This Agreement is
made this 27 th day of August, 2008, by and among The Rowman
& Littlefield Publishing Group, Inc., a Maryland corporation
with its principal place of business at 4501 Forbes Boulevard,
Lanham, Maryland 20706 (hereinafter “Parent”),
Sundance/Newbridge, LLC, a Delaware limited liability company and a
wholly-owned subsidiary of Parent (hereinafter
“Buyer”), for the limited purposes provided herein,
Haights Cross Operating Company, a Delaware corporation with its
principal place of business at 10 New King Street, White Plains,
New York 10604 (“Haights”), and Sundance/Newbridge
Educational Publishing, LLC, a Delaware limited liability company
and a direct wholly-owned subsidiary of Haights with its principal
place of business at One Beeman Road, P.O. Box 740, Northborough,
Massachusetts 01532 (hereinafter “Seller”), and shall
be deemed effective as of 12:01 a.m. Eastern time on
August 27, 2008 (the “Effective Time”).
WHEREAS, Seller is
interested in selling certain of its assets, and Buyer is
interested in acquiring said assets; and
WHEREAS, the
parties entered into a Letter of Agreement dated May 19, 2008
(the “Letter of Intent”) with respect to the proposed
sale and purchase of said assets; and
WHEREAS, the
parties desire to enter into a definitive agreement with respect to
the sale and purchase of said assets of Seller.
NOW, THEREFORE,
for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as
follows:
1. At the
time of the closing (the “Closing”), which will occur
simultaneously with the execution and delivery of this Agreement,
but effective as of the Effective Time, Buyer shall purchase from
Seller, and Seller shall sell to Buyer, free and clear of all
liens, claims and encumbrances of any kind, nature or description,
the assets of Seller described below (as the same exist or are in
effect as of the Effective Time):
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(a)
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Seller’s rights and claims
under all contracts, licenses and commitments (the
“Contracts”) between Seller and authors and other
persons and entities, including, without limitation, all rights of
publications, distribution and sale, exclusively relating to
Seller’s owned and distributed titles (hereinafter referred
to as “Seller’s Owned and Distributed Titles”),
(including, without limitation, the Contracts listed on
Schedule 1(a)-1 hereto and Seller’s Owned and
Distributed Titles listed on Schedule 1(a)-2
hereto;
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(b)
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All
raw materials, work in progress, new book contracts, inventories of
finished books (including, without limitation the inventory of
Seller as of the Effective Time set forth on
Schedule 1(b)-1 , collectively, the
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“Inventory”), prepaid
expenses of any kind (including, without limitation, author
advances and royalties, production costs on published and
unpublished Seller’s Owned and Distributed Titles,
commissions and advertising costs, including any of the foregoing
listed on Schedule 1(b)-2 hereto), promotional
materials and catalogs exclusively relating to Seller’s Owned
and Distributed Titles;
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(c)
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Book plates, flats and film
negatives exclusively relating to Seller’s Owned and
Distributed Titles (which shall be available for immediate transfer
to Buyer’s printer should Buyer decide to move
them);
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(d)
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All
U.S. and foreign copyrights, trademarks, tradenames, goodwill,
domain names and registrations thereof, websites, URL’s,
email addresses and all other intellectual and intangible property
rights exclusively relating to Seller’s Owned and Distributed
Titles and imprints, including film options and other licenses to
licensees (“Intellectual Property Rights”), including,
without limitation, the copyrights, trademarks, tradenames, domain
names, URL’s and email addresses listed on
Schedule 1(d) hereto;
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(e)
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All
research materials, marketing materials and product development
assets relating to Seller’s Owned and Distributed
Titles;
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(f)
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The
convention exhibit utilized by Seller in connection with the sale
of Seller’s Owned and Distributed Titles.
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(g)
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All
mailing lists, customer lists and sales reports by title and by
customer to the extent available in Seller’s computerized
systems and exclusively relating to Seller’s Owned and
Distributed Titles;
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(h)
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Computer hardware and computer
software and files, to the extent transferable by law, exclusively
related to editorial, marketing, production, sales and order
fulfillment of Seller’s Owned and Distributed Titles,
including, without limitation, the computer hardware and computer
software listed on Schedule 1(h) hereto utilized by
Seller in connection with the publication, distribution and sale of
Seller’s Owned and Distributed Titles;
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(i)
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[reserved];
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(j)
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The
sole and exclusive right to use the trade names “Sundance
Publishing” and “Newbridge Educational
Publishing” as an imprint of Buyer or its designee in
connection with its sale of Seller’s Owned and Distributed
Titles and any logos or designs exclusively relating thereto.
