SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
MICROLEAGUE MULTIMEDIA, INC.
(Name of Issuer)
Common Stock par value $.01 per share
(Title of Class of Securities)
59507T 10 0
(CUSIP Number)
Steven B. King, Esquire
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market Street
Philadelphia, PA 19103
215-994-1037
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
September 8, 1997
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of this Schedule
13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box [ ].
Note: Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
- ----------------------------
* The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to the subject class
of securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18 of the
Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities
of that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
Page 1 of 6
<PAGE>
SCHEDULE 13D
CUSIP NO. 59507T 10 0 | 13D | PAGE 2 OF 6
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
Penn Janney Opportunities Fund, L.P.
23-2890322
- -------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
N/A (a) [ ]
(b) [ ]
- -------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------
4 SOURCE OF FUNDS WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
[ ]
- -------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
492,837*
NUMBER OF SHARES -----------------------------------------------------
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING 0
PERSON WITH -----------------------------------------------------
9 SOLE DISPOSITIVE POWER
492,837*
-----------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
492,837*
- -------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- -------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.4%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON PN
- -------------------------------------------------------------------------------
* Approximate amount of shares issuable upon conversion of Debenture and Note,
and exercise of Warrant, as further described below in Item 5.
<PAGE>
PAGE 3 OF 6
Item 1. Security and Issuer
This statement on Schedule 13D relates to the Common Stock,
par value $.01 per share (the "Shares") of Microleague Multimedia, Inc., a
Pennsylvania corporation (the "Issuer"). The principal executive offices of the
Issuer are located at 1001 Millersville Road, Lancaster, PA 17604-4547.
Item 2. Identity and Background
(a) This Statement on Schedule 13D is being filed by Penn
Janney Opportunities Fund, L.P., a Delaware Limited Partnership (the "Fund").
The Fund is a later stage venture capital partnership focusing on companies
primarily in the Mid-Atlantic region in a variety of businesses and industries.
The Fund's objective is to provide expansion capital to companies with
significant growth potential and to create a diversified portfolio of high
quality investments that provide a high rate of return to its limited partners.
Penn Janney GP, L.L.C., the general partner of the Fund, manages the business of
the Fund.
(b) A business address of the Fund is c/o Penn Janney
Advisory, Inc., 1801 Market Street, 11th Floor, Philadelphia, PA, 19103.
(c) Not Applicable.
(d) The Fund has not been convicted in a criminal
proceeding.
(e) The Fund has not been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction as a result of which
it was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, Federal or
state securities laws or finding any violation with respect to such laws.
(f) Not Applicable
Item 3. Source and Amount of Funds or Other Consideration
Working capital. $1,200,000 in the aggregate.
Item 4. Purpose of Transaction
The purpose of the transaction is to acquire certain debt
securities and warrants of the Issuer convertible into, or giving the right to
acquire, Shares of the Issuer. On or about April 25, 1997 the Fund advanced
$200,000 to the Issuer pursuant to the terms of the Debenture and the Warrant,
as hereinafter defined. On or about May 1, 1997, the Fund advanced an additional
$300,000 to the Issuer pursuant to the terms of the Debenture and the Warrant.
On or about June 2, 1997, the Fund advanced an additional $500,000 to the Issuer
of the Debenture and the Warrant. On September 8, 1997, the Fund advanced
$200,000 to the Issuer as payment in full for the Note, as hereinafter defined.
The Fund currently has no plans or proposals which relate to or would result in:
(a) the acquisition by any person of additional securities of the Issuer (other
than the possible acquisition of Shares pursuant to routine
(3)
<PAGE>
Item 4. Purpose of Transaction (cont'd) PAGE 4 OF 6
exercise or conversion of outstanding securities of the Issuer), or the
disposition of securities of the Issuer; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Issuer or any of its subsidiaries; (c) a sale or transfer of a material amount
of assets of the Issuer or any of its subsidiaries; (d) any change in the
present board of directors or management of the Issuer, including any plans or
proposals to change the number or term of directors or to fill any existing
vacancies on the Board; (e) any material change in the present capitalization or
dividend policy of the Issuer; (f) any other material change in the Issuer's
business or corporate structure; (g) any changes in the Issuer's charter, bylaws
or instruments corresponding thereto or other actions which may impede the
acquisition of control of the Issuer by any person; (h) a class of securities of
the Issuer being delisted from a national securities exchange or ceasing to be
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association; (i) a class of equity securities of the Issuer
becoming eligible for termination of registration pursuant to Section 12(g)(4)
of the Act; or (j) any action similar to those enumerated above.
Item 5. Interest in Securities of the Issuer
(a) The Fund is the beneficial owner of the following
Shares:
<TABLE>
<CAPTION>
Number Percent
of Shares of Class* Description
<S> <C> <C>
278,552 4.2%* Shares issuable pursuant to the terms of and upon conversion of
that certain Convertible Secured Subordinated Debenture dated April
25, 1997 issued by Microleague Multimedia, Inc. in favor of Penn
Janney Opportunities Fund, L.P. in the principal amount of
$1,000,000 (the "Debenture").
100,000 1.5%* Shares issuable upon exercise of the Warrant to Purchase 100,000
Shares of Common Stock of Microleague Multimedia, Inc., dated April
25, 1997 granted by Microleague Mulitmedia, Inc. to Penn Janney
Opportunities Fund, L.P. (the "Warrant").
114,285 1.7%* Shares issuable pursuant to the terms of the Convertible Term Note
dated September 8, 1997 issued by Microleague Multimedia, Inc. in
favor of Penn Janney Opportunities Fund, L.P. in the principal
amount of $200,000 (the "Note").
------- -----
492,837 7.4%*
======= =====
TOTAL
</TABLE>
*Calculated pursuant to Rule 13d-3(d) promulgated under the Act.
(4)
<PAGE>
Item 5. Interest in Securities of the Issuer (cont'd) PAGE 5 OF 6
(b) The Fund will have the sole power to vote, direct the
vote of, dispose of, and direct the disposition of the Shares if they are in
fact acquired by the Fund pursuant to the terms of the Debenture, Warrant, and
Note.
(c) No transactions in the Shares were effected by the
Shareholder during the past 60 days except as set forth in this Statement on
Schedule 13D.
(d) Not Applicable
(e) Not Applicable.
Item 6. Contracts, Agreements, Understandings or Relationships with
Respect to Securities of the Issuer
See Response to Item 7 below.
Item 7. Material to be Filed as Exhibits
7.1. Convertible Secured Subordinated Debenture dated April 25,
1997 issued by Microleague Multimedia, Inc. in favor of Penn Janney
Opportunities Fund, L.P. in the principal amount of $1,000,000 (the
"Debenture").
7.2. Warrant to Purchase 100,000 Shares of Common Stock of
Microleague Multimedia, Inc., dated April 25, 1997 granted by
Microleague Mulitmedia, Inc. to Penn Janney Opportunities Fund,
L.P. (the "Warrant").
7.3. Amendment No. 1, dated September 8, 1997, to the Debenture.
7.4 Convertible Term Loan Agreement dated September 8, 1997 issued
by Microleague Multimedia, Inc. in favor of Penn Janney
Opportunities Fund, L.P. in the principal amount of $200,000.
(5)
<PAGE>
PAGE 6 OF 6
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
PENN JANNEY OPPORTUNITIES FUND, L.P.
By: PENN JANNEY GP, L.L.C.,
its General Partner
Dated: September 10, 1997 By: /s/ Richard M. Fox
Richard M. Fox, Managing Member
(6)
<PAGE>
MESIROV GELMAN JAFFE CRAMER & JAMIESON
ATTORNEYS AT LAW
1735 Market Street, Philadelphia, PA 19103-7598
(215) 994-1037
September 17, 1997
VIA EDGAR
SECURITIES AND EXCHANGE COMMISSION
Judiciary Plaza
450 Fifth Street, N.W.
Washington DC 20549
Re: Microleague Multimedia, Inc.
Statement on Schedule 13D for Penn Janney Opportunities
Fund, L.P.
Gentlemen:
We enclose herewith for filing on behalf of the Penn Janney
Opportunities Fund, L.P., one copy of Statement on Schedule 13D.
Sincerely,
/s/ Steven B. King
Steven B. King
SBK/rns
cc:
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO COUNSEL FOR THE ISSUER THAT SUCH REGISTRATION IS NOT
REQUIRED AND THAT THE PROPOSED TRANSFER MAY BE MADE WITHOUT VIOLATION OF THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAW.
$1,000,000 April 25, 1997
MICROLEAGUE MULTIMEDIA, INC.
