CONVERTIBLE TERM LOAN AGREEMENT
between
MICROLEAGUE MULTIMEDIA, INC.
and
THE LENDERS LISTED HEREIN
September 8, 1997
CONVERTIBLE TERM LOAN AGREEMENT
THIS CONVERTIBLE TERM LOAN AGREEMENT, dated as of September 8, 1997
(this "Agreement"), is entered into by and among MicroLeague Multimedia, Inc.
("MMI"), a Pennsylvania corporation, the lender(s) listed on Schedule I attached
hereto and incorporated herein by reference (each an "Original Lender" and
collectively, the "Original Lenders") and any other lender who may subsequently
execute the Joinder Agreement attached hereto as Exhibit "B" (together with the
Original Lenders, each a "Lender" and collectively, the "Lenders"). MMI is
sometimes referred to herein as the "Borrower."
WITNESSETH:
WHEREAS, MMI desires to obtain, and each Lender in accordance with the
dollar amount set forth opposite the name of such Lender on Schedule I or a
Joinder Agreement attached hereto, has agreed or will agree, to provide term
loans, which term loans shall be used by MMI for working capital and general
corporate purposes; and
WHEREAS, MMI has entered into a subscription agreement with each
Original Lender dated the date hereof, and will subsequently execute a
subscription agreement with each other Lender who executes a Joinder Agreement
(the "Subscription Agreements") whereby each Lender has subscribed for and
agreed to purchase a Convertible Term Note ("Convertible Term Note") of MMI in
the principal amount set forth on the signature page of the applicable
Subscription Agreement;
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound hereby, the parties hereto agree as follows:
I. THE CONVERTIBLE TERM LOANS
1.1 The Convertible Term Loans.
(a) Subject to the terms and conditions hereof, each Lender
severally agrees to make a term loan (each a "Convertible Term Loan" and
collectively the "Convertible Term Loans") to MMI in the principal amount set
forth opposite the name of such Lender on Schedule I or the Joinder Agreement,
as the case may be.
(b) Each Convertible Term Loan shall bear interest at the rate
of 12% per annum, calculated on the basis of a 360-day year for the actual
number of days elapsed, which interest shall accrue commencing as of the date of
the Convertible Term Note issued to such Lender.
(c) The outstanding principal amount of the Convertible Term
Loans and accrued interest shall be repaid as follows:
(i) payments of interest shall be due and payable
quarterly with the first payment due on December 8, 1997 and subsequent payments
due on each of March 8, 1998, June 8, 1998 and September 8, 1998;
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(ii) interest shall be payable either in cash or, at
the option of the Company, in-kind, as follows: payments in-kind shall be made
by the issuance of a Convertible Term Note in an original principal amount equal
to the amount of such interest then due, and which Convertible Term Note shall
otherwise contain terms identical to those set forth in this Convertible Term
Loan Agreement and the other Convertible Term Notes issued hereunder (each an
"Additional Convertible Term Note"); and
(iii) all remaining unpaid principal and accrued
interest shall be repaid on the earlier to occur of (1) September 8, 1998, or
(2) the date when declared due and payable by a Lender upon the occurrence of an
Event of Default (as defined in Article V below) (the "Maturity Date"), either
in cash or, at the option of each Lender, in shares of the Company's common
stock, $.01 par value per share ("Common Stock") pursuant to Section 1.7 hereof.
1.2 The Convertible Term Notes. Each Convertible Term Loan shall be
evidenced by a Convertible Term Note payable to the order of the applicable
Lender for the principal amount set out in each Convertible Term Note and
otherwise in the form attached hereto as Exhibit "A". The Convertible Term Notes
shall be dated as of the date hereof for all Original Lenders and as of the date
of the Joinder Agreement whereby the applicable Lender has agreed to become
bound by the terms hereof for all other Lenders, shall bear interest at the rate
per annum and be repayable as to principal and interest in accordance with the
terms hereof and as specified in each Convertible Term Note. The Convertible
Term Notes and this Agreement are collectively referred to hereafter as the
"Loan Documents."
1.3 Prepayments.
(a) MMI may, at its option, prepay the Convertible Term Loans
and interest in whole at any time or in part from time to time; provided,
however, that all prepayments shall be allocated among the Convertible Term
Loans, pro rata; further provided, that any partial prepayment of a Convertible
Term Loan shall require the relevant Convertible Term Note to be returned to the
Company for cancellation and a new Convertible Term Note shall be issued to such
holder for any remaining principal balance; and further provided, that the
Company shall be required to provide at least ten (10) days prior written notice
to all holders of Convertible Term Notes of any intention by the Company to
repay (whether through a scheduled payment or prepayment) all or any portion of
such Convertible Term Notes.
