<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: January 6, 1997
Thomas Nelson, Inc.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Tennessee 0-4095 62-0679364
- -------------------------------------------------------------------------------
(State or other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification No.)
501 Nelson Place
Nashville, Tennessee 37214-1000
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: 615/889-9000
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 21, 1996, Thomas Nelson, Inc., a Tennessee corporation
("Nelson"), its wholly owned subsidiary, Word, Incorporated, a Delaware
corporation ("Word"), and Word Direct Partners, L.P., a Texas limited
partnership whose sole general partner and sole limited partner are direct or
indirect wholly owned subsidiaries of Nelson (collectively, the "Sellers")
entered into an Asset Purchase Agreement (together with Amendment No. 1 thereto
dated as of January 6, 1997, the "Asset Purchase Agreement") among the Sellers
and Gaylord Entertainment Company, a Delaware corporation ("Gaylord"). The
Asset Purchase Agreement provided for the purchase by Gaylord of certain assets
of Sellers (the "Purchased Assets"), which Purchased Assets comprised the music
division of Nelson (the "Music Business"), which included the production of
recorded music and related products, the distribution of recordings for other
companies and music publishing, including songwriter development, print music
publishing and copyright administration. Gaylord also agreed to assume certain
liabilities associated with the Music Business (the "Assumed Liabilities").
In connection with the transactions contemplated by the Asset Purchase
Agreement, subsidiaries of Gaylord purchased certain assets relating primarily
to the Music Business of Word Communications, Ltd., a Canadian corporation, and
Nelson Word, Ltd., a United Kingdom corporation, both of which are direct or
indirect wholly owned subsidiaries of Nelson (the "Foreign Subsidiaries").
On January 6, 1997, the transactions contemplated by the Asset Purchase
Agreement were consummated. Pursuant to Amendment No. 1 and a working capital
adjustment based on changes in the balance sheet of the Music Business from June
30, 1996 to the date of closing, Gaylord paid to Sellers $120,693,000 at the
closing. The purchase price is subject to further adjustment based on a
post-transaction analysis of changes in working capital not reflected on the
balance sheet of the Music Business at the closing date.
Pursuant to the Asset Purchase Agreement, Sellers entered into an agreement
with Gaylord whereby Sellers will provide, and Gaylord will compensate them for,
certain administrative support services to the Music Business (such as billing,
collection, inventory warehousing and shipping) during a transition period not
to exceed twelve months following the closing.
The proceeds received by Nelson were used to retire $35 million of the
Series A Senior Notes pursuant to the Company's Note Purchase Agreement dated
January 3, 1996 and to pay the outstanding balance of approximately $50 million
under the Company's Amended and Restated Credit Agreement dated December 13,
1995, as amended, among the Company, SunTrust Bank, Nashville, N.A., National
City Bank of Louisville, First American National Bank in Nashville, NationsBank
of Texas, N.A. in Dallas, and Creditanstalt-Bankverein in New York, with the
remainder of the proceeds to be invested in short-term government securities or
similar investments pending application by the Company.
2
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Not applicable.
(b) Pro Forma Financial Information:
(i) Pro forma consolidated balance sheet of Thomas Nelson, Inc. and
Subsidiaries as of September 30, 1996 giving effect to the
disposition of the Music Division as of September 30, 1996.
(ii) Pro forma consolidated statements of income of Thomas Nelson, Inc.
and Subsidiaries for the twelve months ended March 31, 1996 and for
the six month period ended September 30, 1996 giving effect to the
disposition of the Music Division as if such transaction had occurred
as of beginning of periods presented.
The unaudited pro forma condensed consolidated financial statements
presented herein are shown for illustrative purposes only and are not
necessarily indicative of the financial position or results of operations
of the Company that would have actually resulted had the transaction and
debt retirement occurred as of the date or for the periods presented, or
that may result in the future.
The unaudited Pro Forma Condensed Consolidated Balance Sheet of the
Company as of September 30, 1996, reflects the financial position of the
Company after giving effect to the sale of the Company's Music Business,
as discussed in Item 2, and assumes the disposition took place on
September 30, 1996. The unaudited Pro Forma Condensed Consolidated
Statements of Operations for the year ended March 31, 1996, and the six
months ended September 30, 1996, assume that the disposition occurred at
the beginning of the periods presented, and are based on the operations of
the Company for the year ended March 31, 1996, and the six months ended
September 30, 1996. Such pro forma statements also reflect use of the
sale proceeds to retire debt over the reporting periods.
The unaudited pro forma condensed consolidated financial statements
should be read in conjunction with the historical financial statements
and related notes of the Company for the year ended March 31, 1996, as
filed on Form 10-K, and for the six months ended September 30, 1996, as
filed on Form 10-Q.
3
<PAGE> 4
THOMAS NELSON, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Disposed
Historical Business (a) Adjustments Pro Forma
---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Accounts receivable, net $109,268 $(34,978) $74,290
Inventories 91,964 (16,558) 75,406
Other 39,011 (6,108) $(2,150)(b)
5,688 (c) 36,441
-------- -------- -------- --------
Total Current Assets 240,243 (57,644) 3,538 186,137
Property, Plant and Equipment, net 34,993 (1,003) 33,990
Deferred Charges and Other Assets 24,896 (8,554) (947)(b) 15,395
Goodwill 75,300 (16,000)(b) 59,300
-------- -------- -------- --------
TOTAL ASSETS $375,432 $(67,201) $(13,409) $294,822
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $25,869 ($13,683) $12,186
Other current liabilities 37,889 (1,264) 36,625
-------- -------- --------
Total Current Liabilities 63,758 (14,947) 48,811
Long-Term Debt 179,572 $(85,000)(c) 94,572
Other Liabilities 6,644 (834) 5,810
Shareholders' Equity
Preferred stock, $1.00 par value, authorized
1,000,000 shares; none issued 0 0
Common stock, $1.00 par value, authorized
20,000,000 shares; issued 16,009,248 16,009 16,009
Class B common stock, $1.00 par value,
authorized 5,000,000 shares; issued
1,112,075 1,112 1,112
Additional paid-in capital 78,942 78,942
Retained earnings 29,293 (51,420) 71,944 49,817
Deferred compensation (251) (251)
Foreign currency translation adjustments 353 (353)(d) 0
-------- -------- -------- --------
Total Shareholders' Equity 125,458 (51,420) 71,591 145,629
-------- -------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $375,432 $(67,201) $(13,409) $294,822
======== ======== ======== ========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Balance
Sheet.
4
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THOMAS NELSON, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
a) Represents the historical unaudited September 30, 1996 balances for the
businesses which are eliminated to reflect the sale to Gaylord
Entertainment, Inc.
b) Music portion of intangibles and other assets associated with the sale.
c) Application of cash proceeds resulting from the sale of the business, net
of the estimated tax liability.
d) Liquidation of foreign currency translation associated with the sale of
foreign subsidiary assets.
5
<PAGE> 6
THOMAS NELSON, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR SIX MONTHS ENDED SEPTEMBER 30, 1996
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Disposed
Historical Business (a) Adjustments Pro Forma
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
NET REVENUES $166,159 $(45,774) $120,385
COST AND EXPENSES:
Cost of goods sold 86,952 (23,574) 63,378
Selling, general and administrative 65,757 (19,814) 45,943
Amortization of goodwill and
non-compete agreements 1,479 $(489)(b) 990
-------- -------- ------ --------
Total expenses 154,188 (43,388) (489) 110,311
-------- -------- ------ --------
OPERATING INCOME 11,971 (2,386) 489 10,074
Other income 208 208
Interest expense 6,190 (2,975)(c) 3,215
-------- -------- ------ --------
Income from continuing operations
before income taxes 5,989 (2,386) 3,464 7,067
Provision for income taxes 2,276 (907) 1,316 2,685
-------- -------- ------ --------
NET INCOME $ 3,713 $ (1,479) $2,148 $ 4,382
======== ======== ====== ========
Weighted average number
of shares outstanding:
Primary 17,139 17,139
======== ========
Fully-diluted 20,374 20,374
======== ========
NET INCOME PER SHARE:
Primary $ 0.22 $ 0.26
======== ========
Fully-diluted $ 0.22 $ 0.25
======== ========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Operations.
6
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THOMAS NELSON, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR TWELVE MONTHS ENDED MARCH 31, 1996
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Disposed
Historical Business (a) Adjustments Pro Forma
---------- -------- ----------- ---------
<S> <C> <C> <C> <C>
NET REVENUES $308,410 $(88,572) $219,838
COST AND EXPENSES:
Cost of goods sold 172,956 (46,334) 126,622
Selling, general and administrative 133,651 (45,661) 87,990
Amortization of goodwill and
non-compete agreements 2,090 $ (978)(b) 1,112
-------- -------- ------ --------
Total expenses 308,697 (91,995) (978) 215,724
-------- -------- ------ --------
OPERATING INCOME (LOSS) (287) 3,423 978 4,114
Other income 595 595
Interest expense 10,691 (5,950)(c) 4,741
-------- -------- ------ --------
Loss from continuing operations
before income taxes (10,383) 3,423 6,928 (32)
Benefit for income taxes (4,147) 1,367 2,767 (13)
-------- -------- ------ --------
Loss from continuing operations, net (6,236) 2,056 4,161 (19)
Loss from discontinued operations, net (4,678) (4,678)
-------- -------- ------ --------
NET LOSS ($10,914) $ 2,056 $4,161 $ (4,697)
======== ======== ====== ========
Weighted average number
of shares outstanding 15,718 15,718
======== ========
NET LOSS PER SHARE:
Loss from continuing operations $ (0.39) $ -
Loss from discontinued operations (0.30) (0.30)
-------- --------
$ (0.69) $ (0.30)
======== ========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Operations.
7
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THOMAS NELSON, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
a) To reflect elimination of disposed businesses operations.
b) Adjust amortization of intangibles and other assets associated with the
sale.
c) Adjust interest expense for the reduction of debt.
8
<PAGE> 9
(c) Exhibits:
(2.1) Asset Purchase Agreement, dated as of November 21, 1996 by and among
Thomas Nelson, Inc., Word, Incorporated and Word Direct Partners,
L.P. as Sellers and Gaylord Entertainment Company as Buyer.
Schedules to the Asset Purchase Agreement have been omitted. The
Company agrees to furnish supplementally a copy of any Schedule to
the Commission upon request.
(2.2) Amendment No. 1 to the Asset Purchase Agreement dated as of January
6, 1997, by and among Thomas Nelson, Inc., Word Incorporated and
Word Direct Partners, L.P. as Sellers and Gaylord Entertainment
Company as Buyer.
(2.3) Asset Purchase Agreement dated as of January 6, 1997, by and between
Nelson Word Limited and Word Entertainment Limited. Schedules to the
Asset Purchase Agreement have been omitted. The Company agrees to
furnish supplementally a copy of any Schedule to the Commission upon
request.
(2.4) Subsidiary Asset Purchase Agreement executed on January 6, 1997 and
dated as of November 21, 1996 between Word Communications, Ltd. and
Word Entertainment (Canada), Inc. Schedules to the Asset Purchase
Agreement have been omitted. The Company agrees to furnish
supplementally a copy of any Schedule to the Commission upon
request.
(4.1) Second Amendment to Credit Agreement dated November 15, 1996, among
Thomas Nelson, Inc., SunTrust Bank, Nashville, N.A., National City
Bank of Louisville, First American National Bank in Nashville,
NationsBank of Texas, N.A. in Dallas, Creditanstalt-Bankverein in
New York.
(4.2) Third Amendment to Credit Agreement dated January 7, 1997, among
Thomas Nelson, Inc., SunTrust Bank, Nashville, N.A., National City
Bank of Louisville, First American National Bank in Nashville,
NationsBank of Texas, N.A. in Dallas, Creditanstalt-Bankverein in
New York.
9
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the undersigned
hereunto duly authorized.
THOMAS NELSON, INC.
By: /s/ Joe L. Powers
-------------------------------------
Name: Joe L. Powers
Title: Executive Vice President
Date: January 21, 1997
10
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
Numbers Number
- ------- ------
<S> <C>
2.1 Asset Purchase Agreement, dated as of November 21,
1996 by and among Thomas Nelson, Inc., Word, Incorporated
and Word Direct Partners, L.P. as Sellers and Gaylord
Entertainment Company as Buyer.
2.2 Amendment No. 1 to the Asset Purchase Agreement dated
as of January 6, 1997, by and among Thomas Nelson, Inc.,
Word Incorporated and Word Direct Partners, L.P. as
Sellers and Gaylord Entertainment Company as Buyer.
2.3 Asset Purchase Agreement dated as of January 6, 1997,
by and between Nelson Word Limited and Word Entertainment
Limited.
2.4 Subsidiary Asset Purchase Agreement executed on
January 6, 1997 and dated as of November 21, 1996 between
Word Communications, Ltd. and Word Entertainment (Canada),
Inc.
4.1 Second Amendment to Credit Agreement dated November
15, 1996, among Thomas Nelson, Inc., SunTrust Bank,
Nashville, N.A., National City Bank of Louisville, First
American National Bank in Nashville, NationsBank of Texas,
N.A. in Dallas, Creditanstalt-Bankverein in New York.
4.2 Third Amendment to Credit Agreement dated January 7,
1997, among Thomas Nelson, Inc., SunTrust Bank, Nashville,
N.A., National City Bank of Louisville, First American
National Bank in Nashville, NationsBank of Texas, N.A. in
Dallas, Creditanstalt-Bankverein in New York.
</TABLE>
<PAGE> 1
Exhibit 2.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
THOMAS NELSON, INC., A TENNESSEE CORPORATION,
WORD, INCORPORATED, A DELAWARE CORPORATION
WORD DIRECT PARTNERS, L.P., A TEXAS LIMITED PARTNERSHIP
AND
GAYLORD ENTERTAINMENT COMPANY, A DELAWARE CORPORATION
DATED AS OF NOVEMBER 21, 1996
<PAGE> 2
2
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
ARTICLE HEADING PAGE
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<S> <C>
ARTICLE 1.
CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2.
PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1. Purchase and Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2. Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 3.
CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2. Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3. Pre-Closing Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4. Preliminary Post-Closing Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5. Collection of Commingled Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.6. Definitive Post-Closing Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 4.
CLOSING; OBLIGATIONS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1. Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2. Obligations of the Parties at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES BY SELLERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.1. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.2. Organization, Good Standing and Qualification . . . . . . . . . . . . . . . . . . . . . . . 16
5.3. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.4. No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.6. Records and Books of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.7. Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.8. Title to Assets; Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.9. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.10. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.11. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.12. Orders, Decrees, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.13. Compliance With Law; Permits and Licenses . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.14. Other Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.15. Broker's and Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.16. Fixed Assets; Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
3
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<TABLE>
<S> <C>
5.17. Supplemental Schedule of Purchase and Sales Commitments and Orders . . . . . . . . . . . . 22
5.18. Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.19. Actions Not in Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.20. No Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.21. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.22. Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.23. Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.24. Secrecy and Noncompetition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.25. Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.26. No Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.27. Sellers Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES BY BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.2. Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.3. No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.4. Sufficient Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.5. Certain Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.6. Broker's and Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 7.
COVENANTS AND AGREEMENTS OF SELLERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.1. Conduct of Business Pending the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.2. Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3. Government Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4. Bulk Sales Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5. Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.6. Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.7. Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.8. Supplemental Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.9. Consents Under Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.10. Supplemental Schedule of Compositions . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 8.
COVENANTS AND AGREEMENTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.2. Books and Records; Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.3. Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.4. Buyer's Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 9.
</TABLE>
4
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<TABLE>
<S> <C>
CONDITIONS TO BUYER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.1. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.2. Performance by Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.3. Certificates of Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.4. Opinion of Counsel for Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.5. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.6. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.7. Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.8. Assignments and Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.9. Subsidiary Asset Purchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 10.
CONDITIONS TO SELLERS' OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.2. Performance by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.3. Certificates of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.4. Opinion of Counsel for Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.5. Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.6. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.7. License Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.8. Subsidiary Asset Purchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 11.
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.1. Indemnification by Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.2. Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.3. Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11.4. Limitations; Exclusive Remedy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 12.
TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.1. Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 13.
NONCOMPETE AND CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.1. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.2. Noncompete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13.3. Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.4. Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.5. Geographic Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 14.
</TABLE>
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<TABLE>
<S> <C>
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.1. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.2. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
14.3. Assignability; Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.4. Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.5. Entire Agreement; Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.6. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.7. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.8. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14.9. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
14.10. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
14.11. No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
14.12. Interpretive Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
14.13. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
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SCHEDULES
<TABLE>
<S> <C>
1.1(a) Material Acquisition Agreements
1.1(d) Material Artist Agreements
1.1(g) Material A/V Works
1.1(h) Material A/V Work Agreements
1.1(j) Sellers' Catalogue
1.1(o) Compositions
1.1(r) Material Distributed Label Agreements
1.1(s) Material Distribution Agreements
1.1(v) Excluded Music Business Assets
1.1(aj) Masters
1.1(az) Trademarks
1.1(ba) Material Unison Music Agreements
1.1(bb) Unrecouped Advances
1.1(bc) Material Writer Agreements
2.2 Audit Claims
3.3(a) Accounting Principles
5.4 Consents (mortgages, instruments, etc.)
5.5 Interim Statement of Assets and Liabilities
5.7 Undisclosed Liabilities
5.8 Liens
</TABLE>
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<PAGE> 8
<TABLE>
<S> <C>
5.9(f) I/P Contracts not in full force and effect
5.11 Litigation
5.14 Material Other Contracts
5.16(a) Fixed Assets and Motor Vehicle Leases
5.16(b) Leased Real Estate
5.17 Purchase Commitments (to be delivered at closing)
5.18 Labor Agreements
5.20 Changes Since Balance Sheet Date
5.21 Employee Compensation
5.24 Secrecy and NonCompetition Agreements
7.5(c) Trademarks to be licensed to Seller under License Agreement
7.9 Assumed Contract Consents
</TABLE>
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into this 21st day of November, 1996 between THOMAS NELSON, INC., a Tennessee
corporation ("Nelson"), WORD, INCORPORATED, a Delaware corporation ("Word"),
and WORD DIRECT PARTNERS, L.P., a Texas limited partnership ("Word Direct")
(Nelson, Word and Word Direct each are sometimes defined herein as a "Seller"
and collectively as the "Sellers"), and GAYLORD ENTERTAINMENT COMPANY, a
Delaware corporation ("Buyer").
RECITALS
WHEREAS, certain of the assets of Nelson, Word and Word Direct, wholly
owned direct and indirect subsidiaries of Nelson, and certain of the assets of
Word Communications, Ltd., a Canadian corporation ("Word Canada"), and Nelson
Word, Ltd., a United Kingdom corporation ("Word U.K."; together with Word
Canada, the "Foreign Subsidiaries"), wholly owned subsidiaries of Word,
together comprise the music division of Nelson; and
WHEREAS, Sellers desire to sell to Buyer at the Closing (as
hereinafter defined) and Buyer desires to purchase from Sellers substantially
all of the assets and to assume certain of the liabilities associated with the
Music Business (as hereinafter defined), as more fully described herein, upon
and subject to the terms and conditions contained in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the premises and of the mutual
representations, warranties and covenants which are made and to be performed by
the respective parties, it is agreed as follows:
ARTICLE 1.
CERTAIN DEFINITIONS
1.1. For purposes of this Agreement, certain defined terms
shall have the respective meanings set forth below:
(a) "Acquisition Agreements" shall mean and include
individually and collectively each and every contract (excluding
Artist Agreements, Writer Agreements,
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Distributed Label Agreements, A/V Work Agreements, the Unison Music
Agreements and Producer Agreements) pursuant to which Sellers own an
interest in the I/P Assets, including, without limitation, catalogue
purchase, master license, co-publishing, royalty participation,
administration, subpublishing and collection agreements, and any and
all rights and benefits thereunder, and assignments thereof, including
any Unrecouped Advances, including, without limitation, the Material
Acquisition Agreements described in Schedule 1.1(a).
(b) "Actions" means any claims, actions, suits,
proceedings and investigations, whether at law, in equity or before
any court, arbitrator, arbitration panel or Governmental Authority.
(c) "Affiliate" of a party means any Person other
than a natural person which, directly or indirectly, controls, is
controlled by or is under common control with such party, including
with respect to Sellers, without limitation, the Subsidiaries.
(d) "Artist Agreements" shall mean all agreements,
including all amendments thereto, required for exploitation of the
Masters or the A/V Works (other than artists who performed solely as
"sidemen" on such Masters for whose performance Seller has, and at the
Closing Date shall have, all necessary rights), including, without
limitation, those Material Artist Agreements described in Schedule
1.1(d) hereto.
(e) "Artwork" shall mean the photographs, negatives,
photographic plates, covers, liners, textual, advertising, point of
purchase and promotional materials related to the I/P Assets, and all
rights to make commercial use thereof as used in the Music Business
prior to the date hereof.
(f) "Assets" means all assets, properties, rights,
and businesses of every kind and description wherever located, whether
tangible or intangible, real, personal or mixed, owned in whole or in
part by Sellers on the date hereof, or at Closing, as the case may be,
or in which Sellers have any interest on the date hereof, or at
Closing, as the case may be, and directly related to the Music
Business, including, without limitation, the I/P Assets; the I/P
Contracts; Sellers' interest in the Leased Real Estate; the Operating
Information; the Books and Records as defined in Section 8.2; the
Other Contracts; the Receivables (including all rights to returned
products in respect thereof); the Song Files; the Unrecouped Advances;
the Inventory; Direct Marketing Assets; Home Page Assets; all prepaid
rent, prepaid supplies, advances and other prepaid expenses (other
than prepaid insurance) and deposits and deferred charges attributable
to any of the assets being assigned to Buyer hereunder; machinery,
fixtures, equipment, motor vehicles, computers, terminals, monitors,
non-mainframe hardware and all claims and causes of action relating to
any of the foregoing. Without limiting the foregoing the "Assets"
shall include (i) all assets, property, rights and business of Sellers
shown or reflected (or which should have been shown or reflected) on
the Financial Statements, (ii) all assets, property, rights and
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business directly relating to the Music Business acquired by Sellers
on or after the date hereof and prior to the Closing Date and, (iii)
to the extent of Sellers' interest therein, all assets, properties,
rights and business of Sellers set forth on any Schedule or Exhibit to
this Agreement as relating to the Music Business, except in each case
for (a) Inventory sold or otherwise disposed of and Receivables
collected prior to the Closing Date in the ordinary course of business
or otherwise in accordance with this Agreement and (b) the Excluded
Assets. To the extent that any assets, property, rights or business
of Sellers are intended to be transferred to Buyer pursuant to the
general language of this Agreement but do not appear on the applicable
Schedules or Exhibits to this Agreement, the general language shall
govern and such assets, property, rights and business shall
nonetheless be deemed transferred to Buyer.
(g) "A/V Works" means works owned in whole or in part
by any Seller and directly related to the Music Business that consist
of a series of related images which are intrinsically intended to be
shown by the use of machines or devices such as projectors, viewers,
or electronic equipment, together with accompanying sounds, if any,
regardless of the nature of the material objects, such as films or
tapes, in which the works are embodied including, without limitation,
those Material A/V Works designated in Schedule 1.1(g).
(h) "A/V Work Agreements" means all agreements
related to the production, manufacture and distribution or other
exploitation of A/V Works, including, without limitation, those
Material A/V Work Agreements designated in Schedule 1.1(h).
(i) "Balance Sheet Date" means June 30, 1996.
(j) "Catalogue" means Sellers' catalogue of current
Compositions, Records and related products attached hereto as Schedule
1.1(j).
(k) "Children's Products" means materials including,
but not limited to, literary works, musical works and/or sound
recordings containing words, whether written or spoken, pictures,
graphics, computer-generated images, sounds and/or music, fixed in any
tangible medium of expression from which they can be perceived,
reproduced or otherwise communicated, either directly or with the aid
of a machine, primarily intended to be marketed, sold and/or
distributed for use by persons under eighteen years of age.
(l) "Closing Statement" means, as the context
requires, the Estimated Closing Statement (as defined in Section 3.3),
the Preliminary Post-Closing Statement (as defined in Section 3.4) or
the Definitive Post-Closing Statement (as defined in Section 3.6).
(m) "Code" means the Internal Revenue Code of 1986,
as amended.
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(n) "Commingled Receivables" means those accounts
receivable of Sellers in respect of the Music Business which are
commingled with accounts receivable of Sellers in respect of
operations other than the Music Business calculated on a basis
consistent with the basis upon which such receivables were calculated
in the Interim Statement of Assets and Liabilities.
(o) "Compositions" means all right, title and
interest in all musical compositions owned in whole or in part by
Sellers or in which Sellers own an interest and directly related to
the Music Business, including without limitation, derivative works
thereof, arrangements, titles, lyrics and music thereof, all
demonstration recordings thereof and all other rights therein and
thereto, whether now or hereafter known, and all claims and demands
accrued or to accrue with respect thereto, and the copyrights and the
future contingent renewal and extended terms of copyrights therein and
thereto, and all rights to secure renewals and extensions of
copyright, throughout the world, including, without limitation those
musical compositions set forth on Schedule 1.1(o) attached hereto and
incorporated by this reference.
(p) "Contracts" means the I/P Contracts and the Other
Contracts.
(q) "Direct Marketing Assets" means (i) all customer
lists owned by any Seller or an Affiliate thereof and used at any time
within the last five years to solicit the sale of any finished goods
Inventory, (ii) Sellers' catalogues and other mail pieces used for
mail and telemarketing of any finished goods Inventory, (iii) Sellers'
"800" toll-free number used in direct marketing and telemarketing in
connection with the Music Business and (iv) all other assets used by
Sellers in the direct marketing and telemarketing of finished goods
Inventory.
(r) "Distributed Label Agreements" means all
contracts, including all amendments thereto, directly related to the
Music Business, pursuant to which Seller has been granted the right to
use or exploit in any way sound recordings, records or audiovisual
works owned in whole or in part by any other person, firm or entity,
including, without limitation, those Material Distributed Label
Agreements set forth on Schedule 1.1(r).
(s) "Distribution Agreements" shall mean all
contracts, including all amendments thereto, granting others the right
to use or exploit in any way the Masters, A/V Works, Printed Works,
Trademarks, or Artwork, including, without limitation, granting others
the right to manufacture, distribute and sell Records manufactured
from the Masters, including, without limitation, those Material
Distribution Agreements set forth on Schedule 1.1(s).
(t) "Environmental Laws" means all federal, state,
local and foreign environmental, health and safety laws, codes and
ordinances and all rules and regulations
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<PAGE> 13
promulgated thereunder, including, without limitation laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including, without
limitation, a, surface water, ground water, land surface or subsurface
strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of pollutants, contaminants, chemicals or industrial, solid, toxic or
hazardous substances or wastes. As used in this Agreement, the term
"hazardous substances or wastes" includes, without limitation, (i) all
substances which are designated pursuant to Section 311(b)(2)(A) of the
Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C Section 1251
et seq.; (ii) any element, compound, mixture, solution, or substance
which is designated pursuant to Section 102 of the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42
U.S.C. Section 9601 et seq.; (iii) any hazardous waste having the
characteristics which are identified under or listed pursuant to
Section 3001 of the Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C. Section 6901 et seq.; (iv) any toxic pollutant listed under
Section 307(a) of the FWPCA; (v) any hazardous air pollutant which is
listed under Section 112 of the Clean Air Act, 42 U.S.C. Section 7401
et seq.; (vi) any imminently hazardous chemical substance or mixture
with respect to which action has been taken pursuant to Section 7 of
the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; and
(vii) waste oil.