CONVERTIBLE SECURED SUBORDINATED DEBENTURE
For value received, Microleague Multimedia, Inc., a Pennsylvania
corporation (the "Company"), and each of the subsidiaries of the Company
identified on Schedule 1 attached hereto (the "Subsidiaries"), jointly and
severally intending to be legally bound, hereby promise to pay to the order of
Penn Janney Opportunities Fund, L.P. or its registered assigns (the "Holder"),
the principal amount of One Million Dollars ($1,000,000), or such other amount
as shall then equal the outstanding principal amount hereof, and any unpaid
accrued interest hereon, on the earlier to occur of (i) October 30, 1998; or
(ii) the date when declared due and payable by the Holder upon the occurrence of
an Event of Default (as defined below) (the "Maturity Date"). "Company" as used
in this Debenture shall include any entity which may succeed to or assume the
obligations of the Company under this Debenture.
Payments of principal and accrued but unpaid interest on this Debenture
(to the extent not paid by the issuance of Additional Convertible Debentures as
defined in and pursuant to Paragraph 1.2 below or by the issuance of Conversion
Shares as set forth in Paragraph 2.1 below) shall be made in lawful money of the
United States of America by delivery of a check payable to the Holder or, at the
election of the Holder, by wire transfer of immediately available funds to such
financial institution as instructed in writing by Holder. All payments hereunder
(including payments made by the issuance of Additional Convertible Debentures or
by the issuance of Conversion Shares) shall be made at 1801 Market Street, 11th
Floor, Philadelphia, PA 19103 or at such other office designated in writing by
Holder (the "Registered Address").
The Company may treat the Holder as the owner of this Debenture for the
purpose of receiving payment and for all other purposes, and the Company shall
not be affected by any notice to the contrary, except as provided herein.
<PAGE>
ARTICLE ONE
Interest
1.1 Interest Rate. Interest on the unpaid principal balance hereunder
shall accrue at the rate of twelve percent (12%) per annum. Payments of interest
hereunder shall be paid in the manner set forth in Paragraph 1.2 below, and
shall be due and payable quarterly with the first payment due on July 31, 1997
and subsequent payments due on each of October 31, 1997, January 31, 1998, April
30, 1998, July 31, 1998, and October 31, 1998. Any payments of principal or
interest not made when due hereunder shall accrue interest at the rate of
fifteen (15%) per annum (the "Default Rate"). Interest shall be calculated on
the basis of a 360 day year and the number of actual days elapsed.
1.2 Payment in Cash or In-Kind. 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 debenture in an original principal amount
equal to the amount of such interest then due, and which debenture shall
otherwise contain terms identical to those set forth in this Debenture,
including terms as to maturity, payments, security, and conversion (each an
"Additional Convertible Debenture").
ARTICLE TWO
Conversion of Debenture
This Debenture may be converted into shares of Common Stock of
the Company, as follows:
2.1 Conversion. Subject to and upon compliance with the
provisions of this Article Two, at the option of the Holder, at any time prior
to the close of business on the Maturity Date (or such later date upon which all
obligations hereunder have not been satisfied by the Company), and from time to
time, the unpaid principal balance (and any accrued but unpaid interest) of the
Debenture 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 eighty five
percent (85%) of the Fair Market Value (as hereinafter defined) of a share of
the Company's Common Stock on (a) the trading day immediately preceding the date
of this Debenture (which the Holder and the Company agree is the amount set
forth on the signature page hereof) or (b) the date on which the Conversion
Notice (as hereinafter defined) is executed and sent to the Company, whichever
is lower. The term "Fair Market Value" with respect to a share and a date shall
mean the average closing price of a share of the Company's common stock for the
five (5) trading days immediately before such date on the national securities
exchange (or NASDAQ, SmallCap or National Market System, as the case may be)
where such shares are traded, or if such shares are not then traded on a
national securities exchange or on NASDAQ, SmallCap or National Market System,
the average of the closing bid and closing asked prices of such a share for the
five (5) trading days immediately before such date. A trading day is one on
which at least one trade of the Company's common stock is reported by such
securities exchange or NASDAQ, as the case may be.
The conversion right shall be exercised by sending to the Company a
conversion notice substantially in the form attached hereto (the "Conversion
Notice"), duly executed by the Holder thereof. The Conversion Notice shall state
the principal amount and such portion of the accrued but unpaid interest thereof
to be so converted, shall identify a closing date not more than 20 nor less than
10 days from the date of the Conversion Notice, and shall include or be
accompanied by representations as to the Holder's investment intent
<PAGE>
substantially similar to those contained in this Debenture. On such closing
date, this Debenture shall be returned to the Company for cancellation (or
re-issuance in such amount as is still outstanding hereunder, as the case may
be.)
Conversion Shares issuable upon conversion of the Debenture shall be
issued in the name of the Holder and shall be transferable only in accordance
with all of the terms and restrictions contained herein.
Upon such conversion, the Company shall pay all accrued and unpaid
interest through the conversion date on the Debenture or such part thereof
delivered for conversion (other than the portion, if any, which the Holder
elects to convert into Conversion Shares).
No fractional Shares shall be issued or delivered upon conversion of
the Debenture. In case the Debenture shall be surrendered for the conversion of
only a portion of the principal amount thereof, the Company shall, at the time
of issuing the Conversion Shares issuable upon the conversion of such portion,
execute and deliver to the Holder of the Debenture so surrendered a new
debenture equal in principal amount to the unconverted portion of the
surrendered Debenture, dated the conversion date, and otherwise identical to
this Debenture.
2.2 Adjustments.
(a) 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.
(b) 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 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 (b) shall apply to successive transactions of the
nature to which it relates.
(c) 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 the Holder shall have the right, at
any time thereafter, to receive upon conversion of this Debenture 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 this Debenture immediately prior to such reclassification or
other event. Thereafter, the rights of the Holder with respect to the adjustment
of the amount of securities or other property obtainable upon conversion of this
Debenture shall be appropriately continued and preserved, so as to afford as
nearly as may be possible protection of the nature afforded by this Paragraph
2.2. The provisions of this clause (c) shall apply to successive transactions of
the nature to which it relates.
(d) Notwithstanding anything to the contrary contained or
implied in this Article Two, the adjustments to the Conversion Price provided
for herein shall be made only to the Conversion Price determined in accordance
with clause (a) of the definition of such term, unless the event giving rise to
such adjustment occurs during the period beginning the fifth trading day
immediately preceding the date on which the Conversion Notice is executed and
<PAGE>
sent to the Company, and ending on the date of delivery of the shares of Common
Stock with respect to such conversion, in which case the adjustments shall be
made to the Conversion Price determined in accordance with clauses (a) and (b)
of the definition of such term.
2.3 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 its 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
(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 the
Holder 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.
2.4 Notice of Adjustment of Conversion Price, etc. If there
shall be any adjustment as provided in Paragraph 2.2 hereof, 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
this Debenture, the Company shall forthwith cause written notice thereof to be
sent by registered or certified mail, postage prepaid, to the Holder, 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 this Debenture after such adjustment, or the kind and amount of
any such securities or property so issuable or deliverable upon the conversion
of this Debenture, as the case may be.
ARTICLE THREE
INTENTIONALLY LEFT BLANK
ARTICLE FOUR
Security
The obligations of the Company under this Debenture shall be secured by
a security interest in and lien on the assets of the Company and its
subsidiaries, pursuant to the terms of that certain Security Agreement dated
April 25, 1997 between the Company and Penn Janney Opportunities Fund, L.P.
<PAGE>
(the "Security Agreement").
ARTICLE FIVE
Subordination
5.1 Senior Debt. As used in this Debenture, the term "Senior
Debt" shall mean all amounts due and owing by the Company or any of its
subsidiaries to banks and other financial institutions, which amounts were
incurred or available for borrowing under existing lines of credit or other
written agreements in effect on the date of this Debenture, as set forth on
Schedule 5.1 to this Debenture, and any debt incurred to a bank or financial
institution after the date hereof to repay, renew or extend such existing
indebtedness, provided that any such incurrence, renewal or extension does not
result in an increase in the principal amount of "Senior Debt," above the amount
outstanding or available for borrowing as described above on the date hereof or
the date of such repayment, renewal or extension, whichever is higher, and any
other indebtedness incurred by the Company after the date hereof with the
express prior written consent of the Holder (or Holders representing a majority
of the principal hereof if there is at such time more than one Holder) to treat
such indebtedness as "Senior Debt."
5.2 Subordination. The Company covenants and agrees and the
Holder, by acceptance hereof, covenants, expressly for the benefit of the
present and future holders of Senior Debt, that all cash payments on this
Debenture are expressly subordinated in right of payment to the payment in full
of principal and interest of the Senior Debt of the Company in accordance with
the provisions of this Article Five. The Company may not, however, renew or
extend any Senior Debt (except as provided in Section 5.1 above), or issue
additional debt as Senior Debt without the express prior written consent of
Holder (or Holders representing a majority of the principal hereof if there is
at such time more than one Holder) which consent may be withheld in the sole
discretion of such Holder(s). Further, the Company may not issue additional
subordinated debt which is senior to the payments under this Debenture without
the express prior written consent of Holder (or Holders representing a majority
of the principal hereof if there is at such time more than one Holder) which
consent may be withheld in the sole discretion of such Holder(s).