(b) There shall be no penalty for prepayment of the
Convertible Term Loans or interest payable thereon.
1.4 Net Payments. All payments made to the Lenders by MMI hereunder or
under the Convertible Term Notes will be made without setoff, counterclaim or
other defense. All such payments will be made free and clear of, and without
deduction or withholding for, any present or future taxes, levies, imposts,
duties, fees, assessments or other charges of whatever nature now or hereafter
imposed by any jurisdiction or any political subdivision or taxing authority
thereof or therein.
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1.5 Convertible Term Loans Unsecured and Subordinate. The performance
by MMI of its obligations under this Agreement and the Convertible Term Notes is
not secured by the pledge, grant or assignment to the Lenders of any assets of
MMI or any other person. Further, such obligations are subordinate to any
existing debt of MMI and are subordinate to any debt hereafter created by MMI
for money borrowed from any bank, other financing organization, or any other
person or entity, or any purchase money debt in favor of any bona-fide purchase
money seller or any other obligations under capital leases, and all principal,
interest, premiums, charges, and other sums related to any such obligations.
Such debt includes, but is not limited to, any debt created or assumed in
connection with a merger or the acquisition of assets or stock. No payments
shall be made hereunder if at such time any default has occurred and is
continuing with respect to such other debt. The subordination described in this
section is self-executing and no further documentation is necessary. In the
event any lender of MMI ("Payee") requests evidence of the subordination
described in this Section 1.5, each Lender hereby agrees to execute a
subordination agreement in the form reasonably requested by such Payee.
1.6 New Lenders to Sign Joinder Agreement. If the Company sells any
Convertible Term Notes after the date hereof, the Company will, as a condition
precedent to the sale of such Convertible Term Notes, require the purchaser to
execute the Joinder Agreement which is in the form attached hereto as Exhibit
"B", wherein such purchaser agrees to be bound by and to comply with all of the
terms and conditions of this Agreement, unless such purchaser is already a party
to this Agreement.
1.7 Conversion of Convertible Term Note. THE COMPANY DOES NOT CURRENTLY
HAVE A SUFFICIENT NUMBER OF SHARES OF COMMON STOCK AUTHORIZED TO MEET ITS
OBLIGATIONS TO ISSUE SHARES UNDERLYING THE TERM NOTES. SUCH OBLIGATION OF THE
COMPANY IS SUBJECT TO THE COMPANY AMENDING ITS ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF ITS AUTHORIZED SHARES OF COMMON STOCK, INCLUDING
OBTAINING APPROVAL OF ITS SHAREHOLDERS TO SUCH AMENDMENT.
SEE THE "RISK FACTORS" SECTION OF THE SUBSCRIPTION AGREEMENTS (SECTION 8).
The Company hereby represents and covenants to each Lender
that it will use its best efforts to increase its authorized shares of Common
Stock in order to meet all obligations to issue shares of Common Stock pursuant
to the Convertible Term Notes as promptly as practicable after the date of this
Agreement, and to such end, will propose such an increase in the authorized
shares of Common Stock at the Company's next annual meeting of shareholders.
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(a) Conversion Right.
(i) Subject to and upon compliance with the
provisions of this Section 1.7, at the option of each Lender at any time on or
before the Maturity Date or such later date upon which all obligations under a
Convertible Term Note have not been satisfied by the Company), the unpaid
principal balance and any accrued but unpaid interest of a Convertible Term Note
or any portion thereof may be converted into fully-paid and non-assessable
shares of Common Stock of the Company (the "Conversion Shares"), at a conversion
price per share (the "Conversion Price") equal to (i) $1.75 per share if the
Convertible Term Note being converted is dated on or before September 8, 1997
and (ii) $2.00 per share if the Convertible Term Note being converted is dated
after September 8, 1997. Notwithstanding the foregoing or anything else to the
contrary contained herein, however, if at any time on or before November 3,
1997, the Company issues a note, debenture or other debt instrument convertible
into the Common Stock of the Company, or issues a warrant, option or other
instrument or agreement giving the holder the right to purchase the common stock
of the Company, the Company shall notify each Lender of all material terms
thereof, and then at the option of each Lender, from and after the time of any
such issuance, the Conversion Price for such Lender's Convertible Term Note in
this Agreement shall be either (x) the Conversion Price set forth in this
Section 1.7(a)(i) or (y) the conversion price or exercise price set forth in any
such debenture, note, instrument, warrant, option or agreement. The Company
shall be required to provide at least ten (10) days prior written notice to all
holders of Convertible Term Notes of any intention by the Company to repay
(whether through a scheduled payment or prepayment) all or any portion of such
Convertible Term Notes. If the Company has not received a Conversion Notice from
a holder of a Convertible Term Note (as provided in Section 1.7(a)(ii) with
respect to such repayment by the Company prior to repayment of such amount in
cash on such date, the right of the holder of such Convertible Term Note to
receive any such amount in Conversion Shares shall expire as of the time of such
receipt.
