Document:

exhibit10_1.htm

     

    

    ASSET
PURCHASE AGREEMENT

    

    

    This Asset Purchase Agreement (this
“Agreement”), dated as of this 11th day of November, 2008, by and among Books Are Fun,
Ltd., an Iowa corporation (“Seller”), Imagine Nation Books, Ltd., an Iowa
corporation (“Buyer”), and The Reader’s Digest Association,
Inc., a Delaware Corporation (“RDA”).

    

    W I T N E S
S E T H :

     

    WHEREAS, Seller is engaged in the
business of selling books, home entertainment products and gift items at
temporary fairs and other displays conducted at schools, hospitals, corporations
and other places of business through a force of sales representatives (the
“Business”); and

     

    WHEREAS, RDA is the parent company of
Seller, and intends to, among other things, guaranty the obligations and
liabilities of Seller hereunder; and

     

    WHEREAS, Buyer desires to acquire, and
Seller desires to sell, certain assets of Seller used in the Business and
identified in Article I of this Agreement, subject to the terms and conditions
of this Agreement.

     

    NOW, THEREFORE, in consideration of the
promises, mutual covenants and agreements contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

    

    ARTICLE I

     

    

     

    SALE OF ASSETS
TO BUYER

     

    Section
1.1                                 Description
of Assets.  Upon
the terms and subject to the conditions set forth in this Agreement, at the
Closing (as defined in Section
5.1), Seller shall sell,
convey, transfer, assign and deliver to Buyer, and Buyer shall purchase and
acquire from Seller, all right, title and interest of Seller as of the Closing
Date (as defined in Section
5.1) in and to the
following assets and properties of Seller relating to the
Business:

     

    (a)  all book, gift and other product
inventory as of December
31, 2008, wherever located
(other than at Seller’s retail stores) including any such items held by or
in-transit to or from Seller’s active independent sales representatives,
excepting (i) exclusions as set forth on
Schedule
1.1(a) and (ii) inventory
otherwise expressly excluded under this Agreement (collectively, the
“Inventory”);

     

    (b)  all rights of Seller pursuant to those
certain warehouse agreements listed on Schedule
1.1(b) to this Agreement
(the “Warehouse
Agreements”);

     

    (c)  all rights of Seller in trademarks,
trade names, service marks, domain names (other than domain names that include
“rdigest”, “rda”, “rd”, “readersdigest” or any derivative thereof), patents,
patent applications, copyrights, mask works, trade secrets, know-how, databases,
logos, or other intellectual property rights (i) in the Inventory and under
agreements with respect to the Inventory (“Inventory
Agreements”); (ii) used
exclusively in or necessary to the conduct of the Business other than rights in
software, including, without limitation, the intellectual property listed on
Schedule
1.1(c) to this Agreement;
and (iii) in the case of software and information technology, (x) in software
and information technology that is owned by Seller and (y) in the licensed
software and information technology described on Schedule
1.1(c) to the extent the
applicable license agreements and other agreements (collectively, the
“Software and
IT Agreements”) are
assignable or otherwise transferable to Buyer without consent, and the right to
institute or maintain any action or investigation for and to recover damages for
any past infringement or any action of unfair competition relating to any of the
intellectual property described herein (collectively, the “Intellectual
Property”);

     

    
      
        
        

      

      
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    (d)  copies of Seller’s business records that
are material to the Acquired Assets (as that term is defined below in this
Section
1.1) including all data,
designs, drawings, blueprints, tracings, sketches, plans, layouts,
specifications, models, programs, cards, tapes, disks, printouts, writings,
manuals and guides pertaining directly to the Acquired Assets, together with any
notes or other memoranda of Seller related to such business
records;

     

    (e)  all claims, causes of action, choses in
action, rights of recovery and rights of set-off of any kind, whether known or
unknown, in favor of Seller, and pertaining to, arising out of or relating to
the Acquired Assets or offsetting any Assumed Liabilities (as defined in
Section
1.2(b));

     

    (f)  all accounts receivable (the
“Rep
Receivables”) due to Seller
from sales representatives who are engaged as sales representatives by Buyer as
of or within ninety (90) days following the Closing Date (Rep Receivables as of
the date hereof are described on Schedule
1.1(f) to this Agreement,
which schedule shall be updated in accordance with Section
1.7 of this Agreement), but
excluding any corporate book fair accounts receivable for which payroll
deductions are being made by corporate sponsors of corporate book fair
events;

     

    (g)  all of Seller’s rights (pursuant to
contract or otherwise) to cause the transfer and delivery to Buyer of any
Inventory held by any of Seller’s current or former sales representatives,
including, without limitation, the rights to sue, collect from, make claims
against or otherwise proceed against the same (collectively, the “Rights”); and

     

    (h)  any rights of Seller in and to any
warranties and licenses received from third parties with respect to any of the
Acquired Assets, to the extent any such rights are
assignable.

     

    All of the assets and properties to be
conveyed, transferred, assigned and/or delivered to Buyer pursuant to this
Section
1.1 are herein collectively
referred to as the “Acquired
Assets.”  Buyer
acknowledges that it is acquiring the Acquired Assets subject to continuing
channel and time distribution restrictions specified in Schedule
3.1(b)
hereto.

     

    On the Closing Date, except as otherwise
provided herein with respect to Inventory, all Acquired Assets in tangible form
shall be promptly surrendered and/or delivered to Buyer, and Seller and RDA
shall thereafter make no further use thereof, either directly or
indirectly.

     

    Section
1.2                                 Excluded
Assets and Assumed Liabilities

     

    (a)  Notwithstanding the provisions of
Section
1.1, the following assets
(collectively, the “Excluded
Assets”) and properties of
Seller shall not be sold, conveyed, transferred, assigned or delivered to Buyer
pursuant to this Agreement (and shall not be Acquired Assets):  (i)
inventory located at Seller’s retail stores; and (ii) any assets, properties,
business, contracts or other agreements, rights or interests of Seller which are
not expressly defined in Section
1.1 above as Acquired
Assets.

     

     

    
      
        
        

      

      
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    (b)  From and after the Closing Date, Buyer
shall assume the Warehouse Agreements, the Inventory Agreements, and the
Software and IT Agreements (the Inventory Agreements and the Software and IT
Agreements, collectively, the “Intellectual
Property Contracts”), other
than any liabilities or obligations thereunder arising or occurring on or prior
to the Closing Date, which shall constitute Retained Liabilities (such
agreements, exclusive of the Retained Liabilities, being herein referred to as
the “Assumed
Liabilities”).  Seller shall
retain, and Buyer shall not assume or be or become liable for, any claims,
demands, commitments, liabilities or obligations of any kind or nature
whatsoever of Seller or RDA, whether fixed or contingent, including, without
limitation, those relating to the purchase of the Inventory, relating to
employees or sale representatives or otherwise arising out of or relating to the
Acquired Assets or the conduct of the Business by Seller, other than the Assumed
Liabilities (the “Retained
Liabilities”).  Seller and RDA shall be responsible for paying,
performing and discharging all Retained Liabilities, and Buyer shall not have
any responsibility for such Retained Liabilities.  It is expressly
understood and agreed that the Retained Liabilities shall include, without
limitation, (i) all liabilities and obligations accruing on or prior to the
Closing Date with respect to the Intellectual Property Contracts and the
Warehouse Agreements; and (ii) all obligations of Seller with respect to its
employees and independent sales representatives.

     

    Section
1.3                                 Transfer
Documents.

     

    (a)  Instruments
of Transfer.  At
the Closing, Seller shall execute and deliver to Buyer a Bill of Sale (the
“Bill of
Sale”) substantially in the
form attached hereto as Exhibit
A; and Seller and Buyer
shall execute and deliver an Assignment and Assumption Agreement (the
“Assignment
and Assumption”)
substantially in the form attached hereto as Exhibit
B, and those certain
Intellectual Property Transfer Documents in the form attached hereto as
Exhibit
H (the “IP Transfer
Documents”).  At
any time and from time to time after the Closing, at Buyer’s request and without
further consideration, Seller and RDA (or their respective successors) promptly
shall execute and deliver such other instruments of sale, transfer, conveyance,
assignment and confirmation, and take such other action, as Buyer may reasonably
request to transfer, convey and assign more effectively to Buyer, and to confirm
Buyer’s title to, all of the Acquired Assets, to put Buyer in actual possession
and operating control thereof, to assist Buyer in exercising all rights with
respect thereto, and/or to carry out the purpose and intent of this
Agreement.

     

    (b)  Consents.  Seller will use
commercially reasonable efforts to obtain as promptly as possible, and in any
event prior to the Closing, all Required Approvals (as defined in Section
3.1(d)).  With
respect to any approval or consent listed on Schedule
3.1(d), if any such
approval or consent cannot be obtained, or if the parties hereafter agree in
writing that it is not in their respective best interests to obtain any such
approval or consent, the Acquired Assets subject to such Required Approval shall
be Excluded Assets and Retained Liabilities of Seller, and Seller will cooperate
with Buyer in any commercially reasonable manner to facilitate Buyer’s efforts
to make alternative arrangements for warehouse facilities, but any costs
associated with such alternative arrangements shall be paid by Buyer unless the
parties expressly agree in writing to the contrary.

     

    Section
1.4                                 Rights;
Power of Attorney.  Seller hereby authorizes
Buyer (acting through its employees or agents), at Buyer’s option, to demand,
receive and enforce the Rights, and to adjust, make, execute and deliver proper
receipts and releases as attorney in fact for Seller, for and in the name of
Seller or in its own name, with the same force and effect as if done by the
Seller.  Seller hereby grants to Buyer a power of attorney to enforce
all rights of Seller with respect to the Rights.  The powers contained
in this paragraph shall be deemed to be coupled with an interest and
irrevocable, and shall be automatically effective at Closing.  Under
no circumstance shall Buyer be deemed to have assumed any liability or
obligation of Seller set forth in the sales representative
agreements.  Seller also hereby covenants and agrees not to make any
further assignment or pledge of the Rights or any interest therein, nor alter,
amend, supplement, modify, terminate, surrender, cancel, impair or release the
Rights.

     

    

    
      
        
        

      

      
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    Section
1.5                                 INTENTIONALLY
OMITTED.

     

    Section
1.6                                 Other
Agreements.  On
the Closing Date, Seller, RDA and Buyer (as applicable) shall execute and
deliver to the other party: (a) a Sourcing Agreement between RDA and Buyer
substantially in the form attached hereto as Exhibit C (the “Sourcing
Agreement”), and (b) a
Noncompetition and Nonsolicitation Agreement among Buyer, RDA and Seller
substantially in the form attached hereto as Exhibit D (the “Noncompetition
Agreement” and together
with the Sourcing Agreement,  the “Other
Agreements”).

