ST. ▇▇▇▇▇▇'▇ PRESS, INCORPORATED
GOLDEN BOOKS PUBLISHING COMPANY, INC.
-------------------------
ASSET PURCHASE AGREEMENT
-------------------------
March 11, 1999
TABLE OF CONTENTS
Section Page
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1. Transfer of Assets.........................................................2
1.1. Sale and Purchase of Assets.........................................2
1.2. Excluded Assets.....................................................8
1.3. Assumption of Liabilities...........................................9
2. Purchase Price............................................................10
2.1. Purchase Price.....................................................10
2.2. Payment of the Purchase Price......................................14
2.3. The Escrow Deposit.................................................14
2.4. Conditions to Release of Escrow Deposit............................15
2.5. Adjustment of the Purchase Price...................................17
2.6. Additional Purchase Price. .......................................20
2.7. Adjustments for Post-January 31, 1999 Events.......................22
2.8. Allocation of Purchase Price.......................................25
3. Closing...................................................................25
3.1. Time and Place.....................................................25
3.2. Delivery of Instruments and Payment................................26
3.3. Delivery of Tangible Assets........................................27
4. Distribution Agreement....................................................27
5. Trademark License - A Golden Guide(R)and Golden Field Guides(TM)..........29
5.1. License............................................................29
5.2. Exclusivity........................................................34
5.3. Right Not to Use...................................................35
5.4. Assignment.........................................................36
5.5. Certificate of Destruction.........................................36
6. Trademark License - Golden Trademarks.....................................36
6.1. License............................................................36
6.2. Exclusivity........................................................41
6.3. Right Not to Use...................................................41
6.4. Assignment.........................................................42
6.5. Certificate of Destruction.........................................42
(i)
7. Sell Off Right............................................................42
7.1. Right Granted..................................................... 42
7.2. End of Sell Off Right..............................................43
8. Representations and Warranties of the Seller..............................43
8.1. Organization and Qualification.....................................43
8.2. Authorization; Consents............................................44
8.3. Assets ............................................................46
8.4. Assets Held by Others .............................................48
8.5. Operation of Business .............................................48
8.6. Contracts .........................................................49
8.7. Financial Representations .........................................52
8.8. Brokers ...........................................................52
8.9. Compliance with Law ...............................................52
8.10. Trademarks and Trade Names ........................................54
8.11. Contents of the Works .............................................55
8.12. Other Liabilities .................................................56
8.13. Disclosure ........................................................57
9. Representations and Warranties of the Purchaser...........................57
9.1. Organization and Qualification ....................................57
9.2. Authorization .....................................................57
9.3. Brokers ...........................................................59
10. Additional Agreements ....................................................59
10.1. Bankruptcy Court Approval .........................................59
10.2. Notice of Other Bids, etc .........................................61
10.3. Break-Up Fee ......................................................61
10.4. Conduct of Business Prior to the Closing ..........................64
11. Conditions to the Obligations of the Seller...............................66
11.1. Representations and Warranties ....................................67
11.2. Performance .......................................................67
11.3. Closing Certificate ...............................................67
11.4. Opinion ...........................................................67
11.5. Escrow Agreement ..................................................67
11.6. Assumption Agreement ..............................................68
11.7. Sale Order ........................................................68
12. Conditions to the Obligations of the Purchaser............................68
12.1. Representations and Warranties ....................................68
12.2. Performance .......................................................68
(ii)
12.3. Closing Certificate ...............................................68
12.4. Opinion ...........................................................69
12.5. Escrow Agreement ..................................................69
12.6. Consents ..........................................................69
12.7. Agreements to Deliver .............................................70
12.8. Sale Order; No Stay ...............................................71
12.9. Instruments of Assignment; Other Agreements .......................72
12.10. No Financial Obligations with Respect to "Adequate Assurance"......72
13. Survival of Representations and Warranties; Indemnification...............73
13.1. Survival of Representations and Warranties.........................73
13.2. Indemnification by the Seller and the Parent.......................73
13.3. Indemnification by the Purchaser...................................76
13.4. Indemnification Procedures.........................................77
13.5. Limitation on Indemnification......................................78
14. Noncompetition. .........................................................79
15. Employees.................................................................82
16. Termination...............................................................83
16.1. Termination........................................................83
16.2. Effect of Termination..............................................84
17. General Provisions........................................................84
17.1. Modification; Waiver...............................................84
17.2. Entire Agreement, etc..............................................84
17.3. Expenses...........................................................85
17.4. Further Actions....................................................85
17.5. Post-Closing Access................................................85
17.6. Notices............................................................85
17.7. Assignment.........................................................86
17.8. Counterparts. ....................................................87
17.9. Headings...........................................................87
17.10. Governing Law......................................................87
(iii)
LIST OF SCHEDULES
Schedule 1.1 The Works
Schedule 1.1(a) Registered and Nonregistered Trademarks
Schedule 1.3(a) Other Contracts to be Assumed
Schedule 2.1(a) Gross Inventory Value
Schedule 2.1(d) Gross Royalty Assets
Schedule 2.6 Estimated Operating Contribution from Unpublished Works
and Definition of Operating Contribution
Schedule 2.7(b)(iii) Certain Employees
Schedule 2.7(b)(iv) Estimate of Plant Costs for February 1999
Schedule 3.3 Delivery of Assets
Schedule 8.2 Contraventions
Schedule 8.3 Encumbrances
Schedule 8.4 Assets Held by Others
Schedule 8.5 Certain Events
Schedule 8.6 Contracts, etc.
Schedule 8.10 Trademarks, etc.
Schedule 8.11 Copyright Registrations
Schedule 12.6 Consents
LIST OF EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Opinion of Patterson, Belknap, ▇▇▇▇ & ▇▇▇▇▇ LLP, counsel to the
Purchaser
Exhibit C Opinion of Proskauer Rose LLP, counsel to the Seller
(iv)
INDEX OF DEFINED TERMS
Accounting Firm Section 2.5(c)
Additional License Section 6.1
Affiliates Section 14(a)
Ancillary Documents Section 8.2
Assets Section 1.1
Assumed Agreement Section 13.1(d)
Assumption Agreement Section 3.2(d)
Bankruptcy Code Premises
Bankruptcy Court Premises
Books Section 1.1
Break-Up Fee Section 10.3
Business Section 1.1
Chapter 11 Cases Section 8.9
Closing Section 3.1
Closing Date Section 3.1
Coin Book Section 6.1
Composite Title Section 6.1(b)
Composite Trademark Section 5.1(c)
Damages Section 13.2
Distribution Agreement Premises
18-Month Period Section 5.1(d)
Escrow Agent Section 2.2(a)
Escrow Agreement Section 2.2(a)
Escrow Deposit Section 2.3
Exchange Act Section 8.7
Excluded Assets Section 1.2
Existing Related Materials Section 7.1
Expenses Section 10.3
final Section 12.8
finality condition Section 12.8
First Reduction Date Section 2.1(c)(i)
Golden Trademarks Section 1.2
Gross Inventory Value Section 2.1(e)
Gross Royalty Assets Section 2.1(d)
(v)
Guides Series Section 1.1
Guides Trademarks Section 5.1
Indemnitee Section 13.4
Indemnitor Section 13.4
Interim Order Section 10.1(a)
Inventory Section 7.1
License Section 5.1
1999 Royalties Section 2.1(b)(ii)
Operating Contribution Schedule 2.6
Parent page 1
Petitions Premises
Production Materials Section 1.1(c)
Purchase Price Section 2.1
Purchase Price Adjustment Section 2.5(b)
Purchaser page 1
Purchaser's Accountants Section 2.5(a)
Related Materials Section 1.1
Remaindering Period Section 5.1(d)
Representatives Section 10.2(a)
Reserve Section 2.4(b)
Returns Section 1.3(a)(i)
Royalties Section 2.1(b)(i)
Sale Motion Section 10.1(a)
Sale Order Section 10.1(a)
Second Reduction Date Section 2.1(c)(ii)
Seller page 1
Six-Month Date Section 5(c)
Unpaid 1998 Royalties Section 2.1(b)(i)
Unpublished Works Section 2.6(a)
▇▇▇▇▇▇▇ Products Section 1.1
Works Section 1.1
(vi)
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated March 11, 1999, by and among ST.
▇▇▇▇▇▇'▇ PRESS, INCORPORATED, a New York corporation (the "Purchaser"), GOLDEN
BOOKS PUBLISHING COMPANY, INC., a Delaware corporation, as debtor and
debtor-in-possession (the "Seller"), and, for the purposes of Sections 5.2, 6.2,
10.1, 10.2 and 14 and the related indemnification provisions of Section 13 only,
the Seller's sole stockholder, GOLDEN BOOKS FAMILY ENTERTAINMENT, INC., a
Delaware corporation, as debtor and debtor-in-possession (the "Parent");
W I T N E S S E T H:
WHEREAS, the Seller is the publisher of a variety of children's and
adult books;
WHEREAS, the Parent, sole stockholder of the Seller, benefits from any
consideration received by the Seller;
WHEREAS, the Seller and the Purchaser entered into an Agreement, dated
February 6, 1998 (as amended, the "Distribution Agreement"), providing for the
Purchaser to distribute adult hardcover and adult trade paperback books
published by the Seller;
WHEREAS, the titles distributed by the Purchaser include series known
as A Golden Guide(R), the Golden Field Guides(TM), and the ▇▇▇▇▇▇▇(R) Book and
Coin Products, as well as various other adult books published by the Seller;
WHEREAS, on February 26, 1999, the Seller and the Parent filed
voluntary petitions (the "Petitions") under Chapter 11 of Title 11 of the United
States Code (the
1
"Bankruptcy Code") with the United States Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court"); and
WHEREAS, the Seller wishes to sell, and the Purchaser wishes to
purchase, certain assets of the Seller's adult book and coin product business;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto hereby agree as follows:
1. Transfer of Assets.
1.1. Sale and Purchase of Assets. At the Closing, on the terms
and subject to the conditions hereof and in reliance upon the representations,
warranties and covenants contained herein, the Seller will sell, convey,
transfer, assign and deliver to the Purchaser, and the Purchaser will purchase
and acquire from the Seller, all of the Seller's right, title and interest in
and to the assets listed in this Section 1.1 primarily related to the Seller's
adult book business (the "Business"). For the purposes of this Agreement, the
Business means the publication of the adult market literary works and coin
products listed on Schedule 1.1 hereto (the "Works") (including, without
limitation, all published and unpublished adult titles, the coin collecting
books and materials sold under the ▇▇▇▇▇▇▇(R) trademark (the "▇▇▇▇▇▇▇ Products")
and the series of Works known as A Golden Guide(R), Golden Field Guides(TM) and
Outdoor Action Guides (the "Guides Series"); the preparation, publication,
distribution and sale of printed physical embodiments of the Works, whether in
printed, audio (including without limitation audiotapes) or electronic form (the
"Books"), and advertising, publicity and promotional materials related thereto
(the "Related Materials"); the exploitation of copyrights, trademarks and other
intellectual property rights used in connection with the Works and the Books;
and any other
2
means of deriving revenue from the Works and the Books. The assets to be sold
hereunder include, without limitation, the following as they exist on the
Closing Date (but not including the Excluded Assets as set forth in Section 1.2)
(collectively, the "Assets"):
(a) The Seller's registered trademarks listed on Schedule 1.1(a),
licenses to use the trademarks A Golden Guide and Golden Field Guides, as
provided in Section 5, and the Golden Trademarks in connection with the Coin
Book (as defined in Section 6.1 below), as provided in Section 6, and the
nonregistered trademarks, trade dress, trade names and logos, now or previously
used by the Seller in connection with the Guides Series, the ▇▇▇▇▇▇▇ Products
and other Works and Books, together with the good will of the Business related
to such trademarks, trade dress, trade names and logos;
(b) All of the Seller's existing copyrights, other literary or
intellectual property rights, and exclusive and nonexclusive licenses granted to
the Seller, throughout the world in each of the Works and the Related Materials,
in any material included in any of the Works, Books and Related Materials, in
all material, if any, at any time posted on any World Wide Web ("Web") site now
or previously used in connection with the Works and Related Materials, in all
computer programs, macros and the like now or previously used primarily in
connection with the Works, Books and Related Materials, in drafts, incomplete
and unpublished manuscripts for Works not yet published or distributed, and all
rights of the Seller to use manuscripts, quotations or other material of others
and to use the names of others in and in connection with the Works, Books and
Related Materials, together with any past causes of action that the Seller has
relating to any of the foregoing;
3
(c) All of the Seller's existing editorial material(including,
without limitation, manuscripts, drafts, editorial notes and proofs),
photographs (including, without limitation, negatives, slides, prints and images
stored in electronic form), artwork (including, without limitation, original
sketches, drawings and paintings, as well as final artwork and images stored in
electronic form), jacket and cover designs, maps, production materials
(including, without limitation, digital files of typeset text, jackets, covers
and inserts, digital files for outputting film for direct plate making, paste-up
and binding die mechanicals, binding and stamping dies, printing plates that are
reusable and film for plate making)(the "Production Materials"), and editorial
files relating primarily to the Works, Books and Related Materials, all
displays, collections, exhibit materials or samples of nature materials or coins
or other types of objects which are the subject of any Golden Guide, Golden
Field Guide or ▇▇▇▇▇▇▇ Product or are otherwise primarily related to the
Business, and all copies and versions of the foregoing, in each case whether
stored at a facility or office of the Seller or at a vendor or a third party
storage facility;
(d) All of the Seller's existing records, files and data
relating primarily to the Business, to actual and prospective authors,
licensors, packagers, editors, copy editors, designers, illustrators, artists,
photographers and other freelancers, and to advertisers placing advertisements
in the ▇▇▇▇▇▇▇ Products, including, without limitation, records containing the
names and addresses of all such persons and entities; all royalty accountings
and other reports, records, correspondence and other documents and information
relating primarily to the Works, the Books and Related Materials; all production
files relating primarily to the Works, the Books and Related Materials; all
publicity, promotion and advertising files relating primarily to the
4
Works, the Books and Related Materials; all subsidiary rights and permissions
files relating primarily to the Works, the Books and Related Materials; all
statistics, demographic data and other information derived from the server logs
for any Web sites now or previously used primarily in connection with the Books
and Related Materials; the results of any market research relating primarily to
the Books and Related Materials; and all trademark registration certificates
relating to the trademarks listed on Schedule 1.1(a), copyright registration and
renewal certificates relating to the Works, the Books and Related Materials and
other documents relating primarily to the trademarks listed on Schedule 1.1(a)
and the copyrights listed on Schedule 8.11 filed or recorded in any governmental
trademark or copyright office;
(e) All orders from customers, contracts, commitments and other
agreements (other than employment contracts, commitments and agreements and
leases of office space or other real property or of office equipment) relating
to the Business, including, without limitation, all publishing agreements with
the authors and other agreements with the writers, licensors, packagers,
illustrators, photographers, artists, revisers, editors, copy editors and
designers of the Works, Books and Related Materials, the trademark license from
Grunar & Jahr to use the "Parents" trademark, all agreements for subsidiary
rights and permissions granted by the Seller and all of the Seller's rights
thereunder, to the extent that such orders, contracts, commitments and other
agreements (i) exclusively relate to the Works, Books or Related Materials, were
entered into in the ordinary and customary course of business, and remain
unperformed or unfulfilled on, or by their terms continue in effect after, the
Closing Date, or (ii) are accepted by the Purchaser;
5
(f) All of the Seller's inventory of the Books and Related
Materials, wherever located, together with all Books returned after the Closing
Date;
(g) All the Seller's existing computer records, files, and data
containing copies of any of the records, files or other assets specified above
or otherwise used primarily in connection with the Business and any computer
software used by the Seller solely in connection with the Business; provided
that the assets sold hereunder do not include the Seller's computer hardware; if
any of the computer records, files or data conveyed exist only on the hard
drives of the Seller's computers, the Purchaser shall be entitled to a copy in
electronic format of each such record or file and all such data;
(h) All ISBN pre-fixes, if any, used primarily in connection with
any of the Books;
(i) All other existing assets, whether tangible or intangible,
(other than computers and other office machinery, equipment, furniture, fixtures
and supplies) used by the Seller primarily in, or derived from, the Business,
including, without limitation, prospective authors' submissions in whatever
form, advance reading copies and bound galleys of Works, computer disks, and
advertiser films and negatives;
(j) All revenues of the Seller from the sale of Books invoiced
after January 31, 1999; and
(k) All revenues, other than from the sale of Books invoiced
prior to February 1, 1999, received after January 31, 1999, whether from
subsidiary rights or any other source of revenue from the Business, regardless
of the period to which such revenues relate.