(ii) The conversion right shall be exercised by
sending to the Company a conversion notice substantially in the form attached
hereto as Exhibit "C" (the "Conversion Notice"), duly executed by the Lender.
The Conversion Notice shall state the principal amount and such portion of the
accrued but unpaid interest thereof to be so converted and shall identify a
closing date not more than 20 nor less than 10 days from the date of the
Conversion Notice. On such closing date, if it is being paid in full by the
Company, the relevant Convertible Term Note shall be returned to the Company for
cancellation.
(iii) Conversion Shares issuable upon conversion of a
Convertible Term Note shall be issued in the name of the relevant Lender and
shall be transferable only in accordance with all of the terms and restrictions
contained herein.
(iv) Upon such conversion, the Company shall pay all
accrued and unpaid interest through the conversion date on the Convertible Term
Note or such part thereof delivered for conversion (other than the portion, if
any, which the Lender elects to convert into Conversion Shares).
(v) No fractional shares shall be issued or delivered
upon conversion
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of Convertible Term Notes. Any principal or accrued interest elected by a holder
of a Convertible Term Note to be converted to Conversion Shares which would
otherwise constitute a fractional share of the Company's Common Stock shall
instead be paid to such holder in cash. Upon conversion of a Convertible Term
Note for only part of the principal remaining unpaid, the Convertible Term Note
shall be returned to the Company for cancellation and a new Convertible Term
Note shall be issued to such holder for any remaining principal balance.
(b) Adjustment.
(i) Shares Included in Computation. The number of
shares of Common Stock at any time deemed to be outstanding for any purpose
hereunder shall not include any shares of Common Stock then owned or held by or
for the account of the Company.
(ii) Subdivision or Combination. Whenever the Company
shall subdivide or combine the outstanding shares of its Common Stock or issue
or declare a stock dividend, the Conversion Price of each Convertible Term Note
in effect immediately prior to such subdivision or combination shall be
proportionately decreased in the case of subdivision or stock dividend or
increased in the case of combination effective at the time of each such
subdivision, stock dividend or combination. The provisions of this clause (ii)
shall apply to successive transactions of the nature to which it relates.
(iii) Reclassification or Change. Whenever any
reclassification or change of the outstanding shares of Common Stock shall occur
(other than a change in par value, or from par value to no par, or from no par
to par value, or as a result of a subdivision or combination), including by
reason of a stock split, stock dividend, merger, consolidation, or like event,
effective provision shall be made whereby each holder of a Convertible Term Note
shall have the right, at any time thereafter, to receive upon conversion of such
holder's Convertible Term Note the number and kind of capital stock or other
securities or property receivable upon such reclassification by a holder of the
number of shares of Common Stock issuable upon conversion of such Convertible
Term Note immediately prior to such reclassification or other event. Thereafter,
the rights of a holder of a Convertible Term Note with respect to the adjustment
of the amount of securities or other property obtainable upon conversion of such
Convertible Term Note shall be appropriately continued and preserved, so as to
afford as nearly as may be possible protection of the nature afforded by this
Paragraph 1.7(b)(iii). The provisions of this clause (iii) shall apply to
successive transactions of the nature to which it relates.
(iv) Notices of Record Date. In case,
(A) the Company shall declare a dividend (or make any
other distribution) on its shares of Common Stock payable otherwise than in cash
out of is earned surplus; or
(B) the Company shall grant the holders of its Common
Stock the right to subscribe for or purchase any shares of its capital stock of
any class; or
(C) the Company shall make any distribution on or in
respect of the Common Stock in connection with the dissolution, liquidation or
winding up of the Company; or
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(D) there is to be a reclassification of the Common
Stock of the Company (other than the subdivision or combination of its
outstanding shares of Common Stock), a consolidation or merger or similar event
to which the Company is a party and in connection with which approval of any
class of shareholders of the Company is required, or a sale or conveyance of the
property of the Company as an entirety or substantially as an entirety,
then and in each such event, the Company shall mail or cause to be mailed to
each holder of a Convertible Term Note a notice specifying the date on which any
record is to be taken for the purpose of such dividend, distribution or granting
of rights, or the date on which such reclassification, consolidation or merger
is expected to become effective, and the time, if any, as of which the holders
of record of Common Stock shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such reorganization or
reclassification. Such notice shall be mailed at least 30 days prior to the
record or effective date therein specified.
(vi) Notice of Adjustment of Conversion Price, etc.
