued
and sold to the Underwriter and the Warrant Shares underlying the Redeemable
Warrants, and the Underwriter's Warrant to be issued and sold to First Colonial
by the Company and the First Colonial Shares, the First Colonial Warrants and
the shares of Common Stock underlying the First Colonial Warrants, have been
duly authorized and, when issued and delivered to the Underwriter or First
Colonial, or the holder of the Redeemable Warrant, as applicable, against
payment therefor in accordance with the terms hereof or thereof, will be validly
issued, fully paid and nonassessable and free of any preemptive or similar
rights. No holders of Company securities have preemptive or similar rights to
purchase Common Stock, Redeemable Warrants or any other securities of the
Company.
Except as expressly described in the Prospectus, there are
no outstanding options, warrants, agreements or other rights requiring or which
upon exercise or payment of consideration (or both) will require the issuance
of, and there are no commitments, plans or arrangements to issue, any shares of
capital stock of the Company or any security convertible into or exchangeable or
exercisable for or comprised of capital stock of the Company or of any
Subsidiary.
(13)
The Company has reserved and kept available for the exercise
of the Redeemable Warrants and the Underwriter's Warrant (and the exercise of
the First Colonial Warrants obtainable upon exercise of the Underwriter's
Warrant), such number of authorized but unissued shares of Common Stock as are
sufficient to permit the exercise in full of the Redeemable Warrants and the
Underwriter's Warrant (and the exercise in full of the First Colonial Warrants
obtainable upon exercise of the Underwriter's Warrant).
The shares of Common Stock acquired upon exercise of the
Redeemable Warrants and the Underwriter's Warrants (and the exercise of the
First Colonial Warrants obtainable upon exercise of the Underwriter's Warrant),
when issued and sold pursuant to the Redeemable Warrants and the Underwriter's
Warrant (and the exercise of the First Colonial Warrants obtainable upon
exercise of the Underwriter's Warrant), respectively, will be validly issued,
fully paid and nonassessable and free of any preemptive or similar rights. The
Redeemable Warrants conform to the description thereof in the Registration
Statement and the Prospectus.
The number of options and warrants outstanding to purchase
Common Stock (including upon conversion or exercise of any security, but
excluding the securities issued pursuant to the Offering and the Bridge
Financing) is equal to or less than 20% of the Company's outstanding Common
Stock, on a fully-diluted basis, and the Company does not currently intend to
permit the number of shares of Common Stock purchasable under options and
warrants (including upon conversion or exercise of any security) to exceed 20%
of the Company's outstanding Common Stock, on a fully-diluted basis.
(g) There are no legal or governmental proceedings
pending or, to the knowledge of the Company after reasonable investigation,
threatened, against the Company or any of the Subsidiaries, or to which the
Company or any of the Subsidiaries, or to which any of their respective
properties, is subject, that are required to be described in the Registration
Statement or the Prospectus but are not described as required, or that, if
decided adversely to the Company or any Subsidiary, could reasonably be expected
to have a Material Adverse Effect; and the aggregate of all pending or
threatened legal, equitable or governmental proceedings to which the Company or
any Subsidiary is or may be a party or which affect any of their properties that
are not described in the Registration Statement or the Prospectus, including
ordinary routine litigation incidental to their business, would not reasonably
be expected to have a Material Adverse Effect.
There are no agreements, contracts, indentures, leases or
other instruments that are required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the Registration
Statement that are not so described or filed, respectively. Neither the Company
(14)
nor any Subsidiary is involved in any strike, job action or labor dispute with
any group of employees, and, to the Company's knowledge, after reasonable
investigation, no such action or dispute is threatened or imminent.
(h) Neither the Company nor any of the Subsidiaries
is (i) in violation of its Articles or Certificate of Incorporation or by-laws
or other organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or body having
jurisdiction over the Company or any of the Subsidiaries or their respective
property, except where any such violation or violations in the aggregate would
not have a Material Adverse Effect or (ii) in default in any material respect in
the performance of any, or in default in any respect in the performance of any
material, obligation, agreement or condition contained in any bond, debenture,
note or any other evidence of indebtedness or in any agreement, indenture, lease
or other instrument to which the Company or any of the Subsidiaries is a party
or by which any of them or any of their respective properties may be bound,
except as expressly disclosed in the Registration Statement and the Prospectus,
and there does not exist with respect to any such bond, debenture, note, other
evidence of indebtedness, agreement, indenture, lease or other instrument any
state of facts which constitutes an event of default, as defined in such
documents, or which, with notice or lapse of time or both, would constitute such
an event of default.
(i) The Company has all requisite power and
authority to execute, deliver and perform its obligations under this Agreement,
the Financial Advisory Services Agreement, the Redeemable Warrants and the
Underwriter's Warrant. The execution and delivery of, and the performance by the
Company of its obligations under, this Agreement, the Financial Advisory
Services Agreement, the Redeemable Warrants and the Underwriter's Warrant have
been duly and validly authorized by the Company. This Agreement, the Financial
Advisory Services Agreement, the Redeemable Warrants and the Underwriter's
Warrant have been duly executed and delivered by the Company and constitute, and
the First Colonial Warrants will be duly executed and delivered by the Company
and will constitute, the valid and legally binding agreements of the Company,
enforceable against the Company in accordance with their respective terms,
except as the enforcement hereof and thereof may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally, and subject to the applicability of general principles of equity, and
except, in the case of this Agreement, as rights to indemnity and contribution
hereunder may be limited by Federal or state securities laws or principles of
public policy.
(15)
(j) Neither (i) the issuance, offer, sale or
delivery of the Primary Shares, the Redeemable Warrants, the Warrant Shares, or
the Underwriter's Warrant (including the shares of Common Stock and First
Colonial Warrants, including the shares of Common Stock issuable upon exercise
of the First Colonial Warrants), (ii) the execution, delivery or performance of
this Agreement, the Financial Advisory Services Agreement, the Redeemable
Warrants and the Underwriter's Warrant by the Company, nor (iii) the
consummation by the Company of the transactions contemplated hereby and thereby,
(A) requires any consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body, administrative agency
or other governmental body, agency or official (except such as may be required
for the registration of (x) the Common Stock, the Redeemable Warrants, and the
Warrant Shares under the Act and the Exchange Act, all of which have been or
will be effected in accordance with this Agreement, and (y) the Underwriter's
Warrant, and the shares of Common Stock and the First Colonial Warrants
(including the shares of Common Stock issuable upon exercise of the First
Colonial Warrants) comprising the Underwriter's Warrant, under the Act and the
Exchange Act, which will be effected in accordance with the terms of the
Underwriter's Warrant, and except for compliance with the securities or Blue Sky
laws of various jurisdictions) or (B) conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the Certificate
or Articles of Incorporation or by-laws or other organizational documents, of
the Company or any of the Subsidiaries or (C) conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under any agreement,
indenture, lease or other instrument to which the Company or any of the
Subsidiaries is a party or by which any of them or any of their respective
properties may be bound, or (D) violates or will violate any statute, law,
regulation, Permit (as hereinafter defined) or filing or judgment, injunction,
order or decree applicable to the Company or any of the Subsidiaries or any of
their respective properties, or (E) will result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company or
any of the Subsidiaries pursuant to the terms of any agreement or instrument to
which any of them is a party or by which any of them may be bound or to which
any of the property or assets of any of them is subject.