     

    Section
1.7                                 Rep
Receivables.  On
the date hereof, Seller shall provide a Schedule
1.1(f) to this Agreement
that contains an estimate of the Rep Receivables as of the date hereof
determined as if all of Seller’s sales representatives were engaged by Buyer as
of the Closing Date.  Two (2) business days prior to Closing, Seller
shall provide to Buyer a revised Schedule
1.1(f) to this Agreement
(the “Updated
Schedule 1.1(f)”), updating
the receivables amount and excluding any sales representatives identified by
Buyer as not under contract to Buyer as of such time.  From time to
time, upon notice to Seller of the engagement of any former Seller sales
representative(s) within ninety (90) days after the Closing, Seller shall,
within five (5) days of such notice, execute any and all assignment documents
reasonably requested by Buyer to evidence the assignment of the Rep Receivables
relating to such sales representative(s), and supplement the Updated
Schedule 1.1(f), to include
the amounts of the Rep Receivables owing from such sales
representative(s).

     

    ARTICLE II

     

    

     

    PURCHASE
PRICE

     

    Section
2.1                                 Purchase
Price.  The purchase price to be paid by Buyer
to Seller for the Acquired Assets shall be Seventeen Million Five Hundred
Thousand and No/100 Dollars ($17,500,000.00), subject to adjustment pursuant to
Section
2.2(b) below (the
“Purchase
Price”) and shall be
payable by delivery from Buyer to Seller at Closing of a promissory note in the form
attached hereto as Exhibit
E (the “Note”), in the maximum principal amount of
the sum of Twelve Million Five Hundred Thousand and No/100 Dollars
($12,500,000.00) plus ten percent (10%) of the Purchase Order Price (as adjusted
pursuant to Section
2.2(b) below), not to
exceed Five Million and No/100 Dollars ($5,000,000.00), which Note shall be
payable at the times and in the manner set forth in Section
2.5
below.

     

    Section
2.2                                 Purchase
Price Adjustment.

     

    (a)  INTENTIONALLY
OMITTED.

     

    (b)  Within thirty (30) days after Closing,
RGIS, LLC (the “Third Party
Auditor”) or such other
third party independent auditor as Buyer and Seller may designate, shall conduct
an audit and review of the Inventory to determine the purchase order price of
the Inventory as of the
close of business on December 31, 2008 (the “Purchase
Order Price”).  Such audit shall be
conducted in a manner reasonably satisfactory to Buyer and Seller, shall include
a physical review of all warehoused Inventory and all books and records relating
to Inventory in transit to, in the possession of or on consignment to
independent sales representatives and shall be final, binding and conclusive on
all parties, absent manifest error.  Notwithstanding the foregoing, the
Purchase Order Price for any portion of the Inventory with respect to which Seller’s (and through the assumption of the
respective Inventory Agreements, Buyer’s) right to sell or distribute the same
expires on or before June 30, 2009 shall be deemed to be zero
($0.00).  The
Third Party Auditor shall promptly report its findings to all of the parties
hereto, which report shall be in reasonable detail and shall contain such
supporting documents and information as any party reasonably
requests.  If the Third Party Auditor reports that the Purchase Order
Price of the Inventory is less than Fifty Million and No/100 Dollars
($50,000,000.00), the principal amount of the Note to be determined based on the
Purchase Order Price shall be ten percent (10%) of the Purchase Order Price as
finally determined by the Third Party Auditor.  The Purchase Order
Price shall not exceed Fifty Million and No/100 Dollars
($50,000,000.00).  Seller shall pay the fees and expenses of the Third
Party Auditor.

     

     

     

    
      
        
        

      

      
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    Section
2.3                                 Transfer
Tax.  Any sales,
use, excise, ad valorem or any other similar Taxes (hereinafter defined)
resulting from the sale of the Acquired Assets pursuant to this Agreement shall
be the responsibility of Seller, and Seller and RDA shall indemnify Buyer
against any such Taxes wherever assessed.  Any personal property Taxes
relating to the Acquired Assets attributable on a pro rata basis to the portion
of any taxable period ending on or prior to the Closing Date shall be the
responsibility of Seller.

     

    Section
2.4                                 Allocation
of Purchase Price.  The consideration for the Acquired
Assets as determined for federal income tax purposes pursuant to Treasury
Regulation 1.1060-1(c) shall be allocated shall be allocated as agreed by Buyer
and Seller within sixty (60) days following the Closing Date.  Buyer and Seller shall
execute and file all tax returns in a manner consistent with the allocations
so agreed to and shall not take any position before
any governmental authority or in any judicial proceeding that is inconsistent
with such allocation, except pursuant to a final “determination” (as defined in
Section 1313(a) of the Internal Revenue Code of 1986, as
amended).  Buyer and Seller shall each timely file a Form 8594
with the IRS in accordance with the requirements of Section 1060 of the
Internal Revenue Code of 1986, and that is prepared in a manner as agreed to in this Section 2.4.  The parties will work in a
collaborative manner in preparing and timely filing Form
8594.

     

    Section
2.5                                 Purchase
Price Note.  The Note shall be due and payable as follows: (i)
a principal amount equal to Five Million and No/100 Dollars ($5,000,000.00)
(which amount shall be guaranteed by Earl Kaplan pursuant to the terms of the
Guaranty in the form attached hereto as Exhibit
G) shall be payable in four (4) quarterly
installments on or before the first anniversary of the Closing Date as more
fully described in the Note; (ii) ten percent (10%) of the Purchase Order
Price (as finally determined pursuant to Section
2.2(b) above), shall be
payable on the first anniversary of the Closing Date; (iii) a principal amount equal to Five
Million and No/100 Dollars ($5,000,000.00) shall be payable on the second
anniversary of the Closing Date, and (iv) a principal amount of Two Million Five
Hundred Thousand and No/100 Dollars ($2,500,000.00) shall be payable on the
third anniversary of the Closing Date.  The Note shall bear interest
at the rate of seven percent (7%) per annum, and accrued and unpaid interest
shall be compounded annually and, with respect to any principal amount being
repaid, shall be payable at the time of such principal repayment.  The
Note may be prepaid in whole or in part at any time without premium or penalty
and shall be subordinated in all respects to all working capital indebtedness of
Buyer incurred in connection with Buyer’s business and owing to one (1) or more
third party institutional lenders.

     

    Section
2.6                                 Fairfield
Lease.  The
parties acknowledge that Seller’s Fairfield, Iowa warehouse lease shall not be considered
a “Warehouse
Agreement” hereunder and
shall not be assumed by Buyer.  Seller agrees to transfer all
Inventory located at Seller’s Fairfield, Iowa warehouse to a warehouse or other
location designated by Buyer on or before thirty (30) days after the Closing
Date.  All reasonable freight and handling charges incurred in
connection with such transfer shall be paid by Buyer.

     

    Section
2.7                                 Calgary Lease.  The parties acknowledge that the
landlord of the warehouse that Seller leases on a month-to-month rate card basis
in Calgary, Alberta, Canada intends to shut down the warehouse
prior to or at the end of December 2008, as described on Schedule
3.1(h).  The
parties shall cooperate in a commercially reasonable manner to transfer all
Inventory located at the Calgary warehouse to another warehouse or other location on or
before Closing, it being acknowledged that the transfer of such Inventory may
not be practicable prior to
the Closing.  All
reasonable freight and handling charges incurred in connection with such
transfer shall be paid by Seller.  Seller will cooperate with Buyer in
any commercially reasonable manner to facilitate Buyer’s efforts to make
alternative arrangements for the Inventory in the Calgary warehouse, but any costs incurred after
Closing associated with such alternative arrangements shall be paid by Buyer
unless the parties expressly agree in writing to the
contrary.  Notwithstanding any other provision herein, in the event
the landlord requires that Seller enter into any new agreement or arrangement to
continue to use the Calgary warehouse either prior to or after the
Closing, the parties agree that Seller may, in consultation with the Buyer,
enter into a new or modified month-to-month lease or arrangement with the
landlord.

     

     

    
      
        
        

      

      
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    ARTICLE III

     

    

     

    REPRESENTATIONS
AND WARRANTIES OF SELLER AND RDA

     

    Section
3.1                                 Seller and RDA jointly and severally
represent and warrant to Buyer, and Buyer in agreeing to consummate the
transactions contemplated by this Agreement has relied upon the following
representations and warranties:

     

    (a)  Organization.  Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Iowa, and has all requisite power and authority (corporate and
otherwise) to own its properties and assets, to carry on its business as now
being conducted, to execute and deliver this Agreement and the other agreements
contemplated hereby, and to consummate the transactions contemplated
hereby.  RDA is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has all requisite
power and authority (corporate and otherwise) to own its properties and assets,
to carry on its business as now being conducted, to execute and deliver this
Agreement and the other agreements contemplated hereby, and to consummate the
transactions contemplated hereby.

     

    (b)  Title to
Acquired Assets.  Except as set forth on
Schedule
3.1(b) to this Agreement,
Seller has good, valid and marketable title to the Acquired Assets, free and
clear of all liens, pledges, mortgages, security interests, claims, leases,
charges, options, rights of first refusal, easements, servitudes, transfers,
restrictions and other encumbrances, restrictions and limitations of every kind
or nature whatsoever (collectively, “Liens”).  At Closing Seller will,
sell, assign, transfer, convey and deliver the Acquired Assets to Buyer, free
and clear of all Liens other than those Liens described on Schedule
3.1(b) designated with an
asterisk.

     

    (c)  Authorization;
No Conflict.  Seller and RDA each has all
requisite power and authority to enter into, execute and deliver this Agreement
and the Other Agreements to which it is a party, to fulfill its obligations
hereunder and thereunder and consummate the transactions contemplated hereby and
thereby.  The execution, delivery and performance of this Agreement
and the Other Agreements to which it is a party, and the consummation by Seller
and RDA of all transactions contemplated hereby and thereby, have been duly
authorized by all requisite corporate action.  This Agreement and, at
Closing,  each of the remaining Other Agreements, has been (or will be
at Closing, as applicable) duly executed and delivered by, and constitute the
valid and legally binding obligations of, Seller and RDA (as applicable),
enforceable against Seller and RDA in accordance with their respective terms,
except that such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
that may affect the enforcement of creditors’ rights generally, and general
equitable principles.  The execution, delivery and performance by
Seller and RDA of this Agreement and the Other Agreements, and the consummation
by Seller and RDA of the transactions contemplated hereby and thereby, will not
(a) violate the provisions of any law, rule or regulation applicable to the
Acquired Assets or the Business; (b) violate any provision of the Certificate of
Incorporation or Bylaws of Seller or RDA; (c) violate any judgment, decree,
order or award of any court, governmental body or arbitrator; or (d) conflict
with or result in the breach or termination of any term or provision of, or
constitute a default under, or cause any acceleration under, or cause the
creation of any Lien upon any portion of the Acquired Assets pursuant to, any
indenture, mortgage, deed of trust or other instrument or agreement to which
Seller or RDA is a party or by which Seller or RDA or its respective properties
is or may be bound.

     

    (d)  Consents.  Except as set forth on
Schedule
3.1(d) to this Agreement
(the matters listed on such schedule being referred to herein as the
“Required
Approvals”), neither Seller
nor RDA is required to give any notice to, make any filing with or obtain any
consent, permit, application, approval, order, qualification, waiver from or
authorization of, or declaration, filing or registration with, any Person
(including any governmental authority) in connection with the execution and
delivery of this Agreement and/or any of  the Other Agreements, or the
consummation or performance of any of the transactions contemplated hereby
and/or thereby.  The term “Person” means any individual, firm,
corporation, limited liability company, limited partnership, partnership or
other entity.

     

     

    
      
        
        

      

      
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    (e)  Inventory.  Schedule
3.1(e) to this Agreement
sets forth a true, correct and complete list of the Inventory as of the date
hereof.  Schedule
3.1(e) to this Agreement
shall only be required to be provided in an electronic form that can be readily
copied by Buyer.

     

    (f)  Intellectual
Property Rights.

     

    (i) Seller exclusively owns or holds a valid
license, in and to the Intellectual Property set forth in such Schedule
1.1(c) to this
Agreement.

     

    (ii) Schedule
1.1(c) to this Agreement
sets forth a true, correct and complete list of the registered Intellectual
Property owned by, exclusively licensed to or otherwise controlled by Seller in
connection with the Inventory or the conduct of the Business, or used
exclusively in, or necessary for the sale of the Inventory or the conduct of the
Business (other than domain names that include “rdigest”, “rda”, “rd”,
“readersdigest” or any derivative thereof).  Each Intellectual
Property Contract is, and as of the Closing Date each will be, valid and binding
on Seller, and to Seller’s knowledge, on the other parties thereto, and is (and
as of the Closing Date will be) in full force and effect.  Except as
set forth on Schedule
3.1(f) to this Agreement,
the consummation of the transactions contemplated hereby will not result in a
breach of or default under any Intellectual Property Contract, and will not
otherwise cause any Intellectual Property Contract to cease to be legal, valid,
binding, enforceable and in full force and effect on identical terms following
the Closing. Seller has taken commercially reasonable
efforts to protect the Intellectual Property rights set forth in Schedule 1.1(c) to this Agreement.  Except as
set forth in Schedule
3.1(f), Seller has not
received any notice of, or knows of any facts which indicate a likelihood of,
any infringement or misappropriation by, or conflict with, any other Person with
respect to the Intellectual Property listed in Schedule
1.1(c) to this
Agreement.  Except as set forth in Schedule
3.1(f), no claim by any
Person contesting the validity of any Intellectual Property listed in
Schedule
1.1(c) to this Agreement
has been made in writing, is currently outstanding or, to the best knowledge of
Seller, is threatened.  Except as set forth in Schedule
3.1(f), with respect to the
Business as currently conducted and the Inventory, Seller has not received any
notice of any infringement, misappropriation or violation by Seller of any
intellectual property rights (including without limitation trademarks,
tradenames or service marks) of any Person, and, to Seller’s knowledge, Seller
has not infringed, misappropriated or otherwise violated any such intellectual
property rights.  Seller is not in breach of or default under any
Intellectual Property Contract, and to Seller’s knowledge no other party to any
Intellectual Property Contract is in breach thereof or default
thereunder.  Seller has delivered to Buyer correct and complete copies
of all Intellectual Property Contracts, together with all modifications or
supplements thereto.

     

    (g)  INTENTIONALLY
OMITTED.

     

     

     

    
      
        
        

      

      
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    (h)  Warehouse
Agreements.  Except as set forth on
Schedule
3.1(h) to this Agreement,
as of the date hereof each of the Warehouse Agreements is, and as of the Closing
Date each will be, valid and binding on Seller, and to Seller’s knowledge, on
the other parties thereto, and is (and as of the Closing Date will be) in full
force and effect.  Seller is not in breach of or default under any
Warehouse
Agreement, and to Seller’s
knowledge no other party to any Warehouse Agreement is in breach thereof or default
thereunder.  Seller has delivered to Buyer correct and complete copies
of all Warehouse Agreements, together with all modifications or supplements
thereto.  Except as set forth on Schedule
3.1(h) to this Agreement,
each of the Warehouse Agreements is assignable to Buyer without the consent or
approval of any lessor or any third party, and the consummation of the
transactions contemplated hereby will not result in a breach of or default under
any Warehouse
Agreement, and will not
otherwise cause any Warehouse Agreement to cease to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
Closing.  Seller is in sole possession of the premises demised under
the Warehouse Agreements and has not assigned, sublet, mortgaged or otherwise
conveyed all or any portion of its respective interest in any Warehouse Agreement or the premises demised under any
Warehouse
Agreement.

     

    (i)  Litigation.  None of the Acquired Assets
are subject to, and Seller is not a party to, or to Seller’s knowledge
threatened with, any litigation, suit, action, investigation, grievance,
arbitration, proceeding, controversy or claim before any court, administrative
agency or other governmental authority, relating to or affecting  the
Acquired Assets, other than those set forth on Schedule
3.1(i) to this
Agreement.  Neither Seller nor RDA is a party to, and to Seller’s
knowledge, neither Seller nor RDA has been threatened with, any litigation,
suit, action, investigation, grievance, arbitration, proceeding, controversy or
claim before any court, administrative agency or other governmental authority
which seeks to challenge the legality, validity or enforceability of this
Agreement, any of the Other Agreements or any of the transactions contemplated
hereby or thereby, or to prevent, delay or impose any conditions on the
consummation of this Agreement, any of the Other Agreements or any of the
transactions contemplated hereby or thereby.  There is no judgment,
order, award, writ, injunction, decree or rule of any court, governmental
department or agency, commission, administrative or other agency,
instrumentality or arbitrator, to which the Acquired Assets are
subject.

     

    (j)  Compliance
with Laws.  The
conduct of the Business by Seller does not violate any federal, state, local or
foreign laws, regulations or orders, the enforcement of which would have a
material and adverse effect on the Acquired Assets or the conduct of Buyer’s
business following the Closing.  Seller has received no notice or
communication from any federal, state, foreign or local governmental or
regulatory authority, or any other  Person, of any such violation or
noncompliance.

     

    (k)  Brokers.  No broker, finder, agent or
similar intermediary has acted for or on behalf of Seller or RDA in connection
with this Agreement or the transactions contemplated hereby, and no broker,
finder, agent or similar intermediary is entitled to any broker’s, finder’s or
similar fee or other commission in connection therewith based on any agreement,
arrangement or understanding with Seller or RDA, or any action taken by Seller
or RDA.  Seller and RDA jointly and severally agree to indemnify and
hold harmless Buyer against any claims and liabilities asserted against it by
any Person acting or claiming to act as a broker or finder on behalf of Seller
or RDA.

     

    ARTICLE IV

     

    

     

    REPRESENTATIONS
AND WARRANTIES OF BUYER

     

    Section
4.1                                 Buyer represents and warrants to Seller
and RDA that:

     

    (a)  Corporate
Status.  Buyer is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Iowa, and has all requisite power and authority to own its
properties, to carry on its business as now being conducted, to execute and
deliver this Agreement and the agreements contemplated herein, and to consummate
the transactions contemplated hereby.

     

     

    
      
        
        

      

      
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    (b)  Authorization
of Agreement.  Buyer has all requisite
power and authority to enter into, execute and deliver this Agreement and the
Other Agreements to which it is a party, fulfill its obligations hereunder and
thereunder and consummate the transactions contemplated hereby and
thereby.  The execution, delivery and performance of this Agreement
and the Other Agreements by Buyer, and the consummation by Buyer of the
transactions contemplated hereby and thereby, have been duly authorized by all
requisite corporate action.  Each of this Agreement and the Other
Agreements has been duly executed and delivered by, and constitutes the valid
and legally binding obligation of, Buyer, enforceable against Buyer in
accordance with its terms, except that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
of general application that may affect the enforcement of creditors’ rights
generally, and general equitable principles.  The execution, delivery
and performance by Buyer of this Agreement and the Other Agreements to which it
is a party, and the consummation by Buyer of the transactions contemplated
hereby and thereby, will not (a) violate the provisions of any law, rule or
regulation applicable to Buyer; (b) violate any provision of the Articles of
Incorporation or Bylaws of Buyer; or (c) violate any judgment, decree, order or
award of any court, governmental body or arbitrator.

     

    (c)  Brokers,
etc.  No broker,
finder, agent or similar intermediary has acted for or on behalf of Buyer in
connection with this Agreement or the transactions contemplated hereby, and no
broker, finder, agent or similar intermediary is entitled to any broker’s,
finder’s or similar fee or other commission in connection therewith based on any
agreement, arrangement or understanding with Buyer or any action taken by
Buyer.  Buyer agrees to indemnify and hold harmless
Seller  and RDA against any claims and liabilities asserted against it
by any Person acting or claiming to act as a broker or finder on behalf of
Buyer.

     

    ARTICLE V

     

    

     

    CLOSING

     

    Section
5.1                                 The
Closing.  The
closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of
Dickstein Shapiro LLP, Washington, DC, on December 19, 2008 at 10:00 a.m.,
local time (the “Closing
Date”), or at such other
time or place, as may be agreed in writing by Seller and
Buyer.

     

    Section
5.2                                 Deliveries.

     

    (a)  Deliveries
by Seller on the Closing Date.  On or prior to the Closing
Date, Seller and/or RDA, as applicable, will execute and deliver to Buyer, the
following documents:

     

    (i) (A) The Bill of Sale and Assignment and
Assumption, each conveying, transferring and assigning to Buyer the Acquired
Assets as set forth therein, free and clear of any and all Liens (other than
those Liens described on Schedule
3.1(b) and designated with
an asterisk); and (B) the IP Transfer Documents;

     

    (ii) The Noncompetition
Agreement;

     

    (iii) The Sourcing
Agreement;

     

    (iv) A certificate of good standing of Seller
issued as of a date within ten (10) days prior to the Closing Date by the
Secretary of State of the State of Iowa and a certificate of good standing of
RDA issued as of a date within ten (10) days prior to the Closing Date by the
Secretary of State of the State of Delaware;

     

     

     

    
      
        
        

      

      
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    (v) A certificate of the secretary or an
assistant secretary of Seller and RDA, each dated the Closing Date, and each
certifying as to: (A)  any resolutions of the board of directors
authorizing the execution, delivery and performance of this Agreement, the Other
Agreements to which it is a party and the transactions contemplated hereby and
thereby; and (B) the incumbency of the officers executing this Agreement
and the Other Agreements;

     

    (vi) An affidavit of non-foreign status of
Seller that complies with Section 1445 of the Internal Revenue Code of 1986, as
amended;

     

    (vii) Updated Schedule
1.1(f);

     

    (viii) A certificate in the form of
Exhibit
F(1) hereto; which shall provide (w) that the
representations and warranties of Seller and RDA made in Sections
3.1(a) and (c) (other than the last sentence therein)
and in Section
3.1(f)(i) (but solely as to
the Intellectual Property listed on Schedule 5.3(c)) are true and correct as of
the Closing Date; (x) the representations and warranties made in the last
sentence of Section
3.1(c), in Section
3.1(d) and in Section
3.1(f)(i) with respect to
the Intellectual Property not listed on Schedule 5.3(c) and Section
3.1(f)(ii) with respect to
all of the Intellectual Property, are true and correct as of the Closing
Date except as would not have a material adverse effect on the Acquired Assets
or Buyer’s ownership or  use of the Acquired Assets in its business in
a manner for which indemnification by the Seller and RDA under Section
6.3 hereof would not be a
sufficient remedy to Buyer; and (y) the extent to which the other
representations and warranties of Seller and RDA in Article 3 herein are or are
not true and correct as of the Closing Date; provided, however, that the changes in
Section
3.1(e) from the date of
this Agreement through the Closing Date shall only be required to be referenced
in this certificate to the extent such changes have not previously been reported
to Buyer pursuant to Section
6.1(h) (it being agreed by
the parties that post-closing indemnification under Section
6.3 for breaches of any
representation or warranty made other than in Section
3.1(a), Section
3.1(c) (excluding the last
sentence thereof) or
Section
3.1(f)(i) with respect to
the Intellectual Property listed on Schedule 5.3(c) would be a sufficient remedy to
Buyer).

     

    (ix) The Sales Rep List (as described in
Section
6.1(g)(i)).

     

    (b)  Deliveries
by Buyer on the Closing Date.  On or prior to the Closing
Date, Buyer will execute and deliver (or cause to be executed and delivered) to
Seller the following documents:

     

    (i) The Assignment and
Assumption;

     

    (ii) A certificate of good standing of Buyer
issued as of a date within ten (10) days prior to the Closing Date by the
Secretary of State of the State of Iowa;

     

    (iii) A certificate of the secretary or an
assistant secretary of Buyer dated the Closing Date, certifying as to:
(A)  any resolutions of the board of managers authorizing the
execution, delivery and performance of this Agreement, the Other Agreements to
which it is a party and the transactions contemplated hereby and thereby; and
(B) the incumbency of the officers executing this Agreement and the Other
Agreements;

     

    (iv) The Noncompetition
Agreement;

     

    (v) The Sourcing
Agreement;

     

     

     

    
      
        
        

      

      
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    (vi) The Guaranty;

     

    (vii) The Note; and

     

    (viii) A certificate in the form of
Exhibit
F(2).

     

    Section
5.3                                 Conditions
to Obligations of Buyer.  The obligations of Buyer
hereunder to purchase and acquire the Acquired Assets at the Closing shall be
subject to the fulfillment to Buyer’s reasonable satisfaction, or waiver by
Buyer, of each of the following conditions:

     

    (a)  Representations
and Warranties True and Correct; Obligations Performed.  The representations and
warranties of Seller and RDA contained in Sections
3.1(a), 3.1(c) (other than the last sentence of
Section
3.1(c)) and in Section 3.1(f)(i) (but solely as
to the Intellectual Property listed on Schedule 5.3(c)) shall be true and correct as of the
Closing Date, as if they were made on and as of such date; and the
representations and warranties made in the last sentence of Section
3.1(c), in Section
3.1(d), and in Section 3.1(f)(i) with respect
to the Intellectual Property not listed on Schedule 5.3(c) and Section
3.1(f)(ii) with respect to all of the Intellectual Property shall be true and correct as of the Closing
Date, as if they were made on and as of such date, except as would not have a
material adverse effect on the Acquired Assets or Buyer’s ownership
or  use of the Acquired Assets in its business in a manner for which
indemnification by the Seller and RDA under Section
6.3 hereof would not be a
sufficient remedy to Buyer.

     

    (b)  Authorization.  There shall not be in
effect on the Closing Date (i) any court order restraining or enjoining the
carrying out of this Agreement or the consummation of the transactions
contemplated by this Agreement or (ii) any proceeding that seeks to restrain,
enjoin or otherwise prevent the consummation of the transactions contemplated by
this Agreement (excluding any proceeding commenced by Buyer or any Person
affiliated with Buyer).

     

    (c)  Documents
and other Deliveries.  Buyer shall have received
(i) each of the deliveries set forth in Section
5.2(a), (ii) the Sales Rep
List, within five (5) business days after the date hereof, and an update thereof
at Closing; provided,
however, that immaterial
deficiencies in the Sales Rep List or the update thereof to be provided at
Closing shall not be deemed
a failure to provide such document for purposes of this Section
5.3(c); and (iii) the
Intellectual Property and server information listed or described on Schedule
5.3(c)
hereof.

     

    (d)  Release of
Liens.  All Liens
in favor of Seller’s lenders or creditors against the Acquired Assets will be
automatically released upon the effectiveness of the Closing; it being
understood that the filing of UCC Financing Statements on Form UCC-3 (or
equivalent) recording the release of Liens will not be filed until after (but in
no event more than five (5) days after) Closing.

     

    Section
5.4                                 Conditions
to Obligations of Seller.  The obligations of Seller
hereunder to sell, convey, transfer, assign and deliver the Acquired Assets to
Buyer at the Closing shall be subject to the fulfillment to its reasonable
satisfaction, or waiver by Seller, of each of the following
conditions:

     

    (a)  Representations
and Warranties True and Correct.  The representations and
warranties of Buyer contained in Sections
4.1(a) and 4.1(b) of this Agreement shall be true and
correct in all material respects as of the Closing Date, as if they were made on
and as of such date.

     

    (b)  Authorization.  There shall not be in
effect on the Closing Date any court order restraining or enjoining the carrying
out of this Agreement or the consummation of the transactions contemplated by
this Agreement (excluding any proceeding commenced by RDA or Seller or any
Person affiliated with RDA or Seller).

     

    (c)  Documents
and other Deliveries.  Seller shall have received
each of the deliveries set forth in Section
5.2(b).

     

     

     

    
      
        
        

      

      
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    (d)  Wachovia
Consent.  That
certain Consent issued by Wachovia Bank, National Association (“Wachovia”) on
November 11, 2008 (the “Wachovia Consent”), shall be valid and in
effect.

     

    Section
5.5                                 No Implied
Waiver.  All
conditions to Closing set forth in Section
5.3 and Section
5.4 shall survive the Closing unless
otherwise expressly waived by the party entitled to performance thereof, and any
party’s failure to assert, or election to close notwithstanding, a breach of any
such conditions, shall not in any way constitute a waiver of such party’s rights
to assert a claim, or obtain indemnification relating thereto pursuant to
Section
6.3 with respect to such
breach, subsequent to Closing.

     

    ARTICLE VI

     

    

     

    COVENANTS

     

    Section
6.1                                 Pre-Closing
Covenants.  From
and after the date hereof and until the Closing Date:

     

    (a)  Absence of
Material Changes.  Without the prior written
consent of Buyer, Seller shall not:  (i) terminate, amend or
renegotiate in any material respect, or grant a waiver of any material term of
or give any material consent with respect to, any Warehouse Agreement; (ii) sell, assign, dispose of or
transfer any of the Acquired Assets, except for sales of Inventory in the
ordinary course of business in a manner consistent with its current practice as
of the date
hereof; (iii) merge or
consolidate with or into any Person; (iv) dissolve, recapitalize or reorganize its business or operations;
(v) cancel, terminate or allow any material property or liability insurance
policy to lapse; (vi) fail in any material way to (A) store, or maintain Inventory in a manner
consistent with Seller’s current practices as of the date hereof; (B) preserve the possession, control
and good and saleable condition of the Acquired Assets (other than by reason of
sales of Inventory permitted hereunder), or (C) use reasonable efforts to
preserve the goodwill of its customers, suppliers, agents, brokers and others
having business relations with Seller with respect to the Business other than as
would be reasonably expected to result from the sale of the Business; or (vii) liquidate or otherwise wind
up its business.  Notwithstanding the
foregoing clauses (vi)(C) and (vii), the parties acknowledge that: (x)
Seller will cease buying inventory, which may lead to changes in relationships
with suppliers and others, (y) Seller will begin focusing on a transition of the
Business to Buyer, which may include the termination of employees and sales
representatives and (z) Seller’s relationship with its customers, suppliers,
agents, brokers, employees, sales representatives and others having business
relations with Seller may be affected (1) by the announcement of the
transactions contemplated by this Agreement or (2) if any employees or sales
representatives are terminated or (3) otherwise as a result of the entering into
or Closing of the transactions contemplated hereby, and that these activities shall not be
deemed to be contrary to clauses (vi)(C) or (vii).  Seller agrees that it shall
not acquire any inventory for the Business after the date of this Agreement
(other than deliveries of orders placed prior to the date of this
Agreement).

     

    (b)  Access.  From and after the date
hereof, with the prior consent of Seller, which consent shall not be
unreasonably withheld, Buyer shall be provided reasonable access during normal
business hours to all relevant books, records, leases, files, operating reports
and information of Seller for the purpose of inspecting and investigating the
Acquired Assets.  Additionally, Seller and RDA shall make available to
Buyer, at no cost to Buyer, a copy of all relevant permits, licenses, lease(s)
and other contracts of Seller for the purpose of inspecting and investigating
the Acquired Assets.  Until the Closing Date, all due diligence shall
be coordinated through (and each party shall only discuss this Agreement with)
the employees listed on Exhibit B to the Letter of
Intent dated as of September 22, 2008 (the “Letter of
Intent”).  It is
further understood and agreed that prior to the Restriction Date (as defined in
Section
6.1(g) below), Buyer shall
not disclose or discuss this Agreement or the transactions contemplated hereby
with Seller’s other employees, sales representatives or consultants without
Seller’s prior written consent.  Nothing herein shall prohibit Buyer
from discussing this Agreement or the transactions contemplated hereby with
Buyer’s employees.

     

     

     

     

    
      
        
        

      

      
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    (c)  Compliance
with Laws and Commitments.  Seller will comply with all
laws and regulations that are applicable to it, or its ownership of the Acquired
Assets, and will perform and comply with all contracts, commitments and
obligations to vendors of Inventory, employees and sales representatives, except
where the failure to do so would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the Acquired
Assets, the transactions contemplated by this Agreement or the Other Agreements,
or following the Closing, Buyer.

     

    (d)  Continued
Truth of Representations and Warranties.  No party
will  take any action that would result in, or be reasonably likely to
result in, any of the representations or warranties set forth in Articles III
and IV hereof being untrue in any material respect or prevent such party from
complying with its respective covenants and agreements
hereunder.

     

    (e)  Continuing
Obligation to Inform.  From time to time prior to
the Closing, Seller will deliver or cause to be delivered to Buyer supplemental
information concerning events subsequent to the date hereof that would render
any statement, representation or warranty in this Agreement or any information
contained in any Schedule inaccurate or incomplete in any material
respect.  Notwithstanding the foregoing, no such supplement shall be
deemed to cure any breach for purposes of Section 5.3(a) or Section 7.1,
7.2 or 7.3.  Additionally, upon receipt
thereof, Seller shall provide Buyer with duly executed copies of all Required
Approvals, and all other consents and approvals contemplated by this Agreement
or the Schedules annexed hereto.

     

    (f)  Exclusivity.  Until the earlier of
Closing under or termination of this Agreement, Seller and RDA shall not (and
shall cause their advisors, agents and representatives not to) solicit,
negotiate or accept any offers to: (i) sell, transfer or encumber in any way all
or any portion of the Intellectual Property, the Inventory, any of Seller’s
rights with respect to, or information pertaining to, any contracts or
agreements between Seller and any of its sales representatives and/or employees,
or any other rights or assets subject to this Agreement, except for sales,
transfers and encumbrances of Inventory made in a manner consistent with Seller’s current
practice as of the date
hereof as permitted under
this Agreement, and terminations of sales representatives and/or employees;
provided, however, that upon such termination, Seller shall immediately provide
Buyer with the name and address of such terminated sales representative or
employee, and shall execute a release of any non-competition or similar
restrictive covenants applicable to Buyer or such representative or employee to
the extent necessary to permit Buyer to contact, hire and/or engage such sales
representative or employee, or (ii) dispose of any of the capital stock of
Seller, or merge or consolidate Seller with any other entity.  Neither
RDA nor Seller shall enter into any agreement with any other Person with regard
to any transaction described in (i) or (ii) above, or otherwise solicit any
business relationship or engage in or continue any discussion or negotiation
with any other Person with respect to any matter pertaining to (i) or (ii)
above.

     

    (g)  Sales
Representatives.

     

    (i) It is intended that, from the date
hereof up to the Closing Date, no party shall, contact, negotiate with
or make offers to engage any or all current or former independent sales
representatives and/or employees of any other party.  Notwithstanding
the foregoing, Buyer may, in its sole discretion, contract, negotiate with
and/or make offers to engage any or all current or former independent sales
representatives and/or employees of Seller, subject to the following
limitations: (i) unless permitted pursuant to Section
6.1(f) above or otherwise
agreed to by Seller, no employee or sales representative of Seller may be
contacted by or on behalf of Buyer prior to the Restriction Date; and (ii) with
respect to any agreement pertaining to the employment of any such employee or
engagement of any such independent sales representative by Buyer, the effective
date for the commencement of employment/engagement shall not be prior to the
Closing Date.  For purposes hereof, the “Restriction
Date” shall be the date
that is two (2) business days after the date hereof.  The Restriction
Date may be extended or accelerated upon mutual agreement of Seller, RDA and
Buyer.  Seller will provide Buyer, (x) within 2 business days of the
date hereof, a list setting forth the name, rep code (as used in lieu of real
names of sales representatives on information provided to Buyer prior to the
date of this Agreement) and, to the extent in Seller’s possession, contact
information of each of
Seller’s current (and to the extent available, former) independent sales
representatives, (the “Sales Rep
List”) and (y) as soon as
reasonably practicable, but in no event later than five (5) business days
following the date hereof, a true and correct copy of each written agreement
between Seller and each of Seller’s current (and to the extent available,
former) independent sales representatives as of the date hereof (the
“Rep
Agreements”).  In
addition, upon request from Buyer after the date hereof Seller will cooperate
and provide Buyer information regarding Seller’s employees, including name,
title, contact information, and compensation and benefit information, in order
for Buyer to assess whether to make any offers of employment to any such Seller
employees.  No less than five (5) business days prior to Closing,
Buyer will inform Seller which if any Seller employees it has made or will make
offers of employment to, and the terms of such offers with respect to salary and
location of employment.

     

     

    
      
        
        

      

      
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    (ii) Seller agrees that, upon Closing any
contractual or other restriction limiting or restricting its current and/or
former sales representatives or employees from contracting with or providing
services to Buyer will be considered terminated or waived; it being understood
and agreed that subject to the provisions of clause (i) above, Buyer may execute
contracts with employees and sales representatives prior to Closing, so long as
such contracts (A) only become effective on or subsequent to the Closing Date
(provided that for purposes of this Agreement such contracts with sales
representatives shall be deemed to be effective as of the date this Agreement is
terminated by Buyer pursuant to Section 7.1(c)(i) if the termination consequence
described in Section
7.3(a) is applicable to
such termination by Buyer) and (B) contain unambiguous terms indicating that
except as provided in Section
7.3, such contracts will be
invalid and of no force and effect in the event the Closing does not occur (in
each case, unless otherwise agreed to in writing by Seller).  Subject
to Section
7.3, it is the parties’
intent that Buyer will only be permitted to proceed with contracts with Seller’s
sales representatives in the event the Closing occurs.  Accordingly,
in the event this Agreement is terminated by any party for any reason except as
provided in Section
7.3, Buyer’s rights granted
under this Section
6.1(g) will be extinguished
and Buyer’s rights and limitations with respect to Seller’s sales
representatives will return to the same status as existed prior to execution of
this Agreement.  It is further understood and agreed that Seller or
RDA shall pay as soon as practicable after Closing, but in no event later than
sixty (60) days after Closing, to any employee
or independent sales representative that has been engaged by Buyer as of the
Closing Date, any and all amounts that may then be owed to such employee(s) or
independent sales representative(s) (in accordance with the agreements between
Seller and the respective employees or sales representatives, and subject to any
rights of set-off Seller may have) for commissions for product sales made prior
to the Closing Date,
and/or for any earned and
unpaid bonus or other compensation to which such employee(s) or independent
sales representative(s) would have been entitled if such employee(s) or
independent sales representative(s) remained with Seller through March 31, 2009
(“Unpaid
Compensation”).  If Seller fails to pay
any such Unpaid Compensation within such sixty (60) day period, Buyer may pay such
amounts on Seller’s behalf, and to the extent any such amounts are actually paid
by Buyer (and without waiving Buyer’s legal right to collect the same from
Seller and RDA), Buyer shall have the right to set-off one hundred ten percent
(110%) of the amount so paid by Buyer against Buyer’s obligation under (which
set-off shall be deemed to be a payment under and reduce the amount owing on)
the  Note.

     

    (h)  Inventory.  On a regular basis, Seller
shall provide to Buyer true and correct spreadsheets showing the amount of
Inventory sold from the date of the last
spreadsheet, and a list of any Inventory that has been moved from one location
to another location.

     

    (i)        Certain
Sales by Sales Representatives.  Buyer agrees that it shall:
(x) inform each of Seller’s sales representatives that it hires that such sales
representative shall remit to Seller all proceeds from and sales reports
regarding any sales of Books Are Fun products or Inventory prior to January 1,
2009, directly to Seller regardless of whether such sale was made before or
after the Closing Date; and (y) in the event Buyer receives any proceeds from a
sales representatives for sales of Books Are Fun products or Inventory prior to
January 1, 2009 (whether such sale was made before or after the Closing Date),
Buyer shall remit such proceeds and sales reports to Seller reasonably promptly,
but in no event later than thirty (30) days after receipt from any sales
representative; it being the intention of the parties that all sales of Books
Are Fun products or Inventory prior to January 1, 2009 shall be for the account
of Seller notwithstanding that the Closing Date may have occurred prior to that
date.  Seller shall be liable for all sales commissions payable to the
sales representatives for sales of Books Are Fun products or Inventory prior to
January 1, 2009 in accordance with the terms of any sales representative
agreement in effect between Seller and the respective sales representative
immediately prior to the Closing Date.

     

     

     

    
      
        
        

      

      
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    Section
6.2                                 Post-Closing
Agreements.  From
and after the Closing Date:

     

    (a)  Retention of
Records.  Until
the sixth (6th) anniversary of the Closing, neither
Seller nor RDA shall dispose of any material books or records relating to the
Acquired Assets, without giving Buyer at least ninety (90) days prior written
notice to such effect, and Buyer shall be given an opportunity, at its cost and
expense, to remove and retain all or any part of such books and records, as
Buyer may select.

     

    (b)  Taxes.  Seller will assume and be
responsible for Taxes (as defined below) incurred by or arising out of Seller’s
ownership, control or operation of the Acquired Assets up to the date of
Closing, or which results from the sale of the Acquired Assets.  Buyer
assumes responsibility for all Taxes relating to the Acquired Assets for the
period beginning on the date of Closing and thereafter.  For purposes
of this Agreement, “Taxes” means any federal, state, local, or
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, social security, unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or
any other tax whatsoever, including any interest, penalty or
addition thereto, whether disputed or not.  Buyer agrees to
cooperate with Seller in order to permit Seller to utilize the resale exemption
and other exemptions under the sales and use tax laws.

     

    (c)  Name
Change.  Seller
and RDA agree that, as of the Closing Date, they will cease to use the name
“Books are Fun, Ltd.” or any derivative or combination thereof and any other
trade names, trademarks, logos, marks, codes, numbers, addresses or domain names
included in the Acquired Assets, except that Seller and RDA can continue to use
the name Books are Fun, Ltd. solely in connection with the preparation and
filing of their financial, tax and similar reports and/or returns which relate
to the Business as of the Closing Date.  On the Closing Date (or as
promptly thereafter as reasonably practical), Seller and RDA shall, at their
sole expense, take all action (including filing appropriate charter amendments)
required to change the name of Seller in all jurisdictions in which it is
registered or qualified to do business.

     

    

     

    Section
6.3                                 Indemnification.

     

    (a)  Survival of
Covenants, Representations and Warranties.  All of the covenants of the
parties contained in this Agreement shall survive the Closing in accordance with
their terms.  All of the representations and warranties of the parties
contained in this Agreement shall survive the Closing hereunder and continue in
full force and effect for a period of eighteen (18) months thereafter, except
for the representations and warranties set forth in Section
3.1(a), Section
3.1(b), Section
3.1(c), Section
3.1(d), Section
3.1(f) (as to title
matters), Section
3.1(k), Section
4.1(a), Section
4.1(b) and Section
4.1(c), which shall survive
indefinitely; provided, that in the event written notice of
any claim for indemnification under Section
6.3(b)(i), Section
6.3(b)(ii), Section
6.3(c)(i) or Section
6.3(c)(ii) shall have been
given in accordance herewith within the applicable survival period, setting
forth such claim in reasonable detail (including a reasonable specification of
the legal and factual basis for such claim and the Loss (as defined in
Section
6.3(b) below) incurred to
the extent known), the representations, warranties, covenants and agreements
that are the subject of such indemnification claim shall survive with respect to
that claim until such time as the claim is fully and finally
resolved.

     

     

     

    
      
        
        

      

      
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    (b)  Indemnification
by Seller and RDA.  Seller and RDA jointly and
severally agree to indemnify and hold harmless Buyer and its officers,
employees, agents, members, affiliates, successors and assigns (Buyer and each
such Person being referred to herein as a “Buyer
Indemnified Party”) from
and against any and all Losses relating to or arising from (i) any breach of any
of the representations or warranties of Seller or RDA set forth in this
Agreement or any Other Agreement; (ii) any breach of any covenant or agreement
of Seller or RDA set forth in this Agreement or any Other Agreement; (iii) any
Retained Liabilities; (iv) any Taxes attributable to the Business and/or
Acquired Assets that are attributable to any period or portion thereof ending on
or before the Closing Date; (v) any liabilities arising from or related to any
failure to comply with laws relating to bulk transfers or bulk sales with
respect to the transactions contemplated by this Agreement; and (vi) any and all
costs and expenses (including without limitation, reasonable legal fees and
accounting fees) incident to the enforcement of the provisions of this
Section 6.3(b).  The term “Losses” shall mean any and all liabilities,
judgments, settlements, actions, suits, proceedings, claims, demands,
allegations, losses, costs and expenses of any kind, including, without
limitation, reasonable fees and disbursements of counsel.

     

    (c)  Indemnification
by Buyer.  Buyer
agrees to indemnify and
hold harmless Seller, RDA and their
respective officers,
employees, agents,
shareholders, affiliates, successors and assigns (Seller, RDA and each such
Person being referred to herein as a “Seller
Indemnified Party”) from
and against any and all Losses relating to or arising from: (i) any breach of
any of the representations or warranties of Buyer set forth in this Agreement or
any Other Agreement; (ii) any breach of any covenant or agreement of Buyer set
forth in this Agreement or any Other Agreement; (iii) any Assumed Liabilities;
(iv) any and all costs and expenses (including without limitation, reasonable
legal fees and accounting fees) incident to the enforcement of the provisions of
this Section 6.3(c); and (v) any Taxes attributable to the
Acquired Assets that are attributable to any period or any portion of a period
ending after the Closing Date.

     

    (d)  Indemnification
Procedure.  If
any Buyer Indemnified Party or a Seller Indemnified Party (each, an
“Indemnified
Party”) is seeking
indemnification hereunder as a result of a third party claim, then such
Indemnified Party shall, within ten (10) days after becoming aware thereof,
notify the parties against whom such indemnification is sought (the
“Indemnifying
Parties”) of the assertion
in writing or the commencement of any claim, demand, action, suit or proceeding
in respect thereof, provided, however, that the failure to notify the
Indemnifying Parties shall not relieve the Indemnifying Parties from any
liability or obligation that they may have pursuant to this paragraph or
otherwise, unless such Indemnifying Parties are materially prejudiced thereby,
and then only to the extent of such damages resulting from such Indemnified
Party’s delay or failure to provide such notice.  Following such
notification, the Indemnifying Parties may elect, in writing, to assume the
defense of such action, suit or proceeding (and the costs related thereto) and,
upon such election, the Indemnifying Parties shall not be liable for any legal
costs subsequently incurred by the Indemnified Party (other than costs of
investigation or the production of documents or witnesses) unless (i) the
Indemnifying Parties have failed to provide legal counsel reasonably
satisfactory to such Indemnified Party in a timely manner; or (ii) the
representation of such Indemnified Party by legal counsel selected by the
Indemnifying Parties would be inappropriate due to conflicts of
interest.  In the defense of any claim, the Indemnifying Parties shall
act in good faith and conduct the defense actively and diligently, and in the
event the Indemnifying Parties are not complying with the foregoing, the
Indemnified Party shall have the right to assume the defense of such claim, at
the sole cost and expense of the Indemnifying Parties.  Nothing set
forth herein shall preclude any Indemnified Party from retaining its own counsel
and participating in the defense of any action, suit or proceeding at its own
expense.  The Indemnifying Parties, or the Indemnified Party, as the
case may be, shall act in good faith, shall consult with the other party, and
the Indemnifying Parties will not, without the prior written consent of the
Indemnified Party, settle, compromise or consent to the entry of judgment in any
pending or threatened action, suit or proceeding in respect of which
indemnification is sought hereunder, unless such settlement, compromise or
judgment (A) includes a provision unconditionally releasing the Indemnified
Party from and against all liability in respect of claims by any releasing party
related to or arising out of such matters or any transaction or conduct in
connection therewith, (B) requires no payment by any Indemnified Party and (C)
does not provide for any admission of liability or wrongdoing by or for
injunctive or other equitable relief against any Indemnified
Party.

     

     

     

    
      
        
        

      

      
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    (e)  Limitations
on Indemnification.  Notwithstanding the
foregoing, Buyer shall not be entitled to indemnification pursuant to
Section
6.3(b)(i) until the total
amount of Losses thereunder exceeds One Hundred Thousand and No/100 Dollars
($100,000.00), in which event Buyer shall be entitled to indemnification for all
such Losses from the first dollar of such Loss.  Seller and RDA shall
not be entitled to indemnification pursuant to Section
6.3(c)(i) until the total
amount of Losses thereunder exceeds One Hundred Thousand and No/100 Dollars
($100,000.00), in which event Seller and RDA shall be entitled to
indemnification for all such Losses from the first dollar of such
Loss.   In no event shall Seller and
RDA be entitled to indemnification under Section
6.3(c)(i) for any Losses in
excess of Five Million and
No/100 Dollars ($5,000,000). In no event shall Buyer be entitled to
indemnification under Section
6.3(b)(i) for any Losses in
excess of Five Million and
No/100 Dollars ($5,000,000); provided, however, that in the event of any
Inventory Losses resulting from a Catastrophic Event (each as defined in Section
6.3(i)), amounts paid to Buyer in connection
therewith will not count towards the minimum or against the maximum liability
amounts set forth above; provided, however, that the maximum liability of Seller
or RDA with respect to Inventory Losses shall be Five Million and No/100 Dollars
($5,000,000).

     

    (f)  Materiality.  Notwithstanding anything to
the contrary contained in this Agreement, for purposes of determining whether
there has been a breach and the amount of any Losses that are the subject matter
of a claim for indemnification hereunder, each representation and warranty in
this Agreement and each certificate or document delivered pursuant to this
Agreement shall be read without regard and without giving effect to the term
“material”, or any derivation thereof, in each instance where the effect of such
term(s) would be to make such representation and warranty less restrictive
(i.e., as if such standard or qualification were deleted from such
representation and warranty).

     

    (g)  Investigation.  The indemnification
obligations set forth in this Section
6.3 are made
notwithstanding any investigation by or on behalf of Buyer or the result of any
investigation, and notwithstanding the participation of Buyer in the
Closing.

     

    (h)  Manner of
Payment.  Except
as otherwise provided herein, any payment with respect to an indemnification
obligation owing hereunder shall be made by wire transfer of immediately
available funds to an account designated by the Indemnified Party, within ten
(10) days after determination thereof.   Prior to recovering any amount from
Seller or RDA, Buyer shall first offset any indemnification obligation owed by
Seller or RDA hereunder against amounts owed pursuant to the Note.  No interest will be due on any
indemnification payments that are payable hereunder.

     

    (i)  Inventory.  In the event that on or
prior to the Closing Date, any portion of the Inventory is rendered
undeliverable or non-saleable (an “Inventory
Loss”), Buyer shall be
required to consummate the Closing, and Buyer’s sole remedy with respect to such
Inventory Loss shall be to seek indemnification pursuant to Section
6.3, subject to the
limitations set forth in Section
6.3(e), provided that if
such Inventory Loss exceeds ten percent (10%) of the Inventory (as determined
based upon the Purchase Order Price of the damaged or non-saleable Inventory as
compared to the Purchase Order Price of all of the Inventory) and such Inventory
Loss is the result of a Catastrophic Event, amounts paid under this Section
6.3(i) shall not count towards the minimum or against the
maximum liability amounts set forth in Section
6.3(e) applicable to other types
of Losses.  For purposes
hereof, a “Catastrophic
Event” shall mean: (x) any event or series of events such
as  fire, flood, earthquake, tornado, unusual or severe weather
conditions or other natural disasters or acts of God, acts of war (whether
declared or not), sabotage or terrorism, riots, civil disturbances or disorders,
strikes and labor unrest, explosions, governmental requisitions, extraordinary
electrical or mechanical failures or perils of the sea, that causes or results
in an Inventory Loss; and
(y) any willful, intentional or grossly negligent act or omission taken by
Seller or RDA which directly caused such Inventory Loss.  The amount to be paid by
Seller to Buyer under this Section
6.3(i) in the event of an
Inventory Loss covered hereby shall be equal to 10% of the Purchase Order Price
of the undeliverable or non-saleable Inventory, except that the Purchase Order
Price for any Inventory
with respect to
which Seller’s (and through the assumption of the
respective Inventory Agreements, Buyer’s) right to sell or distribute the same
expires on or before June 30, 2009, shall be deemed to be zero
($0.00).  In no event shall Buyer be entitled to recover, in the
aggregate, more than Five
Million and No/100 Dollars
($5,000,000) in connection with Inventory Losses.

     

     

     

    
      
        
        

      

      
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    Section
6.4                                 Publicity
and Disclosure.  Both prior to and after the
Closing, prior to issuing any press release, making any public announcement or
disclosure or making any communication to employees or sales representatives
(other than as permitted pursuant to the terms of this Agreement) relating to
this Agreement, any Other Agreement or the subject matter hereof or thereof,
including, without limitation the terms and conditions of this Agreement and/or
the operation of the Business, each party shall provide to the other parties a
copy of such proposed communication within a reasonable time (and in no event
less than one (1) business day) prior to issuing such
press release or making such announcement, disclosure or communication (except
to the extent a party is prohibited from complying with this provision by law on
advice of counsel).  Any party intending to issue such a press release
or make such an announcement, disclosure or communication shall consult with the
other parties and give reasonable consideration to their comments prior to
issuing such press release or making such announcement, disclosure or
communication (except to the extent a party is prohibited from complying with
this provision by law on advice of counsel).  The parties acknowledge
that a joint press release pertaining to the execution and delivery of this
Agreement shall be made after the date hereof but not later than the date which is two (2) business days after the date hereof; provided, however that Buyer shall
agree to a one (1) business day extension of this period if requested in writing
by RDA in the event such additional time is necessary for it to comply with
Regulation FD under the federal securities laws.

     

    Section
6.5                                 Non-disparagement. Each party agrees that, from the date
hereof until two (2)
years from the Closing
Date, it shall not (and none of its subsidiaries or affiliates shall) disparage,
or make or publish any communication that reflects adversely upon any other
party and/or any of their respective affiliates or their respective directors,
officers, employees, sales representatives, partners or stockholders or their
respective personnel, products or practices.

     

    Section
6.6                                 Confidentiality/Non-Disclosure.  Each party hereto agrees,
from and after the date hereof, to keep completely confidential and retain in
strictest confidence and shall not, directly or indirectly disclose, communicate
or divulge to any Person other than the other parties hereto, and their
respective employees, officers and agents, or use for the benefit of any Person
other than the Buyer, any Proprietary Information (as defined
below).  The restriction contained in the preceding sentence shall not
apply to any Proprietary Information that (i) is a matter of public knowledge on
the date hereof, (ii) becomes a matter of public knowledge after the date hereof
solely from a source other than the disclosing party or any other Person subject
to an obligation of confidentiality to the non-disclosing party or (iii) is
required by law or by the order of any court or government agency, or in any
litigation or similar proceeding to be disclosed; provided, that such disclosing
party shall, prior to making such legally required or compelled disclosure,
comply with the provisions of Section
8.4
hereof.  Additionally, it is expressly understood and agreed
that either party may disclose such portions
of the Proprietary Information after the Closing Date that may be reasonably required or commercially
important to disclose to
each party’s respective senior officers, accountants/auditors, lenders (or potential lenders),
investors (or potential investors), lawyers, and/or boards of directors/managing
members or to other third
parties in connection with financings, audits of financial records and other
business books and records or other bona fide business purposes provided such
disclosures are made in a commercially reasonable manner and the disclosing
party informs the recipient that such information is subject to a
confidentiality agreement between RDA and Buyer. For purposes hereof, “Proprietary
Information” means all
information or data with respect to the conduct or details of the Business or
the business of the Buyer (whether constituting a trade secret or not)
including, without limitation, methods of operation, customers and customer
lists, supplier lists, sales data, details of contracts with customers and
suppliers, details of contracts with (and compensation arrangements for)
consultants, independent sales representatives and employees, current, proposed
or former products, proposed, pending or completed acquisitions of any company,
division, product line or other business unit, prices and pricing policies,
fees, costs, plans, designs, technology, inventions, trade secrets, processes,
formulae, know-how, software, marketing methods, models, business methods,
policies, plans, personnel, competitors, markets or other specialized
information or proprietary matters of such Person.  Notwithstanding
the foregoing, Proprietary Information, for purposes of Buyer’s obligations
hereunder, shall not include any information or other data comprising a part of
the Acquired Assets, provided that the Closing occurs, and the definition of Proprietary
Information for purposes of Seller’s and RDA’s obligations hereunder shall not
include historical financial statements and summary financial statements of
Seller or RDA.

     

     

     

    
      
        
        

      

      
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    Section
6.7                                 Further
Assurances.  Subject to the terms and
conditions of this Agreement, at any time or from time to time after the
Closing, at any party’s request and without further consideration, the other
party shall execute and deliver to such party such other instruments of sale,
transfer, conveyance, assignment and confirmation, provide such materials and
information and take such other actions and execute and deliver such other
documents as such party may reasonably request in order to consummate the
transactions contemplated by this Agreement.

     

    Section
6.8                                 Transitional
Assistance.  From
time to time after Closing, upon the reasonable request of Buyer, Seller and RDA
shall assist and cooperate with Buyer to effectuate the transfer of the Acquired
Assets, and transition the independent sales representatives from the business
of Seller to the business of Buyer in an orderly and efficient
manner.

     

    Section
6.9                                 Limitations
on Certain Buyer’s Rights.  Notwithstanding any provision of this
Agreement, the Note or the Noncompetition Agreement to the contrary, Buyer
agrees that following the Closing, during the pendency of any Enforcement
Restriction Period (as defined below), (i) Buyer shall not be entitled to assert
or enforce any rights to indemnification pursuant to Section
6.3(b) of this Agreement,
and (ii) Seller and RDA shall not be subject to any of the limitations set forth
in the Noncompetition Agreement.  “Enforcement Restriction Period”
means the period from the forty-fifth (45th) day following the occurrence of any
Default (as defined in the Note) and ending on the date on which such Default is
cured or waived.  The parties hereto acknowledge and agree that the
pendency of an Enforcement Restriction Period shall not affect (x) Buyer’s right
and remedies with respect to any claim for indemnification asserted prior to the
commencement of such Enforcement Restriction Period; (y) the survival periods
set forth in Section
6.3(a) hereof; or (z) upon
the termination of any Enforcement Restriction Period, any rights of Buyer
pursuant to Section
6.3(b) of this Agreement
(regardless of when such claim arose) or any obligations of Seller and RDA (and
their affiliates) pursuant to the Noncompetition Agreement (provided that with
respect to the Noncompetition Agreement and the termination of any Enforcement
Restriction Period, Seller and RDA will use reasonable efforts to cease, as
promptly as commercially practicable without incurring unreasonable expense,
activities commenced during the Enforcement Restriction Period that would
violate the Noncompetition Agreement in the absence of any Enforcement
Restriction Period).

     

    ARTICLE VII

    TERMINATION;
LIQUIDATED DAMAGES

    

    Section
7.1                                 Termination.  This Agreement may be
terminated and the consummation of the transactions contemplated hereby may be
abandoned at any time prior to Closing only under one of the following
circumstances:

     

    (a)  by mutual written consent of Seller, RDA
and Buyer;

     

     

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

     

    (b)  by Buyer or Seller if any court of
competent jurisdiction in the United States or other United States governmental
authority shall have issued a final non-appealable order, decree or ruling or
taken any other final action restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement, and such order,
decree, ruling or other action is or shall have become final and
nonappealable;

     

    (c)  by either Seller and RDA or Buyer (as
specified below):

     

    (i) by Buyer, if Closing has not occurred on
or before December 29, 2008 (the “Termination
Date”), as a result of
Seller’s or RDA’s failure to satisfy Buyer’s conditions to Closing set forth in
Section
5.3; or

     

    (ii) by Seller and RDA, if Closing has not
occurred on or before the Termination Date, as a result of Buyer’s failure to
satisfy Seller’s conditions to Closing set forth in Section
5.4; or

     

    (d)      by Buyer, if there is an Exclusivity
Breach.

     

    The party desiring to terminate this
Agreement pursuant to Section
7.1 (other than pursuant to
Section
7.1(a)) shall give notice
of such termination to the other party.

     

    Section
7.2                                 Effect of
Termination.  In
the event of termination of this Agreement by either Seller/RDA or Buyer prior
to the Closing pursuant to the provisions of Section
7.1, this Agreement shall
forthwith become void, and there shall be no liability or further obligation on
the part of Buyer or Seller/RDA or their respective officers or directors
(except pursuant to Section
6.4, Section
6.5, Section
6.6, Section
7.3 and Article
VIII, all of which shall
survive the termination); provided, that nothing in this Section
7.2 shall relieve any party
from liability for fraud by such party prior to termination of this
Agreement.  In
the event of a termination of this Agreement for any reason, each party shall
promptly return to the other parties any Proprietary Information provided to it
by such other party.

     

    Section
7.3                                 Termination
Damages.

     

    (a)  Effective immediately upon termination
of this Agreement by Buyer pursuant to Section
7.1(c)(i) as a result of a
failure by Seller or RDA to meet the conditions of Buyer’s obligation to close
set forth in Section
5.3 (other than Section
5.3(b) unless such court order or proceeding was initiated by RDA or Seller or a
Person affiliated with RDA or Seller) on the Termination Date, but only if Buyer
has satisfied its conditions to Closing set forth in Section
5.4 on the Termination
Date, all non-competition, non-solicitation and similar restrictive covenants
(including any limitations or restrictions on the use of Seller’s confidential
or proprietary information) imposed by Seller or any of its Affiliates and
applicable to Buyer, its Affiliates or any of Seller’s current or former sales
representatives, that directly or indirectly prohibit or limit the ability of
Buyer or its Affiliates to negotiate with, make offers and contract with any of
Seller’s current or former sales representatives, shall be permanently
terminated, fully released, and of no further force and effect.  In
this event, Buyer shall not be entitled to any other remedy or relief (including
monetary damages) with respect to such termination. Each of Seller’s current and
former sales representatives shall be third party beneficiaries of this
Section
7.3(a).

     

     

     

    
      
        
        

      

      
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    (b)  In the event that this Agreement is
terminated as a result of the execution and delivery of an agreement by Seller
or RDA with a third person for the sale of the stock of Seller or the sale of all, or substantially all of
the Acquired
Assets (other than in the
ordinary course of business), including as a result of the merger,
consolidation recapitalization or reorganization (an “Exclusivity
Breach”), Seller shall pay
Buyer, in immediately available funds on the date of termination, Five Million
and No/100 Dollars ($5,000,000.00), as liquidated and agreed upon damages for
such Exclusivity Breach, and Buyer shall not be entitled to any other remedy or
relief with respect to such Exclusivity Breach.

     

    (c)  It is acknowledged and agreed that the
actual damages to be incurred by Buyer in the event of a termination by Buyer
under Section
7.1(c)(i) where the
termination consequence described in Section
7.3(a) applies or in the
event of an Exclusivity Breach of the Agreement by Seller and/or RDA would be
difficult if not impossible to measure accurately, and the liquidated damages
specified above in Section
7.3(a) and 7.3(b) are good faith estimates of the amounts
and/or actions required to compensate the parties for their respective
anticipated damages.

     

    (d)  Except as set forth in Section
7.4(e), if this Agreement is terminated by Seller
and RDA pursuant to Section
7.1(c)(ii), Seller
and RDA may pursue damages from
Buyer.

     

    (e)  In the event that this Agreement is
terminated by Seller and
RDA pursuant to Section
7.1(c)(ii) as a result of
the Wachovia Consent not
being valid or in effect for failure of any of the six (6) conditions set forth
in the final paragraph of the Wachovia Consent, Buyer shall pay Seller in immediately available funds on
the date of termination, Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00), as liquidated and agreed
upon damages for such breach, and Seller and RDA shall not be entitled to any other
remedy or relief with respect to such breach; provided that the liquidated
damages set forth in this Section
7.3(e) shall not apply (A) if the Wachovia
Consent is not valid or in effect as a result of (i) Seller and/or RDA’s failure
to enter into an
intercreditor agreement with respect to the Note mutually satisfactory to Seller and
Wachovia or (ii) the expiration of the Wachovia Consent on January 15, 2009 as a
result of the Closing not having occurred on or before such date; or (B) to
Seller and/or RDA’s failure to satisfy the conditions to Closing set forth in
Section
5.3 on or before the Termination
Date.  In the
event that this Agreement is terminated
by Seller and RDA pursuant
to Section
7.1(c)(ii) as a result of
the Wachovia Consent not
being valid or in effect for any reason other than any of the six (6) conditions
set forth in the final paragraph of the Wachovia Consent, Buyer shall reimburse
Seller and RDA for their attorneys’ fees and related expenses with respect to
the negotiation of the Letter of Intent, this Agreement, the Other Agreements
and all related agreements and schedules (promptly upon Seller and/or RDA
providing a written request
for such amount), subject
to a maximum reimbursement of Five Hundred Thousand Dollars ($500,000), and
Seller and RDA may pursue additional damages from Buyer.

     

    ARTICLE VIII

    GENERAL
PROVISIONS

    

    Section
8.1                                 Notices.

     

    (a)  Each notice or other communication (a
“Notice”) given by any party to any other party
in connection with this Agreement shall be in writing, by personal delivery,
receipted reliable overnight delivery service, or certified mail, return receipt
requested, postage prepaid and properly addressed to the recipient as shown in
Section
8.1(b)
below.

     

     

    
      
        
        

      

      
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    (b)  Any Notice shall be effective on the
date it is delivered personally, the business day for scheduled delivery if by
receipted overnight delivery service, or three (3) days after the date it is
mailed by certified mail, return receipt requested, as applicable, to the
following addresses:

     

    
      	
               
      

            	
              If  to Seller or
      RDA:

            	
              The Reader’s Digest Association,
      Inc.

            

    

    Reader’s Digest Road

    Pleasantville, NY 10570

    Attn:  Chief Financial
Officer

    

    with a copy to:

    

    
      	
               
      

            	
              The Reader’s Digest Association,
      Inc.

            

    

    Reader’s Digest Road

    Pleasantville, NY 10570

    Attn:  General
Counsel

    

    and

    

    Quarles & Brady
LLP

    411 East Wisconsin
Avenue

    Milwaukee, WI 53202

    Suite 2040

    Attn: Tyson A. Ciepluch,
Esq.

    

    

    
      	
               
      

            	
              If to
Buyer:

            	
              Imagine Nation Books,
      Ltd.

            

    

    
      	
               
      

            	
              4601 Nautilus Court
  South

            

    

    
      	
               
      

            	
              Boulder, CO 80301

            

    

    
      	
               
      

            	
              Attn:  Ben
      Kaplan

            

    

    

    with a copy to:

    

    Dickstein Shapiro
LLP

    1825 Eye Street,
N.W.

    Washington, D.C.  20006-5403

    Attn: Howard S. Jatlow,
Esq.

    

    

    or such other address as any party may
designate by Notice to the other parties in accordance with this Section
8.1.

     

     

    
      
        
        

      

      
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    Section
8.2                                 Entire
Agreement.  This
Agreement, together with the Other Agreements, shall constitute the entire
agreement of the parties with respect to the subject matter hereof and shall
supersede all prior agreements with respect thereto, including, without
limitation,  the Nondisclosure Agreement dated as of March 18, 2008
and the Letter of Intent.

     

    Section
8.3                                 Successors
and Assigns.  This Agreement shall inure
to the benefit of and be binding on the parties hereto and their respective
successors and assigns.  Buyer may, following the Closing, without the
written consent of Seller or RDA assign this Agreement to any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Buyer, or to an affiliate of
Buyer.  Neither Seller nor RDA may assign any rights to payments
hereunder without the consent or approval of Buyer.

     

    Section
8.4                                 Disclosure
of Confidential Information.  In the event any party or
any of their respective representatives receives a request to disclose any
Proprietary Information or any information pertaining to this Agreement, any
Other Agreement or the transactions contemplated hereby or thereby pursuant to a
valid and effective subpoena or order issued by a court of competent
jurisdiction or by a governmental body, such party agrees (unless otherwise
compelled or requested by such court or governmental body) (i) to notify
all other parties immediately of the existence, terms and circumstances
surrounding such a request, and (ii) if disclosure of such information is
required by law in the opinion of counsel to the party receiving such subpoena
or order, to exercise reasonable efforts to obtain an order or other reliable
assurance that confidential treatment will be accorded to such of the disclosed
information as the party disclosing the information designates.  It is
expressly understood and agreed that Buyer, Seller and RDA may disclose and
discuss the terms of this Agreement, Proprietary Information and the
transactions contemplated hereby to and with their respective senior officers,
accountants, lenders (or potential lenders), investors (or potential investors),
lawyers, and/or boards of directors/managing members, to the extent reasonably
necessary to evaluate or consummate the contemplated transactions, so long as
such Persons are advised of the terms of the confidentiality required hereby,
and agree to abide by its terms.

     

    Section
8.5                                 Miscellaneous.

     

    (a)  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
New
York,
without reference to principles of conflict of laws which would require the
application of the laws of any other jurisdiction.  The parties hereby
agree that the state and federal courts located in the State of New York shall
have exclusive jurisdiction over adjudication of any dispute arising out of or
in any way relating to any right of Buyer to damages in accordance with
Section
7.3(a) or
(b) of this Agreement, and
consent to personal jurisdiction of such courts and service of process in
connection with any such dispute.  This Agreement may not be amended
or modified except by a written agreement executed by the parties hereto or their respective
successors and legal representatives.

     

    (b)  Any dispute concerning this Agreement
(other than disputes with respect to any right of Buyer to damages in accordance
with Section
7.3(a) or (b)) shall be resolved by binding
arbitration in New York, New York in accordance with the arbitration procedures
dictated and governed by the commercial arbitration rules of the American
Arbitration Association (the “AAA”) and the Federal Arbitration
Act.   By executing this Agreement, each
party hereby agrees to have any dispute arising out of a breach or alleged
breach of this Agreement (other than with respect to any right of Buyer to
damages in accordance with Section
7.3(a) or (b)) or any Other Agreement decided by
neutral arbitration and each party is giving up any rights it may possess to
have such disputes litigated in a court of law in state or federal court,
including, without limitation, any rights a party may have to a jury
trial.   Each party’s agreement to this arbitration provision is
voluntary.  Each party acknowledges and agrees that such party has read and
understands the foregoing and agrees to
submit disputes arising hereunder or under the Other Agreements to neutral
arbitration (except as otherwise provided herein).  A judgment upon an
award may be entered in any court having jurisdiction.  A hearing
shall begin within ninety (90) days of demand for arbitration and all hearings
shall conclude within one hundred twenty (120) days of demand for
arbitration.  These time limitations may not be extended unless a
party shows cause for extension and then for no more than a total of sixty (60)
days.  The expedited procedures set forth in Rule 51 et
seq. of the Arbitration
Rules shall be applicable to claims of less than One Million and No/100 Dollars
($1,000,000.00).  Arbitrators shall be licensed attorneys selected
from the Large, Complex
Commercial Litigation Panel
of the AAA.  The parties do not waive applicable federal or state
substantive law except as provided herein.  The fees and disbursements
of the arbitrator shall be paid by the non-prevailing party.  The
prevailing party shall be entitled to recover its costs and expenses (including
reasonable attorneys fees) relating to such arbitration
proceeding.

     

     

     

    
      
        
        

      

      
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    (c)  Any party’s failure to insist upon
strict compliance with any provision of, or to assert any right under, this
Agreement shall not be deemed to be a waiver of such provision or right or of
any other provision of or
right under this Agreement.

     

    (d)  The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.  If any provision of this
Agreement shall be held invalid or unenforceable in part, the remaining portion
of such provision, together with all other provisions of this Agreement, shall
remain valid and enforceable and continue in full effect to the fullest extent
consistent with law.

     

    (e)  The Section headings contained in this
Agreement are for convenience only and in no manner shall be construed as part
of this Agreement.

     

    (f)  This Agreement shall not be altered or
otherwise amended except pursuant to an instrument in writing signed by Buyer,
on the one hand, and Seller and RDA on the other hand.

     

    (g)  This Agreement is intended and agreed to
be solely for the benefit of the parties hereto and their respective successors
and permitted assigns, and, except as set forth in Section
6.3 and Section
7.3(a), no other Person
shall accrue any benefit, claim or right of any kind whatsoever pursuant to,
under, by or through this Agreement.

     

    (h)  All obligations and liabilities of
Seller and RDA hereunder shall be joint and several.

     

    (i)  This Agreement may be executed
simultaneously in two (2) or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.  Each party hereto agrees to be bound by its facsimile or
PDF signature.

     

    (j)  Each party shall be deemed to have
participated equally in the drafting of this Agreement and any ambiguity in this
Agreement shall not be construed against any purported author
hereof.  Each party acknowledges that at all times during the course
of negotiations, and as to the execution of this Agreement and the Other
Agreements, it has been advised by counsel of its own
selection.

     

    Section
8.6                                 Fees and
Expenses.  Except
as expressly provided otherwise herein, all costs and expenses (including
attorney’s fees) incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such
expenses.

     

    Section
8.7                                 Waiver of
Jury Trial.  Each
party hereto hereby (a)  covenants and agrees not to elect a trial by jury
of any issue triable by a jury, and (b) waives any right to trial by jury fully
to the extent that any such right shall now or hereafter exist.  This
waiver of right to trial by jury is separately given by each party hereto,
knowingly and voluntarily, and this waiver is intended to encompass individually
each instance and each issue as to which the right to a jury trial would
otherwise accrue.  Each party is hereby authorized and requested to
submit this Agreement to any court having jurisdiction over the subject matter
and the parties hereto, so as to serve as conclusive evidence of each party’s
herein contained waiver of the right to jury trial.

     

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    IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the day and year first above
written.

     

                        BUYER:

    

                        IMAGINE NATION BOOKS,
LTD.

    

    

                        By /s/ Earl P.
Kaplan                                            

                               Name:  Earl
P. Kaplan

                               Title:  Chief
Executive Officer

    

    

                        SELLER:

    

                        BOOKS ARE FUN,
LTD.

    

    

                        By: /s/ Harris
Williams                                            

                               Name:
Harris
Williams

                               Title: Executive Vice
President

    

    

                        RDA:

    

                        THE READER’S DIGEST
ASSOCIATION, INC.

    

    

                        By: /s/ Harris
Williams                                            

                               Name:
Harris
Williams

                               Title: Chief Financial
OfficerExhibit 10.1

             

            FORM OF

            FIRST AMENDMENT TO THE CORPORATION’S

            2004 STOCK OPTION PLAN

             

            Section 4.1 of the Plan shall be deleted and replaced in its entirety with the following:

             

            4.1 Reserved Shares. Subject to Section 11 (relating to adjustments upon changes in capitalization), the aggregate number of shares of Stock (as defined in Section 6) that may be acquired under the Plan by any one Eligible Employee and by all Eligible Employees pursuant to options granted hereunder shall not exceed 85,306 shares.
            Shares of Stock covered by options granted under the Plan, which options expire, terminate or are canceled for any reason (other than an option, or part thereof, that is canceled by the Committee and for which cash is paid in respect thereof) shall again become available for award under the Plan.

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