Notwithstanding the foregoing, Buyer acknowledges that Seller
and/or its affiliates may continue to sell, solely as it relates to
the Comprehensive Strategies Kit product line, existing inventory
and inventory ordered prior to September 30, 2008 which bears
the trade names Sundance Publishing. Following September 30,
2008, all new inventory orders for the
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Comprehensive Strategies Kit product
line shall bear a name other than Sundance Publishing or Newbridge
Educational Publishing; and
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(k)
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All
accounts receivable of Seller as of the Effective Time (the
“Closing A/R”), as listed on the accounts receivable
subledger on Schedule 1(k) hereof.
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The assets listed
above in subsections (a) through (k), together with any other
assets identified on the Schedules attached hereto, are hereafter
collectively referred to as the “Assets”.
Notwithstanding
anything to the contrary contained herein, Seller shall not sell,
convey, assign or transfer to Buyer, and Buyer shall not acquire or
have any rights to acquire the following assets of Seller
(collectively, the “Excluded Assets”):
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(a)
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Any
cash on hand as of the Effective Time;
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(b)
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The
Comprehension Strategies Kit product line (which product line was
transferred by Seller to an affiliate prior to the Effective Time);
and
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(c)
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Any
other assets or properties of Seller that is not an Asset as of the
Effective Time.
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2. From and
after Closing, Buyer shall pay, perform, discharge or otherwise
satisfy the following (collectively, the “Assumed
Liabilities”): (i) the following liabilities of Seller
as of the Effective Time: all debts, liabilities and obligations
relating to the Assets, but only to the extent that such debts,
liabilities and obligations arise from Buyer’s ownership and
operation of the Assets from and after the Effective Time
(including obligations arising under the Contracts), and
(ii) pay to the individuals listed on Schedule 2 hereof
who accept employment with the Buyer (the “Continuing
Employees”), the amounts which are set forth on
Schedule 2 hereof (the “Employee Payment
Amounts”).
Notwithstanding
anything to the contrary contained herein, other than the Assumed
Liabilities, Seller shall remain solely responsible for and shall
retain, pay, perform and discharge the following liabilities of
Seller (collectively, the “Excluded
Liabilities”):
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(a)
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All
accounts payable outstanding as of the Effective Time or arising
after the Effective Time as a result of purchase orders placed by
Seller prior to the Effective Time;
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(b)
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All
liabilities associated with any claims, demands, suits or causes of
actions occurring prior to the Effective Time or for events
occurring prior to the Effective Time;
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(c)
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All
liabilities for taxes or employee related issues, including, but
not limited to all wages, severance (other than the Employee
Payment Amounts), vacation and sick leave accruals and other
benefits due or claimed by Seller’s employees;
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(d)
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All
debts, liabilities and obligations relating to the Assets existing
immediately prior to the Effective Time, including, but not limited
to, all unpaid royalties earned and outstanding as of the Effective
Time; and
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(e)
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Any
other debts, liabilities and obligations not specifically assumed
by Buyer pursuant to this Section 2.
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3. The asset
purchase and sale contemplated by this Agreement is expressly
subject to each of the following conditions:
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(a)
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the
Release of liens in favor of Seller’s bank lenders on the
Assets in form and substance acceptable to Buyer; and
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(b)
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the
execution and delivery of this Agreement by Buyer and
Seller;
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(c)
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the
inclusion in Schedule 1(a)(2) of a true, complete and correct
list of Seller’s Owned and Distributed Titles as of the
Effective Time, together with the last day such Sellers’
Owned and Distributed Titles were printed, the identity of the
printer used;
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(d)
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the
execution and delivery by Buyer and Triumph Learning, LLC, an
affiliate of the Seller of the Order Fulfillment Agreement
substantially in the form attached hereto as Exhibit A
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(e)
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the
execution and delivery by Buyer of the General Release in the form
attached hereto as Exhibit B ; and
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(f)
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the
execution and delivery by Buyer of the Voluntary Stipulation of
Dismissal with Prejudice in the form attached hereto as
Exhibit C .
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4. Prorations
and Remittances.
(a) All
cash receipts received (other than Closing A/R) and cash
disbursements paid from the conduct of the operation of the Assets
(all such cash receipts received and cash disbursements, the
“Prorated Items”), shall be apportioned between Seller
and Buyer as of the Effective Time in accordance with the principle
that Seller shall be entitled to and responsible for all cash,
revenue, expenses and disbursements attributable to the operation
of the Assets before the Effective Time and Buyer shall be entitled
to and responsible for all cash, revenue, expenses and
disbursements arising from the operation of the Assets from and
after the Effective Time; provided, that notwithstanding the above
and subject to Section 23 hereof, cash that is received on
account of Closing A/R shall belong to the Buyer. The intent of
this provision shall be implemented by Seller or Buyer, as the case
may be, remitting to the other any invoices for Prorated Items that
it receives that reflect a period for which the other party is
responsible and by Seller or Buyer, as applicable, assuming
responsibility for the payment of any invoices for Prorated Items
that reflect a period for which it is responsible with any overage
or shortage in payments by either party to be adjusted and paid as
provided in paragraphs (b) and (c) below.
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(b) All
such prorations shall be made on the basis of actual calendar days
elapsed in the relevant accounting, billing, or revenue period and
shall be based on the most recent information available to Seller
or Buyer, as applicable.
(c) To
the extent possible and based on reasonable estimates, the parties
shall make all prorations at the Closing. All amounts owing from
one party (or parties) to the other party (or parties) that require
adjustment after the Closing shall be settled within 30 calendar
days after the Closing or, if the information necessary for such
adjustment is not available within such 30 calendar day period,
then as soon thereafter as practicable.
(d) After
the Closing, if either Buyer or Seller receives any cash,
collection, proceed, refund, or other amount that is properly due
and owing to the other party in accordance with the terms of this
Agreement, such receiving party shall promptly (but in any event
within 10 calendar days of receipt) remit or shall cause to be
remitted (without interest) such amount to the other party at the
address set forth below. Upon request, the receiving party shall
provide the other party with an accounting or other relevant
documentation relating to any cash of such other party received by
the receiving party from or after the Closing.
5. The
purchase price (the “Purchase Price”) shall be equal to
the sum of (i) twenty percent (20%) of all net revenue (i.e.,
gross revenue less product returns, “Net Revenue”) on
sales of Seller’s Owned and Distributed Titles over the
course of years one (1) through three (3) years and
eleven percent (11%) of Net Revenue for years four (4) and
five (5) (the “Earned Purchase Price”) (the 20 relating
to years 1 through 3 and the 11% relating to years 4 and 5 is
hereinafter referred to as the “Net Revenue
Percentage”), plus (ii) 85% of the amount of the
Closing A/R (the “Base A/R Amount”):
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(a)
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At
Closing, an amount equal to the sum of (1) Two Million Eight
Hundred Thousand ($2,800,000) as an “Advance Payment”
against the Earned Purchase Price, plus (2) the Base
A/R Amount.
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(b)
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A
quarterly statement reflecting the dollar amount of Net Revenue,
multiplied by the applicable Net Revenue Percentage, and the
resulting Earned Purchase Price will be prepared by Buyer and sent
to Seller within forty-five (45) days of the end of each
quarter, with the Advance Payment first being applied to the Earned
Purchase Price. Once the Earned Purchase Price exceeds the Advance
Payment, Buyer shall continue to send quarterly statements to Buyer
which shall be accompanied by a quarterly payment. As provided
above, Buyer’s liability for any Earned Purchase Price shall
cease for sales occurring after the fifth anniversary of the date
of the Closing. In no event shall Seller be liable to repay the
Advance Payment.
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(c)
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Upon request, Buyer shall provide
Seller with additional documents to support Buyer’s quarterly
calculations. Any dispute other than audit expenses regarding the
calculations shall be resolved by an accounting firm not otherwise
engaged by Buyer or Seller, the cost of which shall be borne
equally by Buyer and Seller. Seller shall have the right, subject
to
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reasonable advance notice, to audit
and inspect such books, records, etc. of Buyer as are necessary to
verify Buyer’s compliance with its obligations under this
section 5. Any such audit shall be at the expense of Seller, unless
such audit discloses an underpayment by Buyer in excess of 5% in
any audit period, in which case Buyer shall reimburse Seller for
such expenses. Such audit right shall be limited to no more than
once every twelve months.
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(d)
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For
the avoidance of doubt, the parties hereto acknowledge and agree
that the Purchase Price and the Earned Purchase Price, including
any quarterly payments under Section 5(b) above, constitute
purchase price consideration for the Assets not a royalty, and
neither Parent or Buyer, on the one hand, nor Seller, on the other
hand, shall take any contrary position without the prior written
consent of the other.
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6. Seller
represents and warrants to Buyer and Parent as follows:
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(a)
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Seller is a limited liability
corporation duly incorporated, validly existing, and in good
standing under the laws of Delaware, is duly licensed and qualified
to do business in each jurisdiction where its conduct of its
business requires such qualification, except for those
jurisdictions in which the failure to be so qualified has not had,
and would not reasonably be expected to have, individually or in
the aggregate, a material adverse effect on (i) Seller’s
business, financial condition or results of operations, taken as a
whole, (ii) the Assets, (iii) Buyer’s ability to
own, maintain, use, operate or commercialize the Assets from and
after the Closing or (iv) Seller’s ability to consummate
the transactions contemplated hereby. Haights is a corporation duly
incorporated, validly existing and good standing under the laws of
Delaware.