6
1.2. Excluded Assets. Notwithstanding the provisions of Section
1.1, the term "Assets" does not include any (a) ▇▇▇▇▇ cash funds, bank accounts,
certificates of deposit, commercial paper and Treasury bills and notes and other
marketable securities of the Seller; (b) accounts receivable of the Seller from
sales of books invoiced prior to February 1, 1999; (c) interests of any kind in
real property, computers or other office machinery, equipment, furniture,
fixtures and supplies, whether or not used in or related to the Business; (d)
the Golden(R) and Golden Books(R) trademarks and all other registered and
unregistered trademarks of the Seller containing the word "Golden" together with
the goodwill associated with such trademarks (collectively, the "Golden
Trademarks"); (e) any rights to any of the Seller's other trademarks not
explicitly conveyed herein; (f) any assets held by employee benefit plans,
provided no such plan holds any assets used in the Business; (g) any Work and
related contracts excluded from the Assets pursuant to Section 12.6; and (h) any
assets of the Seller not used primarily in the Business (collectively, the
"Excluded Assets"), and none of the Excluded Assets is intended to be conveyed
under this Agreement.
1.3. Assumption of Liabilities.
(a) As of the Closing, the Purchaser will assume and thereafter pay,
perform or discharge the following, and only the following, obligations and
liabilities:
(i) Crediting of returns received after January
31, 1999 from the Purchaser's customers of Books
("Returns") invoiced prior to February 1, 1999 under the
Distribution Agreement;
7
(ii) The Seller's obligations that accrue after
January 31, 1999 under publishing agreements with authors
and other licensors (including authors and licensors of any
graphic or other non-verbal material) of Works (excluding
any advances with respect to Works published prior to
February 1, 1999) or that accrue after January 31, 1999
under any other contracts included in the Assets and listed
on Schedule 1.3(a);
(iii) The Seller's obligations for Unpaid 1998 Royalties
and 1999 Royalties, as such terms are defined in Section
2.1(b); and
(iv) The Seller's obligation of $27,000 due to RLR
Associates Ltd. for services performed for "Fertility," but
only if such title is included in the Assets.
Notwithstanding the foregoing, the Purchaser assumes no obligations with respect
to any Work excluded from the Assets pursuant to Section 12.6.
(b) Except as otherwise expressly provided in Section 1.3(a), the
Purchaser does not assume, agree to pay, perform or discharge, or indemnify the
Seller against or otherwise have any responsibility for any liability or
obligations whatsoever of the Seller, fixed or contingent, and whether arising
or to be performed before, on or after the Closing.
8
2. Purchase Price.
2.1. Purchase Price. The purchase price (the "Purchase
Price") for the Assets to be purchased and sold hereunder shall be
$10,992,370.76 (which figure does not take account of any reductions to the
Purchase Price referred to in Section 2.1(b)(iii)), consisting of:
(a) The sum of:
(i) $8,500,000;
(ii) (A) $3,757,502, which is Seller's calculation
of Gross Royalty Assets (as such term is defined below),
less (B) $1,732,328, which represents write-offs to Gross
Royalty Assets agreed to by the Purchaser and the Seller;
(iii) (A) $2,211,113, which is Seller's calculation of
Gross Inventory Value (as such term is defined below),
which calculation is reflected in Schedule 2.1(a), less (B)
$619,400, which represents write-offs to Gross Inventory
Value agreed to by the Purchaser and the Seller; and
(iv) $97,826, which represents money paid by the Seller
to RLR Associates Ltd. for packaging services in
connection with "Fertility" and "Meditations for Pregnant
Women," but only if such titles are included in the Assets.
(b) Less the sum of:
(i) $70,476.21, which is Seller's calculation of the
amount due or to become due, but unpaid, to any author,
9
writer, illustrator, artist, photographer, packager or other
licensor relating to the Works, including, without
limitation, amounts due or to become due because of the
sale of copies of Books or the sale or license by the Seller
of any primary or subsidiary rights (collectively, "Royalties"),
with respect to any period ended on or prior to
December 31, 1998("Unpaid 1998 Royalties");
(ii) $1,866.03, which the Seller represents is the
amount of Royalties due or to become due, but unpaid,
for the period beginning on January 1, 1999 and
ending on January 31, 1999 ("1999 Royalties");
(iii) The amount of any reduction in the Purchase
Price pursuant to Section 12.6; and
(iv) $1,150,000, which represents the agreed amount
of a reserve for Returns.
(c) Notwithstanding the foregoing, the Purchase Price shall be
reduced as follows:
(i) By $500,000 (1) on April 1, 1999 if no
Sale Order (as defined in Section 10.1(a) below) has
been entered by the Bankruptcy Court by March 31,
1999; or (2) on April 12, 1999, if a Sale Order was
entered by the Bankruptcy Court by March 31, 1999 and
there has been no Closing (as defined in Section 3.1
below) other than by reason of the
10
Purchaser's material breach of its obligations under
this Agreement (either such date being the "First
Reduction Date"); and
(ii) By an additional $500,000 (1) on April
16, 1999 if no Sale Order has been entered by the
Bankruptcy Court by April 15, 1999; or (2) on April
27, 1999 if a Sale Order was entered by April 15,
1999 and there has been no Closing other than by
reason of the Purchaser's material breach of its
obligations under this Agreement (either such date
being the "Second Reduction Date").
Time is of the essence as to each date set forth in this Section 2.1(c).
(d) As used herein, "Gross Royalty Assets" means all advances
through January 31, 1999 which have been paid by the Seller and are set forth on
Schedule 2.1(d) on account of author earnings with respect to Works that have
not been published prior to February 1, 1999; provided, however, that Gross
Royalty Assets shall not include any such advances under a publishing agreement
which, for any reason, is not assigned to the Purchaser.
(e) As used herein, "Gross Inventory Value" means the cost basis
of the Seller's inventory of Books at January 31, 1999.
2.2. Payment of the Purchase Price. The Purchase Price shall be
paid as follows:
(a) $3,000,000 at the Closing by a wire transfer of immediately
available funds to the escrow agent (the "Escrow Agent") named in the Escrow
Agreement to be entered into at the Closing in substantially the form set forth
in Exhibit A (the "Escrow Agreement"); and
11
(b) The balance of the Purchase Price at the Closing by a wire
transfer of immediately available funds to an account designated in writing by
the Seller.
2.3. The Escrow Deposit. The funds transferred to the Escrow
Agent pursuant to Section 2.2(a) (the "Escrow Deposit") are to be held in
accordance with the terms of the Escrow Agreement to secure the Seller's
indemnification obligations as set forth in Section 13. Subject to the
provisions of the Escrow Agreement, the Escrow Agent will release to the Seller:
(a) The sum of $2,000,000 of the principal balance of the
Escrow Deposit, less any amounts released to the Seller pursuant to Section
2.3(b), upon the entry of an order or orders confirming plans of reorganization
for the Seller and the Parent in the Chapter 11 Cases (as defined in Section 8.9
below) which have become final (as defined in Section 12.8 below) containing no
provisions inconsistent with the terms of this Agreement, except that if such
inconsistency is immaterial, the sum of $2,000,000, less any Damages (as such
term is defined in Section 13.2) to the Purchaser resulting therefrom shall be
released to the Seller.
(b) If $2,000,000 of the Escrow Deposit has not been released to
the Seller pursuant to Section 2.3(a) above by the end of six months after the
Closing Date, $62,500 of the principal balance of the Escrow Deposit six months
after the Closing Date and an additional $62,500 at the end of each three month
period thereafter until such time as payments under Section 2.3(a) and this
Section 2.3(b) aggregate $2,000,000;
(c) $500,000 six months after the Closing Date; and
(d) $500,000 on the first anniversary of the Closing Date.
12
The Escrow Deposit shall be deemed to secure the Seller's and the
Parent's obligations under Section 13.
2.4. Conditions to Release of Escrow Deposit. The Escrow Agent
will not make any release to the Seller from the Escrow Deposit pursuant to
Section 2.3:
(a) That would conflict with the obligations of the Escrow Agent
to continue to hold the Escrow Deposit, or a portion thereof, for pending or
unresolved claims, as more fully set forth in the Escrow Agreement, and to make
payments to the Purchaser in satisfaction of the indemnification obligations of
the Seller set forth herein;
(b) That would reduce the principal balance of the Escrow
Deposit to less than the reserve for pending or unresolved claims (the
"Reserve") required to be held by the Escrow Agent under the terms of the Escrow
Agreement;
(c) That would reduce the principal balance of the Escrow
Deposit, prior to six months after the Closing Date, to less than the greater of
(i) the Reserve and (ii) $1,000,000 or that would reduce the principal balance
of the Escrow Deposit, prior to the first anniversary of the Closing Date, to
less than the greater of (i) the Reserve and (ii) $500,000;
(d) If the Seller or the Parent has breached any of the
provisions of Section 14 (unless such breach has been fully cured and the
Purchaser compensated in full for any damages resulting therefrom);
(e) During the pendency of any bankruptcy or insolvency
proceeding of the Seller or the Parent; or
(f) Unless (i) there is no ongoing, and has been no successful,
attempt by the Seller or the Parent, its or their trustee in bankruptcy or any
creditor or creditors'
13
committee whether in the Chapter 11 Cases or in any subsequent proceeding or
otherwise (A) to avoid any of the transactions or transfers contemplated by, or
to reject, this Agreement, any provisions hereof or any instrument delivered
pursuant hereto or the Distribution Agreement, (B) to claim, or seek additional
consideration from the Purchaser on account of, any of the Assets, or (C) to
claim any portion of the Escrow Deposit not then payable pursuant to the terms
of this Agreement and the Escrow Agreement, provided, however, that in the event
of any such attempt that has been resolved, this Section 2.4(f)(i) shall not
apply so long as the Purchaser has been compensated for any Damages (as such
term is defined in Section 13.2) sustained related thereto or as a result
thereof, (ii) in the event of a sale of the Parent or the Seller, or of assets
of the Seller that include any of the Golden Trademarks and associated good
will, the purchaser thereof has agreed in writing to be bound by the covenants
set forth in Section 14 and to recognize and respect the licenses granted to the
Purchaser in Sections 5, 6 and 7, and (iii) upon confirmation of a plan of
reorganization of the Seller or the Parent, all persons and entities acquiring
any ownership or security interest in the Golden Trademarks and associated good
will have agreed in writing for the benefit of the Purchaser that their
interests in the Golden Trademarks are subject to the licenses granted to the
Purchaser herein and that, if they sell any such intellectual property in
enforcement of a security interest or otherwise, they will require any purchaser
thereof to be bound by such licenses; provided, however, that nothing in this
Section 2.4(f) shall be deemed to apply to any contract to which the terms of
the proviso of Section 12.6 apply.
2.5. Adjustment of the Purchase Price. The Purchase Price shall
be subject to adjustment after the Closing as specified in this Section 2.5.
14
(a) Confirmation of Elements of Purchase Price. Following the
Closing, the Seller will cooperate fully with the Purchaser and the Purchaser's
accountants (the "Purchaser's Accountants") to facilitate their review of the
Seller's calculation of Gross Royalty Assets, Gross Inventory Value, Unpaid 1998
Royalties and 1999 Royalties used to establish the Purchase Price and to afford
them with full access to work papers and such other books and records as the
Purchaser's Accountants may reasonably request in connection with such review.
If there is a determination pursuant to this Section 2.5 that the portion of the
Purchase Price based on Gross Royalty Assets, Gross Inventory Value, Unpaid 1998
Royalties and 1999 Royalties was greater or, except in the case of Gross
Inventory Value, less than it should have been had these been correctly
calculated, the Purchase Price shall be decreased or increased, as applicable,
by the amount of such excess or deficiency.
