EXECUTION
ESCROW AGREEMENT
Among
XXXX XXXXXXX,
as representative of
THE HEARST CORPORATION,
AMERITECH CORPORATION,
KIDSOFT, INC.,
XXXXXX X. XXXXX
and
XXXXXXXX X. XXXXX,
MICROLEAGUE MULTIMEDIA, INC.
and
SUMMIT BANK
Dated as of
June 6, 1997
ESCROW AGREEMENT
Escrow Agreement (the "Agreement"), dated as of June 6,
1997, among Xxxx Xxxxxxx, as representative ("Sellers'
Representative") of The Hearst Corporation, Ameritech
Corporation, KidSoft, Inc., Xxxxxx X. Xxxxx and Xxxxxxxx X.
Xxxxx (each, a "Seller," collectively, "Sellers"),
MicroLeague Multimedia, Inc. ("Buyer") and Summit Bank (the
"Escrow Agent").
Sellers and Buyer are parties to an acquisition
agreement, dated as of June 6, 1997 (the "Acquisition
Agreement"), pursuant to which the Sellers have agreed to
sell, transfer and assign to Buyer the membership interests
in KidSoft, L.L.C. owned, directly or indirectly, by each of
them in exchange for an aggregate of 1,450,000 shares of
common stock, par value $.01 per share, of Buyer (the
"Common Stock") and warrants to purchase 100,000 shares of
Common Stock. Pursuant to Sections 3.2(a), 3.3(a) and
3.4(a) of the Acquisition Agreement, Buyer has agreed to
deliver to the Escrow Agent certificates for an aggregate of
150,000 shares of Common Stock (the "Securities"),
representing a portion of the respective purchase prices for
such membership interests, to secure Buyer's right to
indemnification pursuant to Article XI of the Acquisition
Agreement.
Accordingly, in consideration of the mutual agreements
contained herein, and intending to be legally bound hereby,
the parties agree as follows:
1. Appointment of Escrow Agent. Sellers' Representative
and Buyer appoint the Escrow Agent to act as escrow agent
under this Agreement, and the Escrow Agent accepts such
appointment, for the purpose of receiving and holding the
Securities and releasing the Securities in accordance with
the terms and conditions set forth in this Agreement.
2. Delivery of the Securities; Dividend and Voting Rights.
(a) Upon the execution of this Escrow Agreement, Buyer is
delivering to the Escrow Agent certificates, prepared in the
names of Sellers and in the denominations set forth on
Schedule I hereto and duly executed and sealed by the proper
representatives of Buyer, representing the Securities.
(b) All dividends or distributions in respect of any
Securities held by the Escrow Agent, whether in the form of
cash, securities or other property, shall be paid to
Sellers, pro rata in accordance with their respective
percentage interests set forth on Schedule I hereto. Such
dividends or distributions, as the case may be, shall be
delivered to the Escrow Agent, and shall be accompanied by
delivery instructions prepared by Buyer's Chief Financial
Officer.
(c) Each of the Sellers shall be entitled to vote such
Seller's Securities on all matters submitted to a vote of
shareholders of Buyer; provided, however, each Seller shall
deliver to the Escrow Agent a stock power, duly executed by
such Seller or a duly authorized officer of Seller, as the
case may be, for the purpose of transferring the Securities
or any portion thereof to Buyer in settlement of a Claim (as
defined below).
3. Release of Escrowed Assets.
(a) The Escrow Agent shall hold the Securities until
authorized to release them in accordance with this Section
3.
(i) If, prior to June 6, 1998 (the "Termination Date"),
Buyer asserts a claim for indemnification pursuant to
Section 11.2(a) or 11.2(c) of the Acquisition Agreement (a
"Claim"), Buyer shall promptly notify Sellers'
Representative and the Escrow Agent in writing of such
Claim, setting forth in reasonable detail the nature and
basis therefor and, if determinable, the amount or, if not
then determinable, a reasonable, good faith estimate of the
likely amount thereof (a "Notice of Indemnification"). If
the Escrow Agent has not received from Sellers'
Representative written objection to the Claim or the amount
or reasonableness of the estimated amount thereof on or
before the 15th day following the date of such Notice of
Indemnification (the "Determination Date"), the Claim, if
the amount thereof is determinable, shall be conclusively
presumed to have been agreed to by Sellers' Representative
and certified by Buyer and Sellers' Representative for
payment by the Escrow Agent. In accordance with the
provisions of Article XI of the Acquisition Agreement, the
Escrow Agent promptly thereafter shall surrender the
certificates representing the applicable Securities then
held by the Escrow Agent to Stock Trans, Inc., as transfer
agent for Buyer, or such other institution as shall then be
acting in such capacity (the "Transfer Agent"), together
with instructions in substantially the form of Exhibit A
hereto to issue (A) to Buyer a certificate for the number of
shares of Common Stock (rounded up to the nearest whole
share) having a Market Value (as defined below) equal to the
amount of the Claim, which instructions shall specify such
number of shares, and (B) to the Escrow Agent certificates
for the balance of such Securities in the names of the
applicable Sellers and in proportion to their respective
interests as set forth on Schedule I hereto if the amount of
the Claim is less than the Market Value of the Securities
owned by such Sellers then held by the Escrow Agent.
(ii) As used herein,"Market Value" means the average of the
last sale prices of the Common Stock on the National
Association of Securities Dealers Automated Quotation System
as reported by The Wall Street Journal for the 10
consecutive trading days immediately preceding the
Determination Date or, if no sale occurs on any such day,
the average of the closing bid and asked prices as so
reported on any such day or, if there are no such prices
reported during such 10-day period, the value as of the
Determination Date as determined by an independent appraiser
selected by Buyer and certified in writing to the Escrow
Agent. Buyer's Chief Financial Officer shall certify to the
Escrow Agent in writing the Market Value determined in
accordance with the preceding sentence.
(iii) If the amount of the Claim is not determinable, the
Escrow Agent shall not take any final action with respect
thereto until such time as the amount of such Claim shall
become determinable, at which time Buyer shall give Sellers'
Representative and the Escrow Agent written notice thereof
and the procedures set forth in the preceding sentences
shall then be invoked (such notice that the Claim is
determinable being treated in the same manner as a Notice of
Indemnification), unless otherwise provided in joint
instructions of Buyer and Sellers' Representative delivered
to the Escrow Agent.
(iv) If Sellers' Representative objects to a Claim made by
Buyer, or to the amount or reasonableness of the estimated
amount of such Claim, Sellers' Representative shall promptly
notify Buyer and the Escrow Agent of such objection and the
basis therefor. For a period of 30 days after receipt by
Buyer of such objection, Buyer and Sellers' Representative
shall endeavor to resolve the difference. If such
resolution is effected, they shall jointly certify such
resolution to the Escrow Agent in writing, and the Escrow
Agent shall act in accordance with such joint certification
and the terms hereof. If Buyer and Sellers' Representative
are unable to effect such resolution, following the end of
such 30-day period (including any extensions thereof as
mutually agreed by Buyer and Sellers' Representative) the
Escrow Agent shall not take any action with respect to such
Claim until the difference is resolved (A) as certified to
the Escrow Agent jointly by Buyer and Sellers'
Representative or (B) pursuant to a certified final order or
orders of a court of competent jurisdiction delivered to the
Escrow Agent, as to which all rights of appeal shall have
been exhausted or expired, as certified by the party hereto
delivering such order to the Escrow Agent, setting forth the
amount that Buyer is entitled to receive. Upon receipt of
such certification, the Escrow Agent shall release the
Securities in accordance with the procedures set forth in
Section 3(a)(i) above.
(b) If no Notice of Indemnification is delivered to the
Escrow Agent on or before the Termination Date, unless
Sellers' Representative and Buyer otherwise agree and
together so inform the Escrow Agent in writing, this
Agreement shall terminate and the Escrow Agent shall release
the remaining Securities, if any, to Sellers.
4. Compensation of Escrow Agent. The Escrow Agent shall
receive a document review fee equal to $500 and an annual
fee of $1,500 as compensation for its services under this
Agreement. All such fees shall be shared equally by Buyer
on the one hand and Sellers on the other hand.
5. Obligations of Escrow Agent. The Escrow Agent is not a
party to the Acquisition Agreement. Accordingly, the duties
and obligations of the Escrow Agent are only those
specifically set forth in this Agreement. The Escrow Agent
shall incur no liability for any error of judgment, or for
any action taken or omitted by it, or any action suffered by
it to be taken or omitted, or for any mistake of fact or
law, except for willful misconduct or gross negligence, so
long as it has acted in good faith. The Escrow Agent may
consult with counsel of its choice, including in-house
counsel, and shall be fully protected by, and shall not be
liable for, any action taken, suffered or omitted by it in
accordance with the advice of such counsel. The Escrow
Agent shall not be bound by any modification, amendment,
termination, cancellation, rescission or supersession of
this Agreement unless in writing and signed by the parties
hereto. If the Escrow Agent is uncertain as to its duties
or rights under this Agreement or receives instructions,
claims or demands from Sellers' Representative or Buyer
that, in its opinion, conflict with any of the provisions of
this Agreement, it may refrain from taking any action other
than to keep safely all property held in escrow until it is
directed otherwise in writing by Sellers' Representative and
Buyer or by a final, unappealable order or judgment of a
court of competent jurisdiction. The Escrow Agent shall
have no liability for following the instructions contained
in or given in accordance with this Agreement or written
instructions given jointly by Sellers' Representative and
Buyer. The Escrow Agent shall have no responsibility for
the genuineness or validity of any document or other item
deposited with or delivered to it and no liability for
acting in accordance with any written instructions or
certificates given to it hereunder and believed by it to be
signed by the proper parties. The Escrow Agent shall not be
required to institute legal proceedings of any kind and
shall not be required to defend any legal proceedings that
may be instituted against it in respect of the subject
matter of such instructions unless requested to do so and
indemnified to its satisfaction against the cost and expense
of such defense.
6. Indemnity of Escrow Agent. Sellers and Buyer, jointly
and severally, shall indemnify, defend and hold the Escrow
Agent harmless from and against all loss, damage, liability
and expense that may be incurred by the Escrow Agent arising
out of or in connection with its acceptance of appointment
as Escrow Agent hereunder, except as caused by its gross
negligence, bad faith or willful misconduct, including the
reasonable legal costs and expenses of defending itself
against any claim or liability in connection with its
performance hereunder. Promptly after the receipt by the
Escrow Agent of notice of any demand or claim or the
commencement of any action, suit or proceeding, the Escrow
Agent shall, if a claim in respect thereof is to be made
against Buyer or Sellers, notify Buyer and Sellers'
Representative thereof in writing.
7. Construction of Instruments by Escrow Agent. The
Escrow Agent shall not be called upon to construe any
contract or instrument in connection with this Agreement and
shall not be required to act in respect of the Securities
except in accordance with this Agreement.
8. Action by Sellers. Any action permitted or required to
be taken by Sellers under this Agreement may be taken by
Sellers' Representative and any action taken by Sellers'
Representative hereunder shall be conclusive and binding on
all Sellers.
9. Successors and Assigns. This Agreement is binding
upon, and inures to the benefit of, the parties hereto and
their respective successors and assigns.
10. Notices. All notices, demands and communications
provided for herein or made hereunder shall be delivered, or
mailed first class with postage prepaid, or sent by
facsimile transmission, addressed in each case as follows,
until another address shall have been designated in a
written notice given in like manner, and shall be deemed to
have been given or made when so delivered or mailed or sent
by facsimile transmission:
(a) if to Buyer: MicroLeague Multimedia, Inc.
0000 Xxxxxxxxxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxxx, XX 00000-0000
Attention: Xxxx Xxxxxx
Facsimile No.: (000) 000-0000
Tax I.D.: 00-0000000
with a copy to: Klehr,Harrison,Xxxxxx,
Branzburg & Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention:Xxxxxx X. Xxxxxxxxx,
Esquire
Facsimile No.: (000) 000-0000
(b) if to Sellers'
representative: Xxxx Xxxxxxx
00000 Xxxxx XxXxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
with a copy to: Xxxx Xxxx Xxxx Freiderrich
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxx, Esquire
Facsimile No.: (000) 000-0000
(c) if to the Escrow Agent: Summit Bank Corporate Trust
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxx Xxx Xxxxxx
Facsimile No.: (000) 000-0000
11. Amendments. No amendment, modification or waiver of
any provision of this Agreement shall be effective unless in
writing and signed by the party against whom enforcement is
sought.
12. Severability. If any provision of this Agreement is
held for any reason to be unenforceable, the remainder of
this Agreement shall remain in full force and effect.
13. Headings. The headings in this Agreement are intended
solely for convenience of reference and shall be given no
effect in the construction or interpretation of this
Agreement.
14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Pennsylvania, with regard to its or any other jurisdiction's
conflicts of laws principles.
15. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same
instrument.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement, as of the date first above written.
/S/ Xxxx Xxxxxxx
XXXX XXXXXXX,
as representative of THE
HEARST CORPORATION,
AMERITECH CORPORATION,
KIDSOFT, INC., XXXXXX X.
XXXXX and XXXXXXXX X.
XXXXX
MICROLEAGUE MULTIMEDIA, INC.
By: /s/ Xxxx X. Xxxxxx
Name: Xxxx X. Xxxxxx
Title: Chairman and Chief
Executive Officer
SUMMIT BANK
By: /s/ Xxxx Xxx Xxxxxx
Name: Xxxx Xxx Xxxxxx
Title: Corporate Trust Officer
SCHEDULE I
Name of Seller Number of Securities
The Hearst Corporation 66,185
Ameritech Corporation 60,113
KidSoft, Inc. 22,500
Xxxxxx X. Xxxxx 601
Xxxxxxxx X. Xxxxx 601
EXHIBIT A
ESCROW AGREEMENT INSTRUCTION LETTER
Stock Trans, Inc.
0 X. Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
Pursuant to Section 3(a)(i) of the Escrow Agreement
(the "Escrow Agreement"), dated as of June __, 1997, among
Xxxx Xxxxxxx, as representative of The Hearst Corporation,
Ameritech Corporation, KidSoft, Inc., Xxxxxx X. Xxxxx,
Xxxxxxxx X. Xxxxx, MicroLeague Multimedia, Inc. (the
"Company") and Summit Bank ("Escrow Agent"), you are hereby
instructed to cancel Stock Certificates [insert numbers]
representing an aggregate of _____ shares of Common Stock,
$.01 par value, of the Company ("Common Stock") delivered
herewith and issue to the Company or its nominee a
certificate representing ___ shares of Common Stock, which
shares have a Market Value as of the Determination Date (as
such terms are defined in the Escrow Agreement) of $_______.
You are hereby further instructed to issue certificates
representing an aggregate of _____ shares of Common Stock in
the names and denominations set forth on Schedule I hereto
which you shall deliver to the Escrow Agent, which
certificate represents the balance of the shares of Common
Stock subject to the Escrow Agreement.1
Very truly yours,
Summit Bank
By:
Name:
Title:
_______________________________
1 Delete sentence if amount of Claim equals or
exceeds Market Value of shares represented by
certificate surrendered.