Upon any material default by the Company on any Senior
Debt when due and payable, no cash payment may be made on or in respect of this
Debenture unless or until such default has been cured or is waived.
Upon any insolvency proceedings, receivership,
conservatorship, reorganization, readjustment of debt, marshaling of assets and
liabilities, or similar proceedings, or any liquidation or winding-up of the
Company, whether voluntary or involuntary, the Holder of this Debenture shall
not be entitled to receive thereafter, any amount in cash in respect of this
Debenture unless and until the above Senior Debt shall have been paid or
otherwise discharged (although the Holder may nevertheless receive Additional
Convertible Debentures or Conversion Shares as provided in this Debenture).
In the event of such proceeding, and after payment in full
of all sums owing with respect to such Senior Debt, Holder shall be entitled to
be paid from the remaining assets of the Company the unpaid principal of, and
any unpaid interest due on, this Debenture. Such payments will be made before
any payment or other distribution, whether in cash, property or otherwise shall
be made on account of any capital stock or any obligations of the Company
ranking junior to this Debenture.
5.3 Rights Against the Company and Others. It is understood
that the provisions of this Article Five are, and are intended to be, solely
<PAGE>
for the purpose of defining the relative rights of the Holder of this Debenture
on the one hand and the holder(s) of the Senior Debt of the Company on the other
hand.
Nothing contained in this Article Five or elsewhere in this
Debenture shall or is intended to impair, as between the Company, its creditors
other than the holder(s) of the Senior Debt, and the Holder of this Debenture,
the unconditional and absolute obligation of the Company to pay the Holder of
this Debenture the principal of and all interest on this Debenture as and when
the same shall become due and payable in accordance with its terms, or affect
the relative rights of the Holder of this Debenture and the creditors of the
Company, other than the holder(s) of such Senior Debt, nor shall anything herein
contained prevent the Holder of this Debenture from exercising all remedies
otherwise permitted by applicable law upon default under this Debenture, subject
to the rights, if any, of the holder(s) of Senior Debt in respect to cash,
property or securities of the Company received upon the exercise of any such
remedy.
The subordination herein provided applies to cash payments or
cash distributions by the Company only and shall not affect the right of the
Holder to collect and retain payment from any co-obligor, guarantor or surety,
or to receive Additional Convertible Debentures or Conversion Shares.
Upon any payment or distribution of assets of the Company
referred to in this Article Five, the Holder of this Debenture shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction in
which such dissolution, winding up, liquidation or reorganization proceedings
are pending, or upon a certificate of the liquidating trustee or agent or other
person making any distribution to the Holder of this Debenture, for the purpose
of ascertaining the persons entitled to participate in such distributions, the
holders of Senior Debt and other debt of the Company, the amounts thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article Five.
Notwithstanding anything to the contrary contained or implied
in this Article Five, no payments made to the Holder as permitted hereby shall
be subject to the subordination provisions set forth in this Article Five, and
no such payments shall be or shall be deemed to be held in trust or otherwise
for any other party, including any creditor as to Senior Debt.
ARTICLE SIX
Representations and Warranties of the Company
6.1 The Company represents and warrants to the Holder that:
(a) Existence and Rights. The Company is a corporation
duly organized, validly subsisting and in good standing under the laws of the
Commonwealth of Pennsylvania, and that each of its subsidiaries is duly
organized and validly existing and in good standing in their respective states
of incorporation, and that each of the Company and such subsidiaries is
qualified to do business in each jurisdiction where its activities require such
qualification, except to the extent such failure would not materially, adversely
affect the Company or any subsidiary. The Company has corporate powers and
adequate authority, rights and franchises to own its property and to carry on
its business as now conducted and as contemplated to be conducted.
(b) Debenture Authorized. The Company has full legal
right, power and capacity to execute, deliver and perform the provisions of this
Debenture. The execution and delivery of this Debenture and the performance of
the provisions of this Debenture are not in contravention of or
<PAGE>
in conflict with any law or regulation or any term or provision of the Company's
Articles of Incorporation or By-Laws and are duly authorized and do not require
any further consent or approval of any person, governmental body or regulatory
authority; and this Debenture is the valid, binding and legally enforceable
obligation of the Company in accordance with the terms herein.
(c) No Conflict. The execution, delivery and performance
of this Debenture are not, and will not be, in contravention of or conflict
with, or result in the breach by the Company of, any agreement, indenture,
mortgage, deed of trust or undertaking to which the Company is a party or by
which it or any of its properties or assets may be bound or affected, or any
existing applicable law, rule or regulation or any applicable decree, judgment
or order of any court, Federal or state regulatory body, administrative agency
or other governmental body having jurisdiction over any of the Company's
properties or assets, and, except pursuant to the Security Agreement, does not
cause any lien, charge or other encumbrance to be created or imposed upon any
such property or assets by reason thereof.
(d) Valid Issuance. This Debenture is (and upon issuance
any Conversion Shares or Additional Convertible Debentures will be) duly
authorized. Upon issuance, the Conversion Shares (including any issued upon
conversion of any Additional Convertible Debentures) will be validly issued,
fully paid and nonassessable, free and clear of any and all liens, charges,
restriction, claims and encumbrances of any kind and will not subject the Holder
to any liability by reason of holding such shares.
(e) Capitalization. The capitalization of the Company
(debt and equity) on a consolidated basis as of the date hereof is as set forth
on Schedule 6.1(e) attached hereto.
(f) Material Adverse Event. Since September 30, 1996,
there has not been any material adverse change in the business, operations,
liquidity, assets or prospects of the Company not described in a filing with
Securities and Exchange Commission made after such date, or set forth on
Schedule 6.1(f) hereto.
ARTICLE SEVEN
The Company's Affirmative Covenants
The Company agrees that until this Debenture is paid in full:
7.1 Additional Indebtedness. The Company shall not incur any
indebtedness that is senior in right of payment to this Debenture, other than
Senior Debt, without the express prior written consent of the Holder (or Holders
representing a majority of the principal hereof if there is at such time more
than one Holder), which consent may be withheld in the sole discretion of such
Holder(s).
7.2 Additional Securities. The Company shall not issue
additional securities of the Company other than Common Stock, or securities
convertible into Common Stock at a price per share not less than 90% of the fair
market value of such stock at the time of issuance or conversion, without the
express prior written consent of the Holder (or Holders representing a majority
of the principal hereof if there is at such time more than one Holder) which
consent may be withheld in the sole discretion of such Holder(s).
7.3 Board of Directors. The Company shall nominate and use its
best efforts to elect, including by voting any shares of common stock which the
Company may vote as proxy to elect, Richard Fox as a Director of the Company,
from the date of the next meeting of the Board of Directors of the
<PAGE>
Company (but in any case within thirty (30) days of the date hereof) and until
such time as the Company has no further obligations under this Debenture.
7.4 Pay Applicable Taxes. The Company shall pay promptly when
due any and all use, excise, personal property, income and withholding taxes and
all other taxes, levies, assessments, and governmental charges upon or relating
to the Company's ownership or use of any of its assets or reserves, except for
taxes contested in good faith by appropriate proceedings.
7.5 Maintain Books and Records. The Company shall keep
complete and accurate books and records with respect to the business of the
Company consistent with good business practice, and shall make all filings with
the Securities and Exchange Commission and any other regulatory body required to
be made by the Company.
7.6 Comply with Applicable Laws. The Company will at all times
conduct its business and maintain its property in all material respects in
compliance with all laws, regulations, and administrative orders of any
governmental authority as they apply to the Company's business from time to
time, and with all applicable insurance policies.
7.7 Give Notice of Default. The Company shall promptly notify
the Holder(s) of this Debenture in writing of the occurrence of any Event of
Default hereunder or of any event which would become an Event of Default
hereunder upon the lapse of time or giving of notice specified in this Debenture
(or in such other instrument giving rise to such default).
7.8 SEC Reports. The Company shall provide to the Holders of
this Debenture, any report or form filed by the Company pursuant to the
Securities and Exchange Act of 1934, within ten (10) days of their respective
filings.
ARTICLE EIGHT
Redemption
The Company may redeem at 100% of the principal amount, plus any
accrued interest to the redemption date, all or any portion of the indebtedness
evidenced by this Debenture (provided any partial redemptions prepayments are in
integral multiples of $100,000 and include all payments of interest in cash) at
any time and from time to time prior to its maturity without premium or penalty,
by giving the Holder(s) thirty days notice thereof; provided however, the
conversion provisions of Article 2 shall not be affected by any such notice, and
this Debenture shall remain convertible as provided herein, even as to amounts
to be prepaid as provided in the notice, until (as to such amounts) such date as
the Holder receives the prepayment as set forth in the notice.