(b) Adjustments to Purchase Price. Subject to Section 2.5(c),
within 30 days after receipt by one party of a statement by the other party that
the Purchase Price should be adjusted pursuant to Section 2.5(a) (the "Purchase
Price Adjustment"), setting forth in reasonable detail the reasons for such
adjustment, the party so notified shall pay to the other party, as an adjustment
to the Purchase Price, by wire transfer of immediately available funds, the
amount of such adjustment, together with interest from the Closing Date to date
of payment, at a rate equal to the rate of interest announced publicly from the
time by Chase Manhattan Bank, N.A. in New York, New York as its prime rate. No
claim for a Purchase Price Adjustment will be made by either party unless the
aggregate amount claimed exceeds $50,000. To the extent that there are funds
available in the Escrow Deposit, any amounts owed by the Seller pursuant to this
Section 2.5 may be paid out of the Escrow Deposit.
15
(c) Purchase Price Adjustment Disputes. The Seller or the
Purchaser may dispute any amounts of the Purchase Price Adjustment claimed by
the other party to the extent the net effect of such disputed amounts in the
aggregate would affect the amount of the Purchase Price Adjustment by more than
$10,000; provided that the party disputing any such amount shall notify the
other party in writing of each disputed item, specifying the amount thereof in
dispute, within fifteen (15) business days of receipt of a demand for a Purchase
Price Adjustment. In the event of such a dispute, the Purchaser and the Seller
shall attempt to reconcile their differences. If any such resolution leaves in
dispute amounts the net effect of which in the aggregate would not affect the
amount of the Purchase Price Adjustment by more than $10,000, all such amounts
remaining in dispute shall then be deemed to have been resolved in favor of the
claim for adjustment as delivered pursuant to Section 2.5(b). If the Purchaser
and the Seller are unable to reach a resolution with respect to items in dispute
the net effect of which in the aggregate exceeds $10,000, within twenty (20)
business days, the Purchaser and the Seller shall submit the items remaining in
dispute for resolution to an accounting firm mutually acceptable to the Seller
and the Purchaser (the "Accounting Firm"; the appointment of the Accounting Firm
shall, if necessary, be subject to the approval of the Bankruptcy Court), which
shall be instructed to, within twenty-five (25) business days after submission
to it, determine and report to the parties upon such remaining disputed items in
accordance with the provisions hereof, and such report shall be final, binding
and conclusive on the parties hereto. The fees and expenses of the Accounting
Firm shall be borne equally by the Purchaser and the Seller.
(d) Timing of Payments. Payment of any portion of the amount
payable by the Seller or the Purchaser pursuant to Section 2.5(b) which is in
dispute shall be
16
delayed until the resolution of all disputes as provided in Section 2.5(c) upon
which event such payment shall be paid within five (5) business days following
such resolution.
2.6. Additional Purchase Price. The Purchaser will pay the
Seller an additional amount, not to exceed $600,000, based on the Operating
Contribution (as such term is defined below) from Works unpublished as of
January 31, 1999 for which author agreements were entered into prior to February
1, 1999 that are listed on Schedule 2.6 (the "Unpublished Works"), as follows:
(a) Schedule 2.6 sets forth the estimated Operating Contribution
(as such term is defined below) from each of the Unpublished Works (with
attached estimated profit and loss statements).
(b) As soon as practicable after April 30, 2001, the Purchaser
will calculate the actual Operating Contribution from the Unpublished Works for
the period ended January 31, 2001 in accordance with the definition of
"Operating Contribution" set forth in Schedule 2.6. The Seller shall have the
right for a period of six months after receipt of such calculation, during
regular business hours and with reasonable advance notice, to have the
Purchaser's books of accounts and records relating to the Works listed on
Schedule 2.6 reviewed by one of the Seller's financial officers or by certified
public accountants selected by the Seller for the limited purpose of verifying
the Purchaser's calculation of the Operating Contribution.
(c) Not later than June 30, 2001, the Purchaser will deliver to
the Seller a copy of its calculation of the actual Operating Contribution from
the Unpublished Works for the period ended January 31, 2001, together with a
payment equal to 50 percent of the amount, if any, by which the aggregate amount
of such actual Operating Contribution exceeds
17
the aggregate of the estimates of Operating Contribution from each of the
Unpublished Works referred to in Section 2.6(a) and set forth in Schedule 2.6;
provided, that the maximum amount payable by the Purchaser to the Seller
pursuant to this Section 2.6 shall not exceed $600,000.
(d) No payment shall be required under this Section 2.6 if (i)
the Seller or the Parent has breached any of the provisions of Section 14
(unless such breach has been fully cured and the Purchaser has been compensated
in full for any damages resulting therefrom) or (ii) during the pendency of any
bankruptcy or insolvency proceeding of the Seller or the Parent, its or their
trustee in bankruptcy or any creditor or creditors' committee has successfully
attempted to or is currently attempting to avoid any of the transactions or
transfers contemplated by, or reject, this Agreement, any provision hereof or
any instrument delivered pursuant hereto or has claimed or obtained any
additional consideration from the Purchaser on account of any of the Assets;
provided, however, that in the event of any such attempt that has been resolved,
this Section 2.6(f) shall not apply so long as the Purchaser has been
compensated for any Damages sustained related thereto or as a result thereof.
Notwithstanding anything in Section 2.6(c) to the contrary, any amount due under
Section 2.6(c) will be reduced by any amounts then payable under this Agreement
to the Purchaser by the Seller or the Parent and the Seller will only be
entitled to payment of the net amount.
2.7. Adjustments for Post-January 31, 1999 Events. In addition
to the other adjustments to the Purchase Price set forth above, the following
provisions apply to certain revenues and expenses pertaining to the period
commencing February 1, 1999:
(a) Forthwith, but in any case within seven (7) business days of
its receipt thereof, the Seller will turn over to the Purchaser (i) any monies
received from sales, if
18
any, of Books invoiced after January 31, 1999, other than sales of Books by the
Purchaser under the Distribution Agreement, whenever received, and (ii) any
monies received after January 31, 1999 for subsidiary rights or any other source
of revenues (other than for sale of Books invoiced prior to February 1, 1999)
from the Works or the Business.
(b) The Purchaser will pay directly, or reimburse the Seller for
payments made by the Seller prior to the Closing Date, with respect to the
following expenses:
(i) Costs of paper, printing and binding with
respect to Books and Related Materials received from the
printer or binder after January 31, 1999;
(ii) Reasonable third party advertising,
publicity and promotional expenses for the Works incurred by
the Seller after January 31, 1999 in the ordinary course
consistent with the past practices of the Seller;
(iii) Fifty percent (50%) of the salary of each
individual named on Schedule 2.7(b)(iii) who begins to work
for the Purchaser immediately after the Closing Date (whether
as a temporary or regular employee or an independent
contractor) earned from February 1, 1999 until the Closing
Date; and
(iv) So-called "plant" costs incurred by the
Seller from February 1, 1999 to the Closing Date in the
ordinary course of business consistent with past practice of
the Seller with respect to Unpublished Works, an estimate of
which costs incurred in the month of February 1999 is stated
19
on Schedule 2.7(b)(iv), provided, however, that the
Purchaser will not be required to pay any amount in
excess of 110% of such estimated amount for costs
incurred in February 1999.
Notwithstanding the foregoing, the Purchaser shall not be obligated to pay or
reimburse the Seller for any expenses incurred after February 24, 1999 pursuant
to Section 2.7(b)(ii) above and any expenses incurred after February 28, 1999
pursuant to Section 2.7(b)(iv) above unless (i) the Seller consulted with the
Purchaser prior to incurring such expense and (ii) the Purchaser did not
recommend against such expense.
(c) Not later than ninety (90) days after the Closing Date, the
Seller and the Purchaser will account to each other for the items referred to
above in this Section 2.7. Within 10 days after both accounts have been
received, the amounts due to the Seller and to the Purchaser shall be netted and
the Seller will pay the Purchaser or the Purchaser will pay the Seller, as the
case may be, such net amount.
(d) Notwithstanding the other provisions of this Section 2.7,
any monies described in Section 2.7(a) received by the Seller after the Closing
Date shall be received by the Seller in trust for the Purchaser, as the property
of the Purchaser, and the Seller will, immediately upon receipt, deliver to and
endorse such payments to the order of the Purchaser or, failing such action,
immediately pay over all such revenues to the Purchaser.
2.8. Allocation of Purchase Price. The Purchaser and the Seller
agree that the Purchase Price shall be allocated among the Assets in the manner
set forth in the regulations promulgated under Section 1060 of the Internal
Revenue Code. Within ninety (90) days of Closing, the Purchaser shall prepare
and deliver to the Seller a proposed allocation,
20
which the Seller shall consent or object to within thirty (30) days; provided,
however, the Seller's consent shall not unreasonably be withheld. In the event
the Seller disagrees with the allocation, the parties shall attempt in good
faith to resolve such disagreement. If the parties are unable to resolve such
disagreement prior to ninety (90) days before the final due date (including all
extensions) for the filing of the income tax returns for the year of the
Purchaser's purchase of the Assets, the Accounting Firm shall resolve any issue
in dispute as promptly as possible. The Purchaser and the Seller will report
the sale and purchase of the Assets for all Federal, state and local tax
purposes in a manner consistent with the finally agreed upon allocation. Any
adjustments to the Purchase Price pursuant to Section 2.5 shall be allocated to
the Assets the price for which is so adjusted.
3. Closing.
3.1. Time and Place. The closing of the transactions
contemplated hereby (the "Closing") shall take place at the offices of
Patterson, Belknap, ▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, commencing at 10:00 a.m., local time, on a date to be selected by
the Purchaser, in its sole discretion, not earlier than immediately after entry
of the Sale Order and not later than one (1) business day after the conditions
in Section 12.8 with respect to the Sale Order have been met or waived by the
Purchaser, or as soon as practicable thereafter as all of the conditions set
forth in Sections 11 and 12 are satisfied or waived by the appropriate party, or
at such other place, time or date as the parties hereto may agree (the "Closing
Date").
3.2. Delivery of Instruments and Payment. At the Closing:
21
(a) The Seller will execute and deliver to the Purchaser such
bills of sale, assignments, endorsements and other instruments and documents of
transfer for the Assets (including, without limitation, short form copyright and
trademark assignments, in each case reasonably satisfactory to the Purchaser),
as shall be effective to transfer to the Purchaser on the Closing Date, good and
marketable title to the Assets, free and clear of any mortgages, pledges, liens,
charges or encumbrances thereon other than those described herein;
(b) The Seller and the Purchaser will deliver the other
documents contemplated by the terms of this Agreement;
(c) The Purchaser will pay the Purchase Price in accordance with
the provisions of Section 2.3;
(d) The Purchaser will execute an appropriate agreement assuming
the obligations to be assumed by it pursuant to Section 1.3 (the "Assumption
Agreement"); and
(e) Subject to Section 12.6, the Seller shall assume the
agreements included in the Assets pursuant to Section 365 of the Bankruptcy Code
and assign such agreements to the Purchaser or one or more of the Purchaser's
affiliates, but the Purchaser shall remain liable for the performance by such
affiliates under such assigned agreements to the extent of the Purchaser's
liability pursuant to Section 1.3.
3.3. Delivery of Tangible Assets. Not later than five business
days after the Closing, the Seller will properly pack and ship to the Purchaser,
at the addresses shown on Schedule 3.3, all tangible personal property included
in the Assets, other than those Assets in the possession of persons or entities
other than the Seller or the Purchaser listed on Schedule 8.4.
22
The Seller will prepay all transportation charges and properly insure all
shipments, provided that the Purchaser will promptly reimburse the Seller for
customary transportation and insurance charges (but not warehouse charges or
costs of packing) on presentation of bills therefor.
4. Distribution Agreement. Subject to the closing of the sale and
purchase of the Assets hereunder, January 31, 1999 shall be deemed the last day
of the term of the Distribution Agreement, except that the Distribution
Agreement shall remain in effect in accordance with its terms with respect to
any Works excluded from the Assets pursuant to the proviso of Section 12.6.
The following shall apply to the termination of the Distribution Agreement in
lieu of paragraph 15 thereof:
(a) Subject to Section 4(b) below, the Purchaser will continue
to make payments to the Seller pursuant to the Distribution Agreement at the
times therein provided.
(b) Any shipments of copies of Books (other than Works excluded
from the Assets by Section 12.6) made, or returns of copies of Books (other than
Works excluded from the Assets by Section 12.6) received, by the Purchaser on or
after February 1, 1999 will be for the sole account of the Purchaser and no such
sales or returns will be included in the calculation of amounts due to the
Seller pursuant to the Distribution Agreement.
(c) Any returns of copies of Books (other than Books excluded
from the Assets by Section 12.6) received on or after February 1, 1999, whether
by the Purchaser or the Seller, will be the sole property of the Purchaser. If
the Seller receives any such returns, it will promptly ship them, at its sole
expense, to the Purchaser's warehouse in accordance with shipping instructions
to be provided by the Purchaser, provided that the Purchaser will promptly
23
reimburse the Seller for transportation charges (but not warehouse charges or
costs of packing) on presentation of bills therefor.
(d) Any coop advertising allowances or other promotional
allowances to customers of the Purchaser with respect to the Works (other than
any Works excluded from the Assets by Section 12.6) for advertising or promotion
after January 31, 1999, shall be for the account of the Purchaser and shall not
be deducted from amounts due to the Seller under the Distribution Agreement, but
allowances for advertising and promotion of the Works prior to February 1, 1999
shall be charged to the Seller.
(e) Any fees, charges or other amounts payable to the Purchaser
pursuant to the Distribution Agreement that are, for any reason, not deducted
from amounts otherwise owing to the Seller pursuant to the Distribution
Agreement will be paid by the Seller promptly upon presentation of a statement
setting forth in reasonable detail such fees, charges or other amounts.
(f) Paragraph 14 of the Distribution Agreement shall survive the
termination of the Distribution Agreement.
5. Trademark License - A Golden Guide(R) and Golden Field Guides(TM).
5.1. License. Subject to the closing of the sale and purchase
of the Assets and effective on the Closing Date, the Seller grants the Purchaser
and its affiliated companies an exclusive worldwide, royalty-free license (the
"License") to use, and to sublicense, to the extent permitted by Section 5.1(j),
the right to use, the registered trademark A Golden Guide(R) and the
unregistered trademark Golden Field Guides(TM) (together, the "Guides
24
Trademarks"; it is agreed that the Guides Trademarks do not include the
trademark "Golden Jr. Guides") for eight and one-half years, on the following
terms:
(a) The License may be used by the Purchaser, its affiliated
companies and permitted sublicensees only in connection with the publication,
distribution, sale, advertising, publicity and promotion of any existing or
future works that the Purchaser or any of its affiliated companies publishes in
the Guides Series; provided, however, that, so long as a Guide Trademark or
Composite Trademark (as such term is defined below) is used, future works in the
Guides Series must relate to nature, the physical or natural world, the physical
or biological sciences, travel, parks, natural sites, astronomy, outdoor
activities, arts and crafts, or games and shall not include any titles
specifically marketed to and suitable only for children under age nine.
(b) Any reprinting, other than reprintings ordered or in
progress on the Closing Date, of a Work in the Guides Series, any printings or
reprintings of additional titles in the Guides Series and any advertising,
publicity and promotion therefor that the Purchaser produces using the Guides
Trademarks must show the Purchaser, one of its affiliated companies or a
sublicensee as the publisher.
(c) Any reprintings of a Work in the Guides Series, any
printings or reprintings of additional titles in the Guides Series and any
advertising, publicity and promotion for the Guides Series manufactured later
than six months after the Closing Date (the "Six-Month Date") may use the Guides
Trademarks only in combination with an existing or newly-created trademark or
trade name of the Purchaser or one of its affiliated companies that has no
resemblance to "Golden" (for example, but without limiting the generality of
this provision, "A Golden Guide From St. ▇▇▇▇▇▇'▇" or "A Golden Excell Field
Guide") (a "Composite
25
Trademark"). If at the time the Purchaser adopts a Composite Trademark the
Seller is the sole owner of the Golden Trademarks, the Seller shall have the
right to approve the Composite Trademark unless the trademark or trade name
added by the Purchaser to create such Composite Trademark is a trademark or
trade name owned by and previously used on any books published by the Purchaser
or one of its affiliated companies. The Seller agrees not to unreasonably
withhold or delay approval of the Composite Trademark and agrees that no
transferee of any interest in the Golden Trademarks, including, but not limited
to, a secured party, shall have any right of approval over any Composite
Trademark.
(d) After the Six-Month Date, the Purchaser and its affiliated
companies may continue to distribute and sell copies of titles in the Guide
Series manufactured prior to the Six-Month Date and to use any stock of
advertising, publicity and promotional materials for the Guides Series
manufactured prior to the Six-Month Date, but after the end of the period that
begins on the Closing Date and ends eighteen (18) months later (the "18-Month
Period"), other than the remaindering of existing stock of copies of titles in
the Guides Series during the period ending forty-five (45) days after the
18-Month Period (the "Remaindering Period"), the Purchaser and its affiliated
companies will make no further use of the Guides Trademarks (including, without
limitation, further distribution or sale of existing stock) except in compliance
with Section 5.1(c); provided, that the Purchaser and its affiliated companies
shall not be required to recall any books or materials already sold or
distributed.
(e) Any and all good will that arises out of the Purchaser's use
of the Guides Trademarks (but not from use of a Composite Trademark) will enure
strictly to the benefit of the Seller. The Purchaser acknowledges the Seller's
sole and exclusive ownership of
26
the Guides Trademarks throughout the world. Consequently, the Purchaser will
not anywhere in the world: (i) register or apply to register the Guides
Trademarksor otherwise assert any ownership rights (other than the exclusive
license granted in this Section 5.1) in or to the Guides Trademarks or (ii)
attack or contest the Seller's rights in or to the Guides Trademarks. The
provisions of this Section 5.1(e) will survive the expiration or earlier
termination of the License for whatever reason, except subparagraph (ii) above
which will survive only for the period ending three (3) years after the
Purchaser's last use of the Guides Trademarks pursuant to the License.
During the term of the License, the Seller will cause the Purchaser to be
included as a registered user anywhere in the world where such registration is
appropriate. Neither the Purchaser nor its affiliated companies will register
any Composite Trademark.
(f) The Purchaser acknowledges that the Seller has established a
consistent high quality for the Works published, promoted, sold and distributed
under the Guides Trademarks. In the Purchaser's exercise of its rights under
the License, including in the publication, distribution, sale, advertising,
publicity and promotion of any existing or future works in the Guides Series
under the Guides Trademarks or any Composite Trademark, the Purchaser will
maintain a standard of quality not materially lower than that maintained by the
Seller for the Guides Series up to and including the Closing.
(g) The Purchaser represents and warrants to the Seller that, in
its publication, distribution, sale, advertising, publicity and promotion of any
existing or future works of the Guides Series under the Guides Trademarks: (i)
subject to Section 5.1(e), the Purchaser will comply in all material respects
with all applicable Federal, state and local laws, rules and regulations, as
well as the laws, rules and regulations of any countries outside the U.S.
27
in which the Purchaser exploits the License; (ii) the Purchaser will not commit
any act that brings the Guides Trademarks into scandal or disrepute in a manner
that would materially diminish the value of the Guides Trademarks; and (iii) any
Composite Trademark adopted by the Purchaser will not infringe the rights of any
third party.
(h) The Purchaser acknowledges that a material breach by it of
this Section 5 could cause irreparable harm to the Seller for which there may
not be an adequate remedy at law. Consequently, the Seller will be entitled to
preliminary and permanent injunctive relief against the Seller without the
necessity of proving actual damages in the event of a material breach by the
Purchaser of this Section 5.
(i) If the Purchaser materially breaches Section 5.1(f) and does
not cease further violations within sixty (60) days after receipt of notice
thereof from the Seller detailing the acts that constitute such breach and
demanding their cessation, the Seller may terminate the License by giving thirty
(30) days' prior written notice to the Purchaser.
(j) Any sublicense granted by the Purchaser of the rights
granted by the License must be limited to book club, reprint, serial, audio,
anthology, electronic, multimedia or other "subsidiary" rights customarily
granted by book publishers at the time such sublicense is granted. Any
sublicense hereunder shall be subject to the quality standards set forth in
Section 5.1(f). If the Seller notifies the Purchaser that the holder of any
such sublicense is not maintaining such quality standards and the Purchaser
determines that this is indeed the case, the Purchaser will notify such
sublicensee that its sublicense will terminate unless the problem is corrected
within 60 days.
28
5.2. Exclusivity. None of the Seller, the Parent and any person
who succeeds to an interest in the Guides Trademarks will use, or authorize the
use of, any of the Guides Trademarks for any purpose whatsoever during the term
of the License. None of the Seller, the Parent and any person who acquires an
interest in the Guides Trademarks or any other of the Golden Trademarks will use
any other Golden Trademark to launch, sponsor, publish, distribute, sell,
market, endorse or otherwise participate or assist in any capacity whatsoever in
the preparation, publication, distribution, sale or marketing of any nature
guide, field guide or any book or other work in whatever form or medium that
contains substantial coverage of any subject matter covered by any past, present
or future title in any of the Guides Series, except in each case any nature
guide, field guide or any book or other work specifically marketed to and
suitable only for children under age nine, including, without limitation, any
such guide, book or other work marketed under the Golden Jr. Guides name.
5.3. Right Not to Use. The Purchaser may cease using the Guides
Trademarks before the expiration of the License. At the end of the eight and
one-half year exclusive license period or earlier termination for breach
pursuant to Section 5.1(i), the Purchaser's rights under the License will
terminate completely and the Purchaser will cease all use of the Guides
Trademarks and any Composite Trademark, except that the Purchaser will not be
required to recall any books or any advertising, publicity or promotional
materials therefor that have already been sold or distributed. Nothing in this
Section 5 is intended to limit the Purchaser's right to use the Guides Series'
trade dress (which is included in the Assets) after termination of the License.
29
5.4. Assignment. The Purchaser shall not assign the License
except that the Purchaser may assign it (a) to a successor or purchaser that
acquires all or substantially all of the Purchaser's trade publishing business
or (b) otherwise with the prior written consent of the Seller (which the Seller
agrees not unreasonably to withhold or delay).
5.5. Certificate of Destruction. Upon request, the Purchaser
will provide the Seller with a certificate certifying the destruction of any
copies of titles in the Guides Series that the Purchaser is prohibited from
selling or distributing after the end of the 18-Month Period and that were not
sold or distributed within the 18-Month Period or remaindered during the
Remaindering Period.
6. Trademark License - Golden Trademarks.
6.1. License. Subject to the closing of the sale and purchase of
the Assets and effective on the Closing Date, the Seller grants the Purchaser
and its affiliated companies a non-exclusive worldwide, royalty-free license
(the "Additional License") to use, and to sublicense, to the extent permitted by
Section 6.1(i), the right to use the Golden Trademarks for eight and one-half
years as presently used in the title of existing or future editions of the Book
that currently bears the title The Golden Book of Coin Collecting (the "Coin
Book") and in advertising, publicity and promotion therefor, on the following
terms:
(a) Any reprinting, other than reprintings ordered or in
progress on the Closing Date, of the Coin Book, any printings or reprintings of
future editions of the Coin Book and any advertising, publicity and promotion
with respect to the Coin Book that the Purchaser produces using the Golden
Trademarks must show the Purchaser, one of its affiliated companies or a
sublicensee as the publisher.
30
(b) Any printings or reprintings of the Coin Book (including of
future editions of the Coin Book) and any advertising, publicity and promotion
for the Coin Book which are manufactured after the Six-Month Date may use the
Golden Trademarks only in the title and then only in combination with an
existing or newly-created trademark or trade name of the Purchaser or one of its
affiliated companies that has no resemblance to "Golden" or "Golden Books" (a
"Composite Title"). If at the time the Purchaser adopts a Composite Title the
Seller is the sole owner of the Golden Trademarks, the Seller shall have the
right to approve the Composite Title, unless the trademark or trade name added
by the Purchaser to create such Composite Title is a trademark or trade name
owned by and previously used on any books published by the Purchaser or one of
its affiliated companies. The Seller agrees not to unreasonably withhold or
delay approval of the Composite Title and agrees that no transferee of any
interest in the Golden Trademarks, including, but not limited to, a secured
party, will have any right of approval over any Composite Title.
(c) After the Six-Month Date, the Purchaser and its affiliated
companies may continue to distribute and sell copies of the Coin Book
manufactured prior to the Six-Month Date and to use any stock of advertising,
publicity and promotional materials for the Coin Book manufactured prior to the
Six-Month Date, but after the 18-Month Period, other than the remaindering of
existing stock of the Coin Book during the Remaindering Period, the Purchaser
and its affiliated companies will make no further use of the Golden Trademarks
(including, but not limited to, further distribution or sale of existing stock)
in connection with the Coin Book except in compliance with Section 6.1(b);
provided, that the Purchaser and its
31
affiliated companies shall not be required to recall any books or materials
already sold or distributed.
(d) Any and all good will that arises out of the Purchaser's use
of the Golden Trademarks (but not from use of a Composite Title) will enure
strictly to the benefit of the Seller. The Purchaser acknowledges the Seller's
sole and exclusive ownership of the Golden Trademarks throughout the world.
Consequently, the Purchaser will not anywhere in the world: (i) register or
apply to register the Golden Trademarks or otherwise assert any ownership rights
(other than the Additional License) in or to the Golden Trademarks, or (ii)
attack or contest the Seller's rights in or to the Golden Trademarks. The
provisions of this Section 6.1(d) will survive the expiration or earlier
termination of the Additional License for whatever reason, except subparagraph
(ii) above which will survive only for the period ending three (3) years after
the Purchaser's last use of the Golden Trademarks pursuant to the Additional
License. During the term of the Additional License, the Seller will cause the
Purchaser to be included as a registered user anywhere in the world where such
registration is appropriate. Neither the Purchaser nor its affiliated companies
will register any Composite Title.
(e) The Purchaser acknowledges that the Seller has established a
consistent high quality for the Works published, promoted, sold and distributed
under the Golden Trademarks. In the Purchaser's exercise of its rights under
the Additional License, including in the publication, distribution, sale,
advertising, publicity and promotion of any existing or future editions of the
Coin Book under the Golden Trademarks or any Composite Title, the Purchaser will
maintain a standard of quality not materially lower than that maintained by the
Seller for the Coin Book up to and including the Closing.
32
(f) The Purchaser represents and warrants to the Seller that, in
its publication, distribution, sale, advertising, publicity and promotion of the
Coin Book under the Golden Trademarks: (i) subject to Section 6.1(d), the
Purchaser will comply in all material respects with all applicable Federal,
state and local laws, rules and regulations, as well as the laws, rules and
regulations of any countries outside the U.S. in which the Purchaser exploits
the Additional License; (ii) the Purchaser will not commit any act that brings
the Golden Trademarks into scandal or disrepute in a manner that would
materially diminish the value of the Golden Trademarks; and (iii) any Composite
Title adopted by the Purchaser will not infringe the rights of any third party.
(g) The Purchaser acknowledges that a material breach by it of
this Section 6 could cause irreparable harm to the Seller for which there may
not be an adequate remedy at law. Consequently, the Seller will be entitled to
preliminary and permanent injunctive relief against the Seller without the
necessity of proving actual damages in the event of a material breach by the
Purchaser.
(h) If the Purchaser materially breaches Section 6.1(e) and does
not cease further violations within sixty (60) days after receipt of notice
thereof from the Seller detailing the acts that constitute the breach and
demanding their cessation, the Seller may terminate the Additional License by
giving thirty (30) days' prior written notice to the Purchaser.
(i) Any sublicense granted by the Purchaser of the rights
granted by the Additional License must be limited to book club, reprint, serial,
audio, anthology, electronic, multimedia or other "subsidiary" rights
customarily granted by book publishers at the time such sublicense is entered
into. Any sublicense hereunder shall be subject to the quality standards set
33
forth in Section 6.1(e). If the Seller notifies the Purchaser that the holder
of any such sublicense is not maintaining such quality standards and the
Purchaser determines that this is indeed the case, the Purchaser will notify
such sublicensee that its sublicense will terminate unless the problem is
corrected within 60 days.
6.2. Exclusivity. None of the Seller, the Parent and any person
who acquires an interest in the Golden Trademarks will use any Golden Trademark
to launch, sponsor, publish, distribute, sell, market, endorse or otherwise
participate or assist in any capacity whatsoever in the preparation,
publication, distribution, sale or marketing of any coin guide or any book or
other work in whatever form or medium that relates to coins or coin collecting
except any guide, book or other work specifically marketed and suitable only for
children under age nine.
6.3. Right Not to Use. The Purchaser may cease using the Golden
Trademarks before the expiration of the Additional License. At the end of the
eight and one-half year license period or earlier termination for breach
pursuant to Section 6.1(h), the Purchaser's rights under the Additional License
will terminate completely and the Purchaser will cease all use of the Golden
Trademark and any Composite Title, except that the Purchaser will not be
required to recall any books or materials that have already been sold or
distributed. Nothing in this Section 6 is intended to limit the Purchaser's
right to use the Coin Book's trade dress (which is included in the Assets) after
termination of the Additional License.
6.4. Assignment. The Purchaser shall not assign the Additional
License except that the Purchaser may assign it (a) to a successor or purchaser
that acquires all, or
34
substantially all, of the Purchaser's trade publishing business or (b) otherwise
with the prior written consent of the Seller (which the Seller agrees not
unreasonably to withhold or delay).
6.5. Certificate of Destruction. Upon request, the Purchaser
will provide the Seller with a certificate certifying the destruction of any
copies of the Coin Book that the Purchaser is prohibited from distributing after
the 18-Month Period and that were not sold or distributed within the 18-Month
Period or remaindered during the Remaindering Period.
7. Sell Off Right.
7.1. Right Granted. In addition to the License and the
Additional License granted in Sections 5 and 6, subject to the closing of the
sale and purchase of the Assets, and effective on the Closing Date, the Seller
grants the Purchaser and its affiliated companies a worldwide, royalty-free
right to sell off, during the 18-Month Period only, any Book that is in the
inventory of Books in existence on the Closing Date, any printing or reprinting
thereof that is in progress or ordered as of the Closing Date, and any return of
any Book received after the Closing Date (collectively, the "Inventory"), and to
use any existing Related Materials for such Books and any printing or reprinting
thereof that is in progress or ordered as of the Closing Date (the "Existing
Related Materials"), even though such Books or Related Materials bear one or
more of the trade names, imprints, colophons, or registered or unregistered
trademarks retained by the Seller (whether or not subject to a license under
Section 5 or Section 6).
7.2. End of Sell Off Right. At the end of the 18-Month Period,
except for the remaindering of existing stock during the Remaindering Period,
the Purchaser will cease selling or using the Inventory and Existing Related
Materials in any way and will remainder, or pulp or otherwise destroy, all
remaining stocks of Inventory and Existing Related Materials
35
bearing trademarks of the Seller not included in the Assets and whose continued
sale or use is not otherwise permitted by Section 5 or Section 6, but the
Purchaser shall not be required to recall any Books or Related Materials that
have already been sold or distributed.
8. Representations and Warranties of the Seller. The Seller
represents, warrants and covenants to the Purchaser that:
8.1. Organization and Qualification. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to own the
Assets and carry on the Business, and is duly qualified to do business as a
foreign corporation in the State of New York. The Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
8.2. Authorization; Consents. The Seller and the Parent each have
the requisite corporate power to enter into this Agreement and, in the case of
the Seller, all of the other agreements, certificates and documents delivered or
to be delivered at or before the Closing in connection with the transactions
contemplated hereby (the "Ancillary Documents") to which it is a party. The
execution and delivery by the Seller and the Parent of this Agreement and by the
Seller of the Ancillary Documents to which it is a party, the consummation by
the Seller of the transactions contemplated hereby and thereby, and the
performance by the Seller and the Parent of their respective obligations
hereunder and, in the case of the Seller, thereunder have been, or will have
been by the Closing Date, duly authorized by all necessary corporate action on
the part of the Seller and the Parent. This Agreement has been duly
executed and delivered and (assuming approval of this Agreement by the
Bankruptcy Court) constitutes the legal and binding
36
obligation of the Seller and the Parent enforceable in accordance with its
terms. Upon the execution and delivery thereof by the Seller, the Ancillary
Documents to which it is a party will constitute legal and binding obligations
of the Seller enforceable in accordance with their respective terms. Except as
set forth on Schedule 8.2, the execution and delivery by the Seller and the
Parent of this Agreement and by the Seller of the Ancillary Documents, the
consummation by the Seller of the transactions contemplated hereby and thereby,
and the performance by the Seller and the Parent of their respective obligations
hereunder and the Seller's obligations thereunder will not conflict in any
material respect with or result in any material violation of, or constitute a
material default under (either immediately or with notice or lapse of time), or
result in any right to accelerate or the creation or imposition of any lien,
charge or encumbrance on the Assets pursuant to, any provision of (a) the
certificate of incorporation or by-laws of the Seller or the Parent, (b) any
agreement, contract, lease, license, note, bond, mortgage, indenture, deed of
trust or other instrument to which the Seller or the Parent is a party or by
which any of the Seller's or the Parent's respective properties or other assets
is bound, (c) any governmental franchise, license, permit or authorization, or
any judgment or order of any tribunal or governmental body applicable to the
Seller or the Parent, or any of the Seller's or the Parent's respective
properties or other assets, or (d) any law, statute, decree, rule or regulation
of any jurisdiction applicable to the Seller or the Parent. Except for
approvals of the Bankruptcy Court as referred to in Section 10.1, no
authorization, consent or approval of, or declaration of, filing with or notice
to any governmental body or authority by the Seller or the Parent is necessary
for the execution by the Seller and the Parent of this Agreement or by the
Seller or any of the Ancillary Documents, the consummation by the Seller of the
transactions contemplated
37
hereby and thereby, or the performance by the Seller and the Parent of their
respective obligations hereunder and of the Seller thereunder. Except as
provided in Section 12.6, the Seller and the Parent have obtained, or will have
obtained by the Closing Date, all consents necessary to their execution of this
Agreement and the Ancillary Documents, the consummation of the transactions
contemplated hereby (including without limitation the transfers of Assets and
assignment of contracts contemplated hereby and the waiver of the right to
terminate any publishing agreement upon a change of editor from any author or
other licensor of works having such a right) and the performance of their
obligations hereunder; provided, however, if the Seller has used its best
efforts to obtain the consents listed on Schedule 12.6 as required as a
condition to Closing and has failed to obtain same, and, as a result of the
failure to obtain such consents, there is no Closing, then the Purchaser's
remedies for such failure shall be limited to termination of this Agreement and
the right to receive the Break-Up Fee to the extent provided in Section 10.3.
8.3. Assets. Except as set forth on Schedule 8.3, the Seller
will, upon entry of the Sale Order, have complete and unrestricted power and the
unqualified right to, and will at the Closing, sell, assign and transfer to the
Purchaser good and marketable title to all of the Assets being sold, assigned
and transferred hereunder, free and clear of all mortgages, liens, security
interests, contractual obligations (other than those disclosed on Schedule 8.6)
and obligations to pay royalties, fees or other sums (other than pursuant to
agreements disclosed on Schedule 8.6), encumbrances or charges of any kind,
including, without limitation:
(a) all of the ▇▇▇▇▇▇▇ trademarks and trade dress used on the
▇▇▇▇▇▇▇ Products and associated good will;
38
(b) worldwide copyrights in all the ▇▇▇▇▇▇▇ Products (a complete
list of which is included on Schedule 1.1) and all prior editions thereof;
(c) worldwide copyrights in all of the Golden Guides, Golden
Field Guides and Outdoor Action Guides (a complete list of which is included on
Schedule 1.1) and all prior editions thereof;
(d) the trade dress used with the Golden Guides, Golden Field
Guides and Outdoor Action Guides, and associated good will; and
(e) the right to publish, distribute and sell, on the terms
contained in the applicable contracts listed on Schedule 8.6, all of the other
Works in book form and other rights in the Works specified in those contracts.
Without limiting the generality of any representations and warranties
of the Seller set forth in this Agreement, the artwork in Birds in North America
was created as a "work made for hire", within the meaning of the United States
copyright laws, for the Seller or its predecessors-in-interest, and the
Purchaser will have no obligations with respect thereto except to pay royalties
to the extent consistent with the list of current royalty payments appended to
Schedule 8.6.
The Seller will execute and deliver to the Purchaser such instruments
of sale, assignment and transfer as, in the reasonable opinion of the
Purchaser's counsel, are necessary to transfer good and marketable title to the
Assets as contemplated by this Agreement. None of the computer disks or files
delivered or transmitted, or to be delivered or transmitted, to the Purchaser
will contain at the time of delivery or transmission any virus, software lock,
drop-dead device or other program or defect that would inappropriately affect
any software or hardware.
39
8.4. Assets Held by Others. Schedule 8.4 lists all of the Assets
in the possession of persons or entities other than the Seller or the Purchaser
and the name, address and telephone number of the holder thereof, as well as
"flat lists" from all such persons or entities listing the ISBN numbers and
titles of all film flats or digital files relating to text, inserts, jackets,
covers and other printed components of the Books and Related Materials in their
possession.
8.5. Operation of Business. Since January 1, 1999, except as set
forth on Schedule 8.5, the Seller has operated the Business in the ordinary and
customary course and consistent with past practice. Without limiting the
generality of the foregoing:
(a) Except as set forth on Schedule 8.5, the Seller has not
sold, transferred or encumbered any assets used in the Business, except in the
ordinary and customary course of business and consistent with past practices;
and
(b) The Seller has not agreed, whether in writing or otherwise,
to take any action which would cause the representations set forth in this
Section 8 to be incorrect.
8.6. Contracts. Except as set forth on Schedule 8.6,
(a) The Seller is not a party to, or otherwise bound by, any
agreement, contract, lease, license or other legally binding commitment or
arrangement relating in any way to the Business for an amount greater than
$5,000, individually, or $75,000 in the aggregate, including, without
limitation, any agreement, contract or other commitment or arrangement to use
the services of any production vendor (including, without limitation, any
typesetter, printer or binder), any distributor other than the Purchaser, or the
like in connection with the Books and Related Materials;
40
(b) Except for author royalties not in the aggregate exceeding
the amounts set forth in Sections 2.1(b)(i) and 2.1(b)(ii), the Seller has paid,
or will pay prior to or at the Closing, in full for all services performed,
materials provided and rights granted with respect to the Works, Books and
Related Materials, except those specifically assumed by the Purchaser pursuant
to this Agreement;
(c) The Seller has not granted any person or entity any security
interest in any of the Assets or relating in any way to the Business, and no
third party has any security interest in, or other right with respect to, any
future revenues or potential revenues of the Business;
(d) No agreement, contract, lease, license or other legally
binding commitment or arrangement with respect to the Business to which the
Seller is a party, or by which it or the Assets is bound, is in default; no
event, circumstance or state of facts exist which would, if not corrected
following notice thereof, result in a default under any such agreement,
contract, lease, license or other legally binding commitment or arrangement; and
no party to any such agreement, contract, lease, license or other legal binding
commitment or arrangement has notified the Seller that, or that it believes
that, such a default exists;
(e) The Seller has either accepted or rejected in writing all
manuscripts of Works it has contracted for and received from authors or other
licensors, except that it has received, but has not yet accepted or rejected,
the manuscripts specified on Schedule 8.6;
(f) The Seller has completely fulfilled all contractual
commitments required to be fulfilled to date that it has made to authors or
other licensors with
41
respect to publicity, marketing or promotion of, and efforts to license or
otherwise dispose of rights in, all of the Works published prior to the Closing
Date; all of the contracts with authors or other licensors for Works as to which
any inventory of Books exists or which have been included in catalogs issued by
or in the name of the Seller remain in effect; and no state of facts exists (or
will exist as the result of the Seller's execution of this Agreement or the
fulfilment by the Seller of any of its obligations under this Agreement) that
would give the author or licensor a right to terminate any such contract;
(g) Schedule 8.6 contains a complete list, by title and author,
of all published Works and, except as set forth on Schedule 8.6, there are no
unpaid advances, or advances that will become payable on or after the Closing
Date, against author or other licensor earnings with respect to such Works;
(h) Subject to the first proviso to Section 12.6, as of the date
of the Sale Order, the agreements included in the Assets may be assumed by the
Seller and assigned to the Purchaser pursuant to Section 365 of the Bankruptcy
Code without the consent of any party other than the Seller; provided, however,
if the Seller has used its best efforts to obtain the consents listed on
Schedule 12.6 as required as a condition to Closing and has failed to obtain
same, and, as a result of the failure to obtain such consents, there is no
Closing, then the Purchaser's remedies for such failure shall be limited to
termination of this Agreement and the right to receive the Break-Up Fee to the
extent provided in Section 10.3; and
(i) No author or other licensor has given notice of the
revocation or purported revocation of any foreign language rights in any Work
included in the Assets.
42
8.7. Financial Representations. The figures set forth in Section
2.1 for Gross Royalty Assets, Gross Inventory Value and Unpaid 1998 Royalties
are, except as reflected in a Purchase Price Adjustment, true and correct
statements of, and the figure for 1999 Royalties represents the Seller's good
faith estimate for, those amounts compiled in accordance with the provisions of
Section 2.1 and consistently with the figures used by the Seller in compiling
the financial statements included in the filings of the Parent under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such
financial statements set forth the information included therein in accordance
with generally accepted accounting principles, consistently applied, and are in
compliance with the Exchange Act and the rules and regulations promulgated by
the Securities and Exchange Commission.
8.8. Brokers. No broker, finder or other intermediary has acted
on behalf of the Seller in connection with this Agreement or the transactions
contemplated hereby, except ▇▇▇▇▇ & Company Incorporated, for whose fees the
Seller or the Parent are solely responsible.