(k) Coopers & Lybrand, L.L.P. which has certified
certain financial statements of the Company and its consolidated subsidiaries
and delivered its reports with respect to the audited consolidated financial
statements included in the Registration Statement and the Prospectus (or any
amendment or supplement thereto), are independent public accountants as required
by the Act.
(l) The financial statements and notes forming part
of the Registration Statement and the Prospectus (and any amendment or
supplement thereto), comply in all material respects with the requirements of
(16)
the Act and present fairly in all material respects the consolidated financial
position, results of operations and changes in shareholders' equity and cash
flows of the Company and Subsidiary on the basis stated in the Registration
Statement at the respective dates or for the respective periods to which they
apply; such statements and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the time periods
reported on; and the other financial and statistical information and data set
forth in the Registration Statement and the Prospectus (and any amendment or
supplement thereto) is fairly presented in all material respects and, to the
extent such information and data is derived from the financial books and records
of the Company, is prepared on a basis consistent with such financial statements
and the books and records of the Company.
(m) Except as expressly disclosed by information
contained in the Registration Statement or the Prospectus (or any amendment or
supplement thereto), subsequent to the respective dates as of which such
information is given in the Registration Statement or the Prospectus (or any
amendment or supplement thereto), as the case may be (i) neither the Company nor
any of the Subsidiaries has (A) incurred any liability or obligation, direct or
contingent, or entered into any transaction not in the ordinary course of
business, or that is material to the Company or any Subsidiary, (B) declared or
paid any dividend or made any distribution of or with respect to any shares of
its capital stock or (C) redeemed, purchased or otherwise acquired or agreed to
redeem, purchase or otherwise acquire any shares of its stock and (ii) there has
not been any material change in the capital stock, or material increase in the
short-term or long-term debt of the Company or any Subsidiary, or any material
adverse change, or any development involving or which could reasonably be
expected to have a Material Adverse Effect.
(n) Each of the Company and the Subsidiaries has
good and marketable title to all property and non-material assets described in
the Prospectus as being owned by it (other than assets disposed of in the
ordinary course of business), free and clear of all liens, claims, security
interests or other encumbrances except (i) such as are expressly described in
the Registration Statement and the Prospectus or in a document filed as an
exhibit to the Registration Statement, (ii) liens for current taxes and
assessments not yet due and payable, and (iii) liens imposed by law, such as
mechanics' liens, which were incurred in good faith in the ordinary course of
business and do not and will not have a Material Adverse Effect, and all the
property described in the Prospectus as being held under lease by the Company or
a Subsidiary is held by it under valid, subsisting and enforceable leases, with
only such exceptions as in the aggregate are not materially burdensome and do
not interfere in any material respect with the conduct of the business of the
Company or any Subsidiary.
(17)
(o) The Company has not distributed and, prior to
the later to occur of the Closing Date and completion of the distribution of the
Primary Shares and the Redeemable Warrants, will not distribute any
advertisements, brochures, or other offering material in connection with the
offering and sale of the Primary Shares or the Redeemable Warrants, other than
the Registration Statement, the Prepricing Prospectus, the Prospectus or other
materials, if any, permitted by the Act. Neither the Company nor any of its
Subsidiaries has taken, nor will it take, directly or indirectly, any action
designed to or which reasonably might be expected to cause or result in, or
which has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Common Stock or the Redeemable
Warrants, to facilitate the sale or resale of any of the Primary Shares or the
Redeemable Warrants or Warrant Shares, or for any other reason.
(p) The Company and each Subsidiary and each
officer and director of the Company and each Subsidiary have all permits,
licenses, certificates, franchises and authorizations of governmental or
regulatory authorities ("Permits") as are necessary to own and lease their
respective properties and conduct their businesses in the manner described in
the Prospectus, subject to such qualifications as may be set forth in the
Prospectus, except where the failure to have such Permits would not have a
Material Adverse Effect; except as disclosed in the Prospectus, the Company and
each Subsidiary has conducted, and the Company and each Subsidiary are
conducting, their business in compliance with such Permits and all applicable
federal, state, local and foreign laws, rules and regulations, except where the
failure to conduct such business in compliance with such Permits or such laws,
rules and regulations would not have a Material Adverse Effect. The Company and
each Subsidiary has fulfilled and performed in all material respects all their
respective obligations with respect to the Permits, neither the Company nor any
Subsidiary has received any notice of proceedings relating to the revocation,
modification or termination of any Permit, and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the rights of the holder
of any such Permit, subject in each case to such qualification as may be set
forth in the Prospectus and except to the extent any such revocation or
termination would not have a Material Adverse Effect. Except as disclosed in the
Prospectus, to the best knowledge of the Company, after reasonable
investigation, no change in any laws or regulations is pending which could
reasonably be expected to be adopted and if adopted, could reasonably be
expected to have, individually or in the aggregate with all such changes, a
Material Adverse Effect.
(q) Since January 1, 1991, the Company and each of
its Subsidiaries has filed all material reports, registrations and statements,
(18)
together with any amendments required to be made with respect thereto, that they
were required to file with any regulatory commission, agency or authority. As of
their respective dates, such reports, registrations and statements complied in
all material respects with all of the rules and regulations promulgated by the
applicable commission, agency or authority. The Company and its Subsidiaries
maintain their books and records in accordance in all material respects with all
applicable laws, rules and regulations.
(r) The Company and each Subsidiary maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(s) Neither the Company nor any of the Subsidiaries
nor, to the Company's knowledge, after reasonable investigation, any employee or
agent of the Company or of any Subsidiary has made any payment of funds of the
Company or any Subsidiary or received or retained any funds in violation of any
law, rule or regulation, which payment, receipt or retention of funds is of a
character required to be disclosed in the Prospectus.
(t) Except as disclosed in the Prospectus, the
Company and each of the Subsidiaries have filed all tax returns required to be
filed, which returns are true and correct in all material respects, and neither
the Company nor any Subsidiary is in default in the payment of any taxes which
were payable pursuant to such returns or any assessments with respect thereto,
except such as are being contested in good faith and which, if the result of all
such contests were adverse to the Company and the Subsidiaries, would not have a
Material Adverse Effect.
(u) No holder of any security of the Company has
the right (other than in connection with the "Bridge Warrant" as described in
the Prospectus or a right which has been waived in writing) to have any security
owned by such holder included in the Registration Statement or to demand
registration of any security owned by such holder during the period ending
eighteen months after the date of the Prospectus. Each shareholder of the
Company has delivered to the Underwriter his enforceable written agreement that
he will not, for a period of eighteen months after the date of the Prospectus,
sell, offer to sell, contract to sell or otherwise dispose of any shares of
Common Stock of the Company (or any securities convertible into or exercisable
(19)
or exchangeable for Common Stock or of which Common Stock is a part), owned by
such shareholder, without the prior written consent of the Underwriter.
(v) The Company and the Subsidiaries own or
possess, or can acquire on reasonable terms, all patents, patent applications,
trademarks, service marks, trade names, licenses, copyrights and proprietary
information currently employed by them in connection with, or necessary for the
conduct of, their respective businesses, and neither the Company nor any such
Subsidiary has received any notice of infringement of or conflict with asserted
rights, and after reasonable investigation the Company does not believe that the
Company or any Subsidiary is in violation of any rights, of any third party with
respect to any of the foregoing which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect.
(w) The Company is not and, upon the sale of the
Primary Shares and Redeemable Warrants to be issued and sold in accordance
herewith and the application of the net proceeds to the Company of such sales as
described in the Prospectus under the caption "Use of Proceeds," will not be an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(x) No transaction has occurred between or among
the Company or any Subsidiary, on the one hand, and any of their respective
officers, directors, or five percent shareholders or any affiliate or affiliates
of any such officer, director, or five percent shareholder collectively on the
other hand that is required to be described in, and is not described in, the
Registration Statement and the Prospectus.
8. Further Representations and Warranties and Certain
Covenants of the Company. The Company represents, warrants (and as to paragraphs
(b), (c), (d) and (e), covenants for a period of three years from the date
hereof) to the Underwriter that:
(a) The Company has not incurred any direct or
indirect liability or obligation for finder's fees or any similar fees on behalf
of or payable by the Company or the Underwriter in connection with the Offering
or any other transaction, past, present or contemplated, between or among the
Company and the Underwriter, and the Company agrees to indemnify and hold
harmless the Underwriter from and against any loss or damage (including costs
and expenses of investigation, and reasonable legal and other professional fees)
arising therefrom if the Company has, in fact, incurred any such liability or
obligation.
(20)
(b) The Company shall use its best efforts to limit
the number of options and warrants outstanding to purchase Common Stock
(including upon conversion or exercise of any security but excluding the
securities pursuant to the Offering and the Bridge Financing) to not more than
20% of the Company's outstanding Common Stock, on a fully-diluted basis, for a
three year period following the effective date of the Prospectus, without the
consent of the Underwriter, which consent shall not unreasonably be withheld,
provided that this covenant shall not require the Company to cancel, or require
the holder to exercise, any currently outstanding option or warrant.
(c) The Company shall invite a representative of
First Colonial (which representative shall be subject to the Company's
reasonable approval) to attend all meetings of the Board of Directors of the
Company and each committee of the Board of Directors for a period of three years
beginning on the date of the first such meeting after the Closing Date; provided
however, such representative shall first have delivered to the Company a
confidentiality agreement reasonably satisfactory to the Company.
(d) The Company shall not cause or permit its Common
Stock or the Redeemable Warrants or the Underwriter's Warrant to be delisted,
without the prior approval of the Underwriter, unless required by Nasdaq.
(e) The Company shall use a registrar and transfer
agent reasonably acceptable to the Underwriter.
9. Indemnification and Contribution. (a) The Company agrees
to indemnify and hold harmless the Underwriter and each person, if any, who
controls the Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation, and
attorneys and other professional fees) arising out of or based upon (i) any
untrue statement or alleged untrue statement made by the Company in this
Agreement or (ii) any untrue statement or alleged untrue statement of a material
fact contained in any Prepricing Prospectus or in the Registration Statement or
the Prospectus or in any amendment or supplement to any of the foregoing, or
arising out of or based upon any omission or alleged omission to state therein 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, except insofar as such losses, claims, damages, liabilities or
expenses arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission which has been made therein or omitted
therefrom in reliance upon and in conformity with the information relating to
such Underwriter and which was furnished in writing to the Company by or on
behalf of such Underwriter expressly for use in connection therewith; provided,
(21)
however, that the indemnification contained in this Section 9(a) with respect to
any Prepricing Prospectus shall not inure to the benefit of any Underwriter (or
to the benefit of any person controlling such Underwriter) on account of any
such loss, claim, damage, liability or expense arising from the sale of the
Initial Shares or the Initial Warrants by the Underwriter to any person if a
copy of the Prospectus shall not have been delivered or sent to such person
within the time required by the Act and the regulations thereunder, and the
untrue statement or alleged untrue statement or omission or alleged omission of
a material fact contained in such Prepricing Prospectus was corrected in the
Prospectus, provided that the Company has delivered the Prospectus to the
Underwriter in requisite quantity on a timely basis to permit such delivery or
sending.
In addition to its other obligations under this Section
9(a), the Company agrees that, as an interim measure during the pendency of any
claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in this Section 9(a), it will reimburse the Underwriter on a monthly
basis for all reasonable legal or other professional fees or other out-of-pocket
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
Company's obligation to reimburse the Underwriter for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Underwriter shall
promptly return any such improper payment to the Company, together with
interest, compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit standing) announced
from time to time by CoreStates Bank, N.A. (the "Prime Rate"). Any such interim
reimbursement payments which are not made to the Underwriter within 30 days of a
request for reimbursement shall bear interest at the Prime Rate from the date of
such request. This indemnity agreement shall be in addition to any liabilities
which the Company, or any remedies which the Underwriter, may otherwise have.
(b) If any action, suit or proceeding shall be
brought against the Underwriter or any person controlling the Underwriter in
respect of which indemnity may be sought against the Company, the Underwriter or
such controlling person shall promptly notify the Company, and the Company shall
promptly assume the defense thereof, including the employment of counsel and
payment of all fees and expenses. The Underwriter or any such controlling person
shall have the right to employ separate counsel in any such action, suit or
proceeding and to participate in the defense thereof, but the fees and expenses
(22)
of such separate counsel shall be at the expense of the Underwriter or such
controlling person, as the case may be, unless (i) the Company has agreed in
writing to pay such fees and expenses, (ii) the Company has failed promptly to
assume the defense and employ counsel, or (iii) the named parties to any such
action, suit or proceeding (including any impleaded parties) include both the
Underwriter or such controlling person and the Company and the Underwriter or
such controlling person shall have been advised by its counsel (which counsel is
reasonably satisfactory to the Company) that representation of such indemnified
party and the Company by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such representation
by the same counsel has been proposed) due to actual or potential differing
interests between them (in which case the Company shall not have the right to
assume the defense of such action, suit or proceeding on behalf of the
Underwriter or such controlling person). It is understood, however, that the
Company shall, in connection with any one such action, suit or proceeding or
separate but substantially similar or related actions, suits or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
the Underwriter and controlling persons not having actual or potential differing
interests with the Underwriter or among themselves, which firm shall be
designated in writing by the Underwriter, and that all such fees and expenses
shall be reimbursed on a monthly basis as provided in Section 9(a) hereof. The
Company shall not be liable for any settlement of any such action, suit or
proceeding effected without the Company's written consent, but if settled with
such written consent, or if there shall be a final judgment for the plaintiff in
any such action, suit or proceeding, the Company agrees to indemnify and hold
harmless the Underwriter, to the extent provided in Section 9(a), and any such
controlling person from and against any loss, claim, damage, liability or
expense by reason of such settlement or judgment.
(c) The Underwriter agrees to indemnify and hold
harmless the Company, its directors and its officers who sign the Registration
Statement, and any person who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act to the same extent as the
indemnity from the Company to the Underwriter set forth in Section 9(a) hereof,
but only with respect to information relating to the Underwriter furnished in
writing by or on behalf of the Underwriter expressly for use in the Registration
Statement, the Prospectus or any Prepricing Prospectus, or any amendment or
supplement to any of the foregoing, or the omission of any information relating
to the Underwriter and required to be disclosed by Item 508 of Regulation S-B
promulgated under the Act. If any action, suit or proceeding shall be brought
against the Company, any of its directors, any such officer or any such
(23)
controlling person based on the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto, and in respect of
which indemnity may be sought against the Underwriter pursuant to this Section
9(c), the Underwriter shall have the rights and duties given to the Company by
Section 9(b) above (except that if the Company shall have assumed the defense
thereof the Underwriter shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the Underwriter's expense), and the
Company, its directors, any such officer, and any such controlling person shall
have the rights and duties given to the Underwriter by Section 9(b) above.
(d) If the indemnification provided for in this
Section 9 is unavailable to an indemnified party under Sections 9(a) or 9(c)
hereof in respect of any losses, claims, damages, liabilities or expenses
referred to therein as a result of any finding, determination or order that such
indemnification is illegal or contrary to public policy or for any other reason,
then an indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriter on the other hand from the offering
of the Primary Shares and the Initial Warrants, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and the Underwriter on the other in connection with the statements or
omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriter on the
other shall be deemed to be in the same proportion as the total net proceeds
from the Offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Underwriter, in
each case as set forth in the table on the cover page of the Prospectus;
provided that, in the event that the Underwriter shall have purchased any
Over-allotment Shares or Over-allotment Warrants hereunder, any determination of
the relative benefits received by the Company or the Underwriter from the
Offering shall include the net proceeds (before deducting expenses) received by
the Company, and the underwriting discounts and commissions received by the
Underwriter, from the sale of such Over-allotment Shares and Over-allotment
Warrants, in each case computed on the basis of the respective amounts set forth
in the notes to the table on the cover page of the Prospectus. The relative
fault of the Company on the one hand and the Underwriter on the other hand shall
be determined by reference to, among other things, whether the untrue or alleged
(24)
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or by the Underwriter on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Company and the Underwriter agree that it
would not be just and equitable if contribution pursuant to this Section 9 were
determined by a pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in Section
9(d) above. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities and expenses referred to in Section
9(d) above shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 9, the Underwriter
shall not be required to contribute any amount in excess of the amount by which
the discounts and commissions received by the Underwriter in connection with the
Offering exceed the amount of any damages which the 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 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) It is agreed that any controversy arising out
of the operation of the interim reimbursement arrangements set forth in Section
9(a) above, including the amounts of any requested reimbursement payments and
the method of determining such amounts, shall be settled by arbitration
conducted under the provisions of the Constitution and Rules of the Board of
Governors of the New York Stock Exchange, Inc. or pursuant to the Code of
Arbitration Procedure of the NASD. Any such arbitration shall be commenced by
service of a written demand for arbitration or a written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration shall not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to such demand or notice
shall be authorized to do so. Such arbitration shall be limited to the operation
of the interim reimbursement provisions contained in Section 9(a) above and
shall not resolve the ultimate propriety or enforceability of the other
obligations created by this Section 9.
(g) The indemnity and contribution agreements con-
tained in this Section 9 and the representations, warranties agreements and
covenants of the Company set forth in this Agreement shall remain operative and
in full force and effect, regardless of (i) any investigation made by or on
(25)
behalf of the Underwriter or any person controlling the Underwriter, the
Company, its directors or officers, or any person controlling the Company, (ii)
acceptance of any Primary Shares or Redeemable Warrants and payment therefor
hereunder, or (iii) any termination of this Agreement. A successor to the
Underwriter or any person controlling the Underwriter, or to the Company, its
directors or officers, or any person controlling the Company, are intended to
benefit from, and shall be entitled to the benefits of, the indemnity,
contribution and reimbursement agreements contained in this Section 9.
10. Conditions of Underwriter's Obligations. The
obligations of the Underwriter to purchase the Primary Shares and the
Redeemable Warrants hereunder are subject to the following
conditions:
(a) If, at the time this Agreement is executed and
delivered, it is necessary for the registration statement or a post effective
amendment thereto to be declared effective before the offering of the Primary
Shares and the Redeemable Warrants may commence, the registration statement or
such post-effective amendment shall have become effective not later than 5:30
PM, Philadelphia time, on the date hereof, or at such later date and time as
shall be consented to in writing by the Underwriter, and all filings, if any,
required by Rules 424 and 430A or other applicable rules promulgated under the
Act shall have been timely made; no stop order suspending the effectiveness of
the registration statement shall have been issued and no proceeding for that
purpose shall have been instituted or, to the knowledge of the Company or the
Underwriter, threatened by the Commission, and any request of the Commission or
of the Underwriter for additional information (to be included in the
registration statement or the prospectus or otherwise) shall have been complied
with to the satisfaction of the Commission and the Underwriter.
(b) Subsequent to the effective date of this Agree-
ment, there shall not have occurred any material and adverse change, or any
development involving a prospective such change, in or affecting the condition
(financial or other), business, prospects, properties, net worth, or results of
operations of the Company or the Subsidiaries not contemplated by the specific
language of the Prospectus, or any adverse and material change in market
conditions, which, in the opinion of the Underwriter, would adversely affect the
securities market generally.
(c) The Underwriter shall have received on the
Closing Date an opinion of Morgan, Lewis & Bockius LLP, special counsel for the
Company, dated the Closing Date and addressed to the Underwriter, to the effect
that:
(26)
(i) The Company is a corporation duly
incorporated and validly existing in good standing under the laws of the
Commonwealth of Pennsylvania with full corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto). The Company is duly registered and qualified to conduct its business
and is in good standing as a foreign corporation in each jurisdiction or place
where the nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify or to be in good standing does not have a Material Adverse Effect.
(ii) Each Subsidiary is a corporation duly
incorporated and validly existing and in good standing under the laws of the
respective jurisdiction of its organization, with full corporate power and
authority to own, lease, and operate its properties and to conduct its business
as described in the Registration Statement and the Prospectus (and any amendment
or supplement thereto); each Subsidiary is duly registered and qualified to
conduct its business and is in good standing as a foreign corporation in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify or to be in good standing does not have a Material
Adverse Effect; and all the outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable, and to the knowledge of such counsel, are wholly owned by the
Company directly or indirectly through Subsidiaries, free and clear of any
security interest, lien, adverse claim, equity or other encumbrance, except as
described in the Prospectus and there are no (i) existing preemptive rights
under any Subsidiary's Certificate or Articles of Incorporation or applicable
law or (ii) similar rights that entitle or will entitle any person other than
the Company to acquire any shares of any Subsidiary.
(iii) The authorized, issued and
outstanding capital stock of the Company is as set forth under the caption
"Capitalization" in the Prospectus; and the authorized capital stock of the
Company conforms in all material respects as to legal matters to the description
thereof contained in the Prospectus under the caption "Description of Capital
Stock." All the shares of capital stock of the Company outstanding prior to the
issuance of the Initial Shares and the Initial Warrants to be issued and sold by
the Company hereunder have been duly authorized and validly issued, are fully
paid and nonassessable and free of any (A) preemptive rights under the Company's
Certificate or Articles of Incorporation or applicable Pennsylvania law or (B)
to the knowledge of such counsel, and except as set forth in the Prospectus,
similar rights that entitle any person to acquire any shares of Common Stock (or
any securities convertible into or exercisable or exchangeable for such Common
(27)
Stock or of which such Common Stock is a part) upon the issuance thereof by the
Company.
(iv) The Primary Shares and the Redeemable
Warrants to be issued and sold to the Underwriter and the Warrant Shares
underlying the Redeemable Warrants, and the Underwriter's Warrant (and the First
Colonial Shares and the First Colonial Warrants, and the shares of Common Stock
underlying the First Colonial Warrants) to be issued and sold to First Colonial
by the Company hereunder and thereunder have been duly authorized and, when
issued and delivered to the Underwriter (or First Colonial) against payment
therefor in accordance with the terms hereof, will be validly issued, fully paid
and nonassessable and free of any (A) preemptive rights under the Company's
Articles of Incorporation or applicable Pennsylvania law and (B) to the
knowledge of such counsel, any similar rights that entitle or will entitle any
person to acquire any Common Stock (or any securities convertible into or
exercisable or exchangeable for such Common Stock or of which Common Stock is a
part) upon the issuance thereof by the Company. The Common Stock and the
Redeemable Warrants have been approved for quotation on the Nasdaq SmallCap
Market. To the knowledge of such counsel, except as disclosed in the
Registration Statement and the Prospectus, there is no outstanding option,
warrant or other right calling for the issuance of, and no commitment, plan or
arrangement to issue, any share of capital stock of the Company or any security
convertible into, exercisable for, or exchangeable for capital stock of the
Company or of which Common Stock is a part. Except as described in this
Agreement, the Registration Statement and the Prospectus, such counsel does not
know of any holder of any securities of the Company or any other person who has
the right, contractual or otherwise, to cause the Company to sell or otherwise
issue to such holder, or to permit such holder to underwrite the sale of, or
receive any remuneration or other consideration in connection with the issuance
or sale of, any of the Company Securities or the right to have any Common Stock
or other securities of the Company included in the Registration Statement or the
right, as a result of the filing of the Registration Statement, to require
registration under the Securities Act of any shares of Common Stock or other
securities of the Company.
(v) The Redeemable Warrants, the
Underwriter's Warrant and the First Colonial Warrants conform in all material
respects to the description thereof contained in the Registration Statement and
the Prospectus.
(vi) The forms of certificates for the
Common Stock and the Redeemable Warrants conform to the requirements of
applicable Pennsylvania law; the certificates evidencing the Common Stock and
the Redeemable Warrants are in due and proper legal form and have been duly
authorized for issuance by the Company.
(28)
(vii) The Registration Statement and all
post-effective amendments thereto, if any, have become effective under the Act
and, to the knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose are pending before or contemplated by the Commission; and any
required filing of the Prospectus pursuant to Rule 424(b) has been made in
accordance with Rule 424(b).
(viii) The Company has all necessary
corporate power and authority to enter into this Agreement and the other
agreements, instruments and documents contemplated hereby, to issue, sell and
deliver the Company Securities as provided herein, and this Agreement and each
such other agreement, instrument and document have been duly authorized,
executed and delivered by the Company and are valid, legal and binding
agreements of the Company, enforceable against the Company in accordance with
their respective terms, except (A) as enforcement of rights to indemnity and
contribution hereunder may be limited by federal or state securities laws or
principles of public policy and (B) subject to the qualification that the
enforceability of the Company's obligations hereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights generally and by general
equitable principles.
(ix) Neither the offer, sale or delivery
of the Company Securities, the execution, delivery or performance by the Company
of this Agreement, the Financial Advisory Services Agreement or the
Underwriter's Warrant, compliance by the Company with the provisions hereof or
thereof nor consummation by the Company of the transactions contemplated hereby
or thereby, conflicts or will conflict with or constitutes or will constitute a
breach of, or a default under, the Certificate or Articles of Incorporation or
by-laws or other organizational documents of the Company or any of the
Subsidiaries or the knowledge of such counsel any agreement, indenture, lease or
other instrument to which the Company or any of the Subsidiaries is a party or
by which any of them or any of their respective properties is bound, or to the
knowledge of such counsel will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of any agreement or instrument to which any
of them is a party or by which any of them may be bound or to which any of the
property or assets of any of them is subject, nor will any such action result in
any violation of any existing law or regulation, or any ruling (assuming
compliance with all applicable state securities and Blue Sky laws), judgment,
injunction, order or decree known to such counsel, applicable to the Company,
the Subsidiaries or any of their respective properties.
(x) No consent, approval, authorization or
other order of, or registration or filing with, any court, regulatory body,
(29)
administrative agency or other governmental body, agency, or official is
required on the part of the Company (except as have been obtained under the Act
and the Exchange Act or such as may be required under state securities or Blue
Sky law governing the purchase and distribution of the Company Securities as to
which such counsel need not express an opinion) for the valid issuance and sale
of the Shares, the Redeemable Warrants and the Underwriter's Warrant to the
Underwriter as contemplated by this Agreement, or for the public offering and
sale of the Shares and the Redeemable Warrants as contemplated by Section 3
hereof.
(xi) The Registration Statement and the
Prospectus (including Incorporated Documents) and any supplements or amendments
thereto (except for the financial statements and the notes thereto and the
schedules and other financial and statistical data included therein, as to which
such counsel need not express any opinion) comply as to form in all material
respects with the requirements of the Act and, with respect to Incorporated
Documents, the Exchange Act.
(xii) To the knowledge of such counsel,
(A) other than as described or contemplated in the Prospectus (or any supplement
thereto), there are no legal or governmental proceedings pending or threatened
against the Company or any of the Subsidiaries, or to which the Company or any
of the Subsidiaries or any of their property, is subject, which are required to
be described in the Registration Statement or Prospectus (or any amendment or
supplement thereto) and (B) there are no agreements, contracts, indentures,
leases or other instruments that are required to be described in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto) or to be filed as an exhibit to the Registration Statement that are not
so described or filed, as required.
(xiii) Neither the Company nor any of its
Subsidiaries is in violation of its respective Certificate or Articles of
Incorporation or by-laws or other organizational documents and, to such
counsel's knowledge, no event of default exists, and no event has occurred which
with the giving of notice or lapse of time, or both, would constitute an event
of default, in the due performance and observance of any term, covenant or
condition by the Company or any Subsidiary of any indenture, mortgage, deed of
trust, note, lease or any other agreement or instrument to which the Company or
any Subsidiary is a party or by which they or any of them or their assets or
properties or businesses may be bound or affected.
(xiv) To the knowledge of such counsel,
neither the Company nor any of the Subsidiaries is in violation of any law,
ordinance, administrative or governmental rule or regulation applicable to the
Company or any of the Subsidiaries or the property of any of them, or of any
decree of any court or governmental agency or body having jurisdiction over the
(30)
Company or any of the Subsidiaries or the property of any of them, except to the
extent that any such violation would not have a Material Adverse Effect.
(xv) The Company and each of the
Subsidiaries have full corporate power and authority, and to the knowledge of
such counsel such Permits as are necessary under applicable law, to own their
respective properties and to conduct their respective businesses as now being
conducted as described in the Prospectus, subject to such qualifications as may
be set forth in the Prospectus and except where the failure to have such
Permits, individually or in the aggregate, would not have a Material Adverse
Effect.
(xvi) The statements in the Registration
Statement and Prospectus, under the caption "Description of Securities" present
fairly in all material respects the information required to be shown with
respect to the applicable provisions of Item SB-2.
(xvii) Such counsel have participated in
the preparation of the Registration Statement and the Prospectus, including
review and discussion of the contents thereof, and (although such counsel is not
passing upon and does not assume sole responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and Prospectus (except as provided above with respect to clause (xvi)
of this Section 10(c)) nothing has come to the attention of such counsel that
has caused them to believe that the Registration Statement at the time the
Registration Statement became effective, or the Prospectus, as of its date and
as of the Closing Date or the Option Closing Date, as the case may be, contained
an 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
light of the circumstances under which they were made, not misleading or that
any amendment or supplement to the Prospectus, as of its respective date, and as
of the Closing Date or the Option Closing Date, as the case may be, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that nothing contained herein shall be deemed to
constitute an opinion of such counsel on, and such counsel need express no
opinion with respect to, the financial statements and the notes thereto and the
schedules and other financial and statistical data included in the Registration
Statement or the Prospectus and information furnished in writing by the
Underwriter specifically for inclusion in the Registration Statement and
Prospectus).
The opinion of such counsel shall be limited to the laws of
the United States and the Commonwealth of Pennsylvania.
(31)
(d) The Underwriter shall have received on the
Closing Date an opinion of Mesirov Gelman Jaffe Cramer & Jamieson, counsel for
the Underwriter, dated the Closing Date, and addressed to the Underwriter, with
respect to the matters referred to in clauses (iv) (only the first sentence
thereof, other than subclause (B.) thereof), (vii), and (xi) (other than with
respect to the Incorporated Documents) of the foregoing Section 10(c), matters
related to the validity of the Shares, the Registration Statement and the
Prospectus, and such other matters as the Underwriter may request.
(e) The Underwriter shall have received from
Coopers & Lybrand, L.L.P. a letter or letters dated, respectively, the date
hereof, the Closing Date, and the Option Closing Date in form and substance
satisfactory to the Underwriter, to the effect that:
(i) they are independent accountants with
respect to the Company and its consolidated subsidiary within the meaning of the
Act and the applicable rules and regulations thereunder;
(ii) in their opinion, the audited
consolidated financial statements examined by them and included in the
Registration Statement and the Prospectus comply in all material respects with
the applicable accounting requirements of the Act and the related published
rules and regulations;
(iii) on the basis of a reading of the
latest available interim unaudited consolidated financial statements of the
Company and its consolidated subsidiaries, a reading of the unaudited amounts
for total revenues, income from operations, net income, and net income per share
for the periods subsequent to December 31, 1995 and of the unaudited
consolidated financial statements of the Company and its consolidated
subsidiaries for the periods from which such amounts are derived, carrying out
certain specified procedures (which do not constitute an examination made in
accordance with generally accepted auditing standards), a reading of the minute
books of the shareholders, the board of directors and any committees thereof of
the Company and each of its consolidated Subsidiaries, and inquiries of certain
officials of the Company and its consolidated Subsidiaries who have
responsibility for financial and accounting matters, nothing came to their
attention that caused them to believe that:
(A) the unaudited amounts for
revenues and total and per share amounts of pro forma net income included in the
Registration Statement and the Prospectus, do not agree in a material manner
with the amounts set forth in any unaudited consolidated financial statements
for those same periods or are not in material conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the corresponding amounts in the audited consolidated financial statements
(32)
included in the Registration Statement and the Prospectus; and
(B) at a specific date not more
than five business days prior to the date of such letter, there were any
material changes in the capital stock or long-term debt of the Company and its
consolidated Subsidiaries or any material decreases in net current assets or
shareholders' equity of the Company and its consolidated subsidiaries, in each
case compared with amounts shown on the consolidated balance sheet included in
the Registration Statement and the Prospectus, or for the period from January 1,
1996 to such specified date there were any material decreases, as compared with
the corresponding period for the prior year, in total revenues, income from
operations, net income, or net income per share of the Company and its
consolidated Subsidiary, except in all instances for changes, decreases or
increases set forth in such letter; and
(iv) they have carried out certain
specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information that are derived from the general
accounting records of the Company and its consolidated Subsidiary and are
included in the Registration Statement and the Prospectus under the captions
"Prospectus Summary," "Summary Consolidated Financial Data," "The Company," "Use
of Proceeds," "Capitalization," "Dilution," "Selected Consolidated Financial
Data," "Management's Discussion and Analysis of Financial Condition and Results
of Operations," "Business," "Management," "Certain Transactions," and in Part II
to the Registration Statement, and have compared such amounts, percentages and
financial information with such records of the Company and its consolidated
Subsidiaries and with information derived from such records and have found them
to be in agreement; and
(v) they have performed certain other
procedures as a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to accounting,
financial or statistical information derived from the general accounting records
of the Company) set forth in the Registration Statement and the Prospectus and
specified by the Underwriter agrees with the accounting records of the Company.
In the event that the letters referred to above set forth
any such changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriter that (A) such letters shall be accompanied by a
written explanation of the Company as to the significance thereof, unless the
Underwriter deems such explanation unnecessary, and (B) such changes, decreases
or increases do not, in the sole judgment of the Underwriter, make it
impractical or inadvisable to proceed with the purchase and delivery of the
Shares or Redeemable Warrants as contemplated by the Registration Statement, as
amended as of the date hereof.
(33)
References to the Registration Statement and the Prospectus
in this Section 10(e) are to such documents as amended and supplemented at the
date of such respective letter required to be delivered by Coopers & Lybrand,
L.L.P. hereunder.
(f) (i) No stop order suspending the effectiveness
of the Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission or any state securities board, bureau, commission
or agency at or prior to the Closing Date; (ii) there shall not have been any
change in the capital stock of the Company nor any material increase in the
short-term or long-term debt of the Company (other than in the ordinary course
of business) from that set forth in or contemplated by specific language in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto); (iii) there shall not have been, since the respective dates as of
which information is given in the Registration Statement and the Prospectus (or
any amendment or supplement thereto), except as may otherwise be stated in the
Registration Statement and Prospectus (or any amendment or supplement thereto),
any material adverse change in the condition (financial or other), business,
prospects, properties, net worth, or results of operations of the Company or any
Subsidiary, or in the conditions in any financial market; (iv) the Company and
the Subsidiaries shall not have any liabilities or obligations, direct or
contingent (whether or not in the ordinary course of business), that are
material to the Company or any Subsidiary, other than those reflected in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto); and (v) all the representations and warranties of the Company
contained in this Agreement shall be true and correct on and as of the date
hereof, and on and as of the Closing Date and the Option Closing Date as if made
on and as of the Closing Date and the Option Closing Date, and the Underwriter
shall have received a certificate, dated the Closing Date and the Option Closing
Date and signed by the chief executive officer and the chief accounting officer
of the Company (or such other officers as are acceptable to the Underwriter),
confirming the matters set forth in this Section 10(f) and in Section 10(g)
hereof.
(g) The Company shall not have failed at or prior
to the Closing Date and the Option Closing Date to have performed or complied
with any of its agreements herein contained and required be performed or
complied with by it hereunder at or prior to the Closing Date and Option Closing
Date, as the case may be.
(h) The Underwriter shall have received from each
person who is a director or officer of the Company or a shareholder of the
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Company an agreement to the effect that such person will not, directly or
indirectly without the prior written consent of the Underwriter, for a period of
eighteen months from the date of the Prospectus, sell, offer to sell, contract
to sell or otherwise dispose of any shares of Common Stock of the Company (or
any securities convertible into or exercisable or exchangeable for such Common
Stock or of which Common Stock is a part) owned by such person, and that each
such person shall offer First Colonial the right of first refusal to act as
broker for any sales (whether under Rule 144 or otherwise) of any Common Stock
(or any securities convertible into or exercisable or exchangeable for Common
Stock or of which Common Stock is a part) for the one year period following the
end of the lock-up period and thereafter, for a period of four years following
such one year period, provide First Colonial with prior notice of any sales to
be made of any such securities, whether under Rule 144 or otherwise.
(i) The Company shall have furnished or caused to
be furnished to the Underwriter such further certificates and documents as the
Underwriter shall have reasonably requested.
(j) The Company shall have executed and delivered
to First Colonial the Underwriter's Warrant and the Financial Advisory Services
Agreement.
(k) The Company shall have executed and delivered
to the Underwriter at the Closing Date and each Option Closing Date, a
certificate of the Chief Financial Officer relating to the matters set forth in
paragraph (f)(v) above.
(l) Any event or development relating to or
involving the Company or any officer or director of the Company which makes any
statement made in the Prospectus untrue or which, in the opinion of the Company
and its counsel or the Underwriter and its counsel, requires the making of any
addition to or change in the Prospectus in order to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading.
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Underwriter and its counsel.
Any representation and warranty contained in any certificate
or document signed by any officer of the Company and delivered to the
Underwriter, or to counsel for the Underwriter, shall be deemed a representation
and warranty by the Company to the Underwriter as to the statements made
therein.
(35)
The obligations of the Underwriter to purchase any
Over-allotment Shares or Over-allotment Warrants hereunder are subject to the
satisfaction on and as of any Option Closing Date of the conditions set forth in
this Section 10, except that, if any Option Closing Date is other than the
Closing Date, the certificates, opinions and letters referred to in paragraphs
(c) through (f) and paragraphs (h) and (j) shall be dated the Option Closing
Date in question and the opinions and letters called for by paragraphs (c), (d)
and (e) shall be revised to reflect the sale of Over-allotment Shares and the
Over-allotment Warrants.
11. Expenses. The Company agrees to pay the costs and
expenses associated with the following matters and all other costs and expenses
incident to the performance by it of its obligations hereunder, whether or not
the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 12 or 13 hereof: (i) the preparation, printing or
reproduction, and filing with the Commission, the National Association of
Securities Dealers, Inc. ("NASD") and each state securities or Blue Sky board,
bureau or agency designated by the Underwriter, of the registration statement
(including financial statements and exhibits thereto), each Prepricing
Prospectus, the Prospectus and each amendment or supplement to any of them; (ii)
the printing (or reproduction) and delivery (including postage, air freight
charges and charges for counting and packaging) of such copies of the
Registration Statement, each Prepricing Prospectus, the Prospectus, and all
amendments or supplements to any of them as may be reasonably requested for use
in connection with the offering and sale of the Shares and the Redeemable
Warrants; (iii) the preparation, printing, authentication, issuance and delivery
of certificates for the Shares and the Redeemable Warrants, including any stamp
taxes in connection with the original issuance and sale of the Shares or the
Redeemable Warrants; (iv) the printing (or reproduction) and delivery of this
Agreement, the Underwriter's Questionnaire and other similar Underwriter's
documents, the preliminary and supplemental Blue Sky Memoranda and all other
agreements or documents printed (or reproduced) and delivered in connection with
the offering of the Shares or the Redeemable Warrants; (v) the registration of
the Shares and the Redeemable Warrants and any other Company Securities under
the Act; (vi) the registration or qualification of the Shares and the Redeemable
Warrants for offer and sale under the securities or Blue Sky laws of the several
states as provided in Section 5(g) hereof (including the reasonable fees,
expenses and disbursements of counsel for the Underwriter relating to the
preparation of the preliminary and supplemental Blue Sky Memoranda and such
registration and qualification); (vii) the filing fees with the Commission, the
NASD and each state securities or Blue Sky board, bureau or agency designated by
the Underwriter, and the fees, disbursements and other charges of counsel for
the Underwriter in connection with all such filings; (viii) the listing of the
Shares and the Redeemable Warrants on the Nasdaq SmallCap Market; and (ix) the
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fees and expenses of the Company's accountants and the fees and expenses of
counsel (including local and special counsel) for the Company except as to the
costs of Underwriter's counsel incurred in connection with approval of
Underwriter's compensation hereunder as fair and reasonable in accordance with
the regulations of the NASD.
If this Agreement is terminated by the Underwriter because
of the failure of the Company to satisfy any of the conditions set forth in
Section 10, the Company shall reimburse the Underwriter for all of its
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriter.
12. Effective Date of Agreement. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the Registration Statement or a post-effective amendment thereto to be
declared effective before the offering of the Primary Shares or the Redeemable
Warrants may commence, when notification of the effectiveness of the
Registration Statement or such post-effective amendment has been released by the
Commission. Until such time as this Agreement shall have become effective, it
may be terminated by the Company, by notifying the Underwriter, or by the
Underwriter by notifying the Company.
Any notice under this Section 12 may be given by telegram,
telecopy or telephone but shall be subsequently confirmed by letter.
13. Termination of Agreement. This Agreement shall be
subject to termination in the Underwriter's absolute discretion, without
liability on the part of the Underwriter to the Company, by notice to the
Company, if prior to the Closing Date or any Option Closing Date (if different
from the Closing Date and then only as to Over-allotment Shares or
Over-allotment Warrants), as the case may be, (i) trading in securities
generally on the New York Stock Exchange, American Stock Exchange or Nasdaq
shall have been suspended or materially limited, (ii) a general moratorium on
commercial bank- ing activities in New York shall have been declared by either
Federal or state authorities, (iii) there shall have occurred any outbreak or
escalation of hostilities or other international or domestic calamity or crisis,
or (iv) there shall have occurred any change in political, financial or economic
conditions, the effect of which on the financial markets of the United States is
such as to make it, in the Underwriter's sole unfettered judgment, impracticable
or inadvisable to commence or continue the offering of the Primary Shares or the
Redeemable Warrants at the offering price to the public set forth on the cover
page of the Prospectus or to enforce contracts for the resale of the Primary
Shares or the Redeemable Warrants by the Underwriter. Notice of such termination
may be given to the Company by telegram, telecopy or telephone and shall be
subsequently confirmed by letter.
(37)
14. Information Furnished by the Underwriter. The statements
set forth in the last paragraph on the cover page and in the second and fourth
paragraphs under the caption "Underwriting" in any Prepricing Prospectus and in
the Prospectus, constitute the only information furnished by or on behalf of the
Underwriter as such information is referred to in Sections 7(b) and 9 hereof.
15. Miscellaneous. Except as otherwise provided in Sections
5, 12 and 13 hereof, notice given pursuant to any provision of this Agreement
shall be in writing and shall be delivered (i) if to the Company, at the office
of the Company at 750 Dawson Drive, Newark, Delaware 19713, Attention: Mr. Neil
Swartz, President and Chief Executive Officer, with a copy to Morgan, Lewis &
Bockius LLP, 2000 One Logan Square, Philadelphia, Pennsylvania 19103-6993,
Attention: John F. Bales, III, Esquire; or (ii) if to the Underwriter, in care
of First Colonial Securities Group, Inc., 10 Lake Center Executive Park, 401
North Route 73 - Suite 202, Marlton, New Jersey 08053, Attention: Ben
Lichtenberg, Director of Investment Banking, with a copy to Mesirov Gelman Jaffe
Cramer & Jamieson, 1735 Market Street, Philadelphia, Pennsylvania 19103-7598,
Attention: Steven B. King, Esquire.
This Agreement has been and is made solely for the benefit
of the Underwriter, the Company, its directors and officers, and the controlling
persons referred to in Section 9 hereof and their respective successors and
assigns, to the extent provided herein, and no other person shall acquire or
have any right under or by virtue of this Agreement. Neither the term
"successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from any Underwriter of any Common Stock or Redeemable
Warrants in such purchaser's status as such purchaser.
16. Applicable Law; Counterparts. This Agreement shall be
governed by and construed in accordance with the laws of the State of New Jersey
applicable to contracts made and to be performed within the State of New Jersey
without giving effect to the conflict of laws principles thereof.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument. If signed in
counterparts, this Agreement shall not become effective unless at least one
(38)
counterpart hereof shall have been executed and delivered on behalf of each
party hereto.
Please confirm that the foregoing correctly sets forth the
agreement between the Company and the Underwriter by signing in the place
indicated below.
Very truly yours,
MICROLEAGUE MULTIMEDIA, INC.
By:
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Neil Swartz, Chairman
Confirmed as of the date first above written.
FIRST COLONIAL SECURITIES GROUP, INC.
By:
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Ben Lichtenberg, Director of Investment Banking
(39)
SCHEDULE I
SUBSIDIARIES
Name Address Jurisdiction of Incorporation
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