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
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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
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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:
(1) 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
(2) if to Sellers'
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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
(3) 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.
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/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/ Xxxxx Xxxxxxxx
___________________________
Name: Xxxxx Xxxxxxxx
Title: Vice President and Chief
Financial Officer
SUMMIT BANK
By: /s/ Xxxx Xxx Xxxxxx
___________________________
Name: Xxxx Xxx Xxxxxx
Title: Corporate Trust Officer
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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.
Very truly yours,
Summit Bank
By:
Name:
Title:
Delete sentence if amount of Claim equals or exceeds Market Value of
shares represented by certificate surrendered.