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(b)
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Each of Seller and Haights has full
power and authority to enter into and perform this Agreement. Each
of Seller and Haights has the power and authority to own or lease
its properties and assets and to carry on its business as now
conducted by it as and where such business is now
conducted.
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(c)
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Other than for consents to Contracts
that may be required to transfer (all of which are listed on
Schedule 6(c) hereto (the “Required
Consents”)), the execution and performance of this Agreement
by Seller and Haights will not (i) result in a material breach
of, or constitute a material default under, any order, judgment, or
decree or any agreement or other instrument to which Seller or
Haights is a party or by which Seller or Haights or any of the
Assets may be bound or (ii) constitute a violation of any law
or regulation the enforcement of which would have a material
adverse effect on Seller’s or Haights’ ability to
perform its obligations under this Agreement. The execution and
performance of this Agreement by Seller have been duly authorized
by all necessary corporate actions of Seller and
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this Agreement constitutes the valid
and binding obligation of Seller enforceable against it in
accordance with its terms.
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(d)
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No
consent, approval or authorization of, or designation, declaration,
or filing with, any governmental authority is required on the part
of Seller or Haights in connection with the execution, delivery,
and performance of this Agreement.
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(e)
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There are no judicial or
administrative actions, proceedings, or investigations pending or
threatened that question the validity of this Agreement or any
action taken or to be taken by Seller or Haights in connection with
this Agreement that, if adversely determined, would have a material
adverse effect on Seller’s or Haights’ ability to
perform its obligations under this Agreement. Seller is not a party
to, and is not threatened with, any legal action or other
proceeding before any court or administrative agency against or by
Seller or directly affecting or directly relating to its business
or any of the Assets.
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(f)
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Other than Permitted Liens (as
hereinafter defined), Seller is the owner of and has good and valid
title to all Assets free and clear of all claims, liens, and
encumbrances of whatever nature. At the Closing, Buyer will obtain
good and valid title to all such tangible personal property free
and clear of all claims, liens, and encumbrances of whatever
nature. The tangible personal property included in the Assets will
be sold to Buyer at the Closing but effective as of the Effective
Time in its “as is” condition. Other than as disclosed
on Schedule 6(f) , Seller represents and agrees that
all existing Contracts between Seller and Seller’s clients or
customers are in full force and effect at Closing and that no
material default therein by Seller or, to Seller’s knowledge,
by any other party thereto has occurred. Other than as disclosed on
Schedule 6(f) , Seller has not received any notice of
any claim that Seller has breached any Contract in any material
respect relating to the Assets. Seller has satisfied any minimum
purchase or sale requirements under any Contracts required to be
satisfied on or prior to the Closing Date. Other than the Required
Consents, each Contract included in the Assets is freely
transferable and assignable without the consent of a third party to
Buyer pursuant to the transactions contemplated by this Agreement.
Seller further represents and agrees that Seller will contact all
vendors, if any, holding inventory, film, or plates and alert such
vendors that Buyer is the new owner of such items and that Buyer
may remove any Asset at its discretion. “Permitted
Liens” shall mean: (i) liens for taxes and other
governmental charges and assessments which are not yet due and
payable or which are being contested in good faith; (ii) liens
of landlords or carriers, warehousemen, mechanics and materialmen
and other like liens arising in the ordinary course of business for
sums not yet due and payable; (iii) liens in favor of lenders
pursuant to Seller’s or its affiliate’s credit
facilities that will be released at Closing; (iv) liens filed
by vendors that lease Assets to Seller; (v) rights in favor
of
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authors under any Contract by which
Seller acquired the ownership or right to use any Intellectual
Property Rights or Work (defined below), such rights including but
not limited to royalty rights, or any rights in favor of authors
arising under applicable copyright statutes; and (vi) other
liens or imperfections on property which are not material in amount
or do not materially detract from the value of or materially impair
the existing use of the property affected by such lien,
imperfection or such other matter, agreement or
exception.
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(g)
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Except as set forth on
Schedule 6(g) , the Intellectual Property Rights do not
infringe upon any intellectual property rights of any other person
or entity (including, but not limited to copyright, unfair
competition, trademark, libel or invasion of privacy). Seller has
not received any written or, to Seller’s knowledge, oral
notice alleging any such infringement nor is their any suit, action
or proceeding pending that has been served upon Seller or, to
Seller’s knowledge, threatened against
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