If there shall be any adjustment as provided in this Section 1.7, or if
securities or property other than shares of Common Stock of the Company shall
become issuable or deliverable in lieu of shares of such Common Stock upon the
conversion of a Convertible Term Note, the Company shall forthwith cause written
notice thereof to be sent by registered or certified mail, postage prepaid, to
each holder of a Convertible Term Note, which notice shall be accompanied by a
certificate of the principal financial officer of the Company setting forth in
reasonable detail the facts requiring any such adjustment and the Conversion
Price and number of shares issuable upon the conversion of each Convertible Term
Note after such adjustment, or the kind and amount of any such securities or
property so issuable or deliverable upon the conversion of each Convertible Term
Note, as the case may be.
(c) Restrictions on Transfer.
(i) Lack of Registration. By accepting a Convertible
Term Note, each holder thereof acknowledges that the Convertible Term Notes have
not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws, and that none of the Conversion
Shares or Additional Convertible Term Notes will be registered under any such
laws (except as contemplated by Section 1.7(d) hereof) and represents that it is
acquiring the Convertible Term Note, and will acquire any Conversion Shares and
Additional Convertible Term Notes, for its own account, for investment purposes
only and not with a view to, or for sale in connection with, any distribution
thereof.
(ii) Conditions to Transfer. Each holder of a
Convertible Term Note shall not transfer such Convertible Term Note or any
Conversion Shares or Additional Convertible Term Notes (or any interest therein)
until at least 180 days after the Maturity Date (the "Lock-up Period") and,
thereafter, (A) until it shall have first given written notice
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to the Company describing the manner of any such proposed transfer, and (B)
either (i) the Company has received from such holder's counsel an opinion
satisfactory to the Company and its counsel that such transfer may be made
without compliance with the registration provisions of the Securities Act and
that the proposed transfer may be made without violation of the Securities Act
and any applicable state securities law, or (ii) a registration statement filed
by the Company covering the securities to be transferred is in effect under the
Securities Act and there has been compliance with the applicable state
securities laws.
(d) Registration Rights.
(i) Definitions. "Registrable Securities" means the
Conversion Shares and any other securities issued in exchange for or as
dividends on the Conversion Shares; provided, however, that Registrable
Securities will cease to be Registrable Securities when (1) a registration
statement filed pursuant to the Securities Act covering such Registrable
Securities has been declared effective and they have been disposed of pursuant
to such effective registration statement or (2) they are sold pursuant to the
terms of Rule 144 (or any similar provision then in force) promulgated under the
Securities Act.
(ii) Piggyback Registration Rights.
(1) For a period of five (5) years commencing on the
Maturity Date, if the Company shall determine to proceed with the actual
preparation and filing with the Securities and Exchange Commission ("SEC") of a
registration statement in connection with the proposed offer and sale for money
of any of its securities under the Securities Act, it will give at least thirty
(30) days prior written notice to each registered holder of Registrable
Securities ("Holder") of its intention to do so. Upon the subsequent written
request of a Holder to the Company to include all or a portion of the
Registrable Securities held by such Holder in such registration, given within
ten (10) days after receipt of a notice of registration from the Company and
stating the number of Registrable Securities to be disposed of and the intended
method of disposition, the Company will cause all such Registrable Securities
intended to be disposed of by each Holder to be included in such registration
under the Securities Act, so as to permit the sale or other disposition of such
Registrable Securities by such Holders, subject, however, to the limitations set
forth below.
(2) The Company may at any time delay or withdraw a
registration contemplated by subsection d(ii)(1) above or otherwise elect to
cause such a registration not to become effective.
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(iii) Demand Registration Rights.
(1) For a period of 180 days commencing the day after
expiration of the Lock-up Period, if all Holders have not yet sold or registered
all of the Registrable Securities, then on any one (1) occasion during such
period, the Holders of a majority of any remaining Registrable Securities shall
have the right to demand in writing that the Company register, and the Company
shall then be obligated to so register, all such remaining Registrable
Securities then held by all Holders ("Demand Registration").
(2) If the Company is ineligible to register its
securities with the SEC pursuant to the filing of a Form S-3 registration
statement at the time of a Demand Registration by the Holders, then the Company
shall not be obligated to effect such Demand Registration within six (6) months
after the effective date of any other registration in which any Holder exercised
piggyback registration rights pursuant to subsection (d)(ii) hereof.
(iv) Registration Procedure. With respect to any
registration of Registrable Securities under this Section 1.7(d), the Company
agrees:
(1) to prepare and file with the SEC a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become effective, as well as such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
at least ninety (90) days (or such earlier date as there are no Registrable
Securities remaining under such registration statement);
(2) to furnish to the Holders such number of copies
of a prospectus as the Lenders may reasonably request; and
(3) as expeditiously as possible, to register or
qualify the Registrable Securities under the securities or Blue Sky laws of such
reasonable number of states are requested by the Holders.