8.9. Compliance with Law. The Seller has complied with each, and
has not received any notice of any violation of any, law, statute, regulation,
rule, ordinance, order, writ, injunction, judgment, decree or other legal
requirement relating to the Business or the Assets. Other than the cases
commenced by the Petitions (the "Chapter 11 Cases"), there is no action, suit,
investigation or proceeding pending or, to the Seller's knowledge, threatened
against the Parent or the Seller with respect to the Business or any of the
Assets before any court, arbitrators or administrative or governmental body,
including without limitation any action, suit, investigation or proceeding
claiming infringement of trademark, copyright, libel or harm to person or
property. The Seller is not in default under any order, writ, injunction,
judgment or
43
decree of any court, arbitrators or administrative or governmental body relating
to the Business or the Assets. There are no unsatisfied judgments or
outstanding rders, writs, injunctions or decrees against the Seller relating to
the Business or the Assets or which would effect the Seller's right to convey
title to the Assets as provided herein or burden the title thereby conveyed.
The Seller has complied and will comply with the Bankruptcy Code, the Federal
Rules of Bankruptcy Procedure and all orders of the Bankruptcy Court, including,
but not limited to, with respect to the Sale Motion (as defined in Section
10.1 below) and any order entered in connection therewith. Except as expressly
authorized by this Agreement, the Seller has not taken any action, or failed to
take any action, which is reasonably likely to prevent, impede or result in the
revocation of the vesting in the Purchaser at the Closing following the entry
of the Sale Order of good and marketable title to the Assets (or any portion
thereof) free and clear of all claims and interests of creditors.
8.10. Trademarks and Trade Names. The Seller is the sole owner
of the Golden Trademarks, the Guide Trademarks, the ▇▇▇▇▇▇▇(R) trademarks and
each of the other trademarks, trade dress, trade names and logos used in the
Business, together with associated good will. Each of such trademarks, titles,
trade dress, trade names and logos is valid and none of them has been or is
currently being challenged. Schedule 8.10 includes copies of all registrations
pertaining to such trademarks, titles, trade dress, trade names and logos. All
trademarks included in the Assets that purport to be registered are duly
registered. From and after the Closing Date, the Purchaser will have the
unrestricted right, without liability or obligation to any third party, to use
the trademarks, titles, trade dress, trade names and logos for the continued
conduct of the Business in accordance with past practices as the sole owner
44
thereof, except that, in the case of Golden Trademarks and Guides Trademarks,
and any other trade names, imprints, colophons, or registered or unregistered
trademarks retained by the Seller, such use will be as a licensee in accordance
with and subject to the provisions of the licenses granted in Sections 5, 6 and
7, as applicable. None of the Books and Related Materials or any other
materials used in the Business, any of the trademarks, trade dress or titles to
be licensed or sold to the Purchaser hereunder or any trade dress, trade name
or logo used in the Business infringes any trademark, trade dress, trade name
or logo of any third party or any other right of any person or entity.
8.11. Contents of the Works. Nothing contained in any of the
Works published prior to the Closing, or in any Works the manuscript of which
was accepted (or was required to be accepted) prior to the Closing, and no
publication, distribution, sale or other act of the Seller prior to the Closing
with respect to the Business or the Works, Books or Related Materials, (a)
infringes upon or will infringe upon any right of any kind (including, without
limitation, any copyright, trademark, trade secret, contract right or right of
publicity or privacy) of any person or entity, (b) defames or will defame any
person or entity, (c) otherwise gives rise to, or will give rise to, a legal
cause of action by any person or entity, or (d) violates or will violate any
law, statute or regulation of or any country, state or other political entity.
No material part of any of the Works, Books and Related Materials is in the
public domain. The Seller owns the worldwide copyright to each of the titles in
the Guide Series, each ▇▇▇▇▇▇▇ Product and all Related Materials. The Seller
owns the worldwide copyright, or by contract has the exclusive right to publish,
distribute, sell and publicly display, subject only to the provisions of the
contracts listed on Schedule 8.6, all of the other Works and Books, including
all the underlying
45
material therein, as well as any materials now or previously posted on any Web
site, if any, used in connection with the Books or Related Materials, and the
contracts included in the Assets which relate to unpublished Works convey the
right to publish and distribute the Books and Related Materials to which they
relate. Schedule 8.11 lists the copyright registrations for all the Works,
including the date and number of the registrations and any renewals thereof.
None of the ▇▇▇▇▇▇▇ Products nor any other Book infringes any patent or other
intellectual property right of any third party or contains any defect or
material that will cause injury to any person or damage to any property. There
are no product liability suits pending or, to the knowledge of the Seller,
threatened with respect to the ▇▇▇▇▇▇▇ Products or any other Books. None of
the ▇▇▇▇▇▇▇ Products is patented or manufactured, distributed or sold under any
patent license to which the Seller or any of its Affiliates (as such term is
defined in Section 14(a)) is a party. No author or other licensor of any
materials in any Work in the Guide Series has revoked or will revoke any rights
granted to the Seller that are included in the Assets.
8.12. Other Liabilities. The Seller has no other liabilities or
obligations (direct or indirect, contingent or absolute, matured or unmatured)
of whatever nature relating to the Assets and for which the Purchaser will be
responsible, whether arising out of contract, tort, statute or otherwise, except
(a) as disclosed in the Schedules to this Agreement and (b) for liabilities and
obligations incurred in the ordinary course of business in an amount not greater
than $5,000 in the aggregate.
8.13. Disclosure. This Agreement, the Schedules hereto or any
other information furnished or to be furnished to the Purchaser in connection
with this Agreement and the transactions contemplated hereby do not contain any
untrue statement of a material fact or
46
omit to state any material fact necessary to make the statements contained
herein or therein not false or misleading.
9. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Seller that:
9.1. Organization and Qualification. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York and has the requisite corporate power and authority to
own, lease and operate its properties and carry on its business as it is now
being conducted.
9.2. Authorization. The Purchaser has the requisite corporate
power to enter into this Agreement and all of the Ancillary Documents to which
it is a party. The execution and delivery by the Purchaser of this Agreement
and the Ancillary Documents to which it is a party, the consummation by the
Purchaser of the transactions contemplated hereby and thereby, and the
performance by the Purchaser of its obligations hereunder and thereunder have
been, or will have been by the Closing Date, duly authorized by all necessary
corporate action on the part of the Purchaser. This Agreement has been duly
executed and delivered and constitutes the legal and binding obligation of the
Purchaser enforceable in accordance with its terms. Upon the execution and
delivery thereof by the Purchaser, the Ancillary Documents to which it is a
party will constitute legal and binding obligations of the Purchaser enforceable
in accordance with their respective terms. The execution and delivery by the
Purchaser of this Agreement and the Ancillary Documents, the consummation of the
transactions contemplated hereby and thereby, and the performance by the
Purchaser of its obligations hereunder and thereunder will not conflict with or
result in any material violation of, or constitute a material
47
default under (either immediately or with notice or lapse of time), or result in
any right to accelerate or the creation or imposition of any lien, charge or
encumbrance pursuant to, any provision of (a) the certificate of incorporation
or by-laws of the Purchaser, (b) any agreement, contract, lease, license, note,
bond, mortgage, indenture, deed of trust or other instrument to which the
Purchaser is a party or by which any of the Purchaser's properties or other
assets is bound, (c) any governmental franchise, license, permit or
authorization, or any judgment or order of any tribunal or governmental body
applicable to the Purchaser, or any of the Purchaser's properties or other
assets, or (d) any law, statute, decree, rule or regulation of any jurisdiction.
No authorization, consent or approval of, or declaration of, filing with notice
to any governmental body or authority by the Purchaser is necessary for the
execution of this Agreement or any of the Ancillary Documents, the consummation
by the Purchaser of the transactions contemplated hereby and thereby or the
performance by the Purchaser of its obligations hereunder and thereunder.
9.3. Brokers. No broker, finder or other intermediary has acted
on behalf of the Purchaser in connection with this Agreement or the transactions
contemplated hereby.
10. Additional Agreements.
10.1. Bankruptcy Court Approval. (a) As promptly as practicable
after the date hereof but in no event later than March 11, 1999 the Seller and
the Parent shall (i) file the Sale Motion (as such term is defined below) with
the Bankruptcy Court seeking entry of the Sale Order (as such term is defined
below) and (ii) file a motion for, and use their best efforts to cause the
Bankruptcy Court to enter, an order (the "Interim Order"), in form and substance
reasonably satisfactory to the Purchaser, (x) approving the performance by the
Seller and the
48
Parent of their obligations under Sections 10.2 and 10.3 of this Agreement, (y)
scheduling a hearing on the Sale Motion and prescribing the form and manner of
notice thereof and (z) requiring that any person or entity wishing to make a
higher and better offer for the Assets on the other terms set forth in this
Agreement offer an amount that is at least $750,000 more than the Purchase Price
and that any subsequent bids are in increments of not less than $100,000 above
prior bids and that any such person or entity demonstrate its ability (financial
and otherwise) to perform the obligations of the Purchaser hereunder. The Sale
Motion and the forms of the Interim Order, the Sale Order and the form of notice
shall be subject to review and comment by counsel to the Purchaser. The Seller
and the Parent agree to make promptly any filings, to take all actions and to
use their best efforts to obtain any and all other approvals and orders
necessary or appropriate for the consummation of the transactions contemplated
hereby.
As used herein, "Sale Motion" means the motion of the Seller and the
Parent seeking entry of the Sale Order.
As used herein, "Sale Order" means an order of the Bankruptcy Court, in
form and substance reasonably satisfactory to the Purchaser, ratifying the
Interim Order and approving: (i) the sale of the Assets to the Purchaser
pursuant to this Agreement free and clear of all liens, other encumbrances and
other interests of any kind of any person or entity other than the Seller
(except as otherwise provided in this Agreement); (ii) subject to Section 12.6,
the assumption by the Seller and the assignment to the Purchaser of the
agreements included in the Assets; (iii) the Escrow Agreement; (iv) a first
priority security interest of the Purchaser in the Escrow Deposit; (v) the
assumption of the Distribution Agreement, as amended by this Agreement; and (vi)
the
49
incurrence of the other obligations of the Seller and the Parent in this
Agreement (to the extent they have not already been approved by the Interim
Order) and the Ancillary Agreements.
(b) In the event an appeal is taken from the Sale Order or the
Interim Order, the Seller shall immediately notify the Purchaser of such appeal
and shall within one business day provide the Purchaser with a copy of the
related notice of appeal. The Seller shall also provide the Purchaser with
written notice of any motion or application filed in connection with any appeal
from the Sale Order or the Interim Order and copies of all papers filed in
connection with any of the foregoing.
10.2. Notice of Other Bids, etc. In the event that the Seller,
the Parent or any Representative shall receive any offer, proposal or inquiry
regarding the acquisition of all or any portion of the Assets, the Seller shall
within one business day: (i) notify the Purchaser, in writing, of such proposal
or offer, or any inquiry or contact with any person with respect thereto, and
shall, in any such notice to the Purchaser indicate in reasonable detail the
identify of the offeror and the terms and conditions of any proposal and (ii)
after entry of the Sale Order, notify any such offeror of the entry of the Sale
Order and the fact that the Seller is neither considering nor permitted to
consider any such proposal or offer.
10.3. Break-Up Fee. In the event that, notwithstanding the
execution of this Agreement,
(a) The Seller sells, or agrees to sell, or the Bankruptcy Court
approves any sale of, all or substantially all of the Assets or any material
portion of any of the three (3) principal business segments included in the
Business to any person or entity other than
50
the Purchaser or any of its affiliated companies and such sale closes on or
prior to December 31, 1999; provided, however, that if this Agreement
terminates by reason of a material breach by the Purchaser of its obligations
under this Agreement, the Break-Up Fee (as defined below) will not be payable;
or
(b) This Agreement is terminated by the Purchaser pursuant to
Section 16.1(a)(ii) or by the Seller pursuant to Section 16.1(a)(iii) or if this
Agreement terminates pursuant to Section 16.1(b) other than by reason of a
material breach by the Purchaser of its obligations under this Agreement;
provided, however, that if, prior to or at the time of such termination or
within 30 days thereof (provided that the Seller has made a motion to that
effect not later than five business days of such termination), the Seller has
assumed the Distribution Agreement and such assumption has been approved by the
Bankruptcy Court pursuant to an order of the Bankruptcy Court, the Break-Up Fee
will not be payable unless a sale described in Section 10.3(a) occurs; or
(c) This Agreement is terminated (i) by either the Purchaser or
the Seller pursuant to Section 16.1(a)(iv), (ii) by the Purchaser because of a
failure to satisfy the condition to close set forth in part 2 of Schedule 12.6
or (iii) by the Seller pursuant to Section 16.1(a)(iii) where the delay in
closing results from the failure of the Seller, despite its best efforts, to
satisfy the condition set forth in part 2 of Schedule 12.6; provided, however,
that if, prior to or at the time of such termination or within 30 days thereof
(provided that the Seller has made a motion to that effect not later than five
business days of such termination), the Seller has assumed the Distribution
Agreement and such assumption has been approved by the Bankruptcy Court pursuant
to an order of
51
the Bankruptcy Court, the Break-Up Fee will not be payable unless a sale
described in Section 10.3(a) occurs.
then, following any such event, the Seller promptly will pay to the Purchaser a
fee (the "BreakUp Fee") equal to the sum of (i) three percent (3%) of the
Purchase Price (as set forth in Section 2.1, but not subject to any of the
adjustments provided for in Sections 2.1(c) and 2.5-2.7), and (ii) all of the
reasonable out-of-pocket expenses (including, but not limited to, attorneys' and
accountants' fees) incurred by the Purchaser (whether prior or subsequent to the
execution of this Agreement but not after the submission of a bid referred to in
Section 10.1(a)(ii)(2)) in connection with the transactions contemplated by this
Agreement up to a maximum of $250,000 (the "Expenses"); provided, however, that
in the case of an event described in Section 10.3(c) and if the proviso to
Section 10.3(c) has been satisfied, the Break-Up Fee will instead be equal to
the sum of (A) three percent (3%) of the amount actually received by the Seller
for the Assets or any portions thereof sold in one or more transactions prior to
December 31, 1999, which amount shall be paid to the Seller promptly upon the
Seller's receipt of such amount and (B) the Expenses.
10.4. Conduct of Business Prior to the Closing. (a) The Seller
agrees that, between the date of this Agreement and the Closing Date, except as
permitted by the prior written consent of the Purchaser: (x) the Business shall
be conducted only in, and the Seller shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice; and
(y) the Seller shall use its best efforts to preserve the Business substantially
intact, to preserve the value of the Assets in existence on the date hereof, to
comply with all material governmental and regulatory requirements applicable to
the Business or the Assets and
52
to preserve the present relationships of the Business with customers, suppliers
and other persons with which the Business has significant business relations.
By way of amplification and not limitation, except as contemplated by this
Agreement, the Seller shall not, between the date of this Agreement and the
Closing Date, directly or indirectly, do, or propose or agree to do, any of the
following without the prior written consent of the Purchaser:
(i) make any tax election with respect to the Assets;
(ii) sell (except in the ordinary course of business),
assign, pledge, dispose of or encumber any of the Assets;
(iii) except in the ordinary course of business,
alter, amend, or settle any dispute under any agreement, contract, or
right of the Seller relating to the Business or the Assets;
(iv) fail to defend or initiate any material matter
or proceed with any material matter before any governmental, regulatory
or administrative authorities that is necessary to protect the Assets,
including, without limitation, any appeal taken from the entry of the
Sale Order or any motion or application filed in connection therewith;
(v) fail to (A) maintain the Assets in customary
repair, order and condition in all material respects, (B) maintain
insurance for the Assets reasonably comparable in all material respects
to that in effect on the date of this Agreement or (C) in the event of
a casualty, loss or damage to any of the Assets prior to the Closing
Date for which the Seller is insured, either repair or replace such
damaged assets or, at the option of the Purchaser, transfer the
proceeds of such insurance to the Purchaser;
53
(vi) fail to comply with all material legal and
regulatory requirements and all material contractual obligations
applicable to the Assets;
(vii) terminate, replace, amend or otherwise modify any
of the agreements included in the Assets or waive any of the
obligations of the parties (other than the Seller) to such agreements
or the Seller's rights under any of such agreements; or
(viii)enter into any contract, commitment or lease in
relation to the Business or the Assets which, if entered into on the
date hereof, would be required to be disclosed on a Schedule to the
Agreement.
(b) The Seller agrees to consider in good faith any suggestions
made by the Purchaser with respect to actions to be taken or not taken in the
conduct of the Business between the date hereof and the Closing Date which
action or inaction is necessary or desirable, in the opinion of the Purchaser,
to preserve the value of the Business or any of the Assets. If the Purchaser
suggests to the Seller that it is necessary or desirable for the preservation of
the value of the Business or any of the Assets, in the Purchaser's opinion, that
an action not be taken and the Seller takes such action notwithstanding such
suggestion, then, in addition to any other remedies of the Purchaser, the
Purchaser shall not be obligated under Section 1.3 to assume, pay, perform or
discharge any obligation or liability arising as a result of such action. The
Purchaser shall have no liability, under this Agreement or otherwise, for any
action or inaction of the Seller that had been suggested by the Purchaser.
11. Conditions to the Obligations of the Seller. The obligations of
the Seller to effect the transactions contemplated hereby are subject to the
fulfillment to its satisfaction, prior to or at the Closing, of the following
conditions:
54
11.1. Representations and Warranties. The representations and
warranties of the Purchaser contained herein shall have been true and correct in
all material respects when made and shall be true and correct in all material
respects at and as of the Closing as though such representations and warranties
were made at and as of the Closing (except for representations and warranties
that relate to a specific date).
11.2. Performance. The Purchaser shall have performed and
complied in all material respects with each covenant or condition required by
this Agreement to be performed or complied with by it before or at the Closing.
11.3. Closing Certificate. The Purchaser shall have delivered a
certificate, dated the Closing Date and executed by its chief executive officer
or its chief operating officer, certifying that the conditions set forth in
Sections 11.1 and 11.2 have been fulfilled.
11.4. Opinion. The Seller shall have received from Patterson,
Belknap, ▇▇▇▇ & ▇▇▇▇▇ LLP, counsel to the Purchaser, an opinion, dated the
Closing Date, addressed to the Seller and in substantially the form set forth in
Exhibit B.
11.5. Escrow Agreement. The Purchaser and the Escrow Agent
shall have executed and delivered the Escrow Agreement.
11.6. Assumption Agreement. The Purchaser shall have executed
and delivered the Assumption Agreement.
11.7. Sale Order. The Sale Order shall have been entered.
12. Conditions to the Obligations of the Purchaser. The obligations
of the Purchaser to effect the transactions contemplated hereby are subject to
the fulfillment to its
55
satisfaction, before or at the Closing, of the following conditions, any one or
more of which may be waived by the Purchaser in its sole discretion:
12.1. Representations and Warranties. The representations and
warranties of the Seller contained in this Agreement and the Schedules hereto
shall have been true and correct in all material respects when made and shall be
true and correct in all material respects at and as of the Closing as though
such representations and warranties were made at and as of the Closing (except
for representations and warranties that relate to a specific date).
12.2. Performance. The Seller shall have performed and complied
in all material respects with each covenant and condition required by this
Agreement to be performed or complied with by it before or at the Closing.
12.3. Closing Certificate. The Seller shall have delivered a
certificate, dated the Closing Date and executed by its chief executive officer
or its chief operating officer certifying that the conditions set forth in
Sections 12.1 and 12.2 have been fulfilled.
12.4. Opinion. The Purchaser shall have received from Proskauer
Rose LLP, counsel to the Seller, an opinion, dated the Closing Date, addressed
to the Purchaser and in substantially the form set forth in Exhibit C.
12.5. Escrow Agreement. The Seller and the Escrow Agent shall
have executed and delivered the Escrow Agreement.
12.6. Consents. The Seller shall have received and delivered to
the Purchaser (a) the consents listed on Schedule 12.6, (b) the consents of all
creditors of the Parent, the Seller or any Affiliate whose consent is required
for the transactions contemplated hereby and of all parties to contracts
included in the Assets whose consent is necessary for the assignment of
56
such contracts and (c) a waiver of the right to terminate any publishing
agreement upon a change of editor from all authors or other licensors of Works
having such a right; provided, however, that if the Seller has been unable to
obtain any such consent or waiver with respect to, or the Bankruptcy Court has
not approved the assumption of, (i) any of the publishing agreements with
authors or other licensors listed on Schedule 12.6 (except those indicated as
conditions to Closing), this condition shall be deemed satisfied, and such
agreement, any Work(s) covered thereby and any copies of such Works and any
other agreements relating solely thereto shall be excluded from the Assets (and
any reference to the Assets in the Agreement shall exclude such agreements and
Works) and the Purchase Price shall be reduced by the value ascribed to such
agreement on Schedule 12.6 and the value of such copies at the rate per copy
shown on Schedule 2.1(a) or (ii) any other agreement listed on Schedule 12.6
(except those indicated as conditions to Closing), such agreement shall be
excluded from the Assets (and any reference to he Assets in this Agreement shall
exclude such agreement) and the Purchase Price shall be reduced by the value
ascribed to such agreement on Schedule 12.6; and provided further, the Seller
will use good faith efforts to obtain the consent of ▇▇▇ ▇▇▇▇▇▇▇▇ to the
assignment of the Consulting Agreement, dated November 17, 1998, between the
Seller and ▇▇. ▇▇▇▇▇▇▇▇ and his agreement to provide services to the Purchaser
pursuant to the terms of such Consulting Agreement, but, if notwithstanding its
good faith efforts to obtain such consent and agreement, the Seller is unable to
obtain such consent and agreement, the Seller will make arrangements reasonably
satisfactory to the Purchaser for the timely provision of those services by ▇▇.
▇▇▇▇▇▇▇▇ or other person(s) reasonably satisfactory to the Purchaser at no
additional cost to the Purchaser beyond what it otherwise would have paid ▇▇.
▇▇▇▇▇▇▇▇ under the Consulting Agreement.
57
12.7. Agreements to Deliver. The Purchaser shall have received
letters from all third parties in possession of any of the Assets, including,
without limitation, any Production Materials or any inventory of Books or
Related Materials, agreeing to deliver upon request all Assets in their
possession to the Purchaser without regard to any amounts, if any, owing by the
Seller to such third party; provided that failure to receive letters from one or
more of the third parties listed on Schedule 8.4 and marked with an asterisk
shall not be a reason not to close but shall give rise to Damages (as such term
is defined in Section 13.2) and, provided, further, that the Seller hereby
indemnifies and holds harmless the Purchaser from any Damages resulting from
failure of any third party to so deliver such Assets.
12.8. Sale Order; No Stay. The Sale Order shall have been
entered and become final. The Sale Order shall be considered "final" for
purposes hereof (a) if it has not been reversed, modified or stayed, the time
for appeal therefrom or to seek review, reconsideration or rehearing thereof
(excluding the time to move for relief from a final order or judgment under Rule
60(b) of the Federal Rules of Civil Procedure) has been waived or expired, and
no appeal, petition for certiorari or other proceeding for reargument, review,
reconsideration, rehearing or leave to appeal (including a motion for relief
from a final order or judgment under said Rule 60(b)) is pending, and (b) there
has not been entered by any court of competent jurisdiction a stay of the
consummation of the transaction contemplated hereby and no motion for a stay is
pending or, if such a stay shall have been entered, such stay shall no longer be
in effect. The Purchaser shall waive the condition that the Sale Order shall
have become final (the "finality condition") unless (i) any person has alleged
or claimed that, if the Closing occurred, the Purchaser's purchase of the
Assets would not be in good faith and (ii) the Purchaser's counsel has
58
concluded in its good-faith professional judgment that there is a risk that the
Purchaser's purchase of the Assets and licensing of the Guides Trademarks and
the Golden Trademarks hereunder would not be protected as provided in Section
363(m) of the Bankruptcy Code. If the Seller's counsel informs the Purchaser's
counsel that the Seller's counsel has concluded in its good-faith professional
judgment that there is no risk that the Purchaser's purchase of the Assets and
licensing of the Guides Trademarks and the Golden Trademarks hereunder would
fail to be protected as provided in Section 363(m) of the Bankruptcy Code, then
the First Reduction Date provided in Section 2.1(c)(i)(2) shall be April 22,
1999 instead of April 12, 1999. If the finality condition is not waived by the
Purchaser as provided above, then the Seller's counsel and the Purchaser's
counsel shall work together to expedite the Sale Order becoming final.
12.9. Instruments of Assignment; Other Agreements. The Seller
shall have delivered to the Purchaser such assignments and other instruments
effecting or evidencing the transfers contemplated hereby as the Purchaser shall
reasonably request.
12.10. No Financial Obligations with Respect to "Adequate
Assurance". The Bankruptcy Court shall not have entered any order requiring the
Purchaser to undertake any financial obligations to provide "adequate
assurance," beyond the assumption of liability provided for in this Agreement,
as such term is used in Section 365 of the Bankruptcy Code, to any party to any
agreement assigned to the Purchaser pursuant hereto.
13. Survival of Representations and Warranties; Indemnification.
13.1. Survival of Representations and Warranties. The
representations and warranties contained in Sections 8 and 9 of this Agreement
shall survive any investigation by any party and the Closing but shall expire
and be extinguished on the second anniversary of the
59
Closing Date, except that (a) the representations and warranties set forth in
Section 8.3 with respect to Works in the Guide Series and in the third sentence
of Section 8.11 shall survive until the fifth anniversary of the Closing Date
and (b) the representations and warranties in Section 8.10, insofar as they
relate to the License and the Additional License, shall survive for the term of
the respective license periods. The representations and warranties in Section
5.1(g) and Section 6.1(f) will expire and be extinguished at the end of the term
of the License and Additional License, respectively.
13.2. Indemnification by the Seller and the Parent. From and
after the Closing, the Seller and, with respect to the covenants set forth in
Sections 5.2, 6.2 and 14, the Parent agree to indemnify the Purchaser, and hold
the Purchaser harmless, from and against any out-of-pocket loss, liability,
damage, penalty, claim or expense (including reasonable attorneys' and
consultants' fees and other costs and expenses) (collectively, "Damages")
incurred or sustained by the Purchaser as a result of or relating to:
(a) the non-fulfillment or breach of any covenant or agreement
of the Seller or the Parent set forth in this Agreement;
(b) subject to Section 13.1, the breach of any representation
or warranty of the Seller or the Parent set forth in this Agreement;
(c) any investigation, claim, lawsuit, arbitration, or
regulatory or administrative suit, proceeding, order or action relating to, or
arising out of, any alleged acts, omissions or activities of the Seller or the
Parent before the Closing Date, whether or not disclosed herein or in the
Schedules hereto;
60
(d) (i) any claim by any employee of the Seller or the Parent
or (ii) any claim brought within five years (if the claim relates to any of the
Works in the Guide Series) or two years (if the claim relates to any of the
other Works) from the Closing Date by any consultant, editor, author,
illustrator, artist, photographer or other person who has provided or claims to
have provided any materials included, or has been involved or claims to have
been involved in any other way, in any of the Works, Books and Related Materials
or any successor, heir, estate, executor, administrator or assignee thereof,
that (A) does not arise from an explicit provision of the contracts assumed by
the Purchaser pursuant to this Agreement (each such contract, an "Assumed
Agreement") and required to be performed after the Closing, or (B) challenges,
or asserts any limit on the Purchaser's ownership of or right to exploit without
contractual or other limit (other than the obligation to pay royalties pursuant
to an Assumed Agreement) the copyrights in the Guide Series for their full
terms, including any extensions or renewals thereof, it being the intention of
this Agreement that the Purchaser is not assuming any obligation to any such
employee of the Seller or the Parent or any such consultant, editor, author,
illustrator, artist, photographer or other person, or any other obligation not
explicitly assumed hereunder; provided, however, that this Section 13.2(d) does
not apply to a revocation or purported revocation of foreign language rights;
(e) any claim made against the Purchaser covered by Section
10.A. of the Agreement, dated October 15, 1996, between ▇▇▇▇▇ Leadership Center,
Inc. and the Seller;
(f) any refusal by any third party to turn over any of the
Assets to the Purchaser;
61
(g) any attempt by the Seller, the Parent, or a trustee in
bankruptcy, creditor or creditors' committee of either of them to avoid any of
the transactions or transfers contemplated by, or to reject, this Agreement, any
provision hereof or any instrument delivered pursuant hereto or any other
attempt to do anything described in Section 2.4(f)(i) or any motion or adversary
proceeding brought against the Purchaser in or related to any bankruptcy or
insolvency proceeding of the Seller or the Parent in any way relating to or
arising out of this Agreement or the Distribution Agreement; and
(h) any attempt by the Seller, the Parent, or a trustee in
bankruptcy, creditor or creditors' committee of either of them to avoid any of
the transactions contemplated by, or to reject, any of the orders, contracts,
commitments and other agreements described in Section 1.1(e), whether such
attempt occurs before or after the Closing.
13.3. Indemnification by the Purchaser. From and after the
Closing, the Purchaser agrees to indemnify the Seller, and hold the Seller
harmless from and against, Damages incurred or sustained by the Seller as a
result of or relating to:
(a) the non-fulfillment or breach of any covenant or agreement
of the Purchaser set forth in this Agreement;
(b) subject to Section 13.1, the breach of any representation
or warranty of the Purchaser set forth in this Agreement; and
(c) any investigation, claim, lawsuit, arbitration, or
regulatory or administrative suit, proceeding, order or action relating to, or
arising out of, any acts, omissions or activities of the Purchaser in the
operation of the Business after the Closing Date.
62
13.4. Indemnification Procedures. A party entitled to
indemnification hereunder is referred to herein as an "Indemnitee" and a party
obligated to indemnify an Indemnitee hereunder is referred to herein as an
"Indemnitor." Promptly after receipt by an Indemnitee of notice of any claim
or the commencement of any action, or upon discovery of any facts which an
Indemnitee believes may give rise to a claim for indemnification from an
Indemnitor hereunder, such Indemnitee will, if a claim in respect thereof is to
be made against an Indemnitor under this Section 13, notify such Indemnitor in
writing in reasonable detail of the claim or the commencement of such action.
If any legal action or proceeding asserting such a claim is brought against an
Indemnitee, it shall notify the Indemnitor thereof, such notice to include the
name of the counsel Indemnitee proposes to use to defend such action or
proceeding, which counsel shall be subject to the approval of Indemnitor, such
approval not to be unreasonably withheld or delayed. The Indemnitor shall be
entitled to participate in the defense of a third party claim with its own
counsel at its own expense, and to settle or compromise any such claim or
action; provided, however, that any such settlement or compromise shall be
effected only with the consent of the Indemnitee, which consent shall not be
unreasonably withheld; and provided further, that if the Indemnitee rejects a
settlement that would have included a complete general release of the Indemnitee
from any further liability, would not have imposed any liability or obligations
on Indemnitee not paid for (or, in the case of any obligations other than
obligations to pay money, not fully compensated for) by the Indemnitor, and
would not have required an admission of wrong doing by Indemnitee, its right to
indemnification from the Indemnitor with respect to that claim shall be limited
to the amount that would have been payable by the Indemnitor under such
settlement or compromise, plus all expenses through the
63
date of such rejection for which Indemnitor is responsible pursuant to this
Section 13. The parties hereto agree to render to each other, at Indemnitor's
expense if any out-of-pocket costs are involved, such assistance as may
reasonably be requested in order in insure the proper and adequate defense of
any such claim or proceeding.
13.5. Limitation on Indemnification. In the event of any claim
for indemnification under Section 13.2(b), 13.2(d)(i) or 13.3(b), the Indemnitee
shall not be entitled to indemnification therefor unless and until the
Indemnitee has sustained Damages in excess of $175,000 in the aggregate from all
such claims, in which event the Indemnitee shall be entitled to the full amount
of all Damages suffered or incurred including such $175,000 of Damages. In the
event of any claim for indemnification under Section 13.2(d)(ii), the Indemnitee
shall not be entitled to indemnification therefor unless and until the
Indemnitee has sustained Damages in excess of $100,000 in the aggregate from all
such claims, in which event the Indemnitee shall be entitled to the full amount
of all Damages suffered or incurred including such $100,000 of Damages.
14. Noncompetition.
(a) The Seller and the Parent agree that neither they nor any
of their respective Affiliates (as such term is defined below) will, during a
period of eight and one-half years commencing on the Closing Date, directly or
indirectly:
(i) launch, sponsor, publish, distribute, sell,
market, endorse or otherwise participate or assist in
any capacity whatsoever in the preparation, publication,
distribution, sale or marketing of any book or other work in
whatever form or medium that competes with the any of the
64
Guides Series, with any present or future titles in any of the
Guide Series or with any of the ▇▇▇▇▇▇▇ Products;
(ii) launch, sponsor, publish, distribute,
sell, market, endorse or otherwise participate or assist in
any capacity whatsoever in the preparation, publication,
distribution, sale or marketing of any nature guide, field
guide, coin guide, coin product or any book or other work in
whatever form or medium that contains substantial coverage of
any subject matter covered (A) by any past, present or future
title in any of the Guides Series, or (B) by any of the
▇▇▇▇▇▇▇ Products, except in each case books specifically
marketed to and suitable only for children under age nine;
(iii) make use of, or authorize anyone else to
make use of, for any purpose whatsoever, the Guides
Trademarks;
(iv) do any act or thing that the Seller, the
Parent or an Affiliate of the Seller, knows, or reasonably
should know, will cause, bring about or induce any
interference with, disturbance to or interruption of any
relationships of the Purchaser with the authors, packagers,
editors, illustrators, preparers of art work, production
vendors, customers or any other person or entity involved in
the preparation, publication, distribution or sale of the
Works, Books and Related Materials; or
(v) make any use whatsoever of documents or
information included in the Assets except for the preparation
of tax returns, litigation, financial reporting and other
reasonable requirements.
65
For the purposes of this Agreement, an "Affiliate" of the Seller or the
Parent is any entity or individual controlling, controlled by or under common
control with the Seller or the Parent, whether now or in the future, provided,
however, that it does not include (i) Warburg Pincus Ventures, L.P., (ii)
Warburg, ▇▇▇▇▇▇ & Co., (iii) ▇.▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Company; (iv) holders of
7.65% Senior Notes due 2000 issued by the Seller solely by reason of their
status as holders, (v) holders of 8-3/4% Convertible Trust Originated Preferred
Securities issued by the Seller solely by reason of their status as holders or
(vi) any individual who formerly was employed or served as an officer or
director of the Seller after such individual has ceased to be so employed or
serving. Any breach of this Section 14 by an Affiliate of the Seller or the
Parent shall be deemed to also be a breach by the Seller and the Parent to the
same extent as if the Seller and the Parent had themselves committed the breach.
(b) The Seller and the Parent will not sell or otherwise
transfer all or substantially all of their respective assets, or any of the
Golden Trademarks, without requiring the purchaser thereof to confirm in writing
to and for the benefit of the Purchaser its acceptance of the provisions of this
Section 14, except that the provisions of Sections 14(a)(i) and 14(a)(ii) shall
not be deemed to limit the right of any such purchaser to publish and sell any
work, so long as these are not identified by any trademark or trade name, or
published under any imprint, consisting of or containing "Golden" or any of the
Golden Trademarks.
(c) The Seller and the Parent expressly acknowledge that the
provisions of this Section 14 form an important part of the consideration being
received by the Purchaser and that any failure by either of them, or any
Affiliate of either of them, to comply strictly with the terms of this Section
14 will materially diminish the value to the Purchaser of the
66
Business and the Assets and will result in irreparable injury to the Purchaser.
The Seller and the Parent expressly agree that upon any breach or violation or
threatened breach or violation of this Section 14 by either of them or their
respective Affiliates, the Purchaser, in addition to all other remedies, shall
be entitled, as a matter of right, to temporary, preliminary and permanent
injunctive relief, without the necessity of posting a bond. If for any reason
any court of competent jurisdiction determines that any of the provisions of
Section 14(a) or Section 14(b) are too broad or unreasonable as written and
would therefore be unenforceable, then such provisions shall be deemed modified
and fully enforceable as so modified to the extent that such court would find
them enforceable under the circumstances.
15. Employees. The Purchaser shall have the right, but not the
obligation, to make temporary or regular offers of employment to one or more
editors or other staff employed by the Seller in connection with the Business,
but the Purchaser shall not be deemed thereby to have assumed any obligation of
the Seller or the Parent to such employees, whether to pay salary or otherwise
under any of the Seller's or the Parent's employee benefit plans or arrangements
(including, for these purposes, any severance pay plans or programs maintained
by the Seller or the Parent), nor shall any such employment result in the
Purchaser assuming any obligation of the Seller or the Parent to such employees
or any other employees, former employees, or any of their spouses or dependents,
under Section 4980B(f) of the Internal Revenue Code of 1986, as amended, or
Section 601 et seq. of the Employee Retirement Income Security Act of 1974, as
amended.
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16. Termination.
16.1. Termination. (a) This Agreement may be terminated prior to
the Closing:
(i) by mutual consent of the Purchaser and the Seller;
(ii) by either the Purchaser or the Seller, if
there has been a material misrepresentation by the other
or a material breach by the other of the representations,
warranties and covenants set forth herein;
(iii) by either the Purchaser or the Seller
after the First Reduction Date or the Second Reduction Date;
provided that the terminating party must give written notice
to the non-terminating party of such termination within two
(2) business days following such date; or
(iv) by either the Purchaser or the Seller if the
Seller has failed to obtain, by the date on which the Closing
would otherwise occur under the terms of this Agreement, any
of the consents or the Bankruptcy Court does not approve the
assignment and assumption of any agreement for which a price
or method of pricing is stated on Schedule 12.6 and the
aggregate adjustment in the Purchase Price resulting therefrom
determined using such methodology (disregarding the effect on
the Purchase Price of exclusion of copies of Works affected)
exceeds $1,000,000.
(b) Notwithstanding the foregoing, this Agreement shall
terminate automatically on May 12, 1999 if the Closing has not occurred by such
date, time being of the essence as to such deadline.
16.2. Effect of Termination. In the event of the termination of
this Agreement as provided in Section 16.1, this Agreement will become void and
of no further force
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and effect, except for the provisions of Section 10.3 regarding the Break-Up Fee
and any liability for any breach of the terms of this Agreement prior to such
termination.
17. General Provisions.
17.1. Modification; Waiver. This Agreement may be amended or
modified only by a written instrument executed by the parties hereto. Any of
the terms and conditions of this Agreement may be waived in writing at any time
on or before the Closing Date by the party entitled to the benefits thereof.
17.2. Entire Agreement, etc. This Agreement, together with the
Schedules and Exhibits hereto and the Ancillary Documents, constitutes the
entire agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements and understandings of the parties in connection
therewith.
17.3. Expenses. Except as provided in Section 10.3, each party
shall pay its own expenses incident to the preparation and performance of this
Agreement.
17.4. Further Actions. Each party shall execute and deliver
such certificates, agreements and other documents and take such other actions
as may reasonably be requested by the other party in order to consummate or
implement the transactions contemplated hereby, including without limitation
any documents necessary to confirm or perfect the Purchaser's ownership or
rights in trademarks and copyrights.
17.5. Post-Closing Access. In connection with any matter
relating to any period before, or any period ending on, the Closing Date, the
Purchaser will, upon the request and at the expense of the Seller, permit the
Seller and its representatives full access at all reasonable times to the books
and records of the Business which shall have been transferred to
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the Purchaser as shall be reasonably requested by the Purchaser for tax or
accounting purposes or any other reasonable purpose.
17.6. Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed, registered mail, first-class postage paid,
return receipt requested, or any other delivery service with proof of delivery:
If to the Seller:
Golden Books Publishing
Company, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to the Purchaser:
St. ▇▇▇▇▇▇'▇ Press, Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Operating Officer
with copies to:
St. ▇▇▇▇▇▇'▇ Press, Incorporated
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
and
▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇
& Tyler LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
or to such other address or to such other person as either party hereto shall
have last designated by notice to the other party.
17.7. Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but shall not be assignable, by operation of law or
otherwise, by either party hereto without the prior written consent of the other
party; provided that (a) this Agreement and any of the provisions (including
without limitation the licenses and rights granted pursuant to Sections 5, 6 and
7 and the benefits of the covenants in Section 14) hereof may be assigned by the
Purchaser to one or more of its affiliated companies and (b) the Purchaser may
assign the License and the Additional License in accordance with Section 5.4 and
Section 6.4, respectively, and provided further, that the Seller may assign this
Agreement or portions thereof to a purchaser of all or substantially all of its
assets or of the Golden Trademarks and associated good will that enters into an
agreement, for the benefit of and satisfactory to the Purchaser, to recognize
the licenses and rights granted in Sections 5, 6 and 7 and to adhere to the
covenants set forth in Section 14. Any assignment not permitted hereunder shall
be invalid.
17.8. Counterparts. This Agreement may be executed in several
counterparts, each of which is an original but all of which shall constitute one
instrument.
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17.9. Headings. The section and other headings in this
Agreement are for convenience of reference only and shall not be deemed to
alter or affect the meaning or interpretation of any provision hereof.
17.10. Governing Law. The validity, performance and enforcement
of this Agreement and all Ancillary Documents shall be governed by the laws of
the State of New York, without giving effect to the principles of conflicts of
law thereof.
72
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
ST. ▇▇▇▇▇▇'▇ PRESS, INCORPORATED
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
Title: Executive VP & COO
GOLDEN BOOKS PUBLISHING COMPANY,
INC.
By: /s/ PhilipGalanes
-------------------------------
Title: SVP and General Counsel
For the purpose only of Sections 5.2,
6.2, 10.1, 10.2 and 14 of the
foregoing Asset Purchase Agreement
and the indemnification provisions
of Section 13 related to its
obligations under such Sections 5.2,
6.2 and 14.
GOLDEN BOOKS FAMILY ENTERTAINMENT,
INC.
By: /s/ PhilipGalanes
-------------------------------
Title: SVP and General Counsel
73