ARTICLE NINE
Events of Default
It shall be an event of default hereunder ("Event of Default") if any
of the following conditions or events shall occur and be continuing:
(i) if the Company shall default in the payment of principal
of this Debenture when the same becomes due and payable, whether at maturity or
by declaration of acceleration or otherwise (including by the failure to issue
Conversion Shares as required by this Debenture) and shall fail to cure such
default within ten (10) days after written notice thereof from the Holder (or
Holders representing a majority of the principal hereof if there is at such time
more than one Holder) to the Company; or
<PAGE>
(ii) if the Company shall default in the payment of any
interest on this Debenture (including by the failure to issue any Additional
Convertible Debentures as provided in this Debenture) and shall fail to cure
such default within ten (10) days after written notice thereof from the Holder
(or Holders representing a majority of the principal hereof if there is at such
time more than one Holder) to the Company; or
(iii) if the Company shall materially default in the
performance of or compliance with any term contained herein and such default
shall not have been remedied within twenty (20) days after written notice
thereof from the Holder (or Holders representing a majority of the principal
hereof if there is at such time more than one Holder) to the Company; or
(iv) if the Company shall default in the payment of principal
or interest on any Senior Debt; or
(v) if the Company's Common Stock shall fail to be listed on
the NASDAQ SmallCap or National Market System or a national stock exchange; or
(vi) if the Company shall make an assignment for the benefit
of creditors, or shall admit in writing its inability to pay its debts as they
become due, or a voluntary petition for reorganization under Title 11 of the
United States Code ("Title 11") shall be filed by the Company or an order shall
be entered granting relief to the Company under Title 11 or a petition shall be
filed by the Company in bankruptcy, or the Company shall be adjudicated a
bankrupt or insolvent, or shall file any petition or answer seeking for itself
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, or shall file any answer admitting or not contesting the material
allegations of a petition filed against the Company in any such proceeding, or
shall seek or consent to or acquiesce in the appointment of any trustee,
receiver or liquidator of the Company or of all or any substantial part of the
properties of the Company or if the Company or its directors or majority
shareholders shall take any action looking to the dissolution or liquidation of
the Company; or
(vii) if within one hundred twenty (120) days after the
commencement of an action against the Company seeking a reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, such action shall
not have been dismissed or nullified or all orders or proceedings thereunder
affecting the operations or the business of the Company stayed, or if the stay
of any such order or proceeding shall thereafter be set aside, or if, within one
hundred twenty (120) days after the appointment without the consent or
acquiescence of the Company of any trustee, receiver or liquidator of the
Company or of all or any substantial part of the properties of the Company such
appointment shall not have been vacated; or
(viii) if there is a material adverse change in the financial
condition, business, operations, or assets of the Company and its subsidiaries
taken as a whole after the date hereof;
then, and in any such event, the Holder (or Holders representing a majority of
the principal hereof if there is at such time more than one Holder) may at any
time (unless such Event of Default shall theretofore have been remedied) at its
option, by written notice to the Company, declare the Debenture to be due and
payable, whereupon the Debenture shall forthwith mature and become due and
payable, and thereafter interest shall be due, at the Default Rate, on the
entire principal balance and any accrued but unpaid interest until the same is
fully paid, without presentment, demand, protest or notice, all of which are
<PAGE>
hereby waived.
In case of a default in the payment of any principal of or interest on
the Debenture, the Company will pay to the Holder such further amount as shall
be sufficient to cover the cost and expenses of collection, including, without
limitation, reasonable attorneys' fees, expenses and disbursements.
Notwithstanding any provision contained in this Debenture to the
contrary, the Company's liability for payment of interest shall not exceed the
limits imposed by applicable usury law. If any provision hereof requires
interest payments in excess of the then legally permitted maximum rate, such
provision shall automatically be deemed to require such payment at the then
legally-permitted maximum rate.
ARTICLE TEN
Restrictions on Transfer of Securities
10.1 Lack of Registration. By accepting this Debenture, the
Holder hereby acknowledges that the Debenture has not been registered under the
Securities Act or any state securities laws, and that none of the Conversion
Shares or Additional Convertible Debentures will be registered under any such
laws (except as contemplated by the Registration Rights Agreement between the
Holder and the Company with respect to the Conversion Shares) and represents
that it is acquiring this Debenture, and will acquire any Conversion Shares and
Additional Convertible Debentures, for its own account, for investment purposes
only and not with a view to, or for sale in connection with, any distribution
thereof.
10.2 Conditions to Transfer. The Holder shall not transfer the
Debenture or any Conversion Shares or Additional Convertible Debentures (or any
interest therein) until (a) it shall have first given written notice to Company
describing the manner of any such proposed transfer, and (b) either (i) the
Company has received from 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.
ARTICLE ELEVEN
Registration of Transfer
11.1 Register. The Company shall maintain a register, at the
principal office of the Company, currently at 1001 Millersville Road, Lancaster,
PA 17604-4547(the "Company Address"), for the recordation of ownership and
transfers of this Debenture, which shall be transferable in whole or in part
solely upon fulfillment of the conditions of Article Ten above, and the issuance
of Additional Convertible Debentures and the transfer thereof. Upon fulfillment
of such conditions and upon presentation by the Holder and surrender of this
Debenture (or such Additional Convertible Debentures), the Company shall
register such transfer and issue a new Debenture or Debentures of like aggregate
principal amount and bearing the same date. Company may require the payment of a
sum sufficient to cover any tax or other governmental charge, if any, payable in
connection with any such transfer or exchange.
<PAGE>
11.2 Lost or Destroyed Debentures. Upon receipt by Company at
its principal office of evidence reasonably satisfactory to Company of the loss,
theft, destruction or mutilation of this Debenture, and in the case of any such
loss, theft, or destruction, upon delivery of indemnity reasonably satisfactory
to Company or, in case of any such mutilation, upon surrender and cancellation
of this Debenture, Company will issue a new Debenture of like tenor in lieu of
this Debenture with a notification thereon of the date from which interest has
accrued.
ARTICLE TWELVE
Miscellaneous
12.1 Survival of Representation, Warranties and Covenants. All
agreements, representations, warranties and covenants made herein shall survive
the execution and delivery hereof.
12.2 Failure or Indulgence Not Waiver. No failure or delay on
the part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
12.3 Notices. Any notice or demand herein required or
permitted to be given shall be in writing and may be personally served or sent
by United States mail and shall be deemed to have been given when deposited in
the United States mail, Certified Mail, with postage prepaid and properly
addressed. For the purposes hereof, the address of the Holder shall be the
Registered Address and the address of Company shall be the Company Address. Both
Holder and Company may change the address for service by service of written
notice to the other as herein provided.
12.4 Amendments. The term "Debenture" or "this Debenture" and
all references thereto, as used throughout this instrument, shall mean this
instrument as originally executed or, if later amended or supplemented, then, as
so amended or supplemented.
12.5 Assignability. Subject to Article Ten hereof, this
Debenture shall be binding upon Company, its successors and assigns, and shall
inure to the benefit of Holder and Holder's successors, assigns, legal
representatives, heirs and guardians.
12.6 Governing Law. This Debenture has been executed in and
shall be governed by the laws of the Commonwealth of Pennsylvania without regard
to the conflict of law provisions thereof.
12.7 Treatment of Debenture. To the extent permitted by
generally accepted accounting principles, the Company will treat, account and
report the Debenture (including any Additional Convertible Debentures) as debt
and not equity for accounting purposes and with respect to any returns filed
with federal, state or local tax authorities
12.8 Subordination. THE INDEBTEDNESS, SECURITY INTERESTS
AND/OR LIENS EVIDENCED HEREBY ARE SUBORDINATE TO THE PRIOR PAYMENT, SATISFACTION
AND DISCHARGE IN FULL OF ALL OBLIGATIONS OF MICROLEAGUE MULTIMEDIA, INC. TO PNC
BANK, DELAWARE AND ALL SECURITY INTERESTS AND LIENS OF PNC BANK DELAWARE
PURSUANT TO THAT CERTAIN SUBORDINATION AGREEMENT DATED AS OF ______________,
1997 BY AND AMONG PENN JANNEY OPPORTUNITIES FUND, L.P., MICROLEAGUE MULTIMEDIA,
INC. AND PNC BANK, DELAWARE.
<PAGE>
IN WITNESS WHEREOF, Company has caused this Debenture to be signed in
its name by its duly authorized officer this 25th day of April, 1997.
MICROLEAGUE MULTIMEDIA, INC.
By: /s/ Neil B. Swartz
NEIL B. SWARTZ, CHAIRMAN
AND CHIEF EXECUTIVE OFFICER
REP HOLDING COMPANY
By: /s/ Neil B. Swartz
NEIL B. SWARTZ, President
REP ACQUISITION CORPORATION
By: /s/ Neil B. Swartz
NEIL B. SWARTZ, President
Acknowledged and Agreed to:
PENN JANNEY OPPORTUNITIES
FUND, L.P.
BY: Penn Janney GP, L.L.C.
its General Partner
By: /s/ Richard M. Fox
Richard Fox, Managing Member
Average Closing Price Pursuant to Section 2.1: $3.59 per share.
<PAGE>
CONVERSION NOTICE
The undersigned Holder of a Convertible Secured Subordinated
Debenture ("Debenture") issued by Microleague Multimedia, Inc. (the "Company"),
hereby elects to convert the below listed amounts of principal and accrued
interest of the Debenture into shares of Common Stock of the Company as provided
in Article Two of the Debenture:
Principal Accrued Interest Total Amount
$ $ $
Fair Market Value of a share of Common Stock of the Company as
determined pursuant to Section 21 of the Debenture: $________ per share.
Number of shares of Common Stock of the Company to be received
by this conversion (total amount divided by Fair Market Value per share):
______________
PENN JANNEY OPPORTUNITIES
FUND, L.P.
By:__________________________
its General Partner
By:_______________________
, President
Dated:________________________
<PAGE>
SCHEDULE 1
Subsidiaries
Ablesoft, Inc.
REP Holding Company, Inc.
REP Acquisition Corporation
<PAGE>
SCHEDULE 5.1
Senior Debt
PNC Loan Principal Interest
1/2/97 Term Loan $17,874.99 $120.68
Line of Credit $1,430,000.00 $9,582.98
8/30/96 Term Loan $10,891.07 $66.57
5/8/86 Term Loan $27,900.00 $188.38
8/24/95 Term Loan $375,000.00 $2,531.67
2/16/95 Term Loan $22,916.58 $154.73
<PAGE>
SCHEDULE 6.1(e)
Capitalization
<PAGE>
SCHEDULE 6.1(f)
Material Adverse Events
VOID AFTER 5:00 P.M., PHILADELPHIA TIME, ON APRIL 24, 2002 OR IF NOT A BUSINESS
DAY, AS DEFINED HEREIN, AT 5:00 P.M., PHILADELPHIA TIME, ON THE NEXT FOLLOWING
BUSINESS DAY.
WARRANT TO PURCHASE 100,000 SHARES OF COMMON STOCK
OF MICROLEAGUE MULTIMEDIA, INC.
NO. 1/PJOF
TRANSFER RESTRICTED -- SEE SECTION 6.02
For good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged by Microleague Multimedia, Inc., a
Pennsylvania corporation (the "Company"), and intending to be legally bound
hereby, the Company hereby grants to Penn Janney Opportunities Fund, L.P. ("Penn
Janney") and its registered, permitted assigns (collectively, the
"Warrantholder"), subject to the terms and conditions hereof, the right and
option to purchase One Hundred Thousand (100,000) fully-paid and nonassessable
shares of the Company's $.01 par value common stock (the "Common Stock") (the
"Penn Janney Shares").
ARTICLE I
Section 1.01: Definition of Terms. As used in this Warrant,
the following capitalized terms shall have the following respective meanings:
(a) Business Day: A day other than a Saturday, Sunday or
other day on which banks in the Commonwealth of Pennsylvania are authorized by
law to remain closed.
(b) Common Stock: Common Stock, $0.01 par value, of the
Company.
(c) Common Stock Equivalents: Securities that are
convertible into or exercisable or exchangeable for shares of Common Stock or of
which Common Stock is a part.
(d) Exchange Act: The Securities Exchange Act of 1934,
as amended.
(e) Exercise Price Per Share: 85% of the Fair Market
Value of a share of the Common Stock on (i) the date of this Warrant (which the
Warrantholder and the Company agree is the amount set forth on the signature
page hereof); or (ii) the trading day immediately preceding the date of exercise
of this Warrant, with respect to each particular exercise hereof, subject in
either such case to adjustment as provided in Article III hereof, whichever is
lower.
(1)
<PAGE>
(f) Fair Market Value: The term "Fair Market Value" with
respect to a share and a date shall mean the average closing price of a share of
the Company's common stock for the five (5) trading days immediately before such
date on the national securities exchange (or NASDAQ, SmallCap or National Market
System, as the case may be) where such shares are traded, or if such shares are
not then traded on a national securities exchange or on NASDAQ, SmallCap or
National Market System, the average of the closing bid and closing asked prices
of such a share for the five (5) trading days immediately before such date. A
trading day is one on which at least one trade of the Company's common stock is
reported by such securities exchange or NASDAQ, as the case may be.
(g) Holder: A Holder of this Warrant or of Registrable
Securities.
(h) NASD: National Association of Securities Dealers,
Inc.
(i) Penn Janney Shares: The shares of Common Stock
issuable upon exercise of this Warrant.
(j) Person: An individual, partnership, joint venture,
corporation, trust, limited liability company, unincorporated organization,
government or any department or agency thereof, or any other entity.
(k) Prospectus: Any prospectus included in any
Registration Statement, as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and all other amendments and
supplements to the Prospectus, including post-effective amendments and all
material incorporated by reference in such Prospectus.
(l) Public Offering: A public offering of any of the
Company's equity or debt securities pursuant to a registration statement under
the Securities Act.
(m) Registrable Securities: The Penn Janney Shares and
all other securities that may be or are issued upon the exercise of this
Warrant, including those which may thereafter be issued in respect of any such
securities by means of any stock splits, stock dividends, recapitalizations or
the like, and as adjusted pursuant to Article III hereof.
(n) Registration Rights Agreement: That certain
Registration Rights Agreement dated the date of this Warrant between
(2)
<PAGE>
the Company and Penn Janney providing for certain registration rights relating
to, among other things, the Penn Janney Shares.
(o) Registration Statement: Any registration statement
of the Company filed or to be filed with the SEC which covers any of the
Registrable Securities pursuant to the provisions of this Agreement, including
the Prospectus, amendments and supplements to such Registration Statement,
including post-effective amendments, all exhibits and all material incorporated
by reference by such registration statement.
(p) SEC: The Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act or the
Exchange Act.
(q) Securities Act: The Securities Act of 1933, as
amended.
(r) Warrant: This warrant, and all other warrants that
may be issued in its place or in exchange or satisfaction therefor, including
without limitation, any issued pursuant to Section 2.02(c) hereof. This Warrant
is sometimes herein referred to as the "Penn Janney Warrant."
(s) Warrant Expiration Date: 5:00 P.M., Philadelphia
time, on April 24, 2002 or, if such day is not a Business Day, the next
succeeding day which is a Business Day.
(t) Warrantholder: The person(s) or entity(ies) to whom
this Warrant is originally issued, or any successor in interest thereto, or any
assignee or transferee thereof, in whose name this Warrant is registered upon
the books to be maintained by the Company for that purpose.
ARTICLE II
Duration and Exercise of Warrant
Section 2.01: Duration of Warrant. Subject to the terms
contained herein, this Warrant may be exercised from time to time at any time
after 9:00 A.M., Philadelphia time, on April 26, 1997, and before the Warrant
Expiration Date. If this Warrant is not exercised in full on or before the
Warrant Expiration Date, it shall become void to the extent not exercised, and
all unexercised rights hereunder shall thereupon cease.
Section 2.02: Exercise of Warrant.
(a) The Warrantholder may exercise this Warrant, in
whole or in part, from time to time as follows:
(3)
<PAGE>
(1) At any time after the date hereof by
presentation and surrender of this Warrant to the Company at
its corporate office at 1001 Millersville Road, Lancaster,
Pennsylvania 17604-4547, with the Subscription Form annexed
hereto duly executed and accompanied by payment (by
certified or official bank check payable to the order of the
Company) of the Exercise Price Per Share for each Penn
Janney Share to be purchased; or
(2) Unless the Penn Janney Shares
underlying this Warrant have been registered under the
Securities Act and all applicable state laws, at any time on
or after September 25, 1998, by presentation and surrender
of this Warrant to the Company at its corporate office set
forth above, with a Cashless Exercise Form annexed hereto
duly executed (a "Cashless Exercise"), for the number of
Penn Janney Shares specified in the Cashless Exercise Form.
Such presentation and surrender shall be in lieu of the
Warrantholder's obligation to pay in cash all or any portion
of the aggregate Exercise Price Per Share. In the event of a
Cashless Exercise, the Warrantholder shall be entitled to
receive that number of Penn Janney Shares determined by
multiplying the number of Penn Janney Shares for which the
Warrantholder desires to exercise this Warrant by a
fraction, the numerator of which shall be an amount equal to
the then current Fair Market Price of a share of Common
Stock less the Exercise Price Per Share (but not less than
zero), and the denominator of which shall be the then
current Fair Market Price of a share of Common Stock.
(b) Upon receipt of this Warrant with either the
Subscription Form duly executed and accompanied by payment of the aggregate
Exercise Price Per Share as set forth in Section 2.02(a), or the Cashless
Exercise Form duly executed, in each case for the Penn Janney Shares for which
this Warrant is then being exercised, the Company shall cause to be issued
certificates for the total number of whole shares of Common Stock which
constitute the number of Penn Janney Shares for which this Warrant is being
exercised or the net amount thereof which the Warrantholder is entitled to
receive upon a Cashless Exercise (adjusted to reflect the effect of the
anti-dilution provisions contained in Article III hereof, if any, and as
provided in Section 4.04 hereof) in such denominations as are requested for
delivery to the Warrantholder, and the Company shall thereupon deliver such
certificates to the Warrantholder.
(c) In case the Warrantholder shall exercise this
Warrant with respect to fewer than all of the Penn Janney Shares that may be
purchased under this Warrant, the Company shall execute a new
(4)
<PAGE>
warrant in the form of this Warrant for the balance of such Penn Janney Shares
and promptly deliver such new warrant to the Warrantholder.
(d) The Company shall pay any and all documentary,
stamp, transfer or other transactional taxes attributable to the issuance of
this Warrant or any Penn Janney Shares. The Company shall not, however, be
required to pay any tax imposed on income or gross receipts of the Warrantholder
or any tax which may be payable by the Warrantholder in respect of any transfer
involved in the issuance or delivery of this Warrant in a name other than that
of the Warrantholder at the time of surrender and, until the payment of such
tax, shall not be required to issue such Penn Janney Shares.
ARTICLE III
Adjustment of Shares of Common Stock
Purchasable and of Exercise Price
The Exercise Price Per Share and the number and kind of
Common Stock shall be subject to adjustment from time to time upon the happening
of certain events as provided in this Article III.
Section 3.01: Mechanical Adjustments. (a) If at any time
prior to the exercise of this Warrant in full, the Company shall (i) pay a
dividend or make a distribution on its shares of Common Stock in either case in
shares of Common Stock or Common Stock Equivalents; (ii) subdivide, reclassify
or recapitalize its outstanding Common Stock into a greater number of shares;
(iii) combine, reclassify or recapitalize its outstanding Common Stock into a
smaller number of shares; or (iv) issue by reclassification of its Common Stock
any shares of capital stock of the Company, the Exercise Price Per Share in
effect at the time of the record date of such dividend distribution,
subdivision, combination, reclassification or recapitalization shall be
equitably adjusted to the extent (if any) necessary so that the Warrantholder
shall be entitled to receive, upon exercise of this Warrant, the aggregate
number and kind of shares of Common Stock which, if this Warrant had been
exercised in full immediately prior to such time, such Warrantholder would have
owned upon such exercise(s) and been entitled to receive upon such dividend,
subdivision, combination, reclassification or recapitalization. Any adjustment
required by this Section 3.01(a) shall be made whenever any event listed in this
Section 3.01(a) shall occur.
(b) If at any time prior to the exercise of this Warrant
in full, the Company shall issue or distribute to the holders of shares of
Common Stock evidences of its indebtedness, any other securities of the Company
or any cash, property or other assets (excluding a dividend distribution,
combination, reclassification or
(5)
<PAGE>
recapitalization referred to in Section 3.01(a), and excluding cash dividends or
cash distributions paid out of surplus, earnings or net profits legally
available therefor if the full amount thereof, together with the value of other
dividends and distributions made substantially concurrently therewith or
pursuant to a plan which includes payment thereof, is equivalent to not more
than 5% of the Company's net worth) (any such nonexcluded event being herein
called a "Special Dividend"), the Exercise Price Per Share shall be decreased
immediately after the effective date of such Special Dividend to a price
determined by multiplying the Exercise Price Per Share then in effect by a
fraction the numerator of which shall be the then current Exercise Price Per
Share on such effective date less the fair market value (as determined in good
faith by the Company's Board of Directors) of the evidences of indebtedness,
securities or property, or other assets issued or distributed in such Special
Dividend applicable to one share of Common Stock, and the denominator of which
shall be the then current Exercise Price Per Share. Any adjustment required by
this Section 3.01(b) shall be made whenever the effective date of any such
Special Dividend occurs.
(c) If at any time prior to the exercise of this Warrant
in full, the Company shall make a distribution to the holders of shares of
Common Stock of profits legally available therefor and dividends or
distributions covered by Section 3.01(a) or (b), or subscription rights, options
or warrants for, or the sale of, Common Stock or Common Stock Equivalents for a
price less than 80% of the then fair market value thereof, then in each such
case the Exercise Price Per Share in effect after the effective date of such
distribution shall be adjusted to the price determined by multiplying the
Exercise Price Per Share in effect immediately prior thereto by a fraction, the
numerator of which shall be (i) the total number of shares of Common Stock
outstanding multiplied by (ii) difference between the current Exercise Price Per
Share and the Fair Market Value (as determined in good faith by the Company's
Board of Directors) of such assets or evidences of indebtedness so distributed
or of such Common Stock subscription rights, options and warrants or of such
Common Stock Equivalents applicable to one share of Common Stock, and the
denominator of which shall be (i) the total number of shares of Common Stock
outstanding multiplied by (ii) the current Exercise Price Per Share. Any
adjustment required by this Section 3.01(c) shall be made whenever the effective
date of any such distribution occurs. To the extent such shares of Common Stock
(or Common Stock Equivalents) are not delivered after the expiration of such
subscription rights, options or warrants, the Exercise Price Per Share shall be
readjusted to the Exercise Price Per Share which would then be in effect had the
adjustments made upon the issuance of such rights, options or warrants been made
on the basis of delivery of only the number of shares of Common Stock (or Common
Stock Equivalents) actually delivered, but no such readjustment shall have the
effect of increasing the Exercise Price Per Share to an amount which exceeds the
lower of (i) the
(6)
<PAGE>
Exercise Price Per Share on the original adjustment date (prior to the original
adjustment) or (ii) the Warrant Exercise Price that would have resulted from any
other adjustments pursuant to this Article III (other than adjustments for the
issuance of subscription rights, options or warrants which expire unexercised).
(d) No adjustment in the Exercise Price Per Share shall
be required in the case of (i) the issuance by the Company of options to
purchase shares of the Company's Common Stock which, together with all other
options outstanding at the time of such issuance, in the aggregate, give the
holders thereof the right to acquire up to 15% of the then current outstanding
shares of Common Stock, pursuant to the Company's Stock Option Plan or Plans in
effect on the date hereof or any stock option plan adopted after the date hereof
for the benefit of officers and directors of the Company and the issuance by the
Company of shares upon the exercise of such options, and (ii) the issuance by
the Company of Common Stock pursuant to the exercise of any currently issued and
outstanding warrant. The number of shares of Common Stock set forth in this
paragraph (d) is subject to adjustment in accordance with any anti-dilution
provisions existing on the date hereof under the terms of the instruments
governing their issuance.
(e) Whenever the Exercise Price Per Share payable upon
exercise of this Warrant is adjusted pursuant to one or more of paragraphs (a),
(b) and (c) of this Section 3.01, the number of Penn Janney Shares purchasable
hereunder shall simultaneously be adjusted by multiplying the number of Penn
Janney Shares immediately prior to the event giving rise to such adjustment by
the Exercise Price Per Share in effect on the date thereof and dividing the
product so obtained by the Exercise Price Per Share, as adjusted.
(f) No adjustment in the Exercise Price Per Share shall
be required unless such adjustment would require an increase or decrease of at
least five cents ($.05) in such price; provided, however, that any adjustments
which by reason of this paragraph (f) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 3.01 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be.
(g) If at any time, as a result of any adjustment made
pursuant to Section 3.01(a), the Warrantholder shall become entitled to receive
any shares of the Company other than Common Stock, thereafter the number of such
other shares so receivable upon exercise of any Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in this
Section 3.01.
(7)
<PAGE>
(h) In case any event shall occur as to which the other
provisions of this Article III are not strictly applicable but as to which the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles hereof then, in each such case, the Holders of Warrants representing
the right to purchase a majority of the Penn Janney Shares subject to all
outstanding Warrants may appoint a firm of independent public accountants of
recognized national standing reasonably acceptable to the Company, which shall
give their opinion as to the adjustment, if any, on a basis consistent with the
essential intent and principles established herein, necessary to preserve the
purchase rights represented by the Penn Janney Warrant. Upon receipt of such
opinion, the Company will promptly mail a copy thereof to the Holder of this
Warrant and shall make the adjustments described therein. The fees and expenses
of such independent public accountants shall be borne by the Company.
(i) If, as a result of an adjustment made pursuant to
this Article III, the Holder of any Warrant thereafter surrendered for exercise
shall become entitled to receive shares of two or more classes of capital stock
or shares of Common Stock and other capital stock of the Company (other than as
may be contemplated by this Warrant), the Board of Directors (whose
determination shall be conclusive and shall be described in a written notice to
the Holder of any Warrant promptly after such adjustment) shall determine in
good faith the allocation of the adjusted per share price between or among
shares or such classes of capital stock or shares of Common Stock and other
capital stock.
Section 3.02: Notice of Adjustment. Whenever the number of
Penn Janney Shares or the Exercise Price Per Share is adjusted as herein
provided, the Company shall prepare and deliver to each Warrantholder a
certificate signed by its President and Treasurer or Secretary, setting forth
the adjusted number of Penn Janney Shares purchasable upon exercise of this
Warrant, and the Exercise Price of such securities after such adjustment,
setting forth a brief statement of the facts requiring such adjustment and
setting forth the computation by which such adjustment was made.
Section 3.03: No Adjustment for Dividends. Except as
provided in Sections 3.01 (b) and (c) of this Agreement, no adjustment in
respect of any cash dividends shall be made during the term of this Warrant or
upon the exercise of this Warrant.
Section 3.04: Preservation of Purchase Rights in Certain
Transactions. In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party, or in case of any sale
or conveyance to another entity of all or substantially all of the property of
the Company, or in the case of any statutory exchange of securities with another
corporation
(8)
<PAGE>
(including any exchange effected in connection with a merger of a third
corporation into the Company), the Holder of this Warrant shall have the right
thereafter to receive on the exercise of this Warrant the kind and amount of
securities, cash or other property which the Holder would have owned or have
been entitled to receive immediately after such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
had this Warrant been exercised immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and in any such case, if necessary, appropriate adjustment
shall be made in the application of the provisions set forth in this Article III
with respect to the rights and interests thereafter of the Warrantholder to the
end that the provisions set forth in this Article III shall thereafter
correspondingly be made applicable, as nearly as may reasonably be, in relation
to any shares of stock or other securities or property thereafter deliverable on
the exercise of this Warrant. The provisions of this Section 3.04 shall
similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, statutory exchanges, sales or conveyances which occur
prior to the exercise, repurchase or expiration of this Warrant. The issuer of
any shares of stock or other securities or property thereafter deliverable on
the exercise of this Warrant shall be jointly and severally responsible for all
of the agreements and obligations of the Company hereunder. Notice of any such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and of such provisions so proposed to be made, shall be
mailed to the WarrantHolders not less than 30 days prior to such event. A sale
of all or substantially all of the assets of the Company for a consideration
consisting primarily of securities shall be deemed a consolidation or merger for
the foregoing purposes.
Section 3.05: Form of Warrant After Adjustments. The form of
this Warrant need not be changed because of any adjustments in the Warrant or
Exercise Price Per Share or the number or kind of the Penn Janney Shares, and
Warrants theretofore or thereafter issued may continue to express the same price
and number and kind of shares as are stated in this Warrant, as initially
issued.
Section 3.06: Limitation on Adjustments. Notwithstanding
anything to the contrary contained or implied in this Article III, the
adjustments to the Exercise Price Per Share provided for herein shall be made
only to the Exercise Price Per Share determined in accordance with clause (i) of
the definition of such term, unless the event giving rise to such adjustment
occurs during the period beginning the fifth trading day immediately preceding
the date on which the Cashless Exercise Form or Subscription Form is executed
and sent to the Company, and ending on the date of delivery of the shares of
Common Stock with respect to such exercise, in which case the adjustments shall
be made to the Exercise Price Per Share determined in accordance with clauses
(i) and (ii) of the definition of such term.
(9)
<PAGE>
ARTICLE IV
Other Provisions Relating
to Rights of Warrantholder
Section 4.01: No Rights as Shareholders; Notice to
Warrantholders. Nothing contained in this Warrant shall be construed as
conferring upon the Warrantholder in its position as such or upon its
transferees the right to vote or to receive dividends or to consent or to
receive notice as a shareholder in respect of any meeting of shareholders for
the election of directors of the Company or of any other matter, or any rights
whatsoever as shareholders of the Company. The Company shall give notice to the
Warrantholder if, at any time prior to the expiration or exercise in full of
this Warrant, any of the following events shall occur:
(a) the Company shall effect any transactions subject to
Section 3.01 with respect to the holders of shares of Common Stock;
(b) the Company shall offer to all holders of shares of Common
Stock any additional shares of Common Stock or Common Stock Equivalents or any
right to subscribe thereto;
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger, or sale of all, or
substantially all, of its property, assets, and business as an entirety) shall
be approved; or
(d) any consolidation of the Company with or merger of the
Company into another corporation, or in the case of any sale or conveyance to
another entity of the property of the Company, as an entirety or substantially
as an entirety.
Such notice shall be given not later than ten days prior to the date fixed as a
record date or the date of closing of the Company's stock transfer books for the
determination of the shareholders entitled to such dividend, distribution, or
subscription rights, or for the determination of the shareholders entitled to
vote on such proposed merger, consolidation, sale, conveyance, dissolution,
liquidation or winding up. Such notice shall specify such record date or the
date of closing the stock transfer books, as the case may be, the date of any
shareholder meeting scheduled in connection therewith, and the anticipated
payment or closing date in connection therewith. Failure to provide such notice
shall not affect the validity of any action taken in connection with such
dividend, distribution or subscription rights, or proposed merger,
consolidation, sale, conveyance, dissolution, liquidation or winding up.
(10)
<PAGE>
Section 4.02: Lost, Stolen, Mutilated or Destroyed Warrants. If
this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such
terms as to indemnity or otherwise as it may in its reasonable discretion impose
(which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new Warrant of like denomination and tenor as, and in
substitution for, this Warrant.
Section 4.03: Reservation of Shares.
(a) The Company shall at all times reserve and keep available
for the exercise of this Warrant such number of authorized shares of Common
Stock as are sufficient to permit the exercise in full of this Warrant.
(b) The Company covenants and agrees that all shares of Common
Stock issued on exercise of this Warrant will, upon payment of the respective
Exercise Price therefor in accordance with the terms hereof, be validly issued,
fully paid, nonassessable and free of any preemptive or similar rights.
Section 4.04: No Fractional Shares. Anything contained herein to
the contrary notwithstanding, the Company shall not be required to issue any
fraction of a share in connection with the exercise of this Warrant, and in any
case where the Warrantholder would, except for the provisions of this Section
4.04, be entitled under the terms of this Warrant to receive a fraction of a
share upon the exercise of this Warrant, the Company shall, upon the exercise of
this Warrant and receipt of the Exercise Price Per Share, issue the smaller
number of whole Penn Janney Shares purchasable upon exercise of this Warrant and
shall make an equitable cash adjustment in respect of such fraction of a share
to which the Warrantholder would otherwise be entitled.
ARTICLE V
Treatment of Warrantholder
Prior to due presentment for registration of transfer of all
or any portion of this Warrant in compliance with Section 6.02 hereof, the
Company may deem and treat the Warrantholder as the absolute owner of this
Warrant (notwithstanding any notation of ownership or other writing hereon) for
all purposes and shall not be affected by any notice to the contrary. Upon such
due presentment, the Company shall register the transfer and the assignee on its
books and records.
ARTICLE VI
(11)
<PAGE>
Split-Up, Combination.
Exchange and Transfer of Warrants
Section 6.01: Split-Up, Combination, Exchange and Transfer
of Warrants. Subject to the provisions of Section 6.02 hereof, this Warrant may
be split up, combined or exchanged for another Warrant or Warrants containing
the same terms to purchase a like aggregate number of Penn Janney Shares. If the
Warrantholder desires to split up, combine or exchange this Warrant, it shall
make such request in writing delivered to the Company and shall surrender to the
Company this Warrant and any other Warrant to be so split up, combined or
exchanged. Upon any such surrender for a split up, combination or exchange, the
Company shall execute and deliver to the person entitled thereto a Warrant or
Warrants, as the case may be, as so requested. The Company shall not be required
to effect any split up, combination or exchange which will result in the
issuance of a Warrant entitling the Warrantholder to purchase upon exercise a
fraction of a share of Common Stock. The Company may require such Warrantholder
to pay a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any split up, combination or exchange of Warrants.
This Warrant may be transferred by a Holder in whole or in part, at any time and
from time to time, subject to the restrictions set forth in Section 6.02.
Section 6.02: Restrictions on Transfer. Neither this Warrant
nor any of the shares of Common Stock issued upon the exercise hereof may be
sold, hypothecated, assigned or transferred (any such action, a "Transfer"),
unless (i) the Company has received from Holder's counsel an opinion reasonably
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.
ARTICLE VII
Other Matters
Section 7.01: Expenses of Transfer. The Company shall from
time to time promptly pay, subject to the provisions of Section 6.01 and
paragraph (d) of Section 2.02, all documentary, stamp, transfer or other
transactional taxes that may be imposed upon the Company in respect to the
issuance or delivery of Penn Janney Shares upon the exercise of this Warrant by
the Warrantholder.
Section 7.02: Successors and Assigns. All the covenants,
obligations and provisions of this Warrant by or for the benefit of
(12)
<PAGE>
the Company and the Warrantholder shall bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 7.03: Amendments and Waivers. The provisions of this
Warrant, including the provisions of this sentence, may not be amended, modified
or supplemented, and waiver or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of holders
of at least a majority of the outstanding Registrable Securities. Holders shall
be bound by any consent authorized by this Section 7.03 whether or not
certificates representing such Registrable Securities have been marked to
indicate such consent.
Section 7.04: Counterparts. This Warrant may be executed in
any number of counterparts and by the parties hereto in separate counterparts,
each of which so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
Section 7.05:Governing Law. This Warrant shall be governed
by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to the law of conflicts.
Section 7.06: Severability. In the event that any one or
more of the provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provisions in every other respect and of the
remaining provisions contained herein shall not be affected or impaired thereby.
Section 7.07: Integration/Entire Agreement. This Warrant is
intended by the parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. This Warrant
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
Section 7.08: Notices. Notice or demand pursuant to this
Warrant to be given or made by the Warrantholder to or on the Company shall be
sufficiently given or made if sent by registered or certified mail, postage
prepaid, or by overnight courier, addressed, until another address is designated
in writing by the Company, as follows:
Microleague Multimedia, Inc.
1001 Millersville Road
Lancaster, Pennsylvania 17604-4547
Any notice or demand authorized by this Warrant to be given
or made by the Company to or on the Warrantholder or a Holder of
<PAGE>
Penn Janney Shares shall be sufficiently given or made if sent by registered or
certified mail, postage prepaid, or by overnight courier to such Holder at its
last known address as it shall appear on the books of the Company.
Section 7.09: Headings. The headings herein have been
inserted for convenience of reference only and are not part of this Warrant and
shall not affect the interpretation thereof.
<PAGE>
IN WITNESS WHEREOF, this Warrant has been duly executed by
the Company this 25th day of April, 1997.
MICROLEAGUE MULTIMEDIA, INC.
By: /s/ Neil B. Swartz
Neil B. Swartz,
Title: Chairman and Chief
Executive Officer
The undersigned accepts this Warrant and
agrees to abide by the terms herein
which are applicable to the Holder.
PENN JANNEY OPPORTUNITIES FUND, L.P.
By: Penn Janney GP, L.L.C.
its General Partner
By: /s/ Richard M. Fox
Richard Fox, Managing Member
Fair Market Value pursuant to definition of "Exercise Price Per Share"
subparagraph (i) $3.59.
(15)
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, _________________________ hereby sells,
assigns and transfers unto _____________________ the within Warrant Certificate,
together with all right, title and interest therein, and does hereby irrevocably
constitute and appoint __________________ attorney, to transfer said Warrant
Certificate on the books of Microleague Multimedia, Inc. with respect to the
number of Penn Janney Shares set forth below, with full power of substitution in
the premises:
Name(s) of No. of Penn
Assignee(s) Address Janney Shares
If such number of Warrants shall not be all the Penn Janney Shares represented
by the Warrant Certificate, a new Warrant Certificate shall be issued in the
name of said undersigned for the balance remaining of the Penn Janney Shares
represented by said Warrant Certificate.
Dated: ____________________, 19__
===============================================================================
Note: The above signature should correspond exactly with the name on the face
of this Warrant Certificate.
<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
Microleague Multimedia, Inc.
The undersigned hereby irrevocably elects to exercise the
right of purchase represented by the within Warrant Certificate for, and to
purchase thereunder, _____________________ shares of Common Stock as provided
for therein, and tenders herewith payment of the purchase price in full in the
form of cash or a certified or official bank check in the amount of
$____________.
Please issue a certificate or certificates for such Common
Stock in the name of:
Name ____________________________
(Please Print Name, Address
and Social Security No.)
Signature ___________________________
Note: The above signature should
correspond exactly with the name on
the first page of this Warrant
Certificate or with the name of the
assignee appearing in the
assignment form below.
If such number of shares shall not be all the shares of Common
Stock purchasable under the within Warrant Certificate, a new Warrant
Certificate shall be issued in the name of the undersigned for the balance
remaining of the shares of Common Stock purchasable thereunder.
<PAGE>
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant
pursuant to Section 2.02(a)(2)
The undersigned hereby irrevocably elects to surrender its
Warrant for _________ shares of Common Stock or such lesser number of shares of
Common Stock as may be purchased pursuant to the Cashless Exercise provisions of
the within Warrant, as provided for in Section 2.02(a)(2) of such Warrant.
Please issue a certificate or certificates for such Common
Stock in the name of:
Name
---------------------------------
(Please Print Name, Address and
Social Security No.)
Address
---------------------------------
---------------------------------
---------------------------------
Social Security Number
Signature
---------------------------------
NOTE: The above signature
should correspond exactly
with the name on the
first page of this
Warrant or with the name
of the assignee appearing
in the assignment form
below.
If said number of shares shall not be all the shares of Common
Stock purchasable under the within Warrant Certificate, a new Warrant
Certificate is to be issued in the name of the undersigned for the balance
remaining of the shares of Common Stock purchasable thereunder.
AMENDMENT NUMBER ONE TO CONVERTIBLE SECURED
SUBORDINATED DEBENTURE
THIS AMENDMENT is made this 8th day of September, 1997 by and
between MICROLEAGUE MULTIMEDIA, INC., a Pennsylvania corporation (the "Company")
and PENN JANNEY OPPORTUNITIES FUND, L.P. ("Holder").
Holder is the holder of that certain Convertible Secured
Subordinated Debenture dated April 25, 1997 in the face amount of $1,000,000
(the "Debenture") issued by the Company. Section 7.02 of the Debenture provides
that the Company shall not, until the Debenture is paid in full, issue
additional securities other than common stock or securities convertible into
common stock at a price per share not less than 90% of the fair market value of
such stock at the time of issuance or conversion, without the express prior
written consent of the undersigned.
The Company has advised the Holder that it intends to offer
Convertible Term Notes for sale pursuant to a Convertible Term Loan Agreement
dated September 8, 1997, a copy of which is attached to this Amendment as
Exhibit 1. The Company has requested the consent of the Holder to the issuance
and sale of such Convertible Term Notes, and if and when converted, to the
conversion thereof to Conversion Shares pursuant to the terms of and as defined
in the Convertible Term Loan Agreement.
NOW, THEREFORE, for and in consideration of the mutual
covenants herein contained, and intending to be legally bound hereby, the
parties agree as follows:
1. The Holder hereby consents to the issuance and sale of up
to five million dollars ($5,000,000) of such Convertible Term Notes on the terms
set forth in the Convertible Term Loan Agreement and up to two hundred thousand
dollars ($200,000) of term notes under a Term Note Agreement.
2. The Debenture is hereby amended to provide that,
notwithstanding the Consent contained in Paragraph 1 hereof, the payment in cash
of any principal or interest due on any debt of the Company for borrowed money
(other than debt to which the Debenture has been expressly subordinated and
other than the payment of cash in lieu of fractional share conversions of the
Convertible Term Notes), prior to the time when all Obligations (as defined in
that certain Security Agreement by and among the Company, its subsidiaries, and
the Holder dated April 25, 1997 (the "Security Agreement") executed in
connection with the issuance of the Debenture) of the Company to the Holder
shall have been paid or satisfied in full, shall constitute an Event of
<PAGE>
Default under the Debenture and under the Security Agreement.
3. The Company shall pay directly or reimburse Holder for the
fees and expenses (including reasonable attorneys' fees) of drafting and
renewing the Debenture and related documentation (including this Amendment), and
of reviewing any other documentation prepared in connection with the purchase by
Holder of debt instruments (other than the Debenture) issued by the Company.
4. Except as modified hereby, the Debenture shall remain in
full force and effect in accordance with its terms. Holder may attach this
Amendment to the Debenture, after which time this Amendment will be deemed an
Allonge thereto.
IN WITNESS WHEREOF, the parties have executed and delivered
this Amendment the day and year first above written.
PENN JANNEY OPPORTUNITIES FUND, L.P.
By: Penn Janney GP, L.L.C.,
its General Partner
By: /s/ Richard M. Fox
Richard Fox,
Managing Member
MICROLEAGUE MULTIMEDIA, INC.
By: /s/ Neil B. Schwartz
(2)
<PAGE>
Exhibit 1
Convertible Term Loan Agreement
CONVERTIBLE TERM LOAN AGREEMENT
between
MICROLEAGUE MULTIMEDIA, INC.
and
THE LENDERS LISTED HEREIN
September 8, 1997
<PAGE>
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;
1
<PAGE>
(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.
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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.
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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/ Neil Swartz
Neil Swartz
Chief Executive Officer
LENDERS:
PENN JANNEY OPPORTUNITIES FUND, L.P.
By: Penn Janney GP, L.L.C.,
its general partner
By: /s/ Richard Fox
Richard Fox, Managing Member
Address:
/s/ Norman M. Some
NORMAN M. SOME
Address:
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/s/ Ruly R. Carpenter, III
RULY R. CARPENTER, III
Address:
/s/ W. Thacher Longstreth
W. THACHER LONGSTRETH
Address:
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SCHEDULE I
SCHEDULE OF LENDERS
Lender Principal of Convertible Term Loan
Penn Janney Opportunities Fund, L.P. $200,000
Norman M. Some $200,000
Ruly R. Carpenter, III $200,000
W. Thacher Longstreth $ 50,000
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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
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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: Neil Swartz
Title: Chief Executive Officer
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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]
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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:
