EXECUTION
STOCK PURCHASE AGREEMENT
AMONG
MICROLEAGUE MULTIMEDIA, INC.,
HEARST CORPORATION
AND
AMERITECH CORPORATION
---------------------------------------
252,633 SHARES OF COMMON STOCK
---------------------------------------
Dated as of
June 6, 1997
TABLE OF CONTENTS
PAGE
ARTICLE I - PURCHASE AND SALE OF SHARES....................................1
Section 1.1 Purchase and Sale...............................1
Section 1.2 Closing.........................................1
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF COMPANY.....................2
Section 2.1 Organization....................................2
Section 2.2 Subsidiaries....................................2
Section 2.3 Authorization...................................2
Section 2.4 Capitalization..................................2
Section 2.5 Financial Statements............................3
Section 2.6 No Violation....................................3
Section 2.7 Consents........................................3
Section 2.8 Litigation, Orders..............................3
Section 2.9 Securities Laws.................................4
Section 2.10 Disclosure......................................4
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE INVESTORS..............4
Section 3.1 Investment Intent, Etc..........................4
Section 3.2 Sales of Company Securities.....................5
Section 3.3 Authorization...................................6
Section 3.4 No Violation....................................6
ARTICLE IV - CONDITIONS TO OBLIGATIONS OF THE INVESTORS....................6
Section 4.1 Representations and Warranties..................6
Section 4.2 No Proceeding or Litigation.....................6
Section 4.3 No Injunction...................................7
Section 4.4 Resolutions of the Company......................7
Section 4.5 Incumbency Certificate..........................7
Section 4.6 Opinion of Counsel..............................7
Section 4.7 Consummation of Acquisition of KidSoft..........7
ARTICLE V - CONDITIONS TO OBLIGATIONS OF THE COMPANY.......................7
Section 5.1 Representations and Warranties..................7
Section 5.2 No Proceeding or Litigation.....................7
Section 5.3 No Injunction...................................7
ARTICLE VI - SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION..................8
Section 6.1 Survival of Representations.....................8
Section 6.2 Indemnification.................................8
Section 6.3 Conditions of Indemnification...................8
ARTICLE VII - REGISTRATION RIGHTS..........................................9
Section 7.1 Piggyback Registration Rights...................9
Section 7.2 Withdrawal of Shares............................9
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Section 7.3 Information Regarding Investors;
Underwriting Arrangements......................9
Section 7.4 Restrictions on Sales..........................10
Section 7.5 Indemnification................................10
ARTICLE VIII - MISCELLANEOUS..............................................12
Section 8.1 Expenses.......................................12
Section 8.2 Further Assurances.............................12
Section 8.3 Parties in Interest............................12
Section 8.4 Entire Agreement, Amendments and Waiver........12
Section 8.5 Headings.......................................12
Section 8.6 Notices........................................12
Section 8.7 Governing Law..................................13
Section 8.8 Third Parties..................................13
Section 8.9 Counterparts...................................13
ARTICLE IX - DEFINED TERMS................................................14
Section 9.1 Location of Certain Defined Terms..............14
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STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of June 6, 1997,
among MicroLeague Multimedia, Inc., a Pennsylvania corporation (the "Company"),
Hearst Corporation, a Delaware corporation ("Hearst"), and Ameritech
Corporation, a Delaware corporation ("Ameritech," and, collectively with Hearst,
the "Investors").
RECITALS
Hearst and Ameritech indirectly hold significant membership interests
in KidSoft, LLC ("KidSoft"). Pursuant to an acquisition agreement (the
"Acquisition Agreement") among the Company, KidSoft, L.L.C., Hearst, Ameritech,
KidSoft Holdings, Inc., Ameritech KidSoft Holdings, Inc., KidSoft, Inc. Daniel
D. Barry and Lawrence R. Gross of even date herewith, the Company has agreed to
acquire all of the outstanding membership interests of KidSoft. As a condition
to such acquisition, the Investors have agreed to purchase from the Company an
aggregate of 252,633 shares of common stock, par value $.01 per share (the
"Common Stock"), of the Company.
Accordingly, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
Section 1.1 Purchase and Sale. Subject to the terms and conditions set
forth herein and in reliance on the representations, warranties and covenants
set forth herein, at the Closing (as defined herein), (a) the Company shall
issue and sell to Hearst, and Hearst shall purchase from the Company, the number
of shares of Common Stock, rounded up to the nearest whole share, having a
market value equal to $800,000, and (b) the Company shall issue and sell to
Ameritech, and Ameritech shall purchase from the Company, the number of shares
of Common Stock, rounded up to the nearest whole share, having a market value
equal to $400,000 (collectively, the "Shares"). For purposes of this Agreement,
the market value of the Common Stock shall be calculated based on the average of
the last sale prices of the Common Stock as reported on the National Association
of Securities Dealers Automated Quotation System for the five consecutive
trading days immediately preceding the Closing Date (as defined herein), or, if
no sale occurs on any such day, the average of the closing bid and asked price
on such day as so reported.
Section 1.2 Closing.
(a) Subject to Article IV, the purchase and sale of the Shares
will take place at a closing (the "Closing") at the offices of Klehr, Harrison,
Harvey, Branzburg & Ellers, to commence at 10:00 A.M. on June 6, 1997, or on
such other date as the Company and the Investors shall agree, which shall be the
date on which the closings under the Acquisition Agreement occur. The date and
time of Closing are referred to herein as the "Closing Date."
(b) At the Closing, each Investor shall deliver by wire
transfer, to such account of the Company as the Company shall direct at least
one business day before the Closing Date, same day funds in an amount equal to
the purchase price of the Shares being purchased by such Investor; provided,
however, the purchase price payable by Ameritech hereunder shall be reduced by
$200,000, representing the amount contributed by Ameritech to KidSoft, LLC prior
to the Closing pursuant to Section 12.10 of the Acquisition Agreement.
(c) At the Closing, the Company shall deliver to each Investor
against payment of the purchase price therefor, a certificate representing such
Investor's Shares. The certificates representing such Shares shall be registered
in the name of such Investor or its nominee.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company represents and warrants to the Investors as follows:
Section 2.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania. The Company has all requisite power and authority to own, operate
and lease its properties and to conduct its business as currently conducted. The
Company is duly qualified or licensed to do business and is in good standing in
each jurisdiction in which its ownership or leasing of property or the conduct
of its business requires such licensing or qualification, except to the extent
that the failure to be so qualified or licensed would not have a Material
Adverse Effect. The Company has delivered to the Investors complete and correct
copies of its articles of incorporation and by-laws, each as in effect on the
date hereof. As used in this Agreement, "Material Adverse Effect" means with
respect to the Company, any Subsidiary or an Investor, any material adverse
effect on the operations, condition (financial or other), assets, liabilities,
earnings or prospects of such entity or on the transactions contemplated hereby.
Section 2.2 Subsidiaries. Each of AbleSoft, Inc., REP Acquisition
Corporation, and REP Holdings Company, Inc. (the "Subsidiaries") is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each Subsidiary has all requisite power and
authority to own, operate and lease it properties and to conduct its business as
currently conducted. Each Subsidiary is duly qualified or licensed to do
business and is in good standing in each jurisdiction is which its ownership or
leasing of property or the conduct of its business requires such licensing or
qualification, except to the extent that the failure to be so qualified would
not have a Material Adverse Effect. The Company is the sole record owner of all
of the outstanding capital stock of each Subsidiary.
Section 2.3 Authorization. The Company has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement and the performance by
the Company of its obligations hereunder have been duly authorized by the Board
of Directors of the Company and no other proceeding therefor on the part of the
Company or its shareholders is required. This Agreement has been duly executed
and delivered by the Company and, assuming the due authorization, execution and
delivery hereof by the Investors, is a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
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Section 2.4 Capitalization.
(a) The authorized capital stock of the Company consists of
10,000,000 shares of Common Stock and of which 4,568,740 shares are issued and
outstanding and 1,000,000 shares of preferred stock, $.01 par value, none of
which are outstanding. Except as set forth on Schedule 2.4, the Company has not
issued and is not obligated to issue any warrants, options or other rights to
purchase or acquire any shares of its capital stock, or any securities
convertible into any such shares or any warrants, options or other rights to
acquire any such convertible securities.
(b) All of the Shares have been duly authorized and, when
issued in accordance with the term of this Agreement will be, validly issued,
fully paid and nonassessable and will not be subject to any preemptive rights.
Except as set forth in Schedule 2.4, there are no preemptive rights, rights of
first refusal, put or call rights or obligations, or anti-dilution rights with
respect to the issuance, sale or redemption of the capital stock of the Company.
Section 2.5 Financial Statements. The Company has previously delivered
to each Investor complete and correct copies of the Company's audited balance
sheets, statements of income and statements of cash flows for each of the years
ended December 31, 1994, 1995 and 1996. All such financial statements were
prepared in conformity with generally accepted accounting principles applied on
a consistent basis, are complete, correct and consistent in all material
respects with the books and records of the Company, contain notations for all
significant accruals or contingencies and fairly present the financial position
of the Company as of the dates thereof and the results of operations and cash
flows of the Company for the periods shown therein.
Section 2.6 No Violation. Neither the execution and delivery of this
Agreement by the Company nor the performance by the Company of its obligations
hereunder will (i) conflict with or result in any breach of any provision of its
articles of incorporation or by-laws, (ii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default or
give rise to any lien or encumbrance on the Company's properties or assets or
any right of termination, cancellation or acceleration under any of the terms or
conditions of any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which the Company is a party or by which it or any
of its properties or assets may be bound, or (iii) violate any statute, law,
rule, regulation, writ, injunction, judgment, order or decree of any court,
administrative agency or governmental authority binding on the Company or any of
its properties or assets, excluding from the foregoing clauses (ii) and (iii)
violations, breaches and defaults that, individually and in the aggregate, would
not have a Material Adverse Effect.
Section 2.7 Consents. Except for consents that have been obtained, no
consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority or other person or entity is
required to be made or obtained by the Company in connection with the execution
and delivery of this Agreement by the Company or the performance by the Company
of its obligations hereunder, other than such consents, approvals,
authorizations, declarations, filings or registrations, the failure of which to
make or obtain, individually and in the aggregate, would not have a Material
Adverse Effect.
Section 2.8 Litigation, Orders. Except as set forth on Schedule 2.8,
there are no claims, actions, suits, proceedings, investigations or inquiries
pending before any court, arbitrator or
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governmental or regulatory official or office, or, to the knowledge of the
Company, threatened, against or affecting the Company or questioning the
validity of this Agreement, the transactions contemplated hereby or any action
taken or to be taken by the Company pursuant to this Agreement, at law or in
equity; nor is there any valid basis for any such claim, action, suit,
proceeding, inquiry or investigation. The Company is not subject to any
judgment, order or decree entered in any lawsuit or proceeding that has had or
may have a Material Adverse Effect.
Section 2.9 Securities Laws. The offer, issuance and sale by the
Company of the Shares pursuant to this Agreement (assuming the accuracy of the
representations and warranties of the Investors contained in Article III) will
be exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and applicable state securities laws.
Section 2.10 Disclosure. The representations and warranties made or
contained in this Agreement, the schedules and exhibits hereto and the
certificates and statements executed or delivered in connection herewith do not,
and the Company's annual report on Form 10-KSB for the year ended December 31,
1996 (the "Form 10-KSB"), the Company's quarterly report on Form 10- QSB for the
quarter ended March 31, 1997 (the "1997 Form 10-QSB") and the information
contained under the heading "Risk Factors" in the draft Private Placement
Memorandum, dated May 1, 1997, relating to the offering by the Company of
convertible preferred stock did not, as of the respective dates thereof, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make such
representations, warranties or other material not misleading. No event has
occurred and nothing material has come to the attention of the Company that
would indicate that any of such information (together with any written updates
thereof furnished by the Company, including information in the 1997 Form 10-QSB
that updates information in the Form 10-QSB) is not true and correct in all
material respects as of the date hereof. To the knowledge of the Company, the
projections contained in the materials furnished to Investors by the Company and
the assumptions underlying such projections were reasonable when made and
continue to be reasonable, and the projections were based upon good faith and
diligent estimates of the anticipated operating results and financial condition
of the Company. There are no facts known to the Company that currently or may in
the future have a Material Adverse Effect and that have not been specifically
disclosed herein, in a schedule furnished herewith or in the documents referred
to above, other than economic conditions affecting the industry of the Company
generally.
Section 2.11 Other Registration Rights. Except as set forth in this
Agreement, the Acquisition Agreement and Schedule 2.11, the Company is not
obligated to register the offer and sale of any of its outstanding capital stock
or other securities.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor represents and warrants to the Company (solely as to
itself) as follows:
Section 3.1 Investment Intent, Etc.
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(a) Such Investor is acquiring the Shares to be acquired by it
hereunder for its own account for investment only and not with a view to or for
sale in connection with the distribution thereof.
(b) Such Investor has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of the investment in the Company contemplated by this Agreement and making
an informed investment decision with respect thereto.
(c) Such Investor is an "accredited investor" as such term is
defined in Rule 501 under the Securities Act.
(d) Such Investor has received copies of and has reviewed (i)
the Company's Quarterly Report on Form 10-QSB with respect to the quarter ended
September 30, 1996; (ii) the 1997 Form 10-QSB, (iii) Form 10-KSB; (iv) a draft,
dated May 1, 1997, of the Company's Proxy Statement with respect to its 1997
annual meeting of shareholders; (v) a draft of the Private Placement Memorandum
of the Company, dated May 1, 1997; and (vi) press releases issued by the Company
since May 23, 1996.
(e) Such Investor understands that certain of the information
provided by the Company in connection with the transactions contemplated hereby
contains forward-looking statements regarding potential future events and
developments affecting the Company's business. Such statements relate to, among
other things, (i) competition for customers for its products and services; (ii)
the uncertainty of developing or obtaining rights to new products that will be
accepted by the market and the timing of the introduction of new products into
the market; (iii) the limited market life of the Company's products; (iv) the
uncertainty of consummating potential acquisitions or entering into joint
ventures; and (v) the availability of financing to fund working capital and
expansion needs. Such Investor further understands that the Company's ability to
predict results or the effect of any pending events on the Company's operating
results is inherently subject to various risks and uncertainties, including
those discussed in the Form 10-KSB under "Description of Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in the Memorandum under "Risk Factors". Such Investor further
understands that the projected financial information regarding the Company's
future performance is merely an estimate based on various assumptions concerning
the occurrence of future events, many of which are beyond the Company's control.
Accordingly, such Investor understands that the Company's actual results in all
likelihood will differ from projected results, and such differences may be
material.
(f) Such Investor has had the opportunity to ask questions of
and receive answers from the Company concerning its business and operations, the
terms and conditions of the acquisition of securities hereunder, as well as the
opportunity to obtain additional information necessary to verify the accuracy of
information furnished in connection therewith that the Company possesses or can
acquire without unreasonable effort or expense.
(g) Such Investor understands that the Shares to be acquired
by such Investor pursuant to this Agreement have not been registered under the
Securities Act or any state securities laws, and may not be transferred unless
subsequently registered thereunder or pursuant to an
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exemption from registration, and that a legend indicating such restrictions will
be placed on the certificates representing such securities.
Section 3.2 Sales of Company Securities. If the Company determines to
effect a public offering of Common Stock or securities convertible into or
exercisable for Common Stock, upon the request of the managing underwriter for
such offering, such Investor shall not offer or sell, or agree to offer or sell,
any Common Stock or securities convertible into or exercisable for Common Stock
during the period requested by such underwriter, which shall not exceed 180
days.
Section 3.3 Authorization. Such Investor has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement and the performance by
such Investor of its obligations hereunder have been duly authorized by the
Board of Directors of Investor. This Agreement has been duly executed and
delivered by such Investor and, assuming the due authorization, execution and
delivery hereof by the Company, is a valid and binding obligation of such
Investor, enforceable against Investor in accordance with its terms.
Section 3.4 No Violation. Neither the execution and delivery of this
Agreement by such Investor nor the performance by it of its obligations
hereunder will (i) conflict with or result in any breach of any provision of the
certificate of incorporation or by-laws of such Investor, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default or give rise to any lien or encumbrance on any of their
respective properties or assets or any right of termination, cancellation or
acceleration under any of the terms or conditions of any note, bond, mortgage,
lease, license, agreement or other instrument or obligation to which Investor is
a party or by which Investor or any of its properties or assets may be bound, or
(iii) violate any statute, law, rule, regulation, writ, injunction, judgment,
order or decree of any court, administrative agency or governmental authority
binding on such Investor or any of its properties or assets, excluding from the
foregoing clauses (ii) and (iii) violations, breaches and defaults that,
individually and in the aggregate, would not have a Material Adverse Effect on
Investor.
ARTICLE IV
CONDITIONS TO OBLIGATIONS OF THE INVESTORS
The obligations of the Investors under this Agreement are subject to
the satisfaction, at or before the Closing, of each of the following conditions:
Section 4.1 Representations and Warranties. The representations and
warranties of the Company shall be true and correct in all material respects as
of the date when made and as of the date of Closing as though made at that time
(except for representations and warranties that expressly relate to a different
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing. The Investors shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect.
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Section 4.2 No Proceeding or Litigation. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting or looking toward an order,
judgment or decree that (a) restrains or prohibits the consummation of any of
the transactions contemplated hereby or (b) could have a Material Adverse Effect
on the Company.
Section 4.3 No Injunction. On the Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or other order issued
by a court of competent jurisdiction restraining or prohibiting the consummation
of the transactions contemplated hereby.
Section 4.4 Resolutions of the Company. The Company shall have executed
and delivered to the Investors copies of resolutions of the Company's Board of
Directors, certified by the Secretary of the Company as in full force and effect
on the Closing Date, authorizing, among other things, the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby.
Section 4.5 Incumbency Certificate. The Company shall have delivered to
each Investor a certificate of the Secretary of the Company, dated as of the
Closing Date, as to the incumbency and signatures of the officers of the Company
executing this Agreement and the related certificates.
Section 4.6 Opinion of Counsel. Each Investor shall have received from
Klehr, Harrison, Harvey, Branzburg & Ellers, counsel to the Company, an opinion,
dated as of the Closing Date, in form and substance reasonably satisfactory to
such Investor, with respect to the matters set forth in Section 2.1, 2.2, 2.3,
2.4, 2.6, 2.7, 2.8 and 2.9.
Section 4.7 Consummation of Acquisition of KidSoft. The transactions
contemplated by the Acquisition Agreement shall have been consummated or shall
be consummated simultaneously with the transactions contemplated hereby.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF THE COMPANY
Section 5.1 Representations and Warranties. The representations and
warranties of each Investor shall be true and correct in all material respects
as of the date when made and as of the date of the Closing as though made at
that time (except for representations and warranties that expressly relate to a
different date) and the Investors shall have performed, satisfied and complied
in all material respects with the covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by the Investors
at or prior to the Closing. The Company shall have received a certificate,
executed by the Chief Executive Officer of each Investor (or other officer
reasonably acceptable to the Company), dated as of the Closing Date, to the
foregoing effect.
Section 5.2 No Proceeding or Litigation. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting or looking
7
toward an order, judgment or decree that restrains or prohibits the consummation
of any of the transactions contemplated hereby.
Section 5.3 No Injunction. On the Closing Date, there shall be no
effective injunction, writ, preliminary restraining order or other order issued
by a court of competent jurisdiction restraining or prohibiting the consummation
of the transactions contemplated hereby.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 6.1 Survival of Representations. All representations,
warranties and agreements made by any party to this Agreement or pursuant hereto
shall survive the Closing and any investigation made by or on behalf of any
party hereto for a period of one year following the Closing Date.
Section 6.2 Indemnification. Subject to the terms and conditions of
this Article VI, the Company shall indemnify, defend and hold harmless each
Investor, each person who controls such party within the meaning of the Exchange
Act, and each of the respective partners, officers, directors, employees and
agents of the foregoing in their respective capacities as such (collectively,
the "Indemnified Parties") from and against all demands, claims, assessments,
losses, damages, liabilities, costs and expenses, including interest, penalties
and reasonable attorneys' fees and expenses (collectively, "Damages"), asserted
against, resulting to, imposed upon or incurred by any such Investor Indemnified
Party, directly or indirectly, by reason of or resulting from a breach of any
representation, warranty or agreement of the Company contained in or made
pursuant to this Agreement (each, a "Claim"); provided, however, the Company's
liability pursuant to this Section 6.2 and the Acquisition Agreement shall not
exceed, in the aggregate, $2,000,000.
Section 6.3 Conditions of Indemnification. The obligations of the
Company to indemnify the Indemnified Parties under Section 6.2 with respect to
Claims made by third parties shall be subject to the following terms and
conditions:
(a) The Indemnified Party shall give the Company prompt notice
of any such Claim, and the Company shall have the right to undertake the defense
thereof by representatives chosen by it;
(b) If the Company, within a reasonable time after notice of
any such Claim, fails to defend any Indemnified Party against which such Claim
has been asserted, such Indemnified Party shall (upon further notice to the
Company) have the right to undertake the defense, compromise or settlement of
such Claim on behalf of and for the account and risk of the Company, subject to
the right of the Company to assume the defense of such Claim at any time prior
to settlement, compromise or final determination thereof; and
(c) Anything in this Section 6.3 to the contrary
notwithstanding, (i) if there is a reasonable probability that a Claim may
materially and adversely affect an Indemnified Party other than as a result of
money damages or other money payments, such Indemnified Party shall have the
8
right, at its own cost and expense, to defend, compromise or settle such Claim;
provided, however, that if such Claim is settled without the Company's consent
(which consent shall not be unreasonably withheld) such Indemnified Party shall
be deemed to have waived all rights hereunder against the Company for money
damages arising out of such Claim, and (ii) the Company shall not, without the
written consent of such Indemnified Party, settle or compromise any Claim or
consent to the entry of any judgment that does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to such Indemnified
Party a release from all liability in respect to such Claim.
ARTICLE VII
REGISTRATION RIGHTS
Section 7.1 Piggyback Registration Rights. If, at any time, the Company
proposes to register any shares of Common Stock under the Securities Act other
than pursuant to a registration effected to implement (a) an employee benefit
plan or (b) a transaction to which Rule 145 or any similar rule of the SEC under
the Securities Act applies, whether or not for sale for its own account, the
Company shall give written notice thereof to the Investors and upon the written
request of any Investor, given within 15 days after the receipt of any such
written notice, the Company will include in such registration statement any or
all of the shares of Common Stock acquired pursuant to this Agreement then owned
by such Investor or acquired by such Investor upon the exercise of warrants of
the Company issued in connection with the transactions contemplated hereby;
provided, however, that (i) the maximum number of shares to be sold shall not
exceed the number which the managing underwriter considers, in good faith, to be
appropriate based on market conditions and other relevant factors (including
pricing); and (ii) if the total number of shares desired to be sold exceeds such
amount, the Company shall be entitled to include in such registration statement
the full amount of shares that it desires to include, and the Investors,
together with any other shareholders who elect to participate in the offering,
shall be entitled to sell up to any remaining amount of shares pro rata in
proportion to the number of shares requested to be included therein.
Section 7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Article VII is reduced as
provided in Section 7.1, any Investor that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to the Company at any time prior to the
effective date thereof. At any time prior to such effective date, the Company
shall have the right to withdraw such registration statement for any reason
whatsoever.
Section 7.3 Information Regarding Investors; Underwriting Arrangements.
(a) Each Investor participating in a registration hereunder
shall furnish to the Company such information regarding such Investor and the
distribution of such Investor's securities as the Company may from time to time
request in order to comply with the Securities Act and the rules and regulations
of the Securities and Exchange Commission thereunder. Each Investor shall notify
the Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such Investor to the Company or of the
happening of any event as a result of which any prospectus relating to such
registration contains an untrue statement of a material fact regarding such
Investor or the distribution of such securities or omits to state any material
fact
9
regarding such Investor or the distribution of such securities required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and shall promptly
furnish to the Company any additional information required to correct or update
any previously furnished information or required so that such prospectus shall
not contain, with respect to such Investor or the distribution of such
securities, 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.
(b) Each Investor participating in a registration hereunder
shall, if requested by the Company or the managing underwriter(s) in connection
with such registration, (i) subject to Section 7.4, agree to sell its shares on
the basis provided in any underwriting arrangements entered into in connection
therewith and (ii) complete and execute all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents customary in similar
offerings.
Section 7.4 Restrictions on Sales. In connection with any registration
under this Article VII, no Investor shall sell any shares of Common Stock or
securities convertible into or exercisable for Common Stock, except pursuant to
such registration, for the period following the effective date of the applicable
registration statement that the managing underwriter of the offering determines
is necessary to effect the offering, which period shall not exceed 180 days.
Section 7.5 Indemnification.
(a) Indemnification by the Company. In connection with any
registration pursuant to this Section 7, the Company shall indemnify, defend and
hold harmless each Investor participating in such registration, each person who
controls such Investor within the meaning of the Securities Act, and each of the
partners, officers, directors, employees and agents of the foregoing in their
respective capacities as such (the "Indemnitees"), to the full extent lawful,
from and against all actions, suits, claims, proceedings, costs, damages,
judgments, amounts paid in settlement and expenses (including, without
limitation, reasonable attorneys' fees and disbursements), whether joint or
several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Registrable Securities
are offered ("Blue Sky Filing"), or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein not misleading and the Company will reimburse each
Indemnitee for any legal or other expenses reasonably incurred in connection
with investigating or defending such Loss; provided, however, that such
indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be
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then supplemented or amended, to the person asserting an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of the securities to such person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of any Indemnitee and shall survive the transfer of such securities by
any Indemnitee.
(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to Section
7.1, the Company shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in subsection (a) of this
Section 7.5) the Company, each director of the Company, each officer of the
Company and each other person, if any, who controls the Company within the
meaning of the Securities Act, with respect to any untrue statement or alleged
untrue statement in, or omission or alleged omission from, such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein or any Blue Sky Filing, or any amendment or supplement
thereto, if such statement or alleged statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such seller for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; provided, however, in no event shall the
liability of any seller under this paragraph (b) exceed the net proceeds
received by such seller (after the payment of underwriting discounts and
commissions) from the sale of its securities pursuant to such registration
statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such seller.
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5 unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such
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action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Expenses. Each party hereto shall pay all fees and expenses
incurred by it in connection with the negotiation and execution of this
Agreement and the consummation of the transactions contemplated hereby.
Section 8.2 Further Assurances. From time to time, at the Company's
request and without further consideration, each party hereto shall execute and
deliver to the Company such documents and take such other action as the Company
may reasonably request in order to consummate more effectively the transactions
contemplated hereby.
Section 8.3 Parties in Interest. This Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the respective successors and
permitted assigns of the parties hereto. The rights and obligations of the
parties hereto hereunder may not be assigned without the consent of the other
parties hereto.
Section 8.4 Entire Agreement, Amendments and Waiver.
(a) This Agreement, the exhibits, the schedules and other
writings referred to herein or delivered pursuant hereto that form a part hereof
contain the entire understanding of the parties with respect to its subject
matter. This Agreement supersedes all prior agreements and understandings
between the parties with respect to its subject matter.
(b) This Agreement may be amended only by a written instrument
duly executed by the parties. Any condition to a party's obligations hereunder
may be waived in writing by such party to the extent permitted by law.
Section 8.5 Headings. The Article and Section headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
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Section 8.6 Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, by telex or facsimile
transmission or mailed (registered or certified mail, postage prepaid, return
receipt requested) as follows:
If to the Company to: MicroLeague Multimedia, Inc.
1001 Millersville Road
Lancaster, PA 17604
Attention: Neil B. Swartz
Facsimile No.: (717) 872-6567
with a copy to: Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Attention: Robert W. Cleveland, Esq.
Facsimile No.: (215) 568-6603
If to Hearst : The Hearst Corporation
959 Eighth Avenue
New York, NY 10019
Attention: General Counsel
If to Ameritech: Ameritech Corporation
30 S. Wacker Drive
Chicago, IL 60606
Attention: Assistant General Counsel - Transactions
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
Section 8.7 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the Commonwealth of
Pennsylvania with regard to its or any other jurisdiction's conflicts of law
rules.
Section 8.8 Third Parties. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any person, other than
the parties hereto and their successors or permitted assigns, any rights or
remedies under or by reason of this Agreement.
Section 8.9 Counterparts. This Agreement may be executed simultaneously
in several counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
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ARTICLE IX
DEFINED TERMS
Section 9.1 Location of Certain Defined Terms. The following terms used
in this Agreement are defined in the Section indicated below:
Term Section
- ---- -------
Acquisition Agreement Forepart
Agreement Forepart
Ameritech Forepart
Blue Sky Filing 7.5(a)
Claim 6.2
Closing 1.2
Closing Date 1.2
Common Stock 1.2
Company Forepart
Company Indemnified Party 6.2
Damages 6.2
Exchange Act 6.2
Hearst Forepart
Indemnified Party 6.3
Indemnitees 7.5(a)
Investor Indemnified Parties 6.2
Investors Forepart
KidSoft Forepart
Loss 7.5(a)
Material Adverse Effect 2.1
Memorandum 2.10
Securities Act 2.9
Subsidiaries 2.2
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
MICROLEAGUE MULTIMEDIA, INC.
By: /s/ Neil B. Swartz
-------------------------------------------
Name: Neil B. Swartz
Title: Chairman and Chief Executive Officer
HEARST CORPORATION
By: /s/ Alfred C. Sikes
-------------------------------------------
Name: Alfred C. Sikes
Title: Vice President
AMERITECH CORPORATION
By: /s/ Bruce B. Howat
-------------------------------------------
Name: Bruce B. Howat
Title: Secretary
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