(u) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder.
(v) "Excluded Assets" means (i) any and all assets,
properties, rights and business of every kind and description,
wherever located, whether tangible or intangible, personal or mixed,
owned in whole or in part by any Seller or in which any Seller has any
interest and relating primarily to the operation of any business of
Sellers other than the Music Business; (ii) the corporate seal,
articles of incorporation, minute books and stock books of Sellers and
the Subsidiaries; (iii) the rights of Sellers under this Agreement;
(iv) proceeds from the Actions listed on Schedule 5.11 attached
hereto; (v) stock and equity interests in the Subsidiaries and any
other Affiliates; (vi) any right, title or interest in or to any of
the rights, properties and assets of Sellers relating to the Music
Business which are listed on Schedule 1.1(v); (vii) all of Sellers'
rights in and to the trademark logos and designs set forth on Schedule
1.1(v); (viii) the Commingled Receivables; and (ix) real property
owned by Sellers wherever located.
(w) "Foreign Assets" means those Assets in which Word
Canada or Word U.K. have an interest which directly relate to the
Music Business, to the extent of any such interest.
(x) "Foreign Liabilities" means those Assumed
Liabilities of Word Canada or Word U.K. which directly relate to the
Music Business.
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(y) "GAAP" means generally accepted United States
accounting principles applied on a basis consistent with the basis
upon which the Financial Statements were prepared.
(z) "Governmental Authority" means any government or
any agency, instrumentality, department, commission, public authority,
court, tribunal or board of any government, whether foreign or
domestic and whether national, federal, state, provincial or local.
(aa) "Home Page Assets" means all of Sellers' "home
pages" or "web sites" identified as "www.wordrecords.com" web site on
the Internet and all related tangible and intangible property
(including, without limitation, software programs and Internet
addresses).
(bb) "Inventory" means all Sellers' inventories
directly related to the Music Business, including supplies, raw
materials, work-in-progress, and finished goods, including, without
limitation, all Records, Print Music and related packaging.
(cc) "I/P Assets" means the Masters, the Compositions,
the Print Music, the Artwork, the A/V Works and the Trademarks.
(dd) "I/P Contracts" means the Acquisition Agreements,
the Artist Agreements, the Producer Agreements, the Writer Agreements,
the A/V Work Agreements, the Licenses, the Distribution Agreements,
the Distributed Label Agreements, the Unison Music Agreements, all
amendments thereto and all other contracts directly related to the
use, exploitation or ownership of the I/P Assets, or Seller's or
Buyer's ability to collect any income derived therefrom anywhere in
the world including: (i) any exclusive contracts (other than
Acquisition Agreements); (ii) any subpublishing agreements; (iii) any
co-publishing, administration, collection or participation agreement;
(iv) any print music agreement; (v) any performing rights society
agreements; and (vi) any blanket licenses.
(ee) "Laws" mean laws, rules, regulations, codes,
orders, ordinances, judgments, injunctions, decrees and policies.
(ff) "Leased Real Estate" means the real estate listed
on Schedule 5.16(b) and all fixed assets, including fixtures,
furniture, furnishings, office equipment and other tangible property
attached or relating thereto.
(gg) "Liabilities" means debts, liabilities,
obligations, royalty payments, duties and responsibilities of any kind
and description, whether absolute or contingent, monetary or
nonmonetary, direct or indirect, known or unknown or matured or
unmatured, or of any other nature.
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(hh) "Licenses" means and include individually and
collectively each and every license, subpublishing agreement,
administration agreement, participation, licensing or collection
agreement, mechanical or public performance society agreement directly
related to the Music Business and all other contracts and agreements
relating to the use or exploitation of the Compositions, the Print
Music, the Masters or the A/V Works and any and all rights and
benefits thereunder.
(ii) "Lien" means any security interest, lien,
mortgage, claim, charge, pledge, restriction, right of first or last
refusal, right of first negotiation, matching right, equitable
interest or encumbrance or adverse claim of any nature.
(jj) "Masters" shall mean all original media directly
related to the Music Business in which sounds of a performance of an
artist are fixed by any method now known and from which songs can be
perceived, reproduced or otherwise communicated, either directly or
with aid of a machine, device or process, as well as outtakes, demos,
alternative versions of same, and alternative mixes, together with all
intangible and/or incorporeal rights attached thereto or in the sound
recording, including, without limitation, to the extent same are
extant, all copyrights, renewal copyrights, copyright registrations
and copyright applications and similar rights, including, without
limitation, the sound recordings specified on Schedule 1.1(aj)
attached hereto and incorporated by this reference.
(kk) "Material" shall mean, when used to modify the
word "Contracts," "A/V Works" or a particular type of Contract, (vii)
in the case of the Artist Agreements, the Producer Agreements, the
Writer Agreements, the A/V Work Agreements, the A/V Works, the
Licenses, the Unison Music Agreements or any I/P Contracts, each such
agreement with each recording artist, producer, songwriter, licensor
or other contributor who has been paid by Sellers net royalties and/or
advances exceeding $50,000 in the aggregate during the current
calendar year or any one of the preceding two calendar years relating
to the creation, production, distribution or the exploitation of
musical compositions or sound recordings; (viii) in the case of the
Distributed Label Agreements, each agreement to distribute the
products of any entity which has been paid by Sellers during the
current calendar year or any one of the two preceding calendar years
an amount in excess of $50,000; (ix) in the case of the Distribution
Agreements, each agreement with any entity with which Sellers
contracted to distribute Sellers' products and which has paid to
Sellers during the current calendar year or any one of the preceding
two calendar years an amount in excess of $50,000; (x) any Other
Contract pursuant to which Sellers are required to pay, have paid, or
entitled to receive or have received an amount in excess of $50,000
during the current calendar year or any one of the two preceding
calendar years of such Other Contract; and (xi) any Acquisition
Agreement by Sellers of any rights in any I/P Asset pursuant to which
Sellers, individually or collectively, have received royalties,
advances and/or other payments exceeding $50,000 during the current
calendar year or in any one of the preceding two calendar years.
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(ll) "Music Business" means the music division of
Sellers, including the production and distribution of recorded music
and related products, the domestic and international distribution of
recordings for other companies and music publishing, including
songwriter development, print music, music publishing and copyright
administration.
(mm) "Operating Information" means all operating data
and records of Sellers directly related to the Music Business,
including books, records, sales and sales promotional data,
advertising materials, customer lists, including all consumer direct
marketing and record club lists and information, credit information,
cost and pricing information, supplier lists, business plans,
reference catalogs, and all data in computer readable form related to
any of the foregoing items.
(nn) "Other Contracts" means all of Sellers' rights in
and under leases, contracts, know-how licenses, purchase and sale
orders, and other agreements, commitments, arrangements and
understandings directly relating to the Music Business.
(oo) "Person" means any natural person, corporation,
limited liability company, business trust, joint venture, association,
company, firm, partnership or other entity or Governmental Authority.
(pp) "Print Music" means any Sellers' interest in and
to all print music works directly related to the Music Business,
reproducing the music and/or lyrics of one or more musical works of
authorship, all artwork related thereto and all photographic or
engraving plates embodying all or part thereof.
(qq) "Producer Agreements" means any agreement with
any individual producer of any of the Masters or A/V Works.
(rr) "Receivables" means all accounts and notes
receivable and the right to receive royalties and other income payable
to either Seller in connection with the Music Business other than
Commingled Receivables.
(ss) "Records" shall mean any reproduction of a
Master, which reproduction is in any form now known and in which
reproductions of sounds, with or without visual images, are fixed by
any method now known, and from which sounds, with or without visual
images, can be perceived, reproduced or otherwise communicated, either
directly or with the aid of a machine, device or process, and
including the object in which sounds, without visual images, are
fixed, including, but not limited to, disc records, soundtracks, film,
tape, tape cartridges and cassette tape, digital audio tape, compact
disc and all "sight and sound devices" including "audiovisual" devices
(as such term is used in the 1976 Copyright Act, as amended).
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(tt) "Returns" mean all returns, declarations,
reports, estimates, information returns and statements required to be
filed with or supplied to any taxing authority in connection with any
Taxes.
(uu) "Royalties" shall mean all royalties, shares of
profits and/or other consideration due and payable to writers,
co-publishers, artists, producers or any other royalty participants in
connection with any I/P Asset.
(vv) "Seller" when used herein shall be deemed to
include Word Canada and Word U.K., except where such reference would
be inappropriate.
(ww) "Song Files" shall mean the copyright assignments
and documents, royalty records, correspondence, books, files and
records, original documents, and the like relating to the Compositions
necessary to administer the Compositions and to collect the monies
earned thereby throughout the world. Song Files shall also mean and
include, all printed editions, folios, sheet music, or other printed
material containing the Compositions and the photographic or engraving
plates, if any, from which they are derived, and any publicity
materials relating to the Compositions or the songwriters including,
without limitation, photographs, posters, biographical materials and
awards as well as all demonstration recordings, phonograph records and
other embodiments of the Compositions.
(xx) "Subsidiaries" means Word Canada, Word U.K., Word
Direct Marketing Services, Inc., Word Direct, Inc., and Word Direct.
(yy) "Taxes" mean all taxes, charges, fees, levies or
other assessments, including, without limitation, income, gross
receipts, excise, real and personal property, sales, transfer,
withholding, license, payroll and franchise taxes, imposed by any
Governmental Authority and shall include any interest, penalties or
additions to tax attributable to any of the foregoing.
(zz) "Trademarks" shall mean all trademarks, trademark
registrations, if any, trademark registration applications, if any,
tradenames and logos which are owned, have been used, or are used, by
or on behalf of Seller in connection with the Music Business, together
with the goodwill associated therewith, including, without limitation,
the trademarks set forth on Schedule 1.1(az), but excluding those
trademarks set forth on Schedule 1.1(v) to the extent such trademarks
are Excluded Assets.
(aaa) "Unison Music Agreements" means all licenses and
other agreements related to the component of the Music Business owned
by Nelson and conducted as "Unison Music" ("Unison") consisting of the
production and distribution and other exploitation of budget-priced
Records through mass market retail outlets, including, without
limitation the Material Unison Music Agreements designated in Schedule
1.1(ba).
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(bbb) "Unrecouped Advances" mean advances and other
recoupable costs and expenses relating to the Assets paid by Seller to
any third Person or incurred by Seller on behalf of a third Person
which are unrecouped as of the Balance Sheet Date, substantially all
of which are set forth on Schedule 1.1(bb).
(ccc) "Writer Agreements" shall mean and include
individually and collectively each of the songwriter, co-publishing,
administration and other agreements between any Seller on the one hand
and any songwriter or arranger on the other and directly related to
the Music Business, including, without limitation, the Material Writer
Agreements identified on Schedule 1.1(bc).
ARTICLE 2.
PURCHASE AND SALE OF ASSETS
2.1. Purchase and Sale of Assets. Subject to the terms and
conditions of this Agreement, at the Closing, Sellers shall sell, transfer,
convey, assign and deliver the Assets to Buyer and Buyer shall purchase,
acquire and accept the Assets from Sellers; provided that the Foreign Assets
shall be purchased, acquired and accepted from Sellers pursuant to the
Subsidiary Asset Purchase Agreements (as defined in Section 7.5(b)).
2.2. Assumption of Liabilities. As additional consideration
hereunder, from and after the Closing Date, Buyer shall assume and discharge
the Liabilities of Sellers (xii) existing on and arising subsequent to the
Closing Date under the Contracts and under all purchase and sales commitments
and orders existing on the Closing Date (the "Assumed Contracts"), (xiii) all
accounts payable, accrued expenses and other Liabilities reflected on the
Closing Statement, and (xiv) pending claims for audit of accountings and
payments owed by Seller to parties to the Contracts in respect of the Music
Business set forth on Schedule 2.2 and any other such claims made after the
date of this Agreement to the extent such claims relate to periods prior to the
Closing Date (collectively, the "Audit Claims") (the Liabilities referred to in
clauses (i), (ii) and (iii) of this sentence being hereinafter collectively
called the "Assumed Liabilities"). Except as provided in the preceding
sentence, and notwithstanding anything else to the contrary contained herein,
Buyer is not assuming and shall not be liable for any Liabilities of Sellers
other than the Assumed Liabilities, including, without limitation, any
Liabilities (a) for indebtedness for borrowed money or overdrafts; (b) relating
to or in any way arising out of the Excluded Assets; (c) for fees and
disbursements referred to in Section 14.2 hereof; (d) to any shareholder or
Affiliate of Sellers or to any current or former employee, officer or director
of Sellers, including, without limitation, any severance pay, post retirement
medical benefits, COBRA benefits or other pension compensation or benefits
whether by operation of Law or otherwise, other than with respect to employees
of the Music Business actually engaged by Buyer after the Closing as expressly
provided in Section 8.3, and only in respect of Liabilities to such employees
arising after the Closing Date or accrued on the Closing Statement; (e)
relating to the execution, delivery and consummation of this Agreement by the
Sellers and the transactions contemplated hereby,
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including, without limitation, any and all Taxes incurred as a result of the
sale contemplated by this Agreement; (f) for any Taxes accrued or incurred
prior to the Closing Date or relating to any period (or portion of a period)
prior thereto; (g) relating to or arising out of any environmental matter,
including, without limitation, any violation of any Environmental Law or any
other Law relating to health and safety of the public or the employees of any
Seller; (h) relating to vacations, sick days and similar benefits accrued prior
to the Closing Date in respect of employees of the Music Business who become
employees of Buyer or its Affiliate after the Closing and not reflected on the
Closing Statement; and (i) of Sellers arising under or pursuant to this
Agreement. Buyer shall not assume or be bound by any Liabilities of Sellers,
except as expressly assumed by it pursuant to this Agreement.
ARTICLE 3.
CONSIDERATION
3.1. Purchase Price. Subject to adjustment as hereinafter
provided in this Article 3, the purchase price for the Assets shall be
$110,000,000 plus the Assumed Liabilities (such price, as adjusted pursuant to
this Article 3 being herein referred to as the "Purchase Price").
3.2. Payment of Purchase Price. At the Closing, Buyer shall
deliver to Sellers a wire transfer of Federal or other immediately available
funds for the cash portion of the Purchase Price to such bank account(s) as
Sellers shall designate.
3.3. Pre-Closing Adjustment.
(a) Three business days prior to the Closing Date,
Sellers shall prepare and furnish to Buyer an estimated balance sheet
reflecting the Assets, Commingled Receivables and Assumed Liabilities as of the
Closing Date (the "Estimated Closing Statement"), which shall be prepared in
accordance with GAAP. The GAAP principles used in preparation of the Estimated
Closing Statement (including those with respect to revenue recognition,
reserves for returns and doubtful Receivables, valuation of Inventories, and
Royalty and production advances) are as set forth on Schedule 3.3(a). Based on
the Estimated Closing Statement, the chief accounting officer of Nelson shall
provide Buyer with a certificate setting forth the Estimated Closing Book
Value. For the purposes of this Section 3.3, the "Estimated Closing Book
Value" means the Assets plus the Commingled Receivables less the Assumed
Liabilities reflected on the Estimated Closing Statement and the "June 30 Book
Value" means the Assets plus the Commingled Receivables less the Liabilities of
the Music Business reflected in the Interim Statement of Assets and Liabilities
(as defined in Section 5.5).
(b) On the Closing Date, the Purchase Price shall be
reduced on a dollar-for-dollar basis to the extent the Estimated Closing Book
Value is less than the June 30 Book Value, or the Purchase Price shall be
increased on a dollar-for-dollar basis to the extent that the Estimated Closing
Book Value is more than the June 30 Book Value, as the case may be.
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3.4. Preliminary Post-Closing Adjustment.
(a) Immediately following the Closing,
representatives of Buyer and Sellers shall conduct a physical count of the
Inventory. Buyer and Sellers shall use such physical inventory to prepare a
report on Inventory as of the Closing (the "Inventory Report"), which report
shall reflect the value of Inventory, net of applicable obsolescence reserves
and other adjustments required, in accordance with GAAP (including the
accounting principles set forth on Schedule 3.3(a) hereto) (the "Inventory
Balance"). The Inventory Report shall be finalized not later than twenty-five
days after the Closing. The dollar amount assigned to Inventory on the
Preliminary Post-Closing Statement (as hereinafter defined) shall be the amount
set forth in the Inventory Report.
(b) Not later than thirty days following the Closing,
Sellers shall deliver a definitive balance sheet (the "Preliminary Post-Closing
Statement") reflecting the Assets, Commingled Receivables and Assumed
Liabilities as of the Closing Date and prepared in the same manner as the
Estimated Closing Statement but containing such adjustments thereto as Sellers
consider required for such statement to fairly present the Assets and Assumed
Liabilities as of the Closing in accordance with Section 3.3(a).
(c) Within three business days following completion
of the Preliminary Post-Closing Statement, the chief accounting officer of
Nelson shall provide Buyer with a certificate setting forth the Assets plus
Commingled Receivables less the Assumed Liabilities reflected on the
Preliminary Post-Closing Statement (the "Preliminary Post- Closing Book
Value"). On the date of delivery of such certificate, the Purchase Price shall
be reduced on a dollar-for-dollar basis to the extent that the Preliminary
Post-Closing Book Value is exceeded by the Estimated Closing Book Value (and,
in such event, Sellers shall make a payment to the Buyer in the amount of such
excess by wire transfer of immediately available funds to an account designated
by Buyer), or the Purchase Price shall be increased on a dollar-for dollar
basis to the extent that the Preliminary Post-Closing Book Value exceeds the
Estimated Closing Book Value (and, in such event, Buyer shall make a payment to
Sellers in the amount of such excess by wire transfer of immediately available
funds to an account designated by Sellers).
3.5. Collection of Commingled Receivables.
(a) Contemporaneous with the determination of the
Preliminary Post-Closing Book Value, Sellers shall prepare and deliver to Buyer
a statement (which statement shall have been prepared on a basis consistent
with that of the Interim Statement of Assets and Liabilities) setting forth the
dollar amount of the Commingled Receivables (the "Statement of Commingled
Receivables").
(b) On or before the tenth day of each of the first
four full months following delivery of the Statement of Commingled Receivables,
Sellers shall pay to Buyer by wire transfer of immediately available funds an
amount equal to one-fourth of the Commingled Receivables less
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(i) in the case of the first such payment, the amount of actual returns of
products credited to customer's accounts applicable to the Commingled
Receivables between the Closing Date and the end of the calendar month
immediately preceding such payment and (ii) in the case of the second, third
and fourth such payments, the amount of actual returns of products credited to
customer's accounts applicable to the Commingled Receivables during the
calendar month immediately preceding such payment until 120 days of returns
credits have been issued.
3.6. Definitive Post-Closing Adjustment.
(a) Not later than 150 days following the Closing
Date, Buyer shall deliver a definitive balance sheet (the "Definitive
Post-Closing Statement") reflecting the Assets, Commingled Receivables and
Assumed Liabilities as of the Closing Date and prepared in the same manner as
the Estimated Closing Statement; provided that all credits issued for returns
of products during the first 120 days after the Closing shall be the reserve
for returns on the Definitive Post-Closing Statement less applicable Inventory
costs and Royalty costs determined in the same manner as in the Preliminary
Post-Closing Statement.
(b) Unless Sellers deliver to Buyer, within fifteen
days of completion and delivery of the Definitive Post-Closing Statement, a
letter specifying in reasonable detail any objections to any item set forth in
the Definitive Post-Closing Statement (a "Dispute Letter"), the Definitive
Post-Closing Statement shall be deemed conclusive and binding on the parties
hereto. If Sellers deliver to Buyer a Dispute Letter setting forth any such
objections within such fifteen day period, Buyer and Sellers shall promptly
attempt to resolve the matters set forth in such Dispute Letter. If Buyer and
Sellers fail to reach an agreement with respect to such matters on or before
the fifteenth day after receipt by Buyer of a Dispute Letter, then as to any
matter(s) in dispute, Buyer or Sellers may submit any matter(s) in dispute set
forth in the Dispute Letter to a mutually acceptable certified public
accountant at a "Big 6" accounting firm located in Nashville, Tennessee for
resolution. Such accountant shall review such materials and conduct such
procedures as shall be necessary to make a determination of such matters as to
which disagreement remains and shall deliver his written opinion thereon to
Buyer and Sellers within thirty days of submission of the dispute to him, which
determination, or any determination of such matters mutually agreed to by Buyer
and Sellers, shall be conclusive and binding on Buyer and Sellers (the "Final
Determination"). In connection therewith, each party will furnish to the
accountant such work papers and schedules and other information relating to the
disputed matter(s) as the accountant may request and will be afforded an
opportunity to present to the accountant any material relating to the disputed
matter(s) and to discuss the disputed matter(s) with the accountant. The costs
and expenses of the accountant incurred with respect to the Final Determination
shall be shared equally by Buyer and Sellers. The Definitive Post-Closing
Statement shall be modified to reflect the Final Determination.
(c) During the period following the issuance of the
Definitive Post-Closing Statement and until the issuance of the Final
Determination, Buyer and Sellers and their respective representatives shall
have the right to communicate with, and to review the work papers and
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schedules prepared or reviewed by, Sellers, Buyer or their respective
accounting advisors in connection therewith, and shall have access to such
employees of Sellers or Buyer and to all relevant books and records of Sellers
or Buyer to the extent reasonably required to complete their review.
(d) Within three business days following completion
of the Definitive Post-Closing Statement and any Final Determination with
respect thereto, the Purchase Price shall be reduced on a dollar-for-dollar
basis to the extent that the Assets plus the Commingled Receivables less the
Assumed Liabilities reflected on the Definitive Post-Closing Statement (the
"Definitive Post-Closing Book Value") is exceeded by the Preliminary
Post-Closing Book Value (and, in such event, Sellers shall make a payment to
the Buyer in the amount of such excess by wire transfer of immediately
available funds to an account designated by Buyer), or the Purchase Price shall
be increased on a dollar-for-dollar basis to the extent that the Definitive
Post-Closing Book Value exceeds the Preliminary Post-Closing Book Value (and,
in such event, Buyer shall make a payment to the Sellers in the amount of such
excess by wire transfer of immediately available funds to an account designated
by Sellers).
(e) All Receivables determined to be uncollectible in
preparing the valuation of Receivables on the Definitive Post-Closing Statement
shall be assigned to Sellers to the extent such uncollectible Receivables in
the aggregate exceed the reserve for doubtful accounts in the Preliminary
Post-Closing Statement.
ARTICLE 4.
CLOSING; OBLIGATIONS OF THE PARTIES
4.1. Closing Date. The Closing (the "Closing") shall take
place at 10:00 a.m., local time, on January 2, 1997 at the offices of Bass,
Berry & Sims PLC, 2700 First American Center, Nashville, Tennessee, or at such
other time and place as the parties hereto mutually agree (the "Closing Date").
4.2. Obligations of the Parties at the Closing.
(a) At the Closing, Buyer shall deliver to Sellers
(or Sellers' agent):
(i) the consideration as specified in
Section 3.1;
(ii) a copy of resolutions of the Board
of Directors of Buyer, certified by Buyer's Secretary,
authorizing the execution, delivery and performance of
this Agreement and the other documents referred to herein
to be executed by Buyer, and the consummation of the
transactions contemplated hereby;
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(iii) a certificate of a duly authorized
officer of Buyer certifying as to the accuracy in all
material respects of Buyer's representations and
warranties at and as of the Closing and that Buyer has
performed or complied in all material respects with all of
the covenants, agreements, terms, provisions and
conditions to be performed or complied with by Buyer at or
before the Closing;
(iv) the opinion of Loeb & Loeb, LLP,
legal counsel for Buyer, in accordance with Section 10.4;
(v) such instruments of assumption, in
form and substance reasonably satisfactory to Sellers, as
shall be necessary for Buyer to assume as of the Closing
Date and agree to pay, perform and discharge the Assumed
Liabilities;
(vi) the Transition Services Agreement
(as hereinafter defined in Section 7.5), duly executed by
Buyer; and
(vii) the License Agreement (as defined
in Section 7.5), duly executed by Buyer.
(b) At the Closing, Sellers will deliver to Buyer:
(i) such bills of sale, endorsements,
assignments, and other good and sufficient instruments of
conveyance and transfer, in form and substance reasonably
satisfactory to Buyer, as shall be effective to vest in
Buyer all of Sellers' title to and interest in the Assets;
(ii) copy of resolutions of the
Board of Directors of each Seller, certified by each
Seller's Secretary, authorizing the execution, delivery and
performance of this Agreement and the other documents
referred to herein to be executed by such Seller, and the
consummation of the transactions contemplated hereby;
(ii) a certificate of the duly authorized
officer of each of the Sellers certifying as to the
accuracy in all material respects of Sellers'
representations and warranties at and as of the Closing,
and that they have performed or complied in all material
respects with all of the covenants, agreements, terms,
provisions and conditions to be performed or complied with
by each of them at or before the Closing;
(iv) the opinion of Bass, Berry & Sims
PLC, legal counsel for the Sellers, in accordance with
Section 9.4;
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(v) the Transition Services Agreement,
duly executed by Nelson and Word;
(vi) a duly executed change of name
certificate for Word and each Affiliate of Sellers using
"Word" in its name, in each case in form suitable for
filing in all appropriate jurisdictions, in the case of
Word, changing the name to a name, which may include
"Word" in conjunction with the word "Publishing," "Books"
or any similar word, and, in the case of any other Sellers
using "Word" in its name, to a name not containing and not
confusingly similar to the word "Word";
(vii) all consents required in connection
with the execution and delivery of this Agreement and the
transactions contemplated hereby;
(viii) the License Agreement, duly
executed by Sellers; and
(ix) appropriate instruments authorizing
Buyer to endorse in the name of Sellers on all checks,
drafts, notes and other instruments for the payment of
money and to receive for the account of Buyer all proceeds
thereof to which Buyer is entitled under this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES BY SELLERS
Sellers jointly and severally hereby represent and warrant as follows:
5.1. Authorization. Sellers have full corporate power and
authority to enter into this Agreement and perform their respective obligations
hereunder and carry out the transactions contemplated hereby. The Board of
Directors of each Seller has taken all action required by law, its Articles of
Incorporation, its Bylaws and otherwise to authorize the execution and delivery
by such Seller of this Agreement and the consummation by such Seller of the
transactions contemplated hereby. Assuming the due execution and delivery by
Buyer, this Agreement constitutes the valid and binding agreement of each
Seller, enforceable against each such Seller in accordance with its terms.
5.2. Organization, Good Standing and Qualification. Each
Seller is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. Each Seller has full
corporate power and authority to carry on its business as now conducted and
possesses all governmental and other permits, licenses and other authorizations
to own, lease or operate the Assets and to carry on the Music Business as
presently conducted.
5.3. Subsidiaries.
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(a) Nelson is the sole record and beneficial owner of
all of the issued and outstanding shares of capital stock of Word.
Word and/or Nelson is the sole record and beneficial owner of all
issued and outstanding shares of capital stock of Word Canada, Word
U.K. and Word Direct Marketing Services, Inc. ("WDMS"). All of the
shares of capital stock of Word Direct, Inc. ("WDI") are owned by
WDMS. All of the outstanding partnership interests in Word Direct are
owned by WDMS and WDI.
(b) Each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
5.4. No Violation. The execution and delivery of this
Agreement by Sellers does not, and the consummation of the transactions
contemplated hereby will not, (f) violate, conflict with, or require the
consent under, any provision of any agreement, indenture, instrument, lease,
security agreement, mortgage or lien to which any of the Sellers is subject or
by which any of them is bound (including, without limitation, any Assumed
Contract), except for such consents as are set forth on Schedule 5.4 and which
shall have been obtained prior to the Closing Date, or as otherwise permitted
pursuant to Section 7.9 hereof; (g) violate or conflict with any provision of
the Articles of Incorporation or Bylaws of any of the Sellers; or (h) violate
any order, arbitration award, judgment, writ, injunction, decree, statute, rule
or regulation applicable to any of the Sellers.
5.5. Financial Statements. (a) Sellers have delivered to Buyer
an unaudited statement of assets and liabilities of the Music Business as at
March 31, 1996, and the related statement of operations of the Music Business
for the fiscal year then ended, and (b) attached hereto as Schedule 5.5 is the
unaudited statement of assets and liabilities of the Music Business as at the
Balance Sheet Date (the "Interim Statement of Assets and Liabilities") which
was previously delivered to Buyer together with the related unaudited statement
of operations of the Music Business for the three months then ended (the
"Interim Financial Statements" and together with the annual financial
statements described in subsection (a) hereof, the "Financial Statements").
The Financial Statements fairly present the assets and liabilities, and
revenues and expenses attributable to the Music Business as at the respective
dates thereof and for the periods therein referred to, in accordance with GAAP,
subject, in the case of the Interim Financial Statements, to normal recurring
year-end adjustments.
5.6. Records and Books of Account. Since the Balance Sheet
Date, the records and books of account of Sellers have been regularly kept and
maintained in conformity with GAAP.
5.7. Liabilities. There are no Liabilities of Seller relating
to the Music Business (including, but not limited to, Liabilities for Taxes
relating to any prior period) other than (i) those Liabilities as are required
by GAAP to be, and which are, disclosed or reserved for on the Interim
Statement of Assets and Liabilities; (ii) those incurred since the Balance
Sheet Date, in the ordinary course of the Music Business, and not in violation
of or in conflict with any of the terms, agreements, warranties,
representations and conditions of Sellers contained in this Agreement; and
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(iii) those arising under Contracts set forth in Schedule 5.7 hereto. There
are no advances (which, alone or in the aggregate are material) which have been
made by any third Persons to any Seller which are recoupable by such third
Persons from income derived from the Assets which will not be reflected on the
Definitive Closing Statement. All Royalties, advances, obligations or
contractual obligations of any kind payable by Sellers to third Persons (such
as recording artists and record companies) prior to the Closing Date will have
been paid or will be accrued on the Estimated Closing Statement.
5.8. Title to Assets; Encumbrances.
(a) Except as set forth on Schedule 5.8, as of the
Closing Date, Sellers will be the owners of and will have good and
marketable title to the Assets, including all of the properties and
Assets reflected in the Interim Statement of Assets and Liabilities
(except for personal property sold since the date of the Interim
Statement of Assets and Liabilities in the ordinary course of
business). As of the Closing, none of the Assets will be subject to
any Lien, except (a) Liens shown on the Financial Statements as
securing specified liabilities, (b) Liens for current Taxes not yet
due and payable, and (c) imperfections of title and Liens, if any,
which do not materially detract from the value of the property subject
thereto or materially impair the use of the property subject thereto.
Except as aforesaid or as set forth on Schedule 5.8, upon the Closing
Buyer shall acquire good and marketable title to all of the Assets,
free and clear of all Liens. All Liens listed on Schedule 5.8
represent Liens on Royalties payable by the Sellers to third parties.
(b) Sellers own and are conveying all of the Assets
that are necessary to conduct the Music Business as conducted prior to
the date hereof, including, without limitation, all rights, assets and
properties from which the products contained in the Catalogue are
derived, other than the Excluded Assets and those services to be
performed under the Transition Services Agreement.
5.9. Intellectual Property.
(a) All rights in I/P Assets are valid and
enforceable, are free and clear of any Liens, and, with the sole
exception of Buyer's Assumed Liabilities, no Royalties, advances or
other payments are or will be payable by Buyer with respect to any of
them. Except with respect to such matters which, alone or in the
aggregate, would not have a material adverse effect on the Assets or
the Music Business (a "Material Adverse Effect"), no Person other than
Seller has or may validly claim a reversionary interest in the
ownership of any I/P Asset (other than Artwork with respect to
products not in the Catalogue) or the income derived therefrom arising
or enforceable at any time prior to the expiration of the maximum term
of copyright throughout the universe other than by virtue of Seller's
failure to exploit the I/P Asset in question. None of the rights of
Seller to any Asset and any licenses or other agreements relating
thereto will be impaired in any way
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by the transactions contemplated by this Agreement except to the
extent that the same would not, alone or in the aggregate, have a
Material Adverse Effect.
(b) Sellers are not infringing upon, or otherwise
acting in conflict with, any rights of any Person with respect to the
use or exploitation of any of the Assets, and during the four years
prior to the date hereof neither Seller nor any Affiliate of Seller
has received written notice of any such claim, nor is Seller aware of
any such claim of which any other Person has received written notice
which was not without merit or which has not been satisfactorily
resolved. The I/P Assets are original works of authorship and do not
infringe upon or violate any rights of privacy or publicity,
copyright, trademark or any other legal or equitable rights of any
Person.
(c) Except to the extent the same would not, alone or
in the aggregate, have a Material Adverse Effect, certificates of
copyright registration and, where the original term of copyright has
expired, certificates of renewal copyright registration, in respect of
the Masters, Compositions, Print Music and Artwork have been issued by
the United States Register of Copyrights with respect to no less than
each of said works that has been published (as defined in the United
States Copyright Act, as amended) and said copyright and renewal
copyright certificates were duly and timely applied for and remain in
full force and effect. No action by or with the authority or consent
of Seller has been taken or omitted which would destroy or impair
protection of any of the I/P Assets under the United States Copyright
Act or the copyright laws of any other territory of the world.
Sellers have received no notices terminating any of Sellers' rights
under Section 304 of the United States Copyright Act.
(d) Other than the Trademarks, there are no
trademarks, trademark registrations, trademark registration
applications, tradenames or logos which are owned, or currently used
by Sellers in connection with the Music Business anywhere in the
world. In the past four years, Sellers have received no written
notice from any person alleging that any Trademark infringes upon the
rights of any other person which was not without merit or which has
not been satisfactorily resolved, and Sellers have no knowledge of any
facts which could reasonably be expected to give rise to such a claim.
(e) Except as specifically set forth in Artist
Agreements, I/P Agreements relating to Masters and Producer Agreements
and with the exception of so-called "mechanical royalties", no
Royalties based on sales are payable by Seller to any party in
connection with any Master.
(f) Except as set forth on Schedule 5.9(f) or to the
extent the same would not have a Material Adverse Effect, each of the
Contracts included in the Assets between any of the Sellers on the one
hand, and any writer, author, artist, producer, grantor, assignor,
assignee, licensor or licensee (or other contributor, creator, owner
or user) on the other hand, and which relates to any I/P Asset is in
full force and effect as of the date
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hereof and enforceable in accordance with its terms (except that such
enforcement may be subject to bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium (whether general or specific) or other
laws now or hereafter in effect relating to creditor's rights
generally and the remedy of specific enforcement and injunctive or
other forms of equitable relief may be subject to equitable defense
and to the discretion of the court before which any proceeding
therefor may be brought); and the Sellers have performed their
obligations thereunder and are not in default with respect to any such
agreements, except where such failure to perform or such default would
not have a Material Adverse Effect.
(g) Except to the extent the same would not have a
Material Adverse Effect, the grant of copyright in each Composition
which was afforded statutory copyright protection under U.S. law as of
January 1, 1978 from the writer(s) thereof to Sellers extends to all
of Sellers' rights to the original term of copyright, the renewal term
and all extensions of such copyright in each country of the world.
(h) Except to the extent the same would not have a
Material Adverse Effect, all of Sellers' rights in each Master, A/V
Work and Print Music will extend for the full duration of copyright
protection in each country of the world.
(i) Schedule 1.1(o) sets forth all Compositions owned
in whole or in part by Sellers contained in Sellers' electronic data
base and includes all Compositions which have generated revenue since
January 1, 1994.
5.10. Tax Matters. There are no Liens for Taxes (other than
Liens for current Taxes not yet due and payable) upon any of the Assets.
5.11. Litigation. Except as set forth in Schedule 5.11, there
are no outstanding Actions pending, or to the knowledge of Sellers, threatened
by or against or affecting the Sellers or any of their properties or rights, in
respect of the Music Business. Sellers are not in default with respect to any
order, writ, injunction or decree of any Governmental Authority. None of the
Actions referred to on Schedule 5.11 hereto is reasonably likely to have a
Material Adverse Effect on the Music Business or the financial condition,
Assets, liabilities or results of operations thereof.
5.12. Orders, Decrees, Etc. There are no orders, decrees,
injunctions, rulings, publications, decisions, directives, or pronouncements of
any court or any Governmental Authority issued against, or binding on, Sellers
which adversely affect the conduct of the Music Business as presently
conducted.
5.13. Compliance With Law; Permits and Licenses.
(a) Sellers have complied and are in compliance with
all Laws of any Governmental Authority applicable to the Music
Business or the Assets including, without limitation, Environmental
Laws, Laws relating to zoning, building codes, antitrust,
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occupational safety and health, consumer product safety, product
liability, hiring, wages, hours, employee benefit plans and programs,
collective bargaining and withholding and social security taxes.
(b) Each Seller holds all the permits, licenses and
franchises which are necessary for or material to its use, occupancy
or operation of the Assets or the conduct of the Music Business; and
no notice of violation of any applicable Law binding on any of Sellers
with respect to the Assets or the Music Business has been received.
5.14. Other Contracts and Commitments. Schedule 5.14 sets forth
a complete and accurate list of all Material Other Contracts. Other than with
respect to such matters which, alone or in the aggregate, would not have a
Material Adverse Effect, (i) each of the Other Contracts is a valid and
subsisting contract of all the parties thereto in full force and effect without
modification, (ii) Sellers are not in default under any of the Other Contracts
and have performed all obligations required to be performed by them thereunder,
and (iii) all of the Other Contracts are legal, valid and binding obligations
and are in full force and effect as of the date hereof and enforceable in
accordance with their terms (except that such enforcement may be subject to
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium
(whether general or specific) or other laws now or hereafter in effect relating
to creditor's rights generally and the remedy of specific enforcement and
injunctive or other forms of equitable relief may be subject to equitable
defense and to the discretion of the court before which any proceeding therefor
may be brought). The Other Contracts include every contract, written or oral,
to which any of Sellers is a party, that is directly related to the Music
Business. Sellers have disclosed and delivered, prior to the date hereof,
copies of all Other Contracts.
5.15. Broker's and Finder's Fees. Except for J.C. Bradford &
Co., no agent, broker, investment banker, person or firm acting on behalf of
Sellers or under their authority is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly in connection with
any of the transactions contemplated hereby. Any fee to which J. C. Bradford &
Co. is entitled shall be the sole responsibility of Sellers.
5.16. Fixed Assets; Leased Premises.
(a) Schedule 5.16(a) hereto sets forth a list and
description as at October 31, 1996 of all equipment, machinery, motor
vehicles, fixtures and other fixed assets relating to the Music
Business owned or used by any Seller, indicating the owner and
location thereof and the cost applicable thereto. Each of the fixed
assets owned or used by Sellers in relation to the Music Business is
in good repair and operating condition, normal wear and tear excepted.
The dollar amount of the fixed assets owned by Sellers as shown on the
Interim Statement of Assets and Liabilities does not exceed Sellers'
cost of the same.
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(b) Schedule 5.16(b) sets forth a list of each lease
of premises used in relation to the Music Business executed by or
binding upon any of Sellers as lessee, sub-lessee, tenant or assignee
(the "Leased Real Estate") setting forth in each case a brief
description of the premises covered thereby, the rental payable
thereunder and the term (including any extensions available)
thereunder. Each such lease is in full force and effect without any
default or breach thereof by the applicable Seller or any other party
thereto. Except as set forth on Schedule 5.16(b), no consent of any
landlord or any other party is required under any such lease in order
to assign each such lease to Buyer and to keep such lease in full
force and effect after the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby. True
and complete copies of all leases required to be listed on
Schedule 5.16(b), including all amendments, addenda, waivers and all
other binding documents affecting the tenant's rights thereunder, have
heretofore been delivered to Buyer.
5.17. Supplemental Schedule of Purchase and Sales Commitments
and Orders. At the Closing, Sellers shall deliver Schedule 5.17 which shall
set forth a list of all purchase commitments and orders of Seller relating to
the Music Business as of a date within three days of the Closing Date involving
more than $5,000 and the aggregate dollar amount of all sales orders (whether
for the sale of products or the rendering of services) of Sellers as of a date
within three days of the Closing Date. Sellers have not from the Balance Sheet
Date to the date hereof, and will not, from the date hereof to the Closing
Date, enter into any purchase or sales commitment or order relating to the
Music Business except in the ordinary course of business consistent with past
practices.
5.18. Labor Relations. There are no labor strikes, disputes,
slow downs, work stoppages or other labor troubles or grievances pending or, to
Sellers' knowledge, threatened against or involving Sellers in respect of the
Music Business. No unfair labor practice complaint before the National Labor
Relations Board, no discharge or grievance before the Equal Employment
Opportunity Commission and no complaint, charge or grievance of any nature
before any similar or comparable state, local or foreign agency, in any case
relating to Sellers in the conduct of the Music Business is pending or, to
Sellers' knowledge, threatened. None of Sellers have received notice, and
Sellers have no knowledge, of the intent of any Governmental Authority
responsible for the enforcement of labor or employment laws to conduct any
investigation of or relating to Seller in respect of the Music Business.
Schedule 5.18 lists each Contract binding on any Seller with respect to the
Music Business with any consultant, labor union or other collective bargaining
organization (each a "Labor Agreement"). Each Labor Agreement is in full force
and effect and no Seller is or, with the giving of notice or, lapse of time, or
both, would be in default thereunder. To the knowledge of Seller, no officer
or key employee of Seller in respect of the Music Business has any plans to
terminate his or her employment with Seller prior to the Closing Date.
5.19. Actions Not in Ordinary Course. Since the Balance Sheet
Date, and other than with respect to such matters which, alone or in the
aggregate, would not have a Material Adverse
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Effect, the Sellers have not, and prior to the Closing Date Sellers will not
have, (i) incurred any Liability directly relating to the Music Business,
except Liabilities incurred in the ordinary course of business and Liabilities
incurred under contracts entered into in the ordinary course of business; (ii)
discharged or satisfied any Lien or paid any Liability directly relating to the
Music Business, other than Liabilities shown on the Interim Statement of Assets
and Liabilities and Liabilities incurred since the Balance Sheet Date in the
ordinary course of business consistent with past practices; (iii) sold or
transferred any assets or written off any Receivables or Commingled
Receivables, except for the sale of Inventory and the collection and write off
of Receivables in the ordinary course of business consistent with past
practices or in connection with the consummation of the transactions
contemplated herein; (iv) granted any Liens; (v) suffered any losses or waived
any rights of substantial value; (vi) granted any bonuses or commissions or
increased the compensation payable to any of its employees, directors or
officers in the music division of Sellers or increased the aggregate payment of
any fees to any such Person except in the ordinary course of business
consistent with past practice or as previously disclosed to Buyer and granted
in connection with the consummation of the transactions contemplated herein;
(vii) made any loans to any individuals, firms, corporations or other entities
in the music division of Seller; (viii) made any change in any method of
accounting or auditing practice relating to the Music Business; or (ix) entered
into any transaction relating to the Music Business other than as contemplated
herein or other than in the ordinary course of business or agreed (whether or
not in writing) to do any of the foregoing.
5.20. No Changes. Since the Balance Sheet Date, except as set
forth in Schedule 5.20, Sellers have conducted the Music Business only in the
ordinary course consistent with past practice, and there has not been:
(a) any material adverse change in the business,
operations, or financial condition of the Music Business;
(b) any sale, transfer or other disposition of any
Assets and no Seller has entered into any contract or commitment
relating to the Music Business, other than in the ordinary course of
business consistent with past practices;
(c) any incurrence of any debt, guarantee,
capitalized lease or contingent obligation other than in the ordinary
course of business consistent with past practices;
(d) any disposition or lapse of any of any of
Sellers' I/P Assets that are material to the Music Business;
(e) any acquisition of any assets, raw materials or
properties in respect of the Music Business, and no Seller has entered
into any other transaction relating to the Music Business other than
in the ordinary course of business consistent with past practices;
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(f) any incurrence or commitment to incur capital
expenditures in relation to the Music Business in the aggregate in
excess of $50,000;
(g) any failure to keep in full force and effect
insurance comparable in amount and scope to coverage maintained by or
on behalf of Sellers in respect of the Music Business on the Balance
Sheet Date;
(h) damage, destruction or casualty loss, whether
covered by insurance or not, affecting the Music Business in the
aggregate in excess of $50,000;
(i) any other action taken that would cause any
representation or and warranty made by it in this Agreement not to
remain true and correct;
(j) any settlement, release or forgiveness of any
claim or litigation or waiver of any right with respect to the Music
Business; or
(k) any commitment by any of Sellers to do any of the
foregoing.
5.21. Compensation. Schedule 5.21 hereto lists the names, title
or job description, and total annual salary of all U.S. employees, officers and
directors of Sellers whose primary responsibilities are related to the Music
Business who, as of the date hereof, are or will be entitled to receive
compensation from Seller at an annualized rate in excess of $25,000 per year.
5.22. Employee Benefits.
(a) None of the Sellers nor any of their ERISA
Affiliates, as hereinafter defined, has incurred (nor has any event
occurred or a claim been threatened which reasonably can be
anticipated to result in a Seller or any of its ERISA Affiliates
incurring) any material loss or Liability in connection with any
existing or previously existing employee benefit plan which could
become, on or after the Closing Date, an obligation or Liability of
Buyer or any of its Affiliates or which has or could give rise to any
Liens on any of the Assets. Without limiting the foregoing, none of
the Sellers has ever contributed to any "multiemployer plan" as such
term is defined in Section 3(37) of ERISA. For purposes hereof, the
term "ERISA Affiliate" means a person or entity which, together with a
Seller, are treated as a single employer under Section 414 of the
Code.
(b) Each Plan that is a group health plan, as such
term is defined in Section 5000(b)(1) of the Code, has been operated
in compliance with the requirements of Section 4980(B) of the Code and
Sections 601 through 608 of ERISA ("COBRA").
(c) Sellers do not maintain or contribute to any
"employee welfare benefit plan" (as such term is defined in Section
3(1) of ERISA) which provides retiree health or other post-termination
employment welfare benefits, other than as required under COBRA.
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5.23. Governmental Approvals. Except as set forth in Section
7.3 hereof, no governmental authorization, approval, order, license, permit,
franchise, or consent and no registration, declaration or filing by Sellers
with any Governmental Authority is required in connection with the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby.
5.24. Secrecy and Noncompetition Agreements. Sellers have
entered into secrecy and noncompetition agreements in the forms set forth on
Schedule 5.24 hereto with the employees listed on such Schedule 5.24, which
persons are all of the persons with whom any of the Sellers has entered into
such agreements in respect of the Music Business. To the knowledge of Sellers,
no employee of the Music Business is subject to any secrecy or noncompetition
agreement with anyone other than Sellers.
5.25. Insurance Policies. All insurance policies which insure
Assets or relate to the Music Business are in amounts customarily deemed to be
adequate, and cover all risks customarily insured against in businesses like
the Music Business, and all premiums due to the date hereof on such policies
have been paid in full. Sellers have not failed to give any notice or present
any claim in respect of the Music Business under any such policy in a timely
fashion. Such insurance to the date hereof has, and to the Closing Date will
have, (a) been maintained in full force and effect and (b) not been canceled or
changed except to extend the maturity dates thereof.
5.26. No Omissions. Sellers do not know of any facts or
circumstances not disclosed to Buyer which indicate that the Assets or the
operations or prospects of Sellers relating to the Music Business may be
adversely affected or which otherwise should be disclosed to Buyer in order to
make any of the representations or warranties made herein on the part of the
Sellers not misleading. To the best knowledge of Sellers, no representation or
warranty by Sellers contained in this Agreement, and no statement contained in
any Schedule, Exhibit, or any certificate required to be furnished to Buyer
under this Agreement, contains any untrue statement of any material fact, or
omits to state any material fact necessary in order to make the statements
contained herein or therein not misleading.
5.27. Sellers Representations and Warranties. The
representations and warranties of Sellers contained in this Agreement, or
otherwise made in writing in connection with the transactions contemplated
hereby, will be true and correct on and as of the Closing Date with the same
force and effect as though such representations and warranties had been made-on
and as of the Closing Date.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES BY BUYER
Buyer hereby represents and warrants to Sellers as follows:
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6.1. Authorization. Buyer has full corporate power and
authority to enter into this Agreement and perform its obligations hereunder
and carry out the transactions contemplated hereby. The Board of Directors of
Buyer has taken all action required by law, its Articles of Incorporation, its
Bylaws and otherwise to authorize the execution and delivery by Buyer of this
Agreement and the consummation by Buyer of the transactions contemplated
hereby. Assuming the due execution and delivery by Sellers, this Agreement
constitutes the valid and binding agreement of Buyer, enforceable against Buyer
in accordance with its terms.
6.2. Organization and Good Standing. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to own, operate
and lease its properties and carry on its business as now conducted. Buyer is
duly qualified to transact business as a foreign corporation and is in good
standing in all jurisdictions where the failure to so qualify would have an
adverse impact on Buyer or on Buyer's operations in such jurisdiction.
6.3. No Violation. The execution and delivery of this
Agreement by Buyer does not, and the consummation of the transactions
contemplated hereby will not, (a) violate, conflict with or require the consent
thereunder any provision of any agreement, indenture, instrument, lease,
security agreement, mortgage or lien to which Buyer is a party or by which it
is bound; (b) violate or conflict with any provision of Buyer's Articles of
Incorporation or Bylaws; (c) violate any order, arbitration award, judgment,
writ, injunction, decree, statute, rule or regulation applicable to Buyer; or
(d) violate any other contractual or legal obligation or restriction to which
Buyer is subject.
6.4. Sufficient Funds. Buyer has and will continue to have
sufficient funds to consummate the transactions contemplated hereby, including,
without limitation, to pay the consideration set forth in Article 3 hereof in
accordance with the terms of this Agreement, and has all requisite power and
authority to make payment of such funds in the manner described herein and such
funds are and will be at the Closing Date free and clear of all Liens.
6.5. Certain Proceedings. There is no pending, or to the
knowledge of Buyer, threatened Actions at law or in equity or before or by any
federal, state, municipal or other governmental department, commission, board,
agency, instrumentality or authority that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with the
consummation of the transactions contemplated hereby.
6.6. Broker's and Finder's Fees. No agent, broker, investment
banker, person or firm acting on behalf of Buyer or under its authority is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee directly or indirectly in connection with any of the transactions
contemplated herein.
6.7. Sellers' Representations and Warranties. The Buyer is not
aware that the Sellers' representations and warranties in Article 5 are untrue
in any material respect on the date
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hereof. As used herein, Buyer's "awareness" for purposes of this Section 6.7
is limited to the actual knowledge of Buyer's Chief Financial Officer, General
Counsel, Director of Internal Audit, Senior Vice President, and Vice President
of Finance and Operations of Opryland Music Group Inc. (together, the "Buyer
Representatives").
ARTICLE 7.
COVENANTS AND AGREEMENTS OF SELLERS
Sellers, jointly and severally, agree that, from the date hereof until
the Closing, and thereafter if so specified, they will, and will cause the
Subsidiaries to, fulfill the following covenants and agreements unless
otherwise consented to by Buyer in writing:
7.1. Conduct of Business Pending the Closing.
(a) Sellers, in respect of the Music Business,
the Assets and the Assumed Liabilities, will:
(i) preserve the existence, rights,
business organization and franchises of the Music
Business, keep available to Buyer Sellers' officers and
employees engaged in the Music Business, and use their
best efforts to preserve for Buyer the present
relationships of Sellers in respect of the Music Business
with their songwriters, artists suppliers and customers
and others having business relationships with them; and
(ii) conduct the Music Business in the
ordinary course of business consistent with past practices
and shall not, without the prior written consent of Buyer,
purchase, sell, lease, encumber or otherwise dispose of
any Assets except Inventories in the ordinary course of
business and consistent with past practice or make any
change in the Music Business, operations or the manner of
conducting the Music Business.
(b) Seller in respect of the Music Business will not,
without the prior written consent of Buyer:
(i) make or obligate themselves to make
any increase in the rate or terms of compensation payable
to any officer, director, or employee engaged primarily in
the Music Business, hire or discharge any officer,
director or employee or otherwise incur any further
employment obligations or commitments other than annual
salary increases in the ordinary course of business
consistent with past practices;
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(ii) enter into any Contract or cancel or
renegotiate or amend any existing Contract except for
Contracts in the ordinary course of business consistent
with past practices of less than $25,000 in each instance;
(iii) permit any renewal option under any
Contract to lapse, or exercise any option to renew any
Contract without the prior consultation with and written
consent of Buyer;
(iv) make or commit to make any capital
expenditure in relation to the Music Business other than
in the ordinary course of business consistent with past
practices in excess thereof in an amount equal to $25,000
or more in the aggregate;
(v) waive any rights of substantial
value;
(vi) dispose of, permit to lapse, or
otherwise fail to preserve any of its rights under I/P
Assets, I/P Contracts or other similar rights, dispose of
or permit to lapse any license, permit or other form of
authorization, or dispose of or disclose to any person,
other than an authorized representative of Buyer, any
customer list, trade secret, or know-how;
(vii) make any change in any method of
accounting or accounting practice or in the application of
such method of accounting or accounting practice or make
any change in accounting estimate;
(viii) pay, loan or advance any amount to
or in respect of, or sell, transfer or lease any assets
(whether real, personal or mixed, tangible or intangible)
to, or enter into any agreement, arrangement or
transaction with, any of its officers or directors, any of
its Affiliates or associates or any Person in which it or
any of its officers, directors, Affiliates or associates,
has any direct or indirect interest, except for (A)
directors, fees and compensation to its officers and
employees at rates not exceeding the rates of compensation
in effect on the Balance Sheet Date and (B) advances made
to employees for travel and other business expenses in
reasonable amounts consistent with past practice;
(ix) without limiting any of the
foregoing, take or refrain from taking any action the
result of which would render any representation or
warranty made to Buyer in or in connection with this
Agreement inaccurate when deemed made on and as of the
Closing Date; or
(x) agree, whether in writing or
otherwise, to take any action prohibited in this Section
7.1.
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7.2. Access. Subject to the terms of the Confidentiality
Agreement between Nelson and Buyer (the "Confidentiality Agreement"), after the
execution of this Agreement and continuing until the Closing, Sellers shall
permit Buyer and its counsel, accountants and other representatives reasonable
access during normal business hours and upon reasonable notice, access to the
properties, books, contracts, commitments, records, employees, representatives
and advisors of Sellers in respect of the Music Business and will furnish Buyer
and its representatives during such period with all such information concerning
Sellers' affairs in respect of the Music Business and such copies of such
documents relating thereto, as Buyer or its representatives may reasonably
request. Sellers agree to permit Buyer and its authorized representatives to
visit, together with representatives of Sellers, suppliers, customers,
recording artists, producers, authors, composers, distributors or others having
business relations with Sellers relating to the Music Business. In the event
that this Agreement is terminated, Buyer shall return all nonpublic documents
furnished hereunder, shall destroy all documents or portions thereof prepared
by Buyer or its representatives that contain nonpublic information furnished by
Sellers pursuant hereto, and, in any event, shall hold all nonpublic
information received pursuant hereto in the same degree of confidence with
which it maintains its own like information unless or until such information is
or becomes a matter of public knowledge or is or becomes known to the party
receiving such information through persons (other than the party providing such
information) having no obligation to maintain such information in confidence.
Notwithstanding any other provision hereof, the parties hereto shall continue
to be bound by the terms and conditions of the Confidentiality Agreement.
7.3. Government Consents and Approvals. Sellers shall take all
necessary corporate and other action and use all reasonable efforts to obtain
promptly all consents, approvals, permits, licenses, authorizations,
exemptions, waivers from Governmental Authorities or third parties under
agreements which are not Contracts required of Sellers to carry out the
transactions contemplated in this Agreement, including but not limited to (i)
filings required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"); (ii) filings required under the Investment
Canada Act (the "Investment Canada Act"); (iii) the Canada Competition Act (the
"Competition Act"); and (iv) filings required under the United Kingdom Fair
Trading Act of 1973 (the "U.K. Fair Trading Act"), and shall provide to Buyer
such information as Buyer may reasonably require to make such filings and
prepare such applications as may be required for the consummation by Buyer of
the transactions contemplated by this Agreement.
7.4. Bulk Sales Compliance. Buyer hereby waives compliance by
Sellers with the provisions of the bulk sales or similar laws of any and all
states (the "Bulk Sales Laws"), and Sellers covenant and agree to pay and
discharge when due all claims, liabilities and related expenses which may be
asserted against Buyer by reason of such noncompliance.
7.5. Other Agreements.
(a) Sellers shall enter into with Buyer an agreement,
in form and substance reasonably satisfactory to Sellers and Buyer,
whereby Sellers will provide, and Buyer will compensate Sellers for,
certain administrative support services to the Music Business
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during a transition period extending not more than 12 months following
the Closing Date (the "Transition Services Agreement").
(b) Each Subsidiary and a direct or indirect
subsidiary of Buyer designated by Buyer (each, a "Foreign Buyer")
shall enter into an agreement, in form and substance reasonably
satisfactory to Sellers and Buyer (the "Subsidiary Asset Purchase
Agreements"). Each Subsidiary Asset Purchase Agreement shall contain
such terms as are necessary and appropriate to effectuate the sale of
the Foreign Assets to the designated Foreign Buyer, on substantially
the terms and conditions provided herein and in accordance with the
intent of Sellers and Buyer herein; provided, however, that any
provisions relating to penalties and other Liabilities which may be
assessed in excess of severance pay (which severance pay shall be the
obligation of Sellers) which arise by operation of Law in respect of
severance of employees of the Music Business of Foreign Subsidiaries
which are not engaged as employees by a Foreign Buyer after the
Closing Date because of the failure of a Foreign Buyer to employ
substantially all such employees shall be subject to mutual agreement
of the parties based on the facts and circumstances at the time the
Subsidiary Asset Purchase Agreements are entered into. The Subsidiary
Asset Purchase Agreements shall be entered into prior to the Closing
Date and provide for closings thereunder on the Closing Date.
(c) On the Closing Date, Nelson and Buyer shall enter
into an agreement, in form and substance reasonably satisfactory to
Nelson and Buyer whereby Buyer will grant to Nelson a license to use
the tradename "Word" and certain related trademarks as set forth on
Schedule 7.5(c) hereto for a period of five years in connection
with certain aspects of Nelson's book publishing business and with
respect to certain video recordings (other than video recordings
consisting primarily of musical performances) which constitute
Children's Products published by Nelson (the "License Agreement").
7.6. Other Transactions. Until the Closing or the termination
of this Agreement in accordance with Article 12, Sellers will not, and will
cause their directors, officers, employees, agents and Affiliates not to,
directly or indirectly, solicit or initiate the submission of proposals from,
or solicit, encourage, entertain or enter into any arrangement, agreement or
understanding with, or engage in any discussions with, or furnish any
information to, any Person, other than Buyer or a representative thereof, with
respect to the acquisition of all or any part of the Assets other than in the
ordinary course of business. Should Sellers or any of their Affiliates or
representatives, during such period, receive any offer relating to such
acquisition, they will provide Buyer with immediate notice thereof, which
notice will include the identity of the prospective offeror and the price and
terms of any offer.
7.7. Notification. Sellers shall give Buyer prompt written
notice of (i) the existence of any fact or the occurrence of any event which
constitutes, or with the giving of notice or the passage of time or both would
constitute, a breach of any representation or warranty by Sellers made herein
or pursuant hereto and (ii) the taking of any action by Sellers that would
breach or
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violate, or constitute a default under, any agreement or covenant of Sellers
made herein or pursuant hereto. The giving of any such notice shall not
affect, modify or limit in any way any representation, warranty, agreement or
covenant of Sellers made herein or pursuant hereto or Buyer's right to rely
thereon.
7.8. Supplemental Disclosure. Sellers agree that, with respect
to its representations and warranties made in this Agreement, they will have a
continuing obligation to supplement or amend the Schedules hereto with respect
to any matter hereafter arising or discovered which, if existing or known at
the date of this Agreement, would have been required to be set forth or
described in the Schedules hereto; provided, however, that neither the
supplementing or amending of any Schedules by Sellers, nor the availability or
other actual delivery of information to, or the discovery of any matters by
Buyer in the course of its investigations, shall affect any covenants or be
deemed to cure any breach of any representation or warranty made in this
Agreement or to have been disclosed as of the date of this Agreement.
7.9. Consents Under Agreements. Prior to the Closing Date, the
Sellers shall obtain the consent or approval of each third party required for
the sale, transfer, conveyance, assignment and delivery to Buyer of each
Assumed Contract selected by Buyer and listed on Schedule 7.9, to the extent
necessary to enable Buyer to enjoy the full rights and benefits in such
Contracts enjoyed by Sellers on the date hereof without breach thereof. In
addition to and not in limitation of the foregoing, Sellers shall obtain the
consent or approval of each third party required for the sale, transfer,
conveyance, assignment and delivery of each Assumed Contract not listed in
Schedule 7.9 and each claim, right or benefit arising thereunder the absence of
which, alone or in the aggregate, would have a Material Adverse Effect.
7.10. Supplemental Schedule of Compositions. Prior to Closing,
Sellers shall supplement Schedule 1.1(o) to include all Compositions owned in
whole or in part by Sellers.
ARTICLE 8.
COVENANTS AND AGREEMENTS OF BUYER
Buyer agrees that from the date hereof until the Closing, and
thereafter if so specified, it will fulfill the following covenants and
agreements unless otherwise consented to by Sellers in writing:
8.1. Consents and Approvals. From the date hereof and prior to
the Closing, Buyer shall take all necessary corporate and other action and use
all reasonable efforts to obtain promptly all consents, approvals, permits,
licenses, authorizations, exemptions, waivers from third parties and amendments
of agreements required of Buyer (including pursuant to the HSR Act, the
Investment Canada Act, the Competition Act or the U.K. Fair Trading Act) to
carry out the transactions contemplated in this Agreement and shall provide to
Sellers such information as
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Sellers shall reasonably require to make such filings and prepare such
applications as may be required for the consummation by Sellers of the
transactions contemplated by this Agreement.
8.2. Books and Records; Personnel. For a period of five years
with respect to Tax related books and records, and three years with respect to
all other books and records, from and after the Closing Date:
(a) Buyer shall not dispose of or destroy any of the
books and records relating to the Music Business for periods prior to
the Closing ("Books and Records") without first offering to turn over
possession thereof to Sellers by written notice to Sellers at least
thirty (30) days prior to the proposed date of such disposition or
destruction.
(b) Buyer shall upon reasonable notice and at
reasonable times allow Sellers and their agents reasonable access to
all Books and Records during normal working hours at Buyer's principal
place of business or at any location where any Books and Records are
stored, and Sellers shall have the right, at their expense, to make
copies of any Books and Records.
(c) Buyer shall make available to Sellers upon
written request (i) copies of any Books and Records, (ii) Buyer's
personnel to assist Sellers in locating and obtaining any Books and
Records, and (iii) any of Buyer's personnel whose assistance or
participation is reasonably required by Sellers in anticipation of, or
preparation for, existing or future litigation, Returns, or other
matters in which Sellers or any of their affiliates are involved.
Sellers shall reimburse Buyer for the reasonable out-of-pocket
expenses incurred by it in performing the covenants contained in this
Section 8.2.
8.3. Employee Matters.
(a) Buyer shall be under no obligation to offer
employment to any employee of the Music Business. Prior to the
Closing Date, Buyer will present Seller with a list of employees of
the Music Business which it (or the appropriate Foreign Buyer)
proposes to hire as of the Closing Date. Such employees shall be
offered employment by Buyer and its Affiliates on such terms as Buyer
shall determine in its sole discretion.
(b) Notwithstanding the operation of any Law, any
Action or any agreement, contract, commitment or understanding binding
upon any Seller, neither Buyer nor any Foreign Buyer, nor any of their
Affiliates, shall have any Liability, whether in respect of present or
future salary, benefits, severance, or otherwise, in respect of any
employee of the Music Business which Buyer does not actually engage as
an employee of Buyer or such Foreign Subsidiary and neither Buyer, any
Foreign Buyer nor any of their Affiliates shall have any Liability,
whether in respect of any salary, benefits, severance or otherwise,
accrued on or prior to the Closing Date with respect to any employee
actually engaged as an employee of Buyer or such Foreign Subsidiary on
the Closing Date except
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to the extent that Buyer refuses to hire any such employee for
discriminatory reasons in violation of federal or state Law. The
Subsidiary Asset Purchase Agreements shall contain such agreements,
covenants and indemnities which may be necessary under applicable Law
to effectuate the foregoing.
(c) To the extent permitted by applicable Law, Buyer
shall offer to each U.S. employee of the Music Business who continues
as an employee of Buyer after the Closing Date the option of making a
direct rollover of such employee's account balance in the Thomas
Nelson Stock Ownership Plan to Buyer's defined contribution plan
maintained under Section 401(k) of the Code.
8.4. Buyer's Disclosure. In the event that any Buyer
Representative becomes aware at any time prior to the Closing Date that any
representation or warranty of Sellers set forth in Article 5 is not true and
correct in any material respect on and as of such date and such facts have not
been disclosed by Sellers in any certificate, supplemental disclosure schedule
or notice required hereunder, Buyer shall use its best efforts to disclose such
fact to Sellers as promptly as reasonably practicable. The parties agree that
the disclosure or failure to disclose any matter required to be disclosed under
this Section 8.4 shall not affect, modify or limit any representation or
warranty of Sellers or Buyer's right to rely thereon.
ARTICLE 9.
CONDITIONS TO BUYER'S OBLIGATIONS
All obligations of Buyer hereunder are subject to the fulfillment or
the waiver in writing thereof, prior to or at the Closing, of each of the
following conditions:
9.1. Representations and Warranties. The representations and
warranties made by Sellers in this Agreement and the statements contained in
the Schedules attached hereto as supplemented through the Closing Date shall be
true in all material respects when made and at and as of the time of the
Closing as though such representations and warranties were made at and as of
such date.
9.2. Performance by Sellers. Sellers shall have performed and
complied in all material respects with all covenants, agreements, obligations
and conditions required by this Agreement to be so complied with or performed.
9.3. Certificates of Sellers. Sellers shall have delivered to
Buyer a Certificate of Sellers, dated the Closing Date, certifying as to the
fulfillment of the conditions specified in Sections 9.1 and 9.2 hereof.
9.4. Opinion of Counsel for Sellers. Buyer shall have received
a written opinion of the Sellers' counsel, Bass, Berry & Sims PLC, dated the
Closing Date, in form and substance
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reasonably satisfactory to it, as to certain matters agreed upon by legal
counsel of Sellers and Buyer. Such opinion may rely upon the opinion of the
Vice President and General Counsel of Nelson as to such questions of fact and
law as Sellers' counsel deems appropriate.
9.5. Consents and Approvals. Buyer shall have received from
Sellers executed counterparts of the consents referred to in Sections 7.3 and
7.9, all of which consents shall be in form and substance reasonably
satisfactory to Buyer. Without limiting the generality of the foregoing, all
applicable waiting periods under the HSR Act, the Investment Canada Act, the
Competition Act, or the U.K. Fair Trading Act shall have expired or been
terminated.
9.6. Litigation. On the date of the Closing, none of the
Sellers shall be a party to, nor will there otherwise be pending or threatened
in writing any judicial, administrative, or other action, proceeding or
investigation seeking to enjoin, prohibit, restrain or otherwise prevent the
transactions contemplated hereby.
9.7. Other Agreements. Buyer shall have received from Sellers
an executed counterpart of the Transition Services Agreement and the Subsidiary
Asset Purchase Agreements.
9.8. Assignments and Notices. Buyer shall have received the
following documents:
(a) Assignments of copyright with respect to the I/P
Assets and I/P Contracts in the form and substance reasonably
satisfactory to Buyer executed, delivered and notarized by Sellers.
(b) Notices in the form and substance reasonably
satisfactory to Buyer herein by reference, advising the applicable
performing rights societies, The Harry Fox Agency, licensees and other
third parties that Sellers have assigned to Buyer all of Sellers'
right, title and interest in the I/P Assets and I/P Contracts and all
rights to receive royalties and other monies payable by such parties
in respect of the I/P Assets and I/P Contracts from and after the
Closing Date.
(c) Assignments of trademark with respect to the
Trademarks in the form and substance reasonably satisfactory to Buyer
executed, delivered and notarized by Sellers.
9.9. Subsidiary Asset Purchase Agreements. The Subsidiary
Asset Purchase Agreements shall have been executed and delivered by the Foreign
Subsidiaries. Consummation of the transactions contemplated by the Subsidiary
Asset Purchase Agreements shall occur simultaneously with the Closing.
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ARTICLE 10.
CONDITIONS TO SELLERS' OBLIGATIONS
All obligations of Sellers under this Agreement are subject to the
fulfillment or the waiver in writing thereof, prior to or at the Closing, of
each of the following conditions:
10.1. Representations and Warranties. The representations and
warranties made by Buyer in this Agreement shall be true in all material
respects when made and at and as of the time of the Closing as though such
representations and warranties were made at and as of such date.
10.2. Performance by Buyer. Buyer shall have performed and
complied in all material respects with all covenants agreements, obligations
and conditions required by this Agreement to be so complied with or performed.
10.3. Certificates of Buyer. Buyer shall have delivered to
Sellers a Certificate of Buyer, dated the Closing Date, certifying as to the
fulfillment of the conditions specified in Sections 10.1 and 10.2 hereof.
10.4. Opinion of Counsel for Buyer. Sellers shall have received
a written opinion of Buyer's counsel, Loeb & Loeb LLP, dated the Closing Date,
in form and substance reasonably satisfactory to them, as to certain matters
agreed upon by legal counsel of Sellers and Buyer. Such opinion may rely upon
the opinion of the Senior Vice President, Legal Counsel and Secretary of Buyer
as to such questions of fact and law as Buyer's counsel deems appropriate.
10.5. Consents and Approvals. Sellers shall have received from
the Buyer executed counterparts of the consents referred to in Sections 7.3 and
7.9, all of which consents shall be in form and substance reasonably
satisfactory to Sellers. Without limiting the generality of the foregoing, all
applicable waiting periods under the HSR Act, the Investment Canada Act and the
U.K. Fair Trade Act shall have expired or been terminated.
10.6. Litigation. On the date of the Closing, Buyer shall not
be a party to, nor will there otherwise be pending or threatened in writing,
any judicial, administrative, or other action, proceeding or investigation
seeking to enjoin, prohibit, restrain or otherwise prevent the transactions
contemplated hereby.
10.7. License Agreement. Nelson shall have received from Buyer
an executed counterpart of the License Agreement.
10.8. Subsidiary Asset Purchase Agreements. The Subsidiary
Asset Purchase Agreements shall have been executed and delivered by the Foreign
Buyer. Consummation of the transactions contemplated by the Subsidiary Asset
Purchase Agreements shall occur simultaneously with the Closing.
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ARTICLE 11.
INDEMNIFICATION
11.1. Indemnification by Sellers. Subject to the limitations of
this Article 11, Sellers hereby jointly and severally agree to defend,
indemnify and hold harmless Buyer, and shall reimburse Buyer for, from and
against each claim, loss, Liability, cost and expense (including reasonable
attorneys' fees) (collectively, "Losses") resulting from or arising out of:
(a) any untrue representation, misrepresentation,
breach of warranty or nonfulfillment of any covenant, agreement or
other obligation by or of any Seller contained herein, or in any
Schedule or Exhibit hereto or any certificate required to be
delivered pursuant hereto;
(b) any Liability or claim of Sellers, whether
arising before or after the Closing, not included in the Assumed
Liabilities;
(c) any Liability or claim arising in any way from
Sellers' failure to perform any Contract prior to the Closing Date
whether or not such Liability is an Assumed Liability, other than
Liabilities in respect of Audit Claims;
(d) any Liability or claim under any Environmental
Laws relating to any event, action or failure to act in respect of the
Leased Real Estate which occurred prior to the Closing Date;
(e) any Liability or claim in respect of any employee
of the Music Business who is not offered and does not become an
employee of Buyer or a Foreign Buyer on or after the Closing other
than any Liability or claim against Buyer for discrimination in the
selection of employees of the Music Business to become employees of
Buyer after the Closing Date in violation of any federal or state Law;
(f) any Liability or claim in respect of Audit
Claims, to the extent all Losses in respect of Audit Claims exceed the
reserve therefore expressly set forth on the Closing Statement;
(g) the failure to obtain the consent or approval of
any third party required for the sale, transfer, assignment and
delivery of any Assumed Contract or any right or benefit arising
thereunder; or
(h) any other Loss incidental to any of the
foregoing.
11.2. Indemnification by Buyer. Buyer hereby agrees to defend,
indemnify and hold harmless Sellers, and shall reimburse Sellers for, from and
against Losses resulting from or arising out of:
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(a) any untrue representation, misrepresentation,
breach of warranty or nonfulfillment of any covenant, agreement or
other obligation by Buyer contained herein or in any certificate,
document or instrument delivered to Sellers pursuant hereto;
(b) Buyer's failure to pay, perform or discharge any
Assumed Liability; and
(c) any other Loss incidental to the foregoing.
11.3. Procedure.
(a) Other than with respect to Audit Claims (which shall
be governed by Section 11.3(b)), the indemnified party shall promptly
notify the indemnifying party of any Action for which indemnification
will be sought under Sections 11.1 or 11.2 of this Agreement and, if
such Action is a third party claim, demand, action or proceeding, the
indemnifying party will have the right at its expense to join in the
defense of said claim, action or proceeding and, if the indemnifying
party agrees in writing to be bound by and promptly pay the full
amount of any final judgment from which no appeal may be taken, then,
at the option of the indemnifying party, the indemnifying party may
assume the defense thereof using counsel reasonably acceptable to the
indemnified party. The indemnified party shall have the right to
participate, at its own expense, with respect to any such third party
claim, demand, action or proceeding. In connection with any such
third party Action, Buyer and the Sellers shall cooperate with each
other and provide each other with access to relevant books and records
in their possession. The indemnifying party shall not, without
written consent of such indemnified party, settle or compromise or
consent to entry of any judgment with respect to any such claim,
investigation, action, suit, hearing or proceeding (a) in which any
relief other than the payment of money damages for which the
indemnified party is fully indemnified hereunder is or may be sought
against such indemnified party or (b) which does not include as an
unconditional term thereof the giving by the claimant, Person
conducting such investigation or initiating such hearing, plaintiff or
petitioner to such indemnified party of a release from all liability
with respect to such claim, investigation, action, suit or proceeding
and all other claims or causes of action (known or unknown) arising or
which might arise out of the same facts. If, in connection with any
Liability or claim for which no relief other than money damages is
sought and which includes an unconditional release from Liability
thereunder, the indemnified party refuses to consent to any
settlement, compromise or consent to entry of any judgment, the
maximum Liability of the indemnifying party relating thereto shall be
the amount of the proposed settlement if the amount thereafter
recovered from the indemnified party on such claim, demand, action or
proceeding is greater than the amount of the proposed settlement.
(b) From and after the Closing Date, Buyer shall be
entitled to assume the defense of all Audit Claims, whether or not
Sellers shall have any Liability in respect thereof pursuant to this
Article 11. Buyer shall not, however, without the written consent of
Nelson (which consent shall not be unreasonably withheld or delayed),
settle,
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compromise or consent to entry of judgment with respect to any Audit
Claim in an amount which would result in a Loss for which Sellers
would be obligated to make an indemnification payment pursuant to this
Article 11; provided, however, that if Nelson's refusal to consent to
any such settlement, compromise or entry of judgment would have a
Material Adverse Effect on Buyer's and its Affiliates' ongoing
operations, Buyer may agree to such settlement, compromise or entry of
judgment notwithstanding Sellers' refusal to consent thereto and
Sellers shall nonetheless be liable for Losses related thereto in
accordance with this Article 11.
11.4. Limitations; Exclusive Remedy.
(a) If the Closing occurs, (i) Sellers will have no
liability for indemnification pursuant to this Article 11 unless, on
or before the third anniversary of the Closing Date, Buyer notifies
Sellers of a claim specifying the factual basis of that claim in
reasonable detail; and (ii) Buyer will have no Liability to Sellers
for indemnification pursuant to Section 11.2(a) (and Section 11.2(c)
to the extent incidental to 11.2(a)) unless, on or before the third
anniversary of the Closing Date, Sellers notify Buyer of a claim
specifying the factual basis of that claim in reasonable detail.
(b) Sellers will have no Liability with respect to
individual claims pursuant to this Article 11, and Buyer shall have no
Liability with respect to individual claims pursuant to Section
11.2(a) and Section 11.2(c) as it relates to Section 11.2(a) that
involve Losses of less than $5,000.
(c) Sellers will have no Liability for Losses
pursuant to this Article 11 until the aggregate of all Losses exceeds
$800,000, in which event only the amount that Buyer is entitled to
recover in respect of any such claims in excess of $800,000 shall be
payable; provided, that, the maximum amount recoverable by Buyer for
indemnification claims under this Article 11 shall in the aggregate be
equal to the Purchase Price.
(d) The indemnities set forth in this Article 11
shall be the exclusive remedy of Buyer or Seller for any
misrepresentation, breach of warranty, or nonfulfillment or failure to
be performed of any covenant or agreement contained in this Agreement;
provided that, (i) the indemnities set forth in this Article 11 shall
not preclude the purchase price adjustments and other payments
required pursuant to Article 3 and (ii) nothing in this Article 11
shall limit any right of any party hereto to any non-monetary remedy
for any breach of this Agreement or to any monetary remedy for breach
of any covenant or agreement in Section 7.4, Section 8.2, Section
8.3(b) or Article 13 of another party to be performed on or after the
Closing.
(e) Notwithstanding anything in this Agreement to the
contrary, Sellers shall be responsible in accordance with this Article
11 for any Losses incurred by Buyer as a result of Buyer's failure to
comply with any applicable law during the first twelve months
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after the Closing due to the ownership of Assets or operation of the
Music Business after the Closing in the same manner Sellers owned or
operated the Assets prior to the Closing; provided, however, that
Sellers shall not be responsible for any Losses incurred after Buyer
obtains actual knowledge of any failure to comply with applicable law
and has a reasonable opportunity to effect such compliance.
(f) Upon making any payment to an indemnified party
for any indemnification claim pursuant to this Article 11, the
indemnifying party shall be subrogated, to the extent of such payment,
to any rights that the indemnified party may have against any other
parties with respect to the subject matter underlying such
indemnification claim.
(g) Notwithstanding anything herein to the contrary,
Buyer shall have no right to any indemnification under this Article 11
for any matter if the Purchase Price was reduced for such matter as a
result of an adjustment thereto in accordance with Article 3 hereof.
ARTICLE 12.
TERMINATION OF AGREEMENT
12.1. Termination Events. This Agreement may be terminated at
any time prior to the Closing:
(a) By mutual agreement of Sellers and Buyer.
(b) By Buyer, (i) if Sellers have violated or
breached in any material respect any of the agreements,
representations or warranties contained in this Agreement which has
not been waived in writing and Sellers have not cured such violation
or breach within thirty business days after Buyer delivers written
notice thereof, or (ii) if any of the conditions set forth in Article
9 hereof have not been satisfied in all material respects by the
Closing or have not been waived in writing by Buyer.
(c) By Sellers, (i) if Buyer has violated or breached
in any material respect any of the agreements, representations or
warranties contained in this Agreement which has not been waived in
writing and Buyer has not cured such violation or breach within thirty
business days after Sellers deliver written notice thereof, or (ii) if
any of the conditions set forth in Article 10 hereof have not been
satisfied in all material respects by the Closing or have not been
waived in writing by Sellers.
(d) By either Buyer or Sellers if the transactions
contemplated by this Agreement shall not have been consummated on or
before March 31, 1997, provided that such right of termination shall
not be available to any party whose failure to fulfill any
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obligation or condition under this Agreement has been the cause of, or
resulted in, the failure of the transactions contemplated hereby to be
consummated on or before that date.
(e) By either Buyer or Sellers if the other makes an
assignment for the benefit of creditors, files a voluntary petition in
bankruptcy or seeks or consents to any reorganization or similar
relief under any present or future bankruptcy act or similar law, or
is adjudicated a bankrupt or insolvent, or if a third party commences
any bankruptcy, insolvency, reorganization or similar proceeding
involving the other.
12.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 12.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations of Buyer in
Section 7.2, and the obligations in Sections 14.2 and 14.9 will survive.
Nothing in this Section 12.2 shall relieve any party to this Agreement of
Liability for breach of this Agreement or for breach of the Confidentiality
Agreement.
ARTICLE 13.
NONCOMPETE AND CONFIDENTIALITY
13.1. Confidentiality. Sellers jointly and severally agree not
to, directly or indirectly, without the prior written consent of Buyer, use or
disclose to any Person, any information, trade secrets, confidential customer
information, technical data or know-how which constitute or relate to the
Assets, Assumed Liabilities, processes, methods, equipment or business
practices of the Music Business.
13.2. Noncompete.
(a) Sellers jointly and severally agree that, for a
period of five years after the Closing Date, Sellers and their
Affiliates will not, directly or indirectly, in the United States, the
United Kingdom and Canada (the "Territory"), (i) engage in the
production or distribution of religious recorded music and related
products, the domestic and international distribution of recordings of
religious music for other companies or music publishing, including
songwriter development, print music, publishing and copyright
administration with respect to religious music (other than the
production of recorded music incidental to any Sellers' and their
Affiliates' audiovisual business) (the "Company Business"); or (ii)
have any interest, as a shareholder, member, partner, owner, agent,
consultant, lender or guarantor, in any other Person engaged in the
Company Business.
(b) Buyer represents and warrants that (i) the Music
Business and Sellers' religious book publishing business have been
operated as an integrated business for purposes of accounting, legal,
production, distribution, sales, promotion, fulfillment and in other
respects since at least 1993, (ii) by acquiring the Assets and
succeeding to the Music Business, Buyer will acquire, directly and
indirectly, Sellers' know-how, access to
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distribution systems and other proprietary information (collectively,
the "Religious Book Publishing Assets") which would enable Buyer to
compete with Seller in the religious book publishing business, and
(iii) the Religious Book Publishing Assets would not otherwise be
available to the Buyer and could not otherwise be developed or
acquired without the Buyer incurring substantial expense. In light of
the foregoing, to preserve for Sellers the value in Sellers' religious
book publishing business and to prevent Buyer from securing Sellers'
Religious Book Publishing Assets without compensating Sellers
therefore, Buyer agrees that, for a period of five years after the
Closing Date ("Buyer's Noncompete Period"), Buyer and its Affiliates
will not, directly or indirectly, in the Territory, (x) engage in the
creation, publication or distribution of religious literary works (the
"Religious Publishing Business"); or (y) have any interest, as a
shareholder, member, partner, owner, agent, consultant, lender or
guarantor, in any other Person engaged in the Religious Publishing
Business. Buyer further agrees that, for an additional period of two
years commencing on the expiration of Buyer's Noncompete Period, Buyer
and its Affiliates will not, directly or indirectly, in the Territory,
engage in the publication or distribution of any literary work under
the Trademark "Word" or any trademark confusingly similar to "Word."
(c) For purposes of this Article 13, ownership of 1%
or less of any class of outstanding securities of a company the
securities of which are listed on a national securities exchange or
which has 1,000 or more shareholders, shall not be deemed to
constitute ownership or participation in the ownership of the business
of such company.
(d) Neither any Seller nor any Affiliate of any
Seller, for a period of five years after the Closing Date, shall (i)
directly or indirectly, hire, entice away, retain, employ or solicit
or attempt to solicit (either for itself or as agent for another or
through the use of an agent or intermediary) for employment or induce,
persuade or encourage any person to leave Buyer's employ who, prior to
the Closing Date was, or during such five year period will be,
employed or retained by Buyer as a department manager of Buyer or a
position senior to department manager of Buyer, (ii) hire or directly
solicit for employment or induce, persuade or encourage a person to
leave Buyer's employ (which direct solicitation, inducement,
persuasion or encouragement shall not include generalized
advertisement for employment or other engagement) who is, at the time
of hiring or solicitation, employed or retained by Buyer as a
consultant, agent, author, producer, songwriter, artist, contributor,
employee or otherwise in the Company Business or (iii) directly or
indirectly, divert or attempt to divert from Buyer any Company
Business whatsoever by influencing or attempting to influence any
consultant, agent, author, producer, songwriter, artist, contributor,
customer, supplier, distributor or other Person providing products
and/or services to Buyer.
(e) Neither Buyer nor any Affiliate of Buyer, for a
period of five years after the Closing Date, shall (i) directly or
indirectly, hire, entice away, retain, employ or solicit or attempt to
solicit (either for itself or as agent for another or through the use
of
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an agent or intermediary) for employment or induce, persuade or
encourage any person to leave a Seller's employ who, prior to the
Closing Date was, or during such five year period will be, employed or
retained by a Seller as a department manager of Nelson or Word (other
than employees of the Music Business selected by Buyer to become
employees pursuant to Section 8.3(a)) or a position senior to
department manager of Nelson or Word, (ii) except as aforesaid hire or
directly solicit for employment or induce, persuade or encourage a
person to leave a Seller's employ (which direct solicitation,
inducement, persuasion or encouragement shall not include generalized
advertisement for employment or other engagement) who is, at the time
of hiring or solicitation, employed or retained by Seller as a
consultant, agent, author, producer, publisher, writer, contributor,
employee or otherwise in the Religious Publishing Business or (iii)
directly or indirectly, divert or attempt to divert from a Seller any
Religious Publishing Business whatsoever by influencing or attempting
to influence any consultant, agent, author, producer, publisher,
writer, contributor, customer, supplier, distributor or other person
or entity providing products and/or services to a Seller.
(f) Notwithstanding any other provision in this
Article 13, nothing shall prevent the Sellers and their Affiliates
from engaging in any activities enumerated in Section 13.2(a)(i) or
(ii) (collectively, as they relate to Sellers and their Affiliates,
"Restricted Activities") or Buyer and its Affiliates from engaging in
any activity enumerated in Section 13(b)(x) or (y) (collectively, as
they relate to Buyer and its Affiliates, also "Restricted Activities")
which meet any of the following requirements:
(i) Any party can engage in Restricted
Activities which relate to Children's Products, only if the business
related to Children's Products which otherwise would be a Restricted
Activity for such party is ancillary to, or an extension of,
Children's Products which are part of a business of such party which
is not a Restricted Activity.
(ii) in connection with the acquisition of any
Person which conducts incidental Restricted Activities. For purposes
hereof, the term "incidental Restricted Activities" shall mean any
Restricted Activities which represent less than twenty-five percent
(25%) of the annual revenues of the acquired Person at the time of the
acquisition of such Person by the acquiring party; provided, however,
that in the event of an acquisition by a party of any Person of which
more than ten percent (10%) but less than twenty-five percent (25%) of
such Person's annual revenues is derived from Restricted Activities,
the acquiring party agrees to divest all ownership of such Restricted
Activities within nine months of the date of such acquisition.
(g) The rights and obligations of the parties under
this Section 13.2 shall terminate immediately notwithstanding the
provisions of Sections 13.2(a) and (b) in the event that any Person
who is engaged in any Restricted Activities acquires Nelson or Buyer,
as the case may be, in a Change in Control. As used herein, "Change
in Control" shall mean an event in which any person or persons (as
such term is used in Sections 13(d)
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and 14(d) of the Securities Exchange Act of 1934, as amended) (other
than an Affiliate of Nelson or Buyer, as applicable, or any Person
engaged in a "going private" transaction involving Buyer or Nelson, as
applicable) acquires (i) beneficial ownership of, or acquires the
right to vote, through acquisition, tender offer, proxy solicitation,
merger or consolidation, fifty percent (50%) or more of the then
issued and outstanding shares of voting common stock of a party or
securities representing fifty percent (50%) or more of the combined
voting power of the then issued and outstanding securities of such
party or (ii) all or substantially all of a party's assets.
13.3. Remedy. Buyer and Sellers acknowledge and agree that any
breach of this Article 13 is likely to result in irreparable injury to Sellers
or Buyer, that monetary damages will be an inadequate remedy of such breach and
that, accordingly, in addition to any other remedy that Seller or Buyer may
have, Seller or Buyer shall be entitled to enforce the specific performance of
this Article 13 and to seek both permanent and temporary relief in the event of
any breach hereof.
13.4. Enforceability. The parties acknowledge that the time,
scope, geographic area and other provisions of this Article 13 have been
specifically negotiated by sophisticated commercial parties and agree that all
such provisions are reasonable under the circumstances of the transactions
contemplated by this Agreement. If any portion of this Article 13 shall be
determined to be invalid and unenforceable as written, each such portion shall
be enforced to the extent reasonable under the circumstances and such
determination shall not affect the validity or enforceability of the balance
hereof, and such balance shall remain in full force and effect. It is
understood that Sellers and Buyer are entering into this non-competition
agreement in order to induce Buyer and Sellers to enter into this Agreement.
13.5. Geographic Scope. The parties acknowledge that the
Company Business and the Religious Publishing Business are each currently
conducted throughout the Territory. In view of the statements made in Section
13.4, the parties agree that the Territory is reasonable in scope.
ARTICLE 14.
MISCELLANEOUS
14.1. Survival of Representations. The parties hereto agree
that, all representations, warranties, covenants, conditions and agreements
contained herein or in any instrument or other document delivered pursuant to
this Agreement or in connection with the transactions contemplated hereby shall
survive the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and any investigation or audit made by any
party hereto and that such representations and warranties shall expire on the
third anniversary of the Closing Date.
43
<PAGE> 52
14.2. Expenses. All fees and expenses incurred by Sellers,
including without limitation, legal fees and expenses and the fees and expenses
of J.C. Bradford & Co., in connection with this Agreement, will be borne by
Sellers and all fees and expenses incurred by Buyer, including without
limitation legal fees and expenses in connection with this Agreement, will be
borne by Buyer.
14.3. Assignability; Parties in Interest.
(a) This Agreement may not be assigned by Seller
without the prior written consent of Buyer. Buyer may assign any or
all of their respective rights hereunder to any of its direct or
indirect majority-owned subsidiaries provided that Buyer shall
continue to remain obligated for the performance of its obligations
hereunder. Buyer shall advise Nelson of any such assignment and shall
designate the assignee and transferee of the assets purchased. Any
such assignee shall assume all duties, obligations and undertakings of
its assignor hereunder, but the assignor shall remain liable
thereunder.
(b) All the terms and provisions of this Agreement
shall be binding upon, shall inure to the benefit of and shall be
enforceable by the respective successors, assigns and legal
representatives of the parties hereto.
14.4. Allocation of Purchase Price. The Purchase Price for the
Assets shall be allocated as agreed in writing by the parties prior to Closing.
The parties hereto agree to follow such allocation for Federal and State income
tax purposes.
14.5. Entire Agreement; Amendments. This Agreement, including
the Exhibits, Schedules referred to herein or delivered pursuant hereto, which
form a part hereof, together with the Confidentiality Agreement, contain the
entire understanding of the parties with respect to their subject matter.
There are no restrictions, agreements, promises, warranties, covenants or
undertakings other than those expressly set forth herein or therein. Except as
otherwise specifically provided herein, this Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Agreement may be amended only by a written instrument duly
executed by Nelson, Word and Buyer or their respective successors, assigns or
legal representatives. Any condition to a party's obligations hereunder may be
waived but only by a written instrument signed by the party entitled to the
benefits thereof. The failure or delay of any party at any time or times to
require performance of any provision or to exercise its rights with respect to
any provision hereof, shall in no manner operate as a waiver of or affect such
party's right at a later time to enforce the same.
14.6. Headings. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretations of this Agreement.
44
<PAGE> 53
14.7. Severability. The invalidity of any term or terms of this
Agreement shall not affect any other term of this Agreement, which shall remain
in full force and effect.
14.8. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed (registered or certified mail, postage
prepaid, return receipt requested) or if sent by telecopy as follows:
If to Sellers:
Thomas Nelson, Inc.
Nelson Place at Elm Hill Pike
P.O. Box 14100
Nashville, Tennessee 37214-1000
Attn: Joe L. Powers, Executive Vice President and
Chief Financial Officer
Telecopy Number: (615) 883-6353
with a copy to:
Thomas Nelson, Inc.
Nelson Place at Elm Hill Pike
P.O. Box 14100
Nashville, Tennessee 37214-1000
Attn: Stuart A. Heaton, Esq.
Telecopy Number: (615) 889-5940
and
Bass, Berry & Sims PLC
2700 First American Center
Nashville, Tennessee 37238
Attn: James H. Cheek, III, Esq.
Telecopy Number: (615) 742-6298
If to Buyer:
Gaylord Entertainment Company
One Gaylord Drive
Nashville, Tennessee 37214
Attn: F. M. Wentworth, Jr., Esq.
Telecopy Number: (615) 316-6530
45
<PAGE> 54
with a copy to:
Loeb & Loeb LLP
45 Music Square West
Nashville, Tennessee 37203
Attn: Malcolm L. Mimms, Jr., Esq.
Telecopy Number: (615) 749-8308
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
14.9. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Tennessee applicable
to agreements made and to be performed wholly within that jurisdiction. Each
of the parties hereto hereby irrevocably and unconditionally consents to submit
to the exclusive jurisdiction of the courts of the State of Tennessee and of
the United States of America, in each case located in Davidson County, for any
litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any litigation relating thereto
except in such courts), and further agrees that service of any process,
summons, notice, or document by U.S. registered mail to its respective address
set forth in Section 14.8 shall be effective service of process for any
litigation brought against it in any court. Each of the parties hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any litigation arising out of this Agreement or the transactions contemplated
hereby in the courts of the State of Tennessee or the United States of America,
in each case located in Davidson County, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such litigation brought in any such court has been brought in an
inconvenient forum.
14.10. Public Announcements. Neither Sellers nor Buyer shall
make any public statements, including, without limitation, any press releases,
with respect to this Agreement and the transactions contemplated hereby without
the prior written consent of the other party (which consent shall not be
unreasonably withheld) except as may be required by law. If a public statement
is required to be made by law, the parties shall consult with each other in
advance as to the contents and timing thereof.
14.11. No Third Party Beneficiaries. This Agreement is intended
and agreed to be solely for the benefit of the parties hereto and no other
party shall accrue any benefit, claim or right of any kind whatsoever pursuant
to, under, by or through this Agreement.
14.12. Interpretive Provisions. Whenever used in this Agreement,
"to Sellers' knowledge" or "to the knowledge of Sellers" shall mean the actual
knowledge of the corporate officers of either Seller.
46
<PAGE> 55
14.13. Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, with the same effect as if the
signatories executing the several counterparts had executed one counterpart.
All such executed counterparts shall together constitute one and the same
instrument.
14.14. Best Efforts to Resolve Discrepancies. The parties agree
that, in the event that any event or condition occurs under this Agreement,
whether pursuant to Section 8.4 or otherwise, which would give rise to a
failure of Sellers to meet Buyer's conditions to closing pursuant to Article 8
or, in the event of a Closing, a right of indemnification by Buyer against
Sellers pursuant to Article 11, the parties hereto agree to negotiate in good
faith to find a mutually satisfactory basis for proceeding with the
transactions contemplated hereby, in order that the Closing may occur prior to
the occurrence of a termination event in Article 12(d).
THIS SPACE INTENTIONALLY LEFT BLANK
47
<PAGE> 56
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of Buyer and by each of Sellers on
the date first above written.
BUYER:
GAYLORD ENTERTAINMENT COMPANY
By: /s/ Terry E. London
----------------------------------------------
Title: Chief Financial and Administrative Officer
------------------------------------------
SELLERS:
THOMAS NELSON, INC.
By: /s/ Joe L. Powers
------------------------------------------
Title: Executive Vice President and Secretary
---------------------------------------
WORD, INCORPORATED
By: /s/ Joe L. Powers
------------------------------------------
Title: Executive Vice President and Secretary
---------------------------------------
WORD DIRECT PARTNERS, L.P.
By Word Direct, Inc., as general partner
By: /s/ Joe L. Powers
------------------------------------------
Title: Treasurer and Secretary
---------------------------------------
48
<PAGE> 1
Exhibit 2.2
AMENDMENT NO. 1 TO THE
ASSET PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 to the ASSET PURCHASE AGREEMENT, dated as
of January 6, 1997 (the "Amendment"), is made by and among THOMAS NELSON, INC.,
a Tennessee corporation ("Nelson"), WORD, INCORPORATED, a Delaware corporation
("Word"), WORD DIRECT PARTNERS, L.P., a Texas limited partnership ("Word
Direct")(Nelson, Word and Word Direct are each sometimes referred to as a
"Seller" and collectively as the "Sellers") and GAYLORD ENTERTAINMENT COMPANY,
a Delaware corporation ("Buyer").
WHEREAS, the Sellers and Buyer are parties to an Asset
Purchase Agreement, made as of November 21, 1996 (the "Asset Purchase
Agreement"), pursuant to which the Sellers have agreed to sell, and Buyer,
directly and through one or more subsidiaries, has agreed to purchase from
Sellers substantially all of the assets and Buyer, directly and through one or
more subsidiaries, has agreed to assume certain of the liabilities associated
with the Music Business (as defined in the Asset Purchase Agreement); and
WHEREAS, the parties hereto desire to amend the Asset Purchase
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
conditions set forth below, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
SECTION 1.01 DEFINITIONS. Capitalized terms used herein
without definition shall have their respective meanings set forth in the Asset
Purchase Agreement.
ARTICLE 2.
AMENDMENTS
SECTION 2.01 EXCLUSION OF THE RECEIVABLES OF WORD
COMMUNICATIONS, LTD.; INCLUSION OF ALL WORD U.K. RECEIVABLES.
(a) The Subsidiary Asset Purchase Agreement, dated
as of November 21, 1996 (the "Canadian Agreement"), to be executed by Word
Canada and Word Entertainment (Canada), Inc., a Yukon corporation ("Canadian
Foreign Buyer") pursuant to Section 7.5(b) of the Asset Purchase Agreement,
<PAGE> 2
provides that Word Canada will not sell, transfer or assign to the Canadian
Foreign Buyer any of the Receivables payable to Word Canada as of the Closing
Date (the "Word Canada Receivables"). In furtherance of the foregoing, Section
1.1(v) of the Asset Purchase Agreement is amended in its entirety to read as
follows:
"(v) "Excluded Assets" means (i) any and all
assets, properties, rights and business of every kind and description,
wherever located, whether tangible or intangible, personal or mixed,
owned in whole or in part by any Seller or in which any Seller has any
interest and relating primarily to the operation of any business of
Sellers other than the Music Business; (ii) the corporate seal,
articles of incorporation, minute books and stock books of Sellers and
the Subsidiaries; (iii) the rights of Sellers under this Agreement;
(iv) proceeds from the Actions listed on Schedule 5.11 attached
hereto; (v) stock and equity interests in the Subsidiaries and any
other Affiliates; (vi) any right, title or interest in or to any of the
rights, properties and assets of Sellers relating to the Music
Business which are listed on Schedule 1.1(v); (vii) all of Sellers'
rights in and to the trademark logos and designs set forth on Schedule
1.1(v); (viii) the Commingled Receivables; (ix) real property owned by
Sellers wherever located; and (x) any and all of the Word Canada
Receivables and related reserves maintained by Sellers on their
financial statements in respect thereof."
(b) The Subsidiary Asset Purchase Agreement, dated
as of January 6, 1997 (the "U.K. Agreement"), to be executed by Word U.K. and
Word Entertainment, Ltd. (the "U.K. Foreign Buyer"), provides that the U.K.
Foreign Buyer shall purchase all of Word U.K.'s right, title and interest in
and to all accounts and notes receivable of Word U.K., whether or not related
to the Music Business. In furtherance of the foregoing, the following sentence
shall be added at the end of Section 1.1(f) of the Asset Purchase Agreement:
"In addition, 'Assets' shall include all of Word U.K.'s right, title
and interest in and to all accounts and notes receivable, whether or
not related to the Music Business, and all rights to returned products
in respect thereof."
SECTION 2.02 PURCHASE PRICE.
(a) Intercompany payables in an amount equal to
$6,314,000 were included in the Interim Statement of
2
<PAGE> 3
Assets and Liabilities. The parties hereto hereby amend Section 2.2 of the
Asset Purchase Agreement so that intercompany payables are not Assumed
Liabilities. As a result of the exclusion of the Word Canada Receivables from
the Assets, the cash portion of the Purchase Price in Section 3.1 of the Asset
Purchase Agreement is hereby reduced by $2,274,000, and as a result of the
exclusion of the intercompany payables from the Assumed Liabilities, the cash
portion of the Purchase Price is increased by $6,314,000, for a net Purchase
Price of $114,040,000, subject to adjustment in accordance with Article 3 of
the Asset Purchase Agreement.
(b) The Word Canada Receivables and related reserves
and any intercompany payables shall be excluded from each of the Estimated
Closing Statement, the Preliminary Post-Closing Statement and the Definitive
Post-Closing Statement.
(c) Pursuant to Section 14.4 and the Estimated
Closing Statement, the parties have agreed to allocate the cash portion of the
Purchase Price in accordance with Exhibit A attached hereto.
SECTION 2.03 POST-CLOSING ADJUSTMENT: SEVERANCE LIABILITY;
SUBSIDIARY ASSET PURCHASE AGREEMENTS.
(a) The parties hereto agree and confirm that Buyer
and each Foreign Buyer will, on the Closing Date, hire the employees of Sellers
in accordance with the terms and conditions of the Asset Purchase Agreement and
the Subsidiary Asset Purchase Agreements. If, prior to the 150th day after the
Closing Date, Buyer terminates any or all of the employees that had been
employed by Sellers in the United States prior to the Closing Date (such
employees hereinafter referred to as the "Designated Employees"), Buyer shall
promptly deliver notice to Nelson of such determination, and any liability of
Buyer for termination of any Designated Employees, whether arising by law,
rule, regulation, court order or contract, express or implied, whether in
respect of severance for years of service, redundancy, penalty, pension or
otherwise, shall be included on the Definitive Post-Closing Statement as an
Assumed Liability as of the Closing Date for purposes of determining
adjustments pursuant to Section 3.6 of the Asset Purchase Agreement; provided,
however, that there shall be excluded from Assumed Liabilities (i) any
liability in respect of Designated Employees for accrued and unpaid payroll or
benefits after the Closing Date, (ii) any liability which arises under
applicable law out of the conduct of Buyer after the Closing Date and (iii) any
liabilities which arise under Buyer's employee benefit plans. Buyer shall give
3
<PAGE> 4
Sellers and any Designated Employee seventy-five (75) days prior notice of
termination of such Designated Employee if Buyer or Sellers are required to do
so by law.
(b) The assets and liabilities of Word Canada and
Word U.K. are reflected on the Interim Statement of Assets and Liabilities in
Schedule 5.5 to the Asset Purchase Agreement. The parties acknowledge that,
notwithstanding the existence of the Subsidiary Asset Purchase Agreements, the
Estimated Closing Statement, the Preliminary Post-Closing Statement and the
Definitive Post-Closing Statement will include the assets and liabilities of
Word Canada and Word U.K. transferred to the Foreign Buyers in the same manner
as in the Interim Statement of Assets and Liabilities.
(c) Pursuant to the Canadian Agreement, the Canadian
Foreign Buyer is agreeing to collect the Word Canada Receivables on behalf of
and as agent for Word Canada. Pursuant to the Canadian Agreement, the Canadian
Foreign Buyer is required to remit proceeds of Word Canada Receivables to Word
Canada on a periodic basis, less the amount of actual returns of products
credited to customers' accounts in respect of such applicable Word Canada
Receivables ("Word Canada Returns"). The parties hereto agree that, for
purposes of determining adjustments pursuant to Section 3.6 of the Asset
Purchase Agreement, (i) to the extent the Canadian Foreign Buyer's collections
in respect of Word Canada Receivables are exceeded by amounts remitted to Word
Canada pursuant to the Canadian Agreement, such excess sum, stated in United
States Dollars, shall be included on the Definitive Post-Closing Statement as
an Assumed Liability as of the Closing Date, (ii) to the extent the Canadian
Foreign Buyer's collections in respect of Word Canada Receivables exceed the
amounts remitted to Word Canada pursuant to the Canadian Agreement, such
excess sum, stated in United States Dollars, shall be applied on the Definitive
Post-Closing Statement to reduce the Assumed Liabilities as of the Closing
Date, and (iii) any reduction in royalty liabilities as a result of returns of
Music Business inventory related to Word Canada Receivables shall be applied
on the Definitive Post-Closing Statement to reduce the Assumed Liabilities as
of the Closing Date. Buyer shall cause the Canadian Foreign Buyer to deliver
regular accountings of collections, credits and related matters relating to
the Word Canada Receivables in such form and frequency as Sellers may
reasonably request.
SECTION 2.04 INDEMNIFICATION. The introductory paragraph of
Section 11.1 and Section 11.1(a) are hereby amended in their entirety to read
as follows:
4
<PAGE> 5
"11.1 Indemnification by Sellers. Subject to the
limitations of this Article 11, Sellers hereby jointly and
severally agree to defend, indemnify and hold harmless Buyer
and each Foreign Buyer, and shall reimburse Buyer and each
Foreign Buyer for, from and against each claim, loss,
Liability, cost and expense (including reasonable attorneys'
fees) (collectively "Losses") resulting or arising out of:
(a) any untrue representation,
misrepresentation, breach of warranty or
nonfulfillment of any covenant, agreement or other
obligation by or of any Seller contained herein or in
any Subsidiary Asset Purchase Agreement, or in any
Schedule or Exhibit hereto or thereto or any
certificate required to be delivered pursuant hereto
or thereto, except to the extent indemnification
therefor is expressly waived in writing by Buyer;"
Additionally, Section 11.2 is hereby amended in its entirety
to read as follows:
"11.2 Indemnification by Buyer. Buyer hereby agrees to
defend, indemnify and hold harmless Sellers, and shall
reimburse Sellers for, from and against Losses resulting from
or arising out of:
(a) any untrue representation,
misrepresentation, breach of warranty or
nonfulfillment of any covenant, agreement or other
obligation by Buyer or any Foreign Buyer contained
herein or in the Subsidiary Asset Purchase Agreements
or in any certificate, document or instrument
delivered to Sellers pursuant hereto or thereto,
except to the extent indemnification therefor is
expressly waived in writing by any Seller;
(b) Buyer's or any Foreign Buyer's failure
to pay, perform or discharge any Assumed Liability;
and
(c) any other Loss incidental to the
foregoing."
SECTION 2.05 THIRD PARTY BENEFICIARIES. The parties hereto
agree that Section 14.11 of the Asset Purchase Agreement is hereby amended in
its entirety to read as follows:
5
<PAGE> 6
"14.11 Third Party Beneficiaries. This Agreement is
intended and agreed to be solely for the benefit of Sellers,
Buyer and all Affiliates thereof, including, without
limitation, any Affiliate of Buyer who conducts the Music
Business or owns all or any part of any of the Assets, or
assumes any of the Assumed Liabilities, whether domestic or
foreign, and whether or not subject to a Subsidiary Asset
Purchase Agreement, and except as aforesaid, no other party
shall accrue any benefit, claim or right of any kind
whatsoever pursuant to, under, by or through this Agreement."
SECTION 2.06 DISTRIBUTION AGREEMENT. On the Closing Date the
parties hereto intend that Nelson will enter an agreement with each Foreign
Buyer engaging such Foreign Buyer as its agent for distribution of literary
works (the "Distribution Agreements"). None of the activities of either
Foreign Buyer permitted under either Distribution Agreement shall constitute a
violation of Buyer's agreements in Section 13.2 of the Asset Purchase
Agreement.
SECTION 2.07 NONCOMPETE. The parties hereto agree that
the unenforceability of any provision of Article 13 under the laws of any
foreign country shall not limit the right of either party hereto to enforce any
provision of the Asset Purchase Agreement, whether or not it relates to actions
by either party or its Affiliates in such foreign country.
SECTION 2.08 CERTAIN WAIVERS. Notwithstanding the
provisions of the Asset Purchase Agreement, Buyer hereby agrees to waive
fulfillment of the following solely as conditions to Buyer's obligations
pursuant to Article 9 of the Asset Purchase Agreement:
(a) Compliance with Section 5.4, No Violation,
and Section 7.9, Consents Under Agreements, is hereby waived with respect to
consents required pursuant to contracts with the following parties:
(i) parties listed on Schedules 1.1(a),
1.1(d), 1.1(g), 1.1(r), 1.1(s), 1.1(ba), 1.1(bc), 5.18 and 7.9 which have not
submitted consents;
(ii) parties to contracts for the lease
of vehicles which are being assumed by Buyer;
(iii) parties to I/P Contracts; and
6
<PAGE> 7
(iv) parties to Assumed Contracts to
which Word U.K. or Word Canada is also a party.
(b) Compliance with Section 7.3, Government
Consents and Approvals, is hereby waived with respect to filings required under
the Investment Canada Act, the Competition Act, and the U.K. Fair Trading Act.
(c) Compliance with Section 7.1, Conduct of
Business Pending the Closing and Section 5.20, No Changes, is hereby waived
with respect to the lease extension for the premises at 7720 Alderbridge Way,
Richmond, British Columbia dated December 23, 1996.
Notwithstanding the provisions of the Asset Purchase Agreement, Sellers'
failure to comply with the provisions of the Asset Purchase Agreement described
in clauses (b) and (c) hereof (but not the provisions of clause (a) hereof)
shall not constitute a breach of any of Sellers' representations, warranties or
covenants for purposes of claims of indemnification pursuant to Article 11 of
the Asset Purchase Agreement.
ARTICLE 3.
MISCELLANEOUS
SECTION 3.01 REPRESENTATIONS AND WARRANTIES. Each party
hereto represents and warrants as to itself that: (a) the Amendment has been
duly authorized by all necessary corporate, shareholder and member action, (b)
the Amendment has been duly executed and delivered by such party and
constitutes a valid and legally binding obligation of such party enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting the enforcement of creditors' rights generally and by
the availability of equitable remedies, and (c) the execution, delivery and
performance by such party of the Amendment does not violate in any material
respect any agreement, instrument or obligation to which such party is a party
or any law, rule or regulation applicable to the party.
SECTION 3.02 RATIFICATION. The parties hereby ratify,
confirm and approve the Asset Purchase Agreement, as amended by this Amendment.
SECTION 3.03 COUNTERPARTS. This Amendment may be executed in
one or more counterparts, each of which shall be deemed an original by the
party or parties executing such counterpart, and all such counterparts taken
together shall constitute one and the same agreement.
7
<PAGE> 8
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first above written.
BUYER:
GAYLORD ENTERTAINMENT COMPANY
By: /s/ Terry E. London
----------------------------------------------
Title: Chief Financial and Administrative Officer
------------------------------------------
SELLERS:
THOMAS NELSON, INC.
By: /s/ Joe L. Powers
------------------------------------------
Title: Executive Vice President and Secretary
---------------------------------------
WORD, INCORPORATED
By: /s/ Joe L. Powers
------------------------------------------
Title: Executive Vice President and Secretary
---------------------------------------
WORD DIRECT PARTNERS, L.P.
By Word Direct, Inc., as general partner
By: /s/ Joe L. Powers
------------------------------------------
Title: Treasurer and Secretary
---------------------------------------
<PAGE> 1
Exhibit 2.3
ASSET PURCHASE
DATE: As of 6 January 1997
PARTIES:
(1) "The Vendor": NELSON WORD LIMITED (registered no 918469) whose
registered office is at 9 Holdom Avenue, Bletchley, Milton Keynes MK1
1QR.
(2) "The Purchaser": WORD ENTERTAINMENT LIMITED (registered no 3244424)
whose registered office is at 1 Old Burlington Street, London, W1X
2NL.
RECITALS
WHEREAS certain of the assets of Thomas Nelson Inc, a Tennessee Corporation
("Nelson"), Word Incorporated, a Delaware Corporation ("Word") and Word Direct
Partners, L.P., a Texas Limited Partnership ("Word Direct"), wholly owned direct
and indirect subsidiaries of Nelson and certain of the assets of Word
Communications, Limited, a British Columbia Company and the Vendor, also wholly
owned subsidiaries of Word, together comprise the music division of Nelson;
WHEREAS, Nelson, Word and Word Direct (collectively the "US Sellers") have
agreed to sell to Gaylord Entertainment Company ("Gaylord") and Gaylord has
agreed to purchase from the US Sellers substantially of all of the assets and to
assume certain of the liabilities associated with the music division of Nelson
pursuant to the terms of an Asset Purchase Agreement dated as of the 21st day of
November 1996, as amended by Amendment No. 1, dated as of 6th day of January
1997 ("the Principal Asset Purchase Agreement"); and
WHEREAS, the Vendor and the Purchaser (a subsidiary of Gaylord) have entered
into this Agreement pursuant to Section 7.5(B) of the Principal Asset Purchase
Agreement for the purpose of conveying to the Purchaser the assets and
liabilities of the Vendor which form part of the music division of Nelson
1
<PAGE> 2
OPERATIVE PROVISIONS:
1. INTERPRETATION
1.1 In this agreement, including the Schedules:
1.1.1 the following words and expressions have the following
meanings, unless they are inconsistent with the context:
"ACQUISITION AGREEMENTS" means and includes individually and
collectively each and every contract (excluding Artist
Agreements, Writer Agreements, Distributed Label Agreements,
Audio Visual Works Agreements and Producer Agreements) pursuant
to which the Vendor owns an interest in the Intellectual
Property Assets related to the Business including without
limitation catalogue purchase, master licence, co-publishing,
royalty participation, administration, sub-publishing
agreements and any and all rights and benefits thereunder and
assignments thereof including the benefit of any Unrecouped
Advances and other outstanding third party balances in favour
of the Vendor;
"AFFILIATE" means any body corporated or unincorporated which
directly or indirectly controls, is controlled by or is under
common control with the Vendor including without limitation
Thomas Nelson Inc, Word, Incorporated and Word Direct Partners
LP;
"ACCOUNTS DATE" means the date to which the Principal Accounts
have been prepared;
"ARTIST AGREEMENTS" shall mean all agreements, including all
amendments thereto, required for the exploitation of the
Masters or the Audio Visual Works (other than artists who
perform solely as "sidemen" on such Masters for whose
performances the Vendor has, and at Completion shall have, all
necessary
2
<PAGE> 3
rights), including without limitation those artist
agreements described in Schedule 14 hereto;
"ARTWORK" shall mean the photographs, negatives, photographic
plates, covers, liners, textual advertising, point of purchase
and promotional materials related to the Intellectual Property
Assets and all rights to make commercial use thereof as used in
the Business prior to the date hereof;
"ASSETS" means the property, assets and rights of the Business
to be purchased by the Purchaser as described in clause 2.2;
"ASSUMED CONTRACTS" shall mean the Contracts defined as such
in clause 2.3 (i);
"ASSUMED LIABILITIES" shall mean the Liabilities to be assumed
by the Purchaser pursuant to the provisions of sub-clauses 2.3
(i), (ii) and (iii);
"AUDIO VISUAL WORKS" means works owned in whole or in part by
the Vendor and directly related to the Business that consist of
a series of related images which are intrinsically intended to
be shown by the use of machines or devices such as projectors,
viewers or electronic equipment, together with accompanying
sounds (if any) regardless of the nature of the material
objects such as films or tapes in which the works are embodied
including without limitation those Audio Visual Works
designated in Part I of Schedule 15 hereto;
"AUDIO VISUAL WORKS AGREEMENTS" means all agreements related to
the production, manufacturing and distribution or other
exploitation of the Audio Visual Works including without
limitation those Audio Visual Works agreements designated in
Part II Schedule 15;
"AUDIT CLAIMS" shall mean the Audit Claims as defined in
clause 2.3(iii);
3
<PAGE> 4
"BALANCE SHEET DATE" means 30 June 1996;
"BUSINESS" means the music business carried on by the Vendor
at the Effective Date, which consists principally of the
production and distribution of recorded music and related
products, the domestic and international distribution of
recordings for other companies and music publishing,
including songwriter development, print music, music
publishing and copyright administration;
"CATALOGUE" means the Vendor's catalogue of current
compositions, records and related products attached hereto as
Schedule 5;
"COMPLETION" means completion of the sale and purchase of the
Business in accordance with clause 4;
"COMPOSITIONS" means all right, title and interest in all
musical works and any associated literary works (for example,
lyrics, spoken text and similar works) owned in whole or in
part by the Vendor or in which the Vendor owns an interest and
directly related to the Business including without limitation,
derivative works thereof, arrangements, titles, lyrics and
music thereof, all demonstration recordings thereof and all
other rights therein and thereto whether now or hereafter known
and all claims, demands, accrued or to accrue with respect
thereto and the copyrights and the future contingent renewal
and extended terms of copyright therein and thereto and all
rights to secure renewals, revivals and extensions of copyright
throughout the world including without limitation those musical
compositions set forth in Schedule 6 attached hereto;
"CONTRACTS" means all of the current contracts and engagements
of the Vendor in relation to the Business, including without
limitation, those listed in Schedule 20, including the
Intellectual Property Contracts, but excluding contracts with
employees;
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"COPYRIGHT" has the meaning attributed to that expression in
the Copyright, Designs and Patents Act 1988 together with (to
the extent that the same are not included in such definition
and without limitation thereto) all like rights throughout the
world whether or not now recognised or in existence including
(without limitation to the generality of the foregoing) all
proprietary rights and all rights of exploitation including
without limitation any rental right and any public lending
right and any and all rights to secure renew and extend any and
all such rights and all revival rights;
"CUSTOMS DEPOSIT" means the deposit of L.40,000 of the Vendor
with Lloyds Bank Plc pursuant to the Deposit Agreement to
secure Own Liabilities dated 2nd October 1996 expressed to be
under investment account numbered 7076776 or such other account
as from time to time substituted therefor;
"DELIVERABLE ASSETS" means all plant, machinery, tools,
equipment, vehicles and other chattels on the Properties or
otherwise owned by the Vendor at the Effective Date for the
purpose of the Business as listed in Schedule 10;
"DIRECT MARKETING ASSETS" means (1) all customer lists owned by
the Vendor and used at any time within the last year, to
solicit the sale of any finished goods Inventory together with
any other lists in the possession of the Vendor (2) the
Vendor's catalogues and any other mail pieces used for mail and
telemarketing of any finished goods inventory, (3) the Vendor's
toll-free number used in direct marketing and telemarketing in
connection with the Business and (4) all other assets and
properties used by the Vendor in the direct marketing and
telemarketing of finished goods inventory;
"DISTRIBUTED LABEL AGREEMENTS" means all contracts, including
all amendments thereto directly related to the Business
pursuant to which the Vendor has been granted the right to use
or exploit in any way sound recordings, records or audiovisual
works owned in whole or in part by any other person, firm or
entity including without limitation those distributed label
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agreements set forth in the Schedule 7;
"DISTRIBUTION AGREEMENTS" shall mean all contracts including
all amendments thereto granting others the right to use or
exploit in any way the Masters, Audio Visual Works, Trade Marks
or Artwork, (including without limitation agreements granting
others the right to manufacture, distribute and sell records
manufactured from the Masters), including without limitation,
those distribution agreements set forth in Schedule 8;
"EFFECTIVE DATE" means the close of business on 6 January 1997
or such other date as shall be nominated as the "Closing Date"
under the Principal Asset Purchase Agreement;
"EMPLOYEES" means the persons who, at the Effective Date, were
employed by the Vendor for the purposes of the Business and
whose employment passes to the Purchaser by virtue of the
Regulations, being those whose names are set out in Schedule
24;
"EXCLUDED ASSETS" means the assets listed in Schedule 2 which
are owned by the Vendor but are excluded from the sale to the
Purchaser;
"GOODWILL" means the goodwill of the Vendor in relation to the
Business, together with the exclusive right for the Purchaser
or its assignee to represent itself as carrying on the Business
in succession to the Vendor, and all trade names associated
with the Business;
"THE INTELLECTUAL PROPERTY ASSETS" means the Masters, the
Compositions, the Print Music, the Artwork, the Audio Visual
Works and the Trade Marks;
"THE INTELLECTUAL PROPERTY CONTRACTS" means the Acquisition
Agreements, the Artist Agreements, the Producer Agreements, the
Audio Visual Work Agreements, the Licences, the Distribution
Agreements, the Distributed Label
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Agreements, the Software Agreements (to the extent assignable
and to the extent of the Vendor's interest therein), the
Writer Agreements all amendments thereto and all other
contracts directly related to the use, exploitation or
ownership of the Intellectual Property Assets or the Vendor's
or the Purchaser's ability to collect any income derived
therefrom anywhere in the world including any exclusive
contracts (other than Acquisition Agreements), any
co-publishing, administration, collection or participation
agreement, any performing rights agreements and any other
blanket licenses;
"LEASEHOLD PROPERTY" means the leasehold premises owned by the
Vendor as listed in Schedule 1;
"LEASE" means the lease or underlease under which the
Leasehold Property is held;
"LIABILITIES" means the debts, liabilities, obligations,
royalty payments, duties and responsibilities of any kind and
description, whether absolute or contingent, monetary or
non-monetary, direct or indirect, known or unknown, matured or
unmatured or of any other nature of the Business ;
"LICENCES" means and includes individually and collectively
each and every licence, sub-publishing agreement,
administration agreement, participation, licensing or
collection agreements, mechanical or public performance society
agreements directly related to the Business and all other
contracts and agreements relating to the use or exploitation of
the Compositions, Print Music, the Masters or the Audio Visual
Works and any and all rights and benefits thereunder;
"LIEN" means any security, interest, lien, mortgage, claim,
charge, pledge, restriction, right of first or last refusal,
right of first negotiation, matching right, equitable interest
or encumbrance or adverse claim of any nature;
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<PAGE> 8
"MASTERS" shall mean all original media directly related to the
Business in which sounds of a performance of an artist are
fixed in any method now known and from which sounds can be
perceived, record used or otherwise reproduced either directly
or with aid of a machine device or process as well as
out-takes, demonstration recordings, alternative versions of
the same and alternative mixes, together with all intangible
and/or incorporeal rights attached thereto or in a sound
recording, including without limitation, to the extent the same
are extant, all copyrights and similar rights including without
limitation the sound recordings specified in Schedule 11
hereto;
"OPERATING INFORMATION" means all operating data and records of
the Vendor directly related to the Business including books,
records, sales and sales promotional data, advertising,
customer lists including all consumer, direct marketing and
record club lists and information, credit information, cost and
pricing information supplier lists, business plans, reference
catalogues and all data in computer readable form relating to
any of the foregoing items;
"PERSON" means any natural person, corporation, limited
liability company, business trust, joint venture, association,
company, firm, partnership or other entity or governmental
authority;
"PRINCIPAL ASSET PURCHASE AGREEMENT" means the Asset Purchase
Agreement entered into by and between Thomas Nelson Inc, Word,
Incorporated, Word Direct Partners, LP and Gaylord
Entertainment Company and dated as of 21 November 1996 as
amended;
"PRINT MUSIC" means the Vendor's interest in and to all print
music work directly related to the Business, reproducing the
music and/or lyrics of one or more musical works or associated
literary works (for example, lyrics, spoken text and similar
works of authorship), all artwork related thereto and all
photographic or engraving plates and any other manufacturing
parts embodying all or part thereof;
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"PRODUCER AGREEMENTS" means any agreement with any individual
producer of any of the Masters or Audio Visual Works;
"RECEIVABLES" means all accounts and notes receivable and the
right to receive royalties and other income payable and other
trade debts owed to the Vendor in connection with the Business,
including without limitation the Customs Deposit;
"RECORDS" shall mean any reproduction of a Master which
reproduction is in any form now known in which reproductions of
sound with or without visual images are fixed by any method now
known and from which sounds with or without visual images can
be perceived be produced or otherwise communicated either
directly or with the aid of a machine, device or process and
including the object in which sounds without visual images are
fixed included but not limited to those records, soundtracks,
film, tapes, tape cartridges and cassettes tapes, digital audio
tapes, compact disc and all light and sound devices including
audio-visual devices as such term is used in the Copyright,
Designs and Patents Act 1988;
"REGULATIONS" means the Transfer of Undertakings (Protection
of Employment) Regulations 1981;
"RETURNS" means all returns, declarations, reports, estimates,
information returns and statements required to be filed with or
supplied to any taxing authority in connection with any Taxes;
"ROYALTIES" shall mean all royalties, share of profits and/or
other consideration due and payable due to writers,
co-publishers, artists, producers or any other royalty
participants in connection with any intellectual property;
"SOFTWARE AGREEMENTS" shall mean all agreements acquiring the
right to make use of any computer software used in the course
of or in connection with the
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Business;
"STOCKS" means the stocks, including raw materials, work in
progress and finished goods, owned by the Vendor at the
Effective Date in connection with the Business, including items
which, although subject to reservation of title, are under the
control of the Vendor;
"SUBSIDIARY" means a subsidiary as defined in the Companies
Act 1985 s 736;
"TAXES" means all taxes, charges, fees, levies, or other
assessments including without limitation, income, gross
receipts, excise, real and personal property, sales, transfer,
withholding licence, payroll and franchise taxes imposed by any
governmental authority and shall include any interest,
penalties or additions to tax attributed to any of the
foregoing;
"TRADE MARKS" shall mean all trade marks whether or not
registered, trade mark registrations if any, trade mark
applications if any, trade names and logos which are owned
being used or are used by or on behalf of the Vendor in
connection with the Business together with the goodwill
associated therewith including but not limited to the
trademarks listed in Schedule 12;
"UNRECOUPED ADVANCES" means advances and other recoupable costs
and expenses relating to the Assets paid by the Vendor to any
third party or incurred by the Vendor on behalf of the third
party which are unrecouped as of the Balance Sheet Date,
substantially all of which are set forth in Schedule 13;
"WARRANTIES" means the representations and warranties of the
Vendor contained in Schedule 4;
"WRITER AGREEMENTS" shall mean and include individually and
collectively, each of the songwriter, co-publishing,
administration and other agreements between the Vendor on the
one hand and any songwriter or arranger on the
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<PAGE> 11
other and directly related to the Business including,
without limitation, the writer agreements identified in
Schedule 16;
1.1.2 all references to a statutory provision shall be construed as
including references to:
(a) any statutory modification, consolidation or
re-enactment (whether before or after today's date)
for the time being in force;
(b) all statutory instruments or orders made pursuant to
it;
(c) any statutory provisions of which it is a
consolidation, re-enactment or modification;
1.1.3 except where the context otherwise requires, words denoting the
singular include the plural and vice versa; words denoting any
gender include all genders; words denoting persons include
firms and corporations and vice versa;
1.1.4 unless otherwise stated, a reference to a clause, sub-clause
or Schedule is a reference to a clause or a sub-clause of, or
a Schedule to, this Agreement;
1.1.5 clause headings are for ease of reference only and do not
affect the construction of this Agreement;
1.1.6 for the purpose of this Agreement references to trademarks and
trade names shall be treated as including service marks and
service names;
1.1.7 terms defined in the Principal Asset Purchase Agreement bear
the same meanings there used in this Agreement unless the
contrary intention appears.
2. AGREEMENT FOR SALE
2.1 The parties refer to the Principal Asset Purchase Agreement and agree
that this
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Agreement shall be subject to, contingent upon and entered into
pursuant to the Principal Asset Purchase Agreement.
2.2 Subject to the terms and conditions of this Agreement, the Vendor with
full title guarantee to the extent of the Vendor's interest therein
shall sell to the Purchaser which shall purchase as at the Effective
Date the following assets and rights of the Vendor used in the conduct
of the Business:
(a) the Goodwill;
(b) the Leasehold Property;
(c) the Deliverable Assets;
(d) the Stocks;
(e) the benefit of the Contracts;
(f) the Direct Marketing Assets;
(g) the Intellectual Property Assets;
(h) the Operating Information;
(i) the Receivables ;
(j) the Unrecouped Advances;
but excluding the Excluded Assets.
2.3 The Purchaser shall, as from the Effective Date, assume and discharge
the Liabilities of the Vendor:-
(i) existing on and arising subsequent to the Effective
Date under the Contracts and under all purchase and
sales commitments and orders existing at the Effective
Date (the "Assumed Contracts");
(ii) all accounts payable, accrued expenses and other
Liabilities reflected on the Closing Statement (as
defined in the Principal Asset Purchase Agreement) ;
(iii) the pending claim for audit of accountings and
payments owed by the
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<PAGE> 13
Vendor to parties to the Contracts as specified in
Schedule 20 and any other such claims made after the
date of this agreement to the extent that such claims
relates to periods prior to the Effective Date
(together "the Audit Claims");
The liabilities referred to in sub clauses (i), (ii) and (iii)
above are herein called the "Assumed Liabilities". Except as
provided above and notwithstanding anything else to the
contrary contained in this agreement, the Purchaser is not
assuming and shall not be liable for any Liabilities of the
Vendor other than the Assumed Liabilities. For the avoidance of
doubt the Purchaser is not liable for any Liabilities which
consists of any of the following Liabilities:
(a) indebtedness for borrowed money or overdrafts
including any inter company debts;
(b) relating to or in any way arising out of the Excluded
Assets;
(c) any fees and expenses incurred by the Vendor in
connection with this agreement, including without
limitation to the generality of the foregoing the
legal fees and expenses of Messrs Bird & Bird and any
other legal fees and expenses, all of which will be
borne by the Vendor;
(d) to any shareholder or Affiliate or to any current or
former employee, officer or director of the Vendor,
including without limitation any severance pay,
post-retirement medical benefits, obligation to make
any contribution to any pension scheme or to make any
pension payments or annuity or other benefit whether
by operation of law or otherwise, save as to the
extent that any such liability arises with respect to
the Employees under clause 7;
(e) relating to the execution, delivery and consummation
of this agreement by the Vendor and the transactions
contemplated herein, including without limitation to
the generality of the foregoing any and all Taxes
incurred as a result of the sale contemplated by this
agreement;
(f) any Taxes accrued or incurred prior to the Effective
Date or relating to any period (or portion of a
period) prior thereto;
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<PAGE> 14
(g) relating to or arising out of any environmental
matter, including, without limitation to the
generality of the foregoing, any violation of any
statutory or regulatory provision or any other legal
provision relating to the health and safety of the
public or the employees of the Vendor;
(h) relating to holiday, sick days, and similar benefits
accruing prior to the Effective Date in respect any
of the Employees;
(i) relating to any obligations of the Vendor arising
under or pursuant to this Agreement;
It is expressly declared that the Purchaser shall not assume or be
bound by any Liabilities except as expressly set out in this Agreement.
2.4 The provisions of Clause 11 shall more particularly apply in relation
to the transfer of the Leased Property.
3. PURCHASE CONSIDERATION
3.1 The consideration for the sale by the Vendor of the Assets shall be the
amounts set out in Schedule 3 totalling the sum of One Million Five
Hundred and Sixty One Thousand United States Dollars ($1,561,000) plus
the Assumed Liabilities (the "Consideration").
3.2 The cash element of the Consideration shall be paid in cash upon
Completion in accordance with Clause 4.
3.3 The Consideration is exclusive of value added tax and the provisions of
Clause 8 shall apply to the treatment of the Consideration for value
added tax purposes.
4. COMPLETION
4.1 Completion of the sale and purchase of the Business shall take place
on the Effective Date at such location as the parties shall agree when
the following matters shall be effected:-
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4.1.1 the Purchaser shall pay to the Vendor the cash element of the
Consideration by transfer of immediately available funds as
the Vendor shall direct.
4.1.2 the Vendor shall deliver to the Purchaser, at the principal
office of the Business, such of the Assets as are capable of
being transferred by delivery.
4.1.3 the Vendor shall cause to be delivered or (if so requested by
the Purchaser) made available to the Purchaser:
4.1.4 such documents in a form reasonably satisfactory to the
Purchaser's solicitors as are necessary to complete the sale
and purchase of the Assets and vest title to the Assets in the
Purchaser, including (but without limitation) assignments of
the Goodwill, the benefit of the Contracts and the
Intellectual Property Assets;
4.1.5 all its books of account, payroll records, income records,
stock and other accounting records, information relating to
customers and suppliers and other books and documents which
relate to the Business (other than minute books relating to
directors' and shareholders' meetings and statutory books);
4.1.6 all its design and drawings, plans, instructional and
promotional material, sales publication, advertising material,
terms and conditions of sale and other technical material and
sales matter which relate to the Business, together with any
plates, blocks, negatives and similar material relating to
them;
4.1.7 all records of National Insurance and PAYE relating to all the
Employees duly completed and up to date;
4.1.8 the value added tax records referred to in clause 8.6;
4.1.9 a certified copy of the special resolution resolving to change
the name of the Vendor in accordance with clause 12.1.
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4.2 Upon completion of the matters referred to above the Purchaser shall
pay the purchase Consideration in the manner specified in clause 3.2.
4.3 The Purchaser shall not be obliged to complete the purchase of any of
the Assets unless the purchase of all the Assets is completed in
accordance with this Agreement or waived pursuant to clause 4.4 below.
4.4 The Purchaser may in its absolute discretion waive any requirement
contained in clause 4.1 provided that any waiver of any such
requirement shall be effective only if made in writing signed by a duly
authorised officer of the Purchaser.
4.5 The Purchaser shall not be obliged to complete the purchase of any of
the Assets until the Closing of the Principal Asset Purchase Agreement
(as defined therein).
4.6 This Agreement will terminate if the Principal Asset Purchase Agreement
terminates before Completion. The Purchaser may not terminate this
Agreement in any other circumstances. In the event of such termination
all further negotiations of the parties under this Agreement will
terminate, except that the Purchaser shall return all non public
documents furnished hereunder, shall destroy all documents or portions
thereof prepared by the Purchaser or its representatives that contain
non public information received pursuant hereto or shall maintain the
same in the same degree of confidence with which it maintains its own
like information unless or until such information is or becomes a
matter of public knowledge or is or becomes known to the party
receiving such information through persons (other than the party
providing such information) having no obligation to maintain such
information in confidence. Furthermore the provision of clauses 17
(Costs) and 21 (Proper Law) shall continue in full force and effect.
4.7 The Assignment of the Lease shall be dealt with in accordance with the
provisions of clause 11.
5. THE CUSTOMS DEPOSIT
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<PAGE> 17
The Vendor and the Purchaser shall co-operate to procure that, as soon
as practicable following Completion, the bond issued by Lloyds Bank Plc
H.M. Customs and Excise which is secured by the Customs Deposit (the
"Customs Bond") shall be released, that the Customs Deposit is returned
to the Vendor and that the Vendor is released from all security granted
by it in relation to the Customs Deposit. The Vendor shall account to
the Purchaser for the Customs Deposit promptly upon receipt of the
same. Pending release of the Customs Bond, the Purchaser shall
indemnify and hold harmless the Vendor against all claims, liabilities
and expenses suffered or incurred by the Vendor in relation to the
Customs Bond arising out of any act of the Purchaser or the conduct of
the Business following completion.
6. CONDUCT OF BUSINESS PRIOR TO COMPLETION
6.1 Pending Completion, the Vendor shall cause the Business to be conducted
only in the ordinary and regular course consistent with past practices
and shall not without the prior written consent of the Purchaser
purchase, sell, lease, encumber or otherwise dispose of any of the
Assets, except Stocks in the ordinary course of business and consistent
with past practice, or make any change in the Business operations or
the manner of conducting the Business.
6.2 The Vendor shall preserve the existence, rights and business
organisation of the Business, keep available to the Purchaser, the
Vendor's officers and employees engaged in the Business and use its
best efforts to preserve for the Purchaser the present relationships of
the Vendor in respect of the Business with its songwriters, artists,
suppliers and customers and any other person having business
relationships with the Vendor.
6.3 The Vendor shall:
6.3.1 ensure that, without the prior written consent of the Purchaser
no Contract or commitment is entered into in relation to the
Business which is likely to involve expenditure in excess of
L.5,000 or result in any material change in the
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operations or activities of the Business;
6.3.2 take all reasonable steps to preserve and protect the Assets
and notify the Purchaser in writing promptly of any adverse
change therein (whether or not covered by insurance or other
indemnity);
6.3.3 not knowingly do, allow or procure any act or omission which
would constitute a breach of any of the Warranties if they were
given at Completion or which would make any of the Warranties
inaccurate or misleading if they were so given; and
6.3.4 not take any other action which is inconsistent with provisions
of this Agreement or the consummation of the transaction
contemplated hereunder.
7. EMPLOYEES
7.1 The Vendor warrants that it has complied with the provisions of
Regulation 10 of the Regulations. The parties acknowledge and agree
that the sale of the Assets from the Vendor to the Purchaser is a
"relevant transfer" as that term is defined in the Regulations.
7.2 All amounts payable to or in relation to the Employees by the Vendor
including but not limited to wages and salaries in respect of the
period to the close of business on the Effective Date shall be
discharged by the Vendor and the Vendor shall indemnify the Purchaser
against any costs, claims, liabilities and expenses arising out of or
in connection with such amounts. All necessary apportionments shall be
made to give effect to this sub-clause.
7.3 If any contract of employment of a person who is not one of the
Employees has effect as if originally made between the Purchaser and
such person as a result of the provisions of Regulation 5 of the
Regulations, then the Vendor shall keep the Purchaser indemnified
against any costs, claims, liabilities and expenses arising out of or
in
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<PAGE> 19
connection with the termination by the Purchaser of any such
employment.
7.4 Nothing in this clause shall have the effect of imposing on the Vendor
any liability in respect of:-
7.4.1 any claim by an Employee in respect of the termination of his
employment after the Effective Date;
7.4.2 any liability arising in connection with the employment of the
Employees after the Effective Date;
and the Purchaser shall indemnify the Vendor accordingly against any
such liabilities.
8. VALUE ADDED TAX
8.1 The Vendor and the Purchaser intend that article 5 of the Value Added
Tax (Special Provisions) Order 1992 shall apply to the sale of the
Assets under this Agreement, so that the sale is treated as neither a
supply of goods nor a supply of services.
8.2 If nevertheless any value added tax is chargeable on any supply the
Vendor under this Agreement, the Purchaser shall pay it the amount of
that tax (and indemnify it for any related interest and penalties) and
the Vendor shall issue to the Purchaser a proper tax invoice in respect
of that tax.
8.3 Without limiting sub-clause 8.2 and subject as otherwise herein
provided, value added tax (the "VAT ruling") shall be treated as
chargeable if HM Customs & Excise rules that it is chargeable. If they
have done so before Completion, the tax shall be payable by the
Purchaser on Completion. If they do so on or after Completion, the tax
shall be payable by the Purchaser within five days after the Vendor
gives the Purchaser notice of the VAT ruling and delivers to the
Purchaser a lawful invoice therefor. In the event of a VAT ruling the
Vendor shall immediately inform the Vendor thereof and shall be
entitled to require the Vendor to appeal against such ruling. Any such
appeal and all negotiations with respect thereto shall be handled by
such professional advisors
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<PAGE> 20
as the Purchaser shall direct. In the event of such appeal the tax
subject to the ruling shall be paid at such time and in such manner as
the Vendor is legally obliged to make payment and other risk in
accordance with any compromise reached with H M Customs & Excise and
shall only otherwise be paid in accordance with the final outcome of
such appeal after due process has been exhausted and in accordance with
the statutory and other provisions governing the outcome and conduct of
such appeal. The Vendor undertakes to co-operate with the Purchaser in
the outcome of such appeal and to do and execute all such acts and
things and deeds as the Vendor may reasonably require with respect
hereto. The Purchaser agrees to keep the Vendor effectively indemnified
against all costs and expenses suffered or incurred by the Vendor as
the result of any such appeal.
8.4 If the Purchaser fails to pay the amount of tax on the due date under
sub-clause 8.3, it shall pay interest on that amount from the due date
until actual payment (excluding any period for which interest
indemnified under sub-clause 8.2 runs) at the rate of four per cent per
annum above the base rate for the time being of Royal Bank of Scotland
compounded monthly.
8.5 With a view to procuring that article 5 of the Value Added Tax (Special
Provisions) Order 1992 applies, the Purchaser shall ensure that the
Purchaser is registered for value added tax on or promptly following
Completion.
8.6 The Vendor and the Purchaser intend that s.33 of the Value Added Tax
Act 1983 shall apply to the sale of the Assets under this agreement and
accordingly:
(a) the Vendor shall on completion deliver to the Purchaser all
records referred to in s.33;
(b) the Vendor shall not make any request to HM Customs & Excise
for those records to be preserved by the Vendor rather than
the Purchaser;
(c) the Purchaser shall preserve those records for such period as
may be required
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<PAGE> 21
by law, and shall do so in the United Kingdom;
(d) the Purchaser shall during that period or such longer period as
it retains the records permit the Vendor reasonable access to
them in the United Kingdom to inspect or make copies of them;
(e) the Vendor (or any person for the time being nominated under
this paragraph) may by written notice to the Purchaser nominate
another person for the purposes of paragraphs (d) in which the
reference in that paragraph to the Vendor shall be read as a
reference to the person nominated.
9. PENSIONS, LIFE ASSURANCE AND MEDICAL INSURANCE
9.1 The Vendor undertakes actively to co-operate with the Purchaser with a
view to the transfer to the Purchaser of the pension arrangements set
out in Part I of Schedule 18 and the policies of insurance set out in
Parts II and III of Schedule 18 or by substitution therefor at the cost
of the Purchaser of similar arrangements or policies of insurance
mutatis mutandis and shall do and execute all such acts, deeds and
things as the Purchaser may reasonably require for such purpose and to
maintain those pension arrangements and such insurance policies in
force for the benefit of the Employees (to the extent that they remain
employed by the Purchaser), pending such transfer or substitution for a
period of not less than three months following the Effective Date
provided that the Purchaser shall meet all payments due under such
policies on behalf of the Vendor and shall indemnify the Vendor against
all claims, liabilities and expenses incurred by it as a result of
complying with the terms of this clause.
10. TITLE AND APPORTIONMENTS
10.1 Subject to the provisions of clause 11 relating to the Lease, the
Vendor shall take all necessary steps and co-operate fully with the
Purchaser to ensure that it obtains the full benefit of the Business
and Assets and shall execute such documents and take such other steps
(or procure other necessary parties so to do) as are reasonably
necessary or appropriate for vesting in the Purchaser all its rights
and interests in the Assets.
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<PAGE> 22
10.2 Subject to the provisions of clause 11 relating to the Lease, insofar
as the Assets comprise the benefit of contracts which cannot
effectively be assigned to the Purchaser without the consent of a third
party or except by an agreement of novation:
10.2.1 the Vendor and the Purchaser shall use all reasonable
endeavours to obtain consent or to procure a novation;
10.2.2 unless and until consent is obtained or the contracts are
novated the Purchaser shall, for its own benefit and to the
extent that the contracts permit, perform on behalf of the
Vendor (but at the Purchaser's expense) all the obligations of
the Vendor arising after the Effective Date (insofar as they
have been disclosed to the Purchaser) and indemnify the Vendor
against all costs, proceedings, claims, demands and expenses
which may be incurred by the Vendor as a result of any act,
neglect, default or omission on the part of the Purchaser to
perform or comply with any such obligation of the Vendor which
falls to be performed after the Effective Date.
11. TRANSFER OF THE LEASEHOLD PROPERTY
11.1 The sale of the Leasehold Property is for the unexpired residue of the
term of the Lease and is at the rent reserved and subject to the
covenants on the part of the tenant and the conditions which it
contains subject (save as herein expressly varied) to the National
Conditions of Sale (20th Edition).
11.2. A copy of the Lease has been supplied to the Purchaser, which shall be
deemed to purchase with full knowledge of its contents and shall raise
no requisition, enquiry or objection in relation to them.
11.3 The assignment of the Lease shall be in consideration of a covenant on
the part of the Purchaser, as from the Effective Date, to pay the rent
reserved by the Lease and to observe and perform the covenants on the
part of the tenant and the conditions contained in the Lease and to
indemnify the Vendor against all claims, demands, proceedings, damages,
costs and expenses arising out of or incidental to their breach,
21
<PAGE> 23
non-observance or non-performance.
11.4 The Vendor shall use all reasonable endeavours to obtain, and will pay
the incidental costs for, any requisite reversioner's licences and the
Purchaser shall co-operate in obtaining the licences by and shall
supply such information and references as may reasonably be required.
Where the reversioner would otherwise be entitled to withhold a
licence, the Purchaser will offer to covenant direct with the
reversioner, with effect from the Effective Date, to pay the rent and
observe and perform the covenants contained in the Lease.
11.5 The following provisions of this clause shall apply with respect to the
period from the Effective Date to the date of the assignment in
relation to the Leasehold Property where the reversioner's licence is
required (or to the date of withdrawal of the property from the sale
under sub-clause 11.7, as the case may be):
11.5.1 The Purchaser may enter the Leasehold Property and occupy it as
licensee of the Vendor and the Vendor shall hold it upon trust
for the Purchaser according to the terms of this agreement.
11.5.2 Notwithstanding the capacity of the Purchaser as licensee of
the Vendor with respect to the occupation of the relevant
Leasehold Property, the Purchaser may carry on business on it
for its own account.
11.5.3 The Purchaser shall be responsible for, and if necessary
reimburse on demand the Vendor against, all rates, water rates,
insurance premiums and other outgoings of an annual or
recurring nature (apportioned on a day to day basis) and also
for all gas and electricity, telephone, telex and facsimile and
other charges in respect the relevant Leasehold Property.
11.5.4 The Purchaser shall pay on the date hereof to the Vendor an
amount equal to the rent reserved by the Lease of the Leasehold
Property for the period from the date hereof until the rent
next falls due and thereafter as and when the rent
22
<PAGE> 24
falls due from the Vendor and shall act or conduct itself in
such a manner that the covenants (other than for the payment of
rent and against alienation without prior consent) on the part
of the tenant contained in the Lease are fully observed and
performed and shall indemnify the Vendor against the breach,
non-observance or non-performance of those covenants
(including the covenant against alienation without prior
consent).
11.5.5 The Purchaser shall bear all third party public liability and
employer's liability risks attached to the occupation and use
of the relevant Leasehold Property and shall indemnify the
Vendor against them.
11.5.6 The assignment of the Lease shall be completed within seven (7)
days after the reversioner's licence has been obtained.
11.5.7 If the Leasehold Property is withdrawn from the sale the
Purchaser shall promptly deliver up vacant possession of that
Property in the state of repair required by the lease to the
Vendor and will cease to be the Vendor's licensee and the
Vendor shall cease to hold the Leasehold Property on trust for
the Purchaser under the terms of this agreement.
11.6 If the Vendor is unable to obtain a reversioner's licence to assign
after all reasonable and proper efforts on its part so to do
(including, where necessary or appropriate, applying at the joint
expense of the parties to the Court for a declaration that the licence
is being unreasonably withheld) the Leasehold Property may at the
election of the Vendor be withdrawn from the sale without prejudice to
the rights of either party against the other in damages or for the
costs of or incidental to the Leasehold Property prior to withdrawal.
11.7 The withdrawal of the Leasehold Property from the sale under clause
11.6 shall have the effect of making the provisions of this agreement
with respect to the Leasehold Property severable from the remainder but
this agreement shall otherwise remain in full force and effect.
23
<PAGE> 25
11.8 General condition 1 to 5, 9, 10, 11(5), 19(1) to (4) and 20 to 22 of
the National Conditions of Sale (20th Edition) shall not apply.
12. WARRANTIES BY THE VENDOR
12.1 The Vendor warrants to the Purchaser that the warranties and
representations set out in Schedule 4 are true and accurate in all
respects;
12.2 All the provisions of this Agreement shall so far as they are capable
of being performed or observed continue in full force and effect
notwithstanding Completion except in respect of those matters then
already performed. The failure to exercise any right under this
Agreement or otherwise shall not constitute a waiver of that or any
other right.
12.3 All claims, liabilities and expenses for breach of any of the
provisions of this Agreement including any breach of Warranty which are
attributable to any breach or default by the Vendor or the Purchaser
under this Agreement shall be governed and limited by the provisions
contained in Article 11 of the Principal Asset Purchase Agreement which
shall apply mutatis mutandis to claims under this Agreement.
13. NAME
13.1 The Vendor shall as soon as possible change its corporate name to
Nelson Media (UK) Limited.
14. FUTURE ACTIVITIES
14.1 The Vendor shall promptly refer to the Purchaser all enquiries relating
to the Business and assign to the Purchaser all orders relating to the
Business, including enquiries or orders for any stocks, spares, parts,
accessories and other equipment manufactured or sold in connection with
the Business, which the Vendor may in future receive.
15. AVAILABILITY OF INFORMATION
15.1 The Vendor shall preserve all information, records and other documents
relating to the
24
<PAGE> 26
Excluded Assets for a period of not less than three (3) years and upon
reasonable notice by the Purchaser make such information, records and
documents as relate to the Business available for inspection by the
Purchaser or its authorised agents at reasonable times during normal
business hours.
15.2 The Vendor shall make available to the Purchaser free of charge any
information remaining in its possession relating to the Business which
the Purchaser may reasonably require relating to the Business and the
Assets. The Purchaser shall make available to the Vendor free of charge
any information and records which the Vendor may reasonably require
relating to the continuing business of the Vendor.
16. ANNOUNCEMENTS
16.1 No announcement of any kind shall be made in respect of the subject
matter of this agreement except as specifically agreed between the
Vendor and the Purchaser. Any announcement by either party shall in any
event be issued only after prior consultation with the other.
17. COSTS
17.1 All expenses incurred by or on behalf of the parties, including all
fees of agents, solicitors, accountants, and actuaries employed by
either of the parties in connection with the negotiation, preparation
and execution of this agreement shall be borne solely by the party
which incurred them.
18. NOTICES
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly
given if delivered or mailed (registered or certified mail, postage
prepaid, return receipt requested) or if sent by telecopy as follows:-
If to the Vendor:
Thomas Nelson Inc.
25
<PAGE> 27
Nelson Place at Elm Hill Pike
P O Box 14100
Nashville, Tennessee 37214-1000
Attn: Joe L Powers, Executive Vice President and
Chief Financial Officer
Telephone Number : (615) 883-6353
with a copy to:
Thomas Nelson Inc.
Nelson Place at Elm Hill Pike
P O Box 14100
Nashville, Tennessee 37214-1000
Attn: Stuart A Heaton Esq
Telephone Number : (615) 889-5940
and
Bird & Bird
90 Fetter Lane
London EC4A 1JP
Attn: Christopher Barrett Esq
Telephone Number : 0171 415 6000
If to the Purchaser:
Gaylord Entertainment Company
One Gaylord Drive
Nashville, Tennessee 37214
Attn: F M Wentworth, Jr Esq
Telephone Number : (615) 316-6530
26
<PAGE> 28
with a copy to:
Davenport Lyons
1 Old Burlington Street
London W1X 2NL
Attn: James Ware Esq
Telephone Number : 0171 468 2600
or to such other address as any party may have furnished to the others
in writing in accordance herewith, except that notices of change of
address shall only be effective upon receipt.
19. ENTIRE AGREEMENT AND SCHEDULES
19.1 This Agreement and the Principal Asset Purchase Agreement and the
Schedules shall constitute the entire agreement and understanding
between the parties with respect to the sale and purchase of the
Business and the Assets. Neither party hereto has entered into this
Agreement in reliance upon any representation warranty or undertaking
of the other party which is not set out and referred to in this
Agreement. No variation of this Agreement shall be effective unless it
is in writing and signed by (or by some person duly authorised by) each
of the parties.
19.2 All the Schedules form part of this agreement.
19.3 This agreement shall be binding upon each party's successors and
permitted assigns.
19.4 Neither party may assign any of its rights under this agreement without
the prior consent of the other.
20. INVALIDITY
20.1 If any term or provision in this agreement shall in whole or in part be
held to any extent to be illegal or unenforceable under any enactment
or rule of law, that term or provision or part shall to that extent be
deemed not to form part of this agreement and
27
<PAGE> 29
the enforceability of the remainder of this agreement shall
not be affected.
21. PROPER LAW
21.1 The construction, validity and performance of this agreement shall be
governed by the laws of England.
27
<PAGE> 30
Duly signed by the parties on the date stated at the beginning of this
agreement:
SIGNED BY /s/ Joe L. Powers )
)
For and on behalf of )
NELSON WORD LIMITED )
in the presence of: -
Witness signature /s/ Eric Heyden
-----------------------------------
Name Eric Heyden
-----------------------------------
Address Thomas Nelson, Inc. - Nashville
-----------------------------------
Occupation Attorney
-----------------------------------
SIGNED BY /s/ Terry E. London )
)
For and on behalf of )
WORD ENTERTAINMENT LIMITED )
in the presence of: -
Witness signature /s/ Frank Wentworth, Jr.
-----------------------------------
Name Frank Wentworth, Jr.
-----------------------------------
Address c/o Gaylord Entertainment Company
-----------------------------------
Occupation Secretary
-----------------------------------
<PAGE> 1
Exhibit 2.4
SUBSIDIARY
ASSET PURCHASE AGREEMENT
BETWEEN
WORD COMMUNICATIONS LTD., A BRITISH COLUMBIA COMPANY
AND
WORD ENTERTAINMENT (CANADA), INC., A YUKON CORPORATION
DATED AS OF NOVEMBER 21, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1
CERTAIN DEFINITIONS
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . 4
1.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Assets . . . . . . . . . . . . . . . 6
2.2 Assumption of Liabilities . . . . . . . . . . . . . . . . 6
ARTICLE 3
CONSIDERATION
3.1 Word Canada Purchase Price . . . . . . . . . . . . . . . 7
ARTICLE 4
WORD CANADA CLOSING; OBLIGATIONS OF THE PARTIES
4.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Obligations of the Parties at the Word Canada Closing . . 7
ARTICLE 5
REPRESENTATIONS AND WARRANTIES BY WORD CANADA
5.1 Confirmation of Representations and Warranties Pursuant
to the Comprehensive Agreement . . . . . . . . . . . . . 9
5.2 Authorization . . . . . . . . . . . . . . . . . . . . . . 10
5.3 Organization, Good Standing and Qualification . . . . . . 10
5.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 10
5.5 Records and Books of Account . . . . . . . . . . . . . . 10
5.6 Contracts and Commitments . . . . . . . . . . . . . . . . 10
5.7 Fixed Assets: Leased Premises . . . . . . . . . . . . . . 11
5.8 Employees . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
<PAGE> 3
-ii-
<TABLE>
<S> <C>
5.9 Employment Agreements . . . . . . . . . . . . . . . . . . 11
5.10 Labour Matters and Employment Standards . . . . . . . . . 12
5.11 Employee Benefit and Pension Plans . . . . . . . . . . . 12
5.12 Government Assistance . . . . . . . . . . . . . . . . . . 13
5.13 Vendor's Residency . . . . . . . . . . . . . . . . . . . 14
5.14 No Omissions . . . . . . . . . . . . . . . . . . . . . . 14
5.15 Word Canada's Representations and Warranties . . . . . . 14
ARTICLE 6
REPRESENTATIONS AND WARRANTIES BY ENTERTAINMENT
6.1 Confirmation of Representations and Warranties Pursuant
to the Comprehensive Agreement . . . . . . . . . . . . . 14
6.2 Authorization . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Organization and Good Standing . . . . . . . . . . . . . 15
6.4 No Violation . . . . . . . . . . . . . . . . . . . . . . 15
6.5 Sufficient Funds . . . . . . . . . . . . . . . . . . . . 15
6.6 Certain Proceedings . . . . . . . . . . . . . . . . . . . 15
ARTICLE 7
COVENANTS AND AGREEMENTS OF WORD CANADA
7.1 Confirmation of Covenants and Agreements Pursuant to the
Comprehensive Agreement . . . . . . . . . . . . . . . . . 16
7.2 Modification . . . . . . . . . . . . . . . . . . . . . . 16
7.3 Supplemental Disclosure . . . . . . . . . . . . . . . . . 16
ARTICLE 8
COVENANTS AND AGREEMENTS OF ENTERTAINMENT
8.1 Confirmation of Covenants and Agreements Pursuant to the
Comprehensive Agreement . . . . . . . . . . . . . . . . . 17
8.2 Consents and Approvals . . . . . . . . . . . . . . . . . 17
8.3 Employee Matters . . . . . . . . . . . . . . . . . . . . 17
8.4 Agreements Regarding Pension Plan . . . . . . . . . . . . 17
</TABLE>
<PAGE> 4
-iii-
<TABLE>
<S> <C>
ARTICLE 9
CONDITIONS TO ENTERTAINMENT'S OBLIGATIONS
9.1 Representations and Warranties . . . . . . . . . . . . . 18
9.2 Performance by Word Canada . . . . . . . . . . . . . . . 18
9.3 Certificates of Word Canada . . . . . . . . . . . . . . . 18
9.4 Opinion of Counsel for Word Canada . . . . . . . . . . . 18
9.5 Distribution Agreement . . . . . . . . . . . . . . . . . 18
9.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . 19
9.7 Comprehensive Agreement Closing . . . . . . . . . . . . . 19
ARTICLE 10
CONDITIONS TO WORD CANADA'S OBLIGATIONS
10.1 Representations and Warranties . . . . . . . . . . . . . 19
10.2 Performance by Entertainment . . . . . . . . . . . . . . 19
10.3 Certificates of Entertainment . . . . . . . . . . . . . . 19
10.4 Opinion of Counsel for Entertainment . . . . . . . . . . 19
10.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . 19
10.6 Comprehensive Agreement Closing . . . . . . . . . . . . . 20
ARTICLE 11
INDEMNIFICATION
11.1 Indemnification . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 12
TERMINATION OF AGREEMENT
12.1 Termination Events . . . . . . . . . . . . . . . . . . . 20
12.2 Effect of Termination . . . . . . . . . . . . . . . . . . 21
</TABLE>
<PAGE> 5
-iv-
<TABLE>
<S> <C>
ARTICLE 13
COLLECTION OF RECEIVABLES AND INVENTORY RETURNS
13.1 Collection of Word Canada Receivables . . . . . . . . . . 21
13.2 Inventory Returns . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 14
MISCELLANEOUS
14.1 Survival of Representations . . . . . . . . . . . . . 22
14.2 Expenses . . . . . . . . . . . . . . . . . . . . . . 22
14.3 Assignability: Parties in Interest . . . . . . . . . 22
14.4 Allocation of Word Canada Purchase Price . . . . . . 23
14.5 Payment of Taxes . . . . . . . . . . . . . . . . . . 23
14.6 Goods and Services Tax Exemption . . . . . . . . . . 23
14.7 Entire Agreement: Amendments . . . . . . . . . . . . 24
14.8 Headings . . . . . . . . . . . . . . . . . . . . . . 24
14.9 Severability . . . . . . . . . . . . . . . . . . . . 24
14.10 Notices . . . . . . . . . . . . . . . . . . . . . . 24
14.11 Governing Law . . . . . . . . . . . . . . . . . . . 26
14.12 Public Announcements . . . . . . . . . . . . . . . . 26
14.13 No Third Party Beneficiaries . . . . . . . . . . . . 27
14.14 Interpretive Provisions . . . . . . . . . . . . . . 27
14.15 Counterparts . . . . . . . . . . . . . . . . . . . . 27
14.16 Best Efforts to Resolve Discrepancies . . . . . . . 27
14.17 Reference Date . . . . . . . . . . . . . . . . . . . 27
</TABLE>
Schedule A - Word Canada Leased Real Estate
Schedule B - Contracts
Schedule C - Assets
Schedule D - Employees
Schedule E - Employment Agreements
Schedule F - Employee Benefit and Pension Plans
Schedule G - Government Assistance
Schedule H - Allocation of Word Canada Purchase Price
<PAGE> 6
SUBSIDIARY
ASSET PURCHASE AGREEMENT
This ASSET SUBSIDIARY PURCHASE AGREEMENT (this "AGREEMENT") is made and
entered into as of the 21st day of November, 1996 between WORD COMMUNICATIONS
LTD., a British Columbia company ("WORD CANADA") and WORD ENTERTAINMENT
(CANADA), INC., a Yukon corporation ("ENTERTAINMENT").
RECITALS
WHEREAS, certain of the assets of Thomas Nelson, Inc., a Tennessee
corporation ("NELSON"), Word, Incorporated, a Delaware corporation ("WORD") and
Word Direct Partners, L.P., a Texas limited partnership ("WORD DIRECT"), wholly
owned direct and indirect subsidiaries of Nelson, and substantially all of the
assets of the music business of Word Canada and certain of the assets of Nelson
Word, Ltd., a United Kingdom corporation ("WORD U.K."), wholly owned
subsidiaries of Word, together comprise the music division of Nelson;
WHEREAS, Nelson, Word and Word Direct (the "SELLERS") desire to sell
to Gaylord Entertainment Company ("GAYLORD") at the Closing (as hereinafter
defined) and Gaylord desires to purchase from Sellers substantially all of the
assets and to assume certain of the liabilities associated with the Word Canada
Music Business (as hereinafter defined), and for that purpose have entered into
an asset purchase agreement dated as of the 21st day of November, 1996 which
was amended on January 6, 1997 (as amended, the "COMPREHENSIVE AGREEMENT"); and
WHEREAS, Word Canada and Entertainment have entered into this Agreement
pursuant to Section 7.5(b) of the Comprehensive Agreement.
NOW, THEREFORE, IN CONSIDERATION of the premises and of the mutual
representations, warranties and covenants which are made and to be performed by
the respective parties, it is agreed as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 DEFINED TERMS. In this Agreement:
<PAGE> 7
- 2 -
(a) Unless otherwise defined herein or unless there is something
in the subject matter or context inconsistent therewith, the
terms defined in the Comprehensive Agreement shall have the
same meanings in this Agreement.
(b) Unless otherwise indicated, all dollar amounts referred to in
this Agreement are in lawful money of the United States of
America.
1.2 DEFINITIONS. For purposes of this Agreement, certain defined terms
shall have the respective meanings set forth below:
(a) "CANADIAN GAAP" means the accounting principles so described
and promulgated by the Canadian Institute of Chartered
Accountants which are applicable as at the date on which any
calculation made hereunder is to be effective or as at the
date of any financial statements referred to herein, as the
case may be.
(b) "DISTRIBUTION AGREEMENT" means the agreement to be made by and
between Nelson, Word and Entertainment relating to the
distribution by Entertainment of books and print publications.
(c) "ITA" means the Income Tax Act (Canada), as amended.
(d) "NELSON NOTE" means the promissory note of Nelson as maker
payable on the Word Canada Closing Date to the order of Word
Canada in an amount equal to US$10 plus the amount by which
the Word Canada Assumed Liabilities exceed the Word Canada
Assets as determined for purposes of the Estimated Closing
Statement.
(e) "WORD CANADA ASSETS" means the Nelson Note and all Assets,
other than the Word Canada Excluded Assets, owned in whole or
in part by Word Canada on the date hereof, or at Closing, as
the case may be, or in which Word Canada has any interest on
the date hereof, or at Closing, as the case may be, and
directly related to the Word Canada Music Business. To the
extent that any assets, property, rights or business of Word
Canada are intended to be transferred to Entertainment
pursuant to the general language of this Agreement but do not
appear on the applicable Schedules or Exhibits to this
Agreement, the general language shall govern and such assets,
property, rights and business shall nonetheless be deemed
transferred to Entertainment. Any reference to
<PAGE> 8
- 3 -
specifically defined property comprising Assets shall mean the
interest of Word Canada in those Assets.
(f) "WORD CANADA ASSUMED LIABILITIES" means those Assumed
Liabilities of Word Canada which directly relate to the Word
Canada Music Business.
(g) "WORD CANADA EXCLUDED ASSETS" means those Excluded Assets
relating to the Word Canada Music Business described in the
Comprehensive Agreement and the Word Canada Receivables as
herein defined.
(h) "WORD CANADA LEASED REAL ESTATE" means the Leased Real Estate
listed on Schedule A and all fixed assets, including fixtures,
furniture, furnishings, office equipment and other tangible
property attached or relating thereto.
(i) "WORD CANADA MUSIC BUSINESS" means that part of the Music
Business conducted by Word Canada.
(j) "WORD CANADA RECEIVABLES" means all accounts and notes
receivable, the right to receive royalties and other income
payable to Word Canada as of the Closing Date and related
reserves.
ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions of
this Agreement and the Comprehensive Purchase Agreement, at the Word Canada
Closing, Word Canada shall sell, transfer, convey, assign and deliver the Word
Canada Assets to Entertainment and Entertainment shall purchase, acquire and
accept the Word Canada Assets from Word Canada.
2.2 ASSUMPTION OF LIABILITIES. As additional consideration hereunder, from
and after the Closing Date, Entertainment shall assume and discharge the Word
Canada Assumed Liabilities. Except as provided in the preceding sentence, and
notwithstanding anything else to the contrary contained herein, Entertainment is
not assuming and shall not be liable for any Liabilities of Word Canada other
than the Word Canada Assumed Liabilities, including, without limitation, any
Liabilities (a) for indebtedness for borrowed money or overdrafts; (b) relating
to or in any way arising out of the Word Canada Excluded Assets; (c) for fees
and disbursements referred to in Section 14.2 hereof; (d) to any shareholder or
Affiliate of Word Canada or to any current or former employee, officer or
director of Word Canada, including,
<PAGE> 9
- 4 -
without limitation, any severance pay, post retirement medical benefits, pension
plans or pension compensation or benefits whether by operation of Law or
otherwise, other than with respect to employees of the Word Canada Music
Business actually engaged by Entertainment after the Closing as expressly
provided in Section 8.2, and only in respect of Liabilities to such employees
arising after the Closing Date or accrued on the Closing Statement; (e) relating
to the execution, delivery and consummation of this Agreement by the Word Canada
and the transactions contemplated hereby, including, without limitation, any and
all Taxes incurred as a result of the sale contemplated by this Agreement other
than as set out in Sections 14.5 and 14.6; (f) for any Taxes accrued or incurred
prior to the Closing Date or relating to any period (or portion of a period)
prior thereto; (g) relating to or arising out of any environmental matter,
including, without limitation, any violation of any Environmental Law or any
other Law relating to health and safety of the public or the employees of Word
Canada attributable to the period prior to the Word Canada Closing Date; (h)
relating to vacations, sick days and similar benefits accrued prior to the
Closing Date in respect of employees of the Word Canada Music Business who
become employees of Entertainment after the Closing and not reflected on the
Closing Statement; and (i) of Word Canada arising under or pursuant to this
Agreement. Entertainment shall not assume or be bound by any Liabilities of
Word Canada, except as expressly assumed by it pursuant to this Agreement.
ARTICLE 3
CONSIDERATION
3.1 WORD CANADA PURCHASE PRICE. The purchase price for the Word Canada
Assets shall be US$10 plus the Word Canada Assumed Liabilities (such price, as
adjusted pursuant to Article 3 of the Comprehensive Purchase Agreement being
herein referred to as the "WORD CANADA PURCHASE PRICE"). Such Word Canada
Purchase Price is to be paid and satisfied pursuant to the provisions of the
Comprehensive Agreement.
ARTICLE 4
WORD CANADA CLOSING; OBLIGATIONS OF THE PARTIES
4.1 CLOSING DATE. The closing relating to the sale and transfer of Word
Canada Assets (the "WORD CANADA CLOSING") shall occur simultaneously with the
Closing (namely at 8:00 a.m., local time on January 6, 1997) at the offices of
Farris, Vaughan, Wills & Murphy, Box 10026 Pacific Centre S, 700 W. Georgia
Street, Vancouver, British Columbia, V7Y 1B3, or at such other time and place
as the parties hereto mutually agree.
<PAGE> 10
- 5 -
4.2 OBLIGATIONS OF THE PARTIES AT THE WORD CANADA CLOSING.
(a) At the Word Canada Closing, Entertainment shall deliver to
Word Canada:
(i) a Certificate of a duly authorized officer of Gaylord
certifying that Sellers had made all deliveries and
fulfilled all obligations at the Closing pursuant to
Section 4.2(b) of the Comprehensive Agreement or, to
the extent that such deliveries were not made or
obligations not fulfilled, that they had been waived
by Gaylord;
(ii) a copy of resolutions of the Board of Directors of
Entertainment, certified by Entertainment's
Secretary, authorizing the execution, delivery and
performance of this Agreement and the other documents
referred to herein to be executed by Entertainment,
and the consummation of the transactions contemplated
hereby;
(iii) a certificate of a duly authorized officer of
Entertainment certifying as to the accuracy in all
material respects of Entertainment's representations
and warranties at and as of the Word Canada Closing
and that Entertainment has performed or complied in
all material respects with all of the covenants,
agreements, terms, provisions and conditions to be
performed or complied with by Entertainment at or
before the Word Canada Closing;
(iv) the Distribution Agreement, duly executed by Gaylord
and Entertainment;
(v) the opinion of Stikeman, Elliott, British Columbia
legal counsel for Entertainment, in accordance with
Section 10.4;
(vi) such instruments of assumption, in form and substance
reasonably satisfactory to Word Canada, as shall be
necessary for Entertainment to assume as of the
Closing Date and agree to pay, perform and discharge
the Word Canada Assumed Liabilities.
<PAGE> 11
- 6 -
(b) At the Word Canada Closing, Word Canada will deliver to
Entertainment:
(i) a Certificate of a duly authorized officer of Sellers
certifying that Gaylord made all deliveries and
fulfilled all obligations at the Closing pursuant to
Section 4.2(a) of the Comprehensive Agreement or, to
the extent that such deliveries were not made or
obligations not fulfilled, that they had been waived
by Sellers;
(ii) such bills of sale, endorsements, assignments, and
other good and sufficient instruments of conveyance
and transfer, in form and substance reasonably
satisfactory to Entertainment, as shall be effective
to vest in Entertainment all of Word Canada's title
to and interest in the Word Canada Assets;
(iii) copy of resolutions of the Board of Directors and the
shareholder of Word Canada, certified by Word
Canada's Secretary, authorizing the execution,
delivery and performance of this Agreement and the
other documents referred to herein to be executed by
Word Canada, and the consummation of the transactions
contemplated hereby;
(iv) a certificate of the duly authorized officer of Word
Canada certifying as to the accuracy in all material
respects of Word Canada's representations and
warranties at and as of the Word Canada Closing, and
that it has performed or complied in all material
respects with all of the covenants, agreements,
terms, provisions and conditions to be performed or
complied with by Word Canada at or before the Word
Canada Closing;
(v) the opinion of Farris, Vaughan, Wills & Murphy, Box
10026 Pacific Centre S, 700 W. Georgia Street,
Vancouver, British Columbia, V7Y 1B3, British
Columbia legal counsel for Word Canada, in accordance
with Section 9.4;
(vi) a duly executed change of name certificate for Word
Canada in form suitable for filing in the Province of
British Columbia, changing the name to a name not
containing and not confusingly similar to the word
"WORD";
(vii) all consents required in connection with the execution
and delivery of this Agreement and the transactions
contemplated hereby;
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(viii) the Distribution Agreement, duly executed by Nelson;
and
(ix) appropriate instruments authorizing Entertainment to
endorse in the name of Word Canada on all checks,
drafts, notes and other instruments for the payment
of money and to receive for the account of
Entertainment the Word Canada Receivables and all
proceeds thereof to which Entertainment is entitled
or is required to collect on behalf of Word Canada
under this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES BY WORD CANADA
Word Canada hereby represents and warrants as follows:
5.1 CONFIRMATION OF REPRESENTATIONS AND WARRANTIES PURSUANT TO THE
COMPREHENSIVE AGREEMENT.
(a) Insofar as the representations and warranties of the Sellers
contained in Article 5 of the Comprehensive Agreement are
applicable to Word Canada they are confirmed, represented and
warranted by Word Canada as if herein set forth seriatim; and
(b) The representations and warranties of Word Canada set out in
Sections 5.2 to 5.15 inclusive of this Agreement are in
addition to and not in substitution for those contained in
Article 5 of the Comprehensive Agreement.
5.2 AUTHORIZATION. Word Canada has full corporate power and authority to
enter into this Agreement and perform its obligations hereunder and carry out
the transactions contemplated hereby. The board of directors and shareholder of
Word Canada have taken all action required by law, Word Canada's memorandum and
articles and otherwise to authorize the execution and delivery by Word Canada of
this Agreement and the consummation by Word Canada of the transactions
contemplated hereby. Assuming the due execution and delivery by Entertainment,
this Agreement constitutes the valid and binding agreement of Word Canada,
enforceable against Word Canada in accordance with its terms.
5.3 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Word Canada is a
company duly organized, validly existing and in good standing under the laws of
the Province of British Columbia. Word Canada has full corporate power and
authority to carry on its business as now conducted and, possesses all
governmental and other permits, licenses and other
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authorizations to own, lease or operate the Word Canada Assets and to carry on
the Word Canada Music Business as presently conducted.
5.4 SUBSIDIARIES. Word Canada has no subsidiaries within the meaning of
that word under the Company Act (British Columbia).
5.5 RECORDS AND BOOKS OF ACCOUNT. Since the Balance Sheet Date, the
records and books of account of Word Canada have been regularly kept and
maintained in conformity with Canadian GAAP.
5.6 CONTRACTS AND COMMITMENTS. Schedule B sets forth a complete and
accurate list of all material contracts to which Word Canada is a party
relating to the Word Canada Music Business. Other than with respect to such
matters which, alone or in the aggregate, would not have a material adverse
effect, (i) each of such Contracts is a valid and subsisting contract of all
the parties thereto in full force and effect without modification, (ii) Word
Canada is not in default under any of such Contracts and has performed all
obligations required to be performed by it thereunder, and (iii) all of such
Contracts are legal, valid and binding obligations and are in full force and
effect as of the date hereof and enforceable in accordance with their terms
(except that such enforcement may be subject to bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium (whether general or specific)
or other laws now or hereafter in effect relating to creditor's rights
generally and the remedy of specific enforcement and injunctive or other forms
of equitable relief may be subject to equitable defense and to the discretion
of the court before which any proceeding therefor may be brought). The
Contracts listed in Schedule B include every contract, written or, other than
in the ordinary course of business, oral, to which Word Canada is a party, that
is directly related to the Word Canada Music Business. Word Canada has
disclosed and delivered, prior to the date hereof, copies of all Contracts
listed on Schedule B.
5.7 FIXED ASSETS: LEASED PREMISES.
(a) Schedule C hereto sets forth a list and description as at
October 31, 1996 of all equipment, machinery, motor vehicles,
fixtures and other assets relating to the Word Canada Music
Business owned or used by Word Canada, indicating the legal
owner and location thereof.
(b) Schedule A sets forth a list of each lease of premises used in
relation to the Word Canada Music Business executed by or
binding upon Word Canada as lessee, sublessee, tenant or
assignee (the "WORD CANADA LEASED REAL ESTATE") setting forth
in each case a brief description of the premises covered
thereby, the rental payable thereunder and the term (including
any extensions available)
<PAGE> 14
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thereunder. Each such lease is in full force and effect
without any default or breach thereof by Word Canada or any
other party thereto. Except as set forth on Schedule A, no
consent of any landlord or any other party is required under
any such lease in order to assign each such lease to
Entertainment and to keep such lease in full force and effect
after the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. True and
complete copies of all leases required to be listed on
Schedule A, including all amendments, addenda, waivers and all
other binding documents affecting the tenant's rights
thereunder, have heretofore been delivered to Entertainment.
5.8 EMPLOYEES. Schedule D attached hereto sets forth the name, job title,
duration of employment, vacation entitlement, employee benefit entitlement and
rate of remuneration (including bonus and commission entitlement) of each
employee of Word Canada to which Entertainment shall offer employment on
Closing. Schedule D also sets forth the names of all employees of Word Canada
who are now on disability, maternity or other authorized leave or who are
receiving workers' compensation or short-terms or long-term disability
benefits.
5.9 EMPLOYMENT AGREEMENTS. Except as listed in Schedule E, Word Canada is
not a party to any written or oral employment, service or consulting agreement
relating to any one or more persons working in the Word Canada Music Business,
except for oral employment agreements which are of indefinite term and without
any special arrangements or commitments with respect to the continuation of
employment or payment of any particular amount upon termination of employment.
There are no employees of the Word Canada Music Business who cannot be
dismissed upon such period of notice as is required by law in respect of a
contract of hire for an indefinite term. Complete and correct copies of all
documentation relevant to those agreements listed in Schedule E are annexed
hereto as Exhibits to Schedule E.
5.10 LABOUR MATTERS AND EMPLOYMENT STANDARDS.
(a) Word Canada is not subject to any agreement with any labour
union or employee association and has not made any commitment
to or conducted negotiations with any labour union or employee
association with respect to any future agreement and, to the
best of the knowledge of Word Canada, there is no current
attempt to organize, certify or establish any labour union or
employee association, in relation to any of the employees of
Word Canada.
(b) There are no existing or, to the best of the knowledge of Word
Canada, threatened, labour strikes or labour disputes,
grievances, controversies or other labour troubles affecting
the Word Canada Music Business.
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(c) Word Canada has complied with all applicable laws, rules,
regulations and orders relating to employment in the Word
Canada Music Business, including those relating to wages,
hours, collective bargaining, occupational health and safety,
workers' hazardous materials, employment standards, pay equity
and workers' compensation. There are no outstanding charges
or complaints against Word Canada relating to unfair labour
practices or discrimination or under any legislation relating
to employees. Word Canada has paid in full all amounts owing
under the Workers' Compensation Act (British Columbia) and the
workers' compensation claims experience of Word Canada would
not permit a penalty reassessment under such legislation.
5.11 EMPLOYEE BENEFIT AND PENSION PLANS.
(a) Except as listed in Schedule F attached hereto, Word Canada
does not have, and is not subject to any present or future
obligation or liability under, any pension plan, deferred
compensation plan, retirement income plan, stock option or
stock purchase plan, profit sharing plan, bonus plan or
policy, employee group insurance plan, hospitalization plan,
disability plan or other employee benefit plan, program,
policy or practice, formal or informal, with respect to any of
the employees of Word Canada, other than the Canada Pension
Plan (Canada) and the Medical Services Plan (British Columbia)
and other similar health plans established pursuant to
statute. Schedule F also lists the general policies,
procedures and work-related rules in effect with respect to
employees of Word Canada, whether written or oral, including
but not limited to policies regarding holidays, sick leave,
vacation, disability and death benefits, termination and
severance pay, automobile allowances and rights to
company-provided automobiles and expense reimbursements. (The
plans, programs, policies, practices and procedures listed in
Schedule F are hereinafter collectively called the "BENEFIT
PLANS"). Complete and correct copies of all documentation
establishing or relating to the Benefit Plans listed in
Schedule F or, where such Benefit Plans are oral commitments,
written summaries of the terms thereof are annexed hereto as
Exhibits to Schedule F.
(b) The pension plans included in the Benefit Plans are registered
under and are in compliance with all applicable federal and
provincial legislation and all reports, returns and filings
required to be made thereunder have been made. Such pension
plans and all other Benefit Plans have been administered in
accordance with their terms and the provisions of applicable
law. Each pension plan has been funded in accordance with the
requirements of such plans. There is no unfunded liability on
either a going concern or termination basis under any such
<PAGE> 16
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pension plan. Word Canada has not made or granted or
committed to make or grant any benefit improvements to which
members of the pension plans or other Benefit Plans are or may
become entitled which are not disclosed in the Exhibits to
Schedule F. No funds have been withdrawn by Word Canada from
any such pension plan or other Benefit Plans.
(c) There are no pending claims by any employee or by any other
person with regard to any Benefit Plan (other than routine
benefit claims) which may result in liability to the employer
and, to the best of the knowledge of the Word Canada Music
Business and the Shareholder, there is no basis for such a
claim. There are no employees or former employees of the Word
Canada Music Business who are receiving from Word Canada any
pension or retirement payments or who are entitled to receive
any such payments not covered by a pension plan to which Word
Canada is a party.
5.12 GOVERNMENT ASSISTANCE. Schedule G attached hereto describes all
agreements, loans, other funding arrangements and assistance programs
(collectively called "GOVERNMENT ASSISTANCE PROGRAMS") (i) which are being
provided to Word Canada from any federal, provincial, municipal or other
government or governmental agency, board, commission or authority, domestic or
foreign (collectively called "GOVERNMENT AGENCIES"), or (ii) under which Word
Canada is obligated to any Government Agencies. Complete and correct copies of
all documents relating to the Government Assistance Programs are annexed hereto
as Exhibits to Schedule G. Word Canada has performed all of its obligations
under the Government Agencies to seek payment or repayment of any amount or
benefit provided under any of the Government Assistance Programs.
5.13 VENDOR'S RESIDENCY. Word Canada is not a non-resident of Canada
within the meaning of the ITA.
5.14 NO OMISSIONS. Word Canada does not know of any facts or circumstances
not disclosed to Entertainment which indicate that the Word Canada Assets or
the operations or prospects of Word Canada relating to the Word Canada Music
Business may be adversely affected or which otherwise should be disclosed to
Entertainment in order to make any of the representations or warranties made
herein on the part of the Word Canada not misleading. To the best knowledge of
Word Canada, no representation or warranty by Word Canada contained in this
Agreement, and no statement contained in any Schedule, Exhibit, or any
certificate required to be furnished to Entertainment under this Agreement or
the Comprehensive Agreement, contains any untrue statement of any material
fact, or omits to
<PAGE> 17
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state any material fact necessary in order to make the statements contained
herein or therein not misleading.
5.15 WORD CANADA'S REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Word Canada contained in this Agreement and in the Comprehensive
Agreement, or otherwise made in writing in connection with the transactions
contemplated hereby, will be true and correct on and as of the Closing Date
with the same force and effect as though such representations and warranties
had been made on and as of the Closing Date.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES BY ENTERTAINMENT
Entertainment hereby represents and warrants to Word Canada as
follows:
6.1 CONFIRMATION OF REPRESENTATIONS AND WARRANTIES PURSUANT TO THE
COMPREHENSIVE AGREEMENT.
(a) Insofar as the representations and warranties of the Buyer
contained in Article 6 of the Comprehensive Agreement are
applicable to Entertainment they are confirmed, represented
and warranted by Entertainment as if herein set forth
seriatim; and
(b) The representations and warranties of Entertainment set out in
Sections 6.2 to 6.6 inclusive of this Agreement are in addition
to and not in substitution for those contained in Article 6 of
the Comprehensive Agreement.
6.2 AUTHORIZATION. Entertainment has full corporate power and authority to
enter into this Agreement and perform its obligations hereunder and carry out
the transactions contemplated hereby. The Board of Directors of Entertainment
has taken all action required by law, its memorandum and articles and otherwise
to authorize the execution and delivery by Entertainment of this Agreement and
the consummation by Entertainment of the transactions contemplated hereby.
Assuming the due execution and delivery by Word Canada, this Agreement
constitutes the valid and binding agreement of Entertainment, enforceable
against Entertainment in accordance with its terms.
6.3 ORGANIZATION AND GOOD STANDING. Entertainment is a company duly
organized, validly existing and in good standing under the laws of the Yukon
Territory and is registered as an extra-provincial company in the Province of
British Columbia and has full corporate
<PAGE> 18
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power and authority to own, operate and lease its properties and carry on its
business as now conducted. Entertainment is duly qualified to transact
business as a foreign corporation and is in good standing in all jurisdictions
where the failure to so qualify would have an adverse impact on Entertainment's
operations in such jurisdiction.
6.4 NO VIOLATION. The execution and delivery of this Agreement by
Entertainment does not, and the consummation of the transactions contemplated
hereby will not, (a) violate, conflict with or require the consent thereunder
of any provision of any agreement, indenture, instrument, lease, security
agreement, mortgage or lien to which Entertainment is a party or by which it is
bound; (b) violate or conflict with any provision of Entertainment's memorandum
or articles; (c) violate any order, arbitration award, judgment, writ,
injunction, decree, statute, rule or regulation applicable to Entertainment; or
(d) violate any other contractual or legal obligation or restriction to which
Entertainment is subject.
6.5 SUFFICIENT FUNDS. Entertainment has and will continue to have
sufficient funds to consummate the transactions contemplated hereby, including,
without limitation, to pay the consideration set forth in Section 3.1 hereof in
accordance with the terms of this Agreement, and has all requisite power and
authority to make payment of such funds in the manner described herein and such
funds are and will be at the Closing Date free and clear of all Liens.
6.6 CERTAIN PROCEEDINGS. There is no pending, or to the knowledge of
Entertainment, threatened Actions at law or in equity or before or by any
federal, state, municipal or other governmental department, commission, board,
agency, instrumentality or authority that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with the
consummation of the transactions contemplated hereby.
ARTICLE 7
COVENANTS AND AGREEMENTS OF WORD CANADA
Word Canada agrees that, from the date hereof until the Word Canada
Closing, and thereafter if so specified, it will fulfil the following covenants
and agreements unless otherwise consented to by Entertainment in writing:
7.1 CONFIRMATION OF COVENANTS AND AGREEMENTS PURSUANT TO THE COMPREHENSIVE
AGREEMENT.
(a) Insofar as the covenants and agreement of Sellers contained in
Article 7 of the Comprehensive Agreement are applicable to
Word Canada they are confirmed, covenanted and agreed by Word
Canada as if herein set forth seriatim; and
<PAGE> 19
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(b) The covenants and agreement of Word Canada set out in this
Agreement are in addition to and not in substitution for those
contained in Article 7 of the Comprehensive Agreement.
7.2 MODIFICATION. Word Canada shall give Entertainment prompt written
notice of (i) the existence of any fact or the occurrence of any event which
constitutes, or with the giving of notice or the passage of time or both would
constitute, a breach of any representation or warranty by Word Canada made
herein or pursuant hereto and (ii) the taking of any action by Word Canada that
would breach or violate, or constitute a default under, any agreements or
covenants of Word Canada made herein or pursuant hereto. The giving of any
such notice shall not affect, modify or limit in any way any representation,
warranty, agreement or covenant of Word Canada made herein or pursuant hereto
or Entertainment's right to rely thereon.
7.3 SUPPLEMENTAL DISCLOSURE. Word Canada agrees that, with respect to its
representations and warranties made in this Agreement, it will have a
continuing obligation to supplement or amend the Schedules hereto with respect
to any matter hereafter arising or discovered which, if existing or known at
the date of this Agreement, would have been required to be set forth or
described in the Schedules hereto; provided, however, that neither the
supplementing or amending of any Schedules by Word Canada, nor the availability
or other actual delivery of information to, or the discovery of any matters by
Entertainment in the course of its investigations, shall affect any covenants
or be deemed to cure any breach of any representation or warranty made in this
Agreement or to have been disclosed as of the date of this Agreement.
ARTICLE 8
COVENANTS AND AGREEMENTS OF ENTERTAINMENT
Entertainment agrees that from the date hereof until the Word Canada
Closing, and thereafter if so specified, it will fulfil the following covenants
and agreements unless otherwise consented to by Word Canada in writing:
8.1 CONFIRMATION OF COVENANTS AND AGREEMENTS PURSUANT TO THE COMPREHENSIVE
AGREEMENT.
(a) Insofar as the covenants and agreement of Buyer contained in
Article 8 of the Comprehensive Agreement are applicable to
Entertainment they are confirmed, covenanted and agreed by
Entertainment as if herein set forth seriatim; and
<PAGE> 20
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(b) The covenants and agreement of Entertainment set out in this
Agreement are in addition to and not in substitution for those
contained in Article 8 of the Comprehensive Agreement.
8.2 CONSENTS AND APPROVALS. From the date hereof and prior to the Word
Canada Closing, Entertainment shall take all necessary corporate and other
action and use all reasonable efforts to obtain promptly all consents,
approvals, permits, licenses, authorizations, exemptions, waivers from third
parties and amendments of agreements required of Entertainment (including
pursuant to the Investment Canada Act (Canada) and the Competition Act
(Canada)) to carry out the transactions contemplated in this Agreement and
shall provide to Word Canada such information as Word Canada shall reasonably
require to make such filings and prepare such applications as may be required
for the consummation by Word Canada of the transactions contemplated by this
Agreement.
8.3 EMPLOYEE MATTERS. Entertainment will, on the Closing Date, offer
employment to each employee of Word Canada listed on Schedule D hereto and
assume any termination liability related thereto.
8.4 AGREEMENTS REGARDING PENSION PLAN. Effective as of the Word Canada
Closing Date, Word Canada will assign to Entertainment, and Entertainment will
adopt and assume and will thereafter be entitled to and bound by, all of Word
Canada's rights, duties, liabilities and obligations under the London Life
Insurance Company pension plan for employees of Word Canada listed in Schedule
F (the "WORD CANADA PENSION PLAN"). To the extent that (i) any assets of the
Word Canada Pension Plan are not vested in the employees, Word Canada agrees to
transfer and assign its interest therein to or for the benefit of such
employees after Closing, and (ii) if any Liability exists or arises in respect
of the Word Canada Pension Plan which has accrued prior to the Word Canada
Closing Date, Word Canada will promptly pay or satisfy such Liability. The
parties agree to make all required amendments and obtain any required third
party consents to effect the transfer of the Word Canada Pension Plan as soon
as practicable.
ARTICLE 9
CONDITIONS TO ENTERTAINMENT'S OBLIGATIONS
All obligations of Entertainment hereunder are subject to the
fulfilment or the waiver in writing thereof, prior to or at the Word Canada
Closing, of each of the following conditions:
<PAGE> 21
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9.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by Word Canada in this Agreement and the Comprehensive Agreement and the
statements contained in the Schedules attached hereto as supplemented through
the Closing Date shall be true in all material respects when made and at and as
of the time of the Word Canada Closing as though such representations and
warranties were made at and as of such date.
9.2 PERFORMANCE BY WORD CANADA. Word