(v) Expenses. The Company shall bear the full cost
and expense of any registration of Registrable Securities referred to in
subsections (d)(ii) and (d)(iii) hereof; provided, however, that each Holder
shall bear the full cost or expense of its own counsel and accountants and any
registration fees, transfer taxes or underwriting discounts or commissions
applicable to the Registrable Securities sold by such Holder pursuant thereto.
(vi) Underwritten Offerings.
(1) If any registration of Registrable Securities is
underwritten, the Company's obligation to register the Registrable Securities of
a Holder is conditioned upon the Holder's participating in any such underwriting
and entering into an underwriting agreement in customary form with the Company's
underwriter. If the underwriter determines that marketing factors require a
limitation on the number of shares to be underwritten, the underwriter may
exclude from such registration and underwriting some or all of the Registrable
Securities which would otherwise be underwritten pursuant
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thereto, but if any other shares of the Company's Common Stock owned by
shareholders of the Company are to be included in such registration and
underwriting, the total amount of the Company's Common Stock requested to be
included on behalf of all such shareholders shall be allocated among the Holders
exercising registration rights and such other shareholders in proportion to the
respective amounts of shares of Common Stock that each such person has requested
be so included.
(2) Each Holder agrees, if so requested by the
managing underwriter in an underwritten offering, not to effect any public sale
or distribution of securities included in such offering, including a sale under
Rule 144 under the Securities Act, during the ten (10) day period prior to, and
during the forty five (45) day period beginning on, the closing date of each
offering made pursuant to such registration statement.
(vii) Indemnification.
(1) The Company shall indemnify and hold harmless
each Holder and each underwriter, within the meaning of the Securities Act, who
may purchase from or sell for such Holder any Registrable Securities from and
against any and all losses, claims, damages and liabilities arising out of or
based on any untrue statement or alleged untrue statement of a material fact
contained in any prospectus, offering circular or other document incident to any
registration, qualification or compliance (or in any related registration
statement, notification or the like) required to be filed or furnished by reason
of this Agreement or caused by any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or alleged untrue
statement or omission or alleged omission based upon information furnished or
required to be furnished to the Company by such Holder or such underwriter
expressly for use therein, which indemnification shall include each person, if
any, who controls any such underwriter within the meaning of the Securities Act.
(2) Each Holder shall severally indemnify the
Company, its directors, each officer signing the related registration statement
and each person, if any, who controls the Company within the meaning of the
Securities Act, from and against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in any prospectus, offering circular or other document
incident to any registration, qualification or compliance (or in any related
registration statement, notification or the like) required to be filed or
furnished by reason of this Agreement and caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading based upon information
furnished or required to be furnished to the Company by such Holder expressly
for use therein.
Each Holder shall furnish to the Company such information regarding
itself, the distribution of such securities and such other information as may
otherwise be required by the Securities Act to be included in such registration
statement and will otherwise use its best efforts to cooperate with the Company
with respect to compliance with any applicable federal or state law or
regulation.
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II. REPRESENTATIONS AND WARRANTIES
MMI represents and warrants to the Lenders that:
2.1 Organization, Standing. It (i) is a corporation duly organized,
validly existing and subsisting in good standing under the laws of the
Commonwealth of Pennsylvania, (ii) has the corporate power and authority
necessary to own its assets, carry on its business and enter into and perform
its obligations hereunder and under the Notes, and (iii) is qualified to do
business and is in good standing in each jurisdiction where the nature of its
business or the ownership of its properties requires such qualification except
where the failure to be so qualified would not have a material adverse effect on
the business, operations, assets or condition (financial or otherwise) of MMI.
2.2 Corporate Authority, Etc. The making and performance of the Loan
Documents are within the power and authority of MMI and have been duly
authorized by all necessary corporate action. The making and performance of the
Loan Documents do not and under present law will not require any consent or
approval of any of MMI's shareholders or any other person (except in connection
with an increase in the authorized number of shares of Common Stock set forth in
the Company's Articles of Incorporation), do not and under present law will not
violate any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award, do not violate any provision of its charter or by-laws
(except in connection with an increase in the Company's authorized Common
Stock), do not and will not result in any breach of any material agreement,
lease or instrument to which it is a party, by which it is bound or to which any
of its assets are or may be subject, and do not and will not give rise to any
lien upon any of its assets. Further, MMI is not in default under any such
agreement, lease or instrument except to the extent such default reasonably
could not have a material adverse effect on the business, operations, assets or
condition (financial or otherwise) of MMI taken as a whole. No authorizations,
approvals or consents of, and no filings or registrations with, any governmental
or regulatory authority or agency (other than authorizations, approvals,
consents, filings and registrations heretofore obtained and in full force and
effect and a Form D to be prepared and filed with the Commission immediately
following the Closing Date) are necessary for the execution, delivery or
performance by MMI of the Loan Documents or for the validity or enforceability
thereof.
2.3 Validity of Documents. The Loan Documents, when executed and
delivered, will be the legal, valid and binding obligation of MMI, enforceable
against it in accordance with their terms. No authorization, consent, approval,
license, exemption of or filing or registration with any court, governmental
agency or other tribunal is or under present law will be necessary to the
validity or performance of any Loan Document, except as to such filings as may
be necessary to increase the number of shares of authorized Common Stock of the
Company.
2.4 Use of Proceeds. The proceeds of the Convertible Term Loans will
be used by MMI for working capital and general corporate purposes. None of the
proceeds of the Convertible Term Loans will be used to purchase or carry any
"margin security" or extend credit for such purpose within the meaning of
Regulations G or U of the Board of
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Governors of the Federal Reserve System.
2.5 Disclosure Generally. The representations and statements made by or
on behalf of MMI in the Loan Documents do not contain any untrue statement of a
material fact or omit to state a material fact or any fact necessary to make the
representations made not materially misleading.
III. CLOSING
On the date of each Subscription Agreement, the Lender executing such
Subscription Agreement shall make the Convertible Term Loan indicated therein to
MMI by paying MMI the principal amount such Convertible Term Loan by delivery to
MMI of a certified or bank cashier's check, payable to the order of "MicroLeague
Multimedia, Inc."
IV. NEGATIVE COVENANTS
Except to the extent waived from time to time by the Lenders, the
following covenants will apply on and after the date hereof until the Notes are
paid in full:
4.1 Payment of Dividends; Redemption of Stock; Mergers. MMI will not
pay any dividends, make any other distributions and/or repurchase, redeem, or
otherwise acquire or set aside reserves to acquire, any of its outstanding stock
or enter into any merger, consolidation or sale of all or substantially all of
its assets or business.
4.2 Guaranty Obligations. MMI will not become a guarantor, surety,
obligor or otherwise become directly, indirectly or contingently liable for the
debts or obligations of others, except as an endorser of checks or drafts
negotiated in the ordinary course of MMI's business and except with respect to
MMI's wholly-owned subsidiaries.
4.3 No Change in Business. The Company will not change substantially
the character of its business as conducted on the date hereof and will continue
to conduct its business in the ordinary course.
4.4 Dealings with Affiliates. MMI will not enter into any transaction
with any holder of 5% or more of any class of capital stock of MMI, or any
member of their immediate families or any corporation or other entity directly
or indirectly controlled by one or more of such stockholders or members of their
immediate families except in the ordinary course of business and on terms not
less favorable to MMI than MMI would obtain in a transaction between unrelated
parties.
V. DEFAULT
Events of Default. MMI shall be in default if any one or more of the
following events ("Event of Default") occurs:
(a) Principal, Interest or Other Amounts. MMI fails to pay any
principal or accrued interest on any Convertible Term Note or any other
indebtedness of the Company which is either senior in priority to the
Convertible Term Notes or secured by
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any assets of the Company for more than five (5) days after it becomes due and
payable, whether at maturity, by notice of intention to prepay, or otherwise;
(b) Representations, Warranties, Etc. Any representation or
warranty made by the Borrower in any of the Loan Documents or in any exhibit,
schedule, report or certificate delivered pursuant hereto or thereto shall prove
to have been false, misleading or incorrect in any material respect when made or
deemed to have been made.
(c) Covenants. MMI fails to observe or perform as and when
required by any of the covenants contained in this Agreement and fails to cure
any such default within fifteen (15) days after receiving written notice of such
default from any Lender.
Upon the occurrence of an Event of Default, then and in every such
event the Convertible Term Loans and all other obligations of MMI under any Loan
Document, including without limitation accrued interest, shall become due and
payable, upon declaration by Lenders representing a majority of the outstanding
aggregate Convertible Term Loan balance, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by MMI. Upon the
occurrence of an Event of Default, MMI agrees, subject only to any limitation
imposed by applicable law, to pay all expenses, including reasonable attorney's
fees and legal expenses, incurred by the Lenders in endeavoring to collect any
amounts payable hereunder which are not paid when due.
VI. MISCELLANEOUS
6.1 Waiver. No failure or delay on the part of the Lenders or any
holder of a Convertible Term Note in exercising any right, power or remedy under
any Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under any Loan Document. The remedies provided under the Loan Documents are
cumulative and not exclusive of any remedies provided by law.
6.2 Amendments. No amendment, modification, termination or waiver of
any Loan Document or any provision thereof nor any consent to any departure by
MMI therefrom shall be effective unless the same shall have been approved by all
parties thereto, be in writing and be signed by all parties thereto and then any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No notice to or demand on MMI shall
entitle MMI to any other or further notice or demand in similar or other
circumstances.
6.3 Governing Law. The Loan Documents and all rights and obligations of
the parties thereunder shall be governed by and be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania without regard to
state or federal principles of conflict of laws.
6.4 Assignment. Each Loan Document shall bind and inure to the benefit
of MMI and the Lenders and their respective successors and assigns.
12
6.5 Notices. All notices, requests, demands, directions, declarations
and other communications between the Lenders and MMI provided for in any Loan
Document shall, except as otherwise expressly provided, be mailed by registered
or certified mail, return receipt requested, or telegraphed, or telefaxed, or
delivered in hand to the applicable party at its address indicated opposite its
name on the signature pages hereto. The foregoing shall be effective and deemed
received three days after being deposited in the mails, postage prepaid,
addressed as aforesaid; and whenever sent by telegram, telegraph or telefax or
delivered in hand, shall be effective when received. Any party may change its
address by a communication in accordance herewith.
6.6 Survival of Warranties and Certain Agreements. All agreements,
representations and warranties made or deemed made herein shall survive the
execution and delivery of this Agreement, the making of any Convertible Term
Loan hereunder and the execution and delivery of any Convertible Term Note.
6.7 Severability. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Agreement or the
Convertible Term Notes shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement
or the Convertible Term Notes or of such provision or obligation in any other
jurisdiction.
6.8 No Fiduciary Relationship. No provision in this Agreement or in any
of the other Loan Documents and no course of dealing between the parties shall
be deemed to create any fiduciary duties by the Lenders to MMI other than those
that exist at law.
6.9 Counterparts; Effectiveness. This Agreement and any amendment
hereto or waiver hereof may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement and any amendments
hereto or waivers hereof shall become effective when each Lender shall have
received signed counterparts or notice by fax of the signature page that the
counterpart has been signed and is being delivered to each Lender or facsimile
that such counterparts have been signed by each of the parties hereto or
thereto.
6.10 Use of Defined Terms. All words used herein in the singular or
plural shall be deemed to have been used in the plural or singular where the
context or construction so requires. Any defined term used in the singular
preceded by "any" shall be taken to indicate any number of the members of the
relevant class.
6.11 Accounting Terms. All accounting terms used herein shall be
construed in accordance with Generally Accepted Accounting Principles.
13
IN WITNESS WHEREOF, each Lender has executed this Agreement, and MMI
has caused this Agreement to be executed by its proper corporate officers
thereunto duly authorized as of the day and year first above written.
MICROLEAGUE MULTIMEDIA, INC.,
a Pennsylvania corporation
By: /s/ Xxxx Xxxxxx
Xxxx Xxxxxx
Chief Executive Officer
LENDERS:
PENN JANNEY OPPORTUNITIES FUND, L.P.
By: Penn Xxxxxx XX, L.L.C.,
its general partner
By: /s/ Xxxxxxx Xxx
Xxxxxxx Xxx, Managing Member
Address:
/s/ Xxxxxx X. Some
XXXXXX X. SOME
Address:
14
/s/ Xxxx X. Xxxxxxxxx, III
XXXX X. XXXXXXXXX, III
Address:
/s/ W. Xxxxxxx Xxxxxxxxxx
W. XXXXXXX XXXXXXXXXX
Address:
15
SCHEDULE I
SCHEDULE OF LENDERS
Lender Principal of Convertible Term Loan
Penn Janney Opportunities Fund, L.P. $200,000
Xxxxxx X. Some $200,000
Xxxx X. Xxxxxxxxx, III $200,000
W. Xxxxxxx Xxxxxxxxxx $ 50,000
18
EXHIBIT "A"
FORM OF NOTE
CONVERTIBLE TERM NOTE
$[ ] ____________ , 1997
For value received, MICROLEAGUE MULTIMEDIA, INC. ("Maker"), hereby
unconditionally promises to pay to the order of ("Lender"), the principal sum of
Dollars ($ ), or such other amount as shall then equal the outstanding principal
amount hereof, and any unpaid accrued interest hereon, at such interest rate and
at such times and in the manner as specified in the Convertible Term Loan
Agreement (defined below).
Payments of principal and accrued but unpaid interest on this Note (to
the extent not paid by the issuance of Additional Term Notes as defined in and
pursuant to Section 1.1 of the Convertible Term Loan Agreement or by the
issuance of Conversion Shares as defined in and pursuant to Section 1.7 of the
Convertible Term Loan Agreement) shall be made in lawful money of the United
States of America by delivery of a certified or bank cashier's check payable to
the Lender or in immediately available funds via wire transfer to such financial
institution as Maker is instructed in writing by Lender. All payments hereunder
shall be remitted to the Lender at the address set forth by the Lender's name on
the signature page of the Convertible Term Loan Agreement or at such other place
as the Lender may designate by written notice in accordance with the Convertible
Term Loan Agreement. Capitalized terms used herein and not otherwise defined
shall have the respective meanings assigned in the Convertible Term Loan
Agreement.
This Note arises out of a certain Convertible Term Loan Agreement dated
September 8, 1997, among Maker, the Lender, and certain other lenders (herein
the "Convertible Term Loan Agreement"), to which reference is made for a
statement of the respective rights and obligations of the parties and the terms
and conditions therein provided under which the principal hereof and accrued
interest thereon and any other amounts payable, if any, may be prepaid or may
become immediately due and payable. This Note is subordinated to the prior
repayment of certain debt of the Maker as and to the extent provided in the
Convertible Term Loan Agreement.
The Maker hereby waives presentment, demand for payment, notice of
dishonor or acceleration, protest and notice of protest, and any and all other
notices or demands in connection with the delivery, acceptance, performance,
default or enforcement of this Note, excepting any notice requirement set forth
in the Convertible Term Loan Agreement. No failure on the part of the holder of
this Note in exercising any right or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or remedy
preclude any other or future exercise thereof or the exercise of any other right
or remedy hereunder. No modification or waiver of any provision of this Note,
nor any departure by Maker therefrom, shall in any event be effective unless the
same shall be in writing, in accordance with Section 6.2 of the Convertible Term
Loan Agreement, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose given.
This Note shall be deemed to have been made under and shall be governed
by the laws of the Commonwealth of Pennsylvania in all respects, including
matters of construction, validity and performance, without regard to principles
of conflict of laws.
IN WITNESS WHEREOF, the undersigned, by its duly authorized officer,
has executed this Note as of the date first above written.
MICROLEAGUE MULTIMEDIA, INC.
a Pennsylvania corporation
By:
Name: Xxxx Xxxxxx
Title: Chief Executive Officer
-2-
EXHIBIT "B"
JOINDER AGREEMENT
The undersigned desires to purchase a Convertible Term Note
(as defined in the Convertible Term Loan Agreement dated September 8, 1997 among
MicroLeague Multimedia, Inc. (the "Company") and the other purchasers of
Convertible Term Notes set forth on the signature page thereof (the "Convertible
Term Loan Agreement")) of the Company in the principal amount of $______________
in accordance with the terms of the Convertible Term Loan Agreement.
The Convertible Term Loan Agreement requires, as a condition
precedent to the acquisition of any Convertible Term Notes of the Company, any
person acquiring such Convertible Term Notes to execute and deliver this Joinder
Agreement to the Company.
NOW, THEREFORE, in consideration of the foregoing, the
undersigned, WITH THE INTENT TO BE LEGALLY BOUND HEREBY, agree as follows:
1. As a condition to the undersigned's acquisition of a
Convertible Term Note, the undersigned agrees to be bound by and to comply with
all the terms and conditions of the Convertible Term Loan Agreement as a
"Lender" thereunder from and after the date hereof.
2. The undersigned (i) acknowledges receipt of a copy of the
Convertible Term Loan Agreement, (ii) has read the Convertible Term Loan
Agreement and (iii) understands that the Convertible Term Loan Agreement imposes
certain restrictions and obligations on the undersigned and the Convertible Term
Notes.
3. The undersigned also acknowledges that an executed copy of
this Joinder Agreement will be attached to the Convertible Term Loan Agreement
to evidence the undersigned's undertaking hereunder.
4. This Joinder Agreement shall be governed by, construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania,
without giving effect to principles of conflicts of laws.
IN WITNESS WHEREOF, the undersigned has executed this Joinder
Agreement on the ____ day of _________________, 199__.
[Insert Name of Person Acquiring Convertible
Term Note]
[Signature]
EXHIBIT "C"
CONVERSION NOTICE
The undersigned Holder of a Convertible Term Note ("Term Note") issued
by Microleague Multimedia, Inc. (the "Company'), hereby elects to convert the
below listed amounts of principal and accrued interest of the Term Note into
shares of Common Stock of the Company as provided in Section 1.7 of the
Convertible Term Loan Agreement dated September 8, 1997:
Principal Accrued Interest Total Amount
$ $ $
The "Conversion Price" per share of Common Stock of the Company shall
be $ per share based on:
[ ] (1) Date of Term Note; or
[ ] (2) Conversion or exercise price of security issued by the
Company subsequent to the issuance of the Term Note.
(Please check applicable box)
Number of shares of Common Stock of the Company to be received by this
conversion (Total Amount divided by the Conversion Price per share):
The closing date of such conversion shall be (not more than 20 nor less
than 10 days from the date of this Conversion Notice).
Dated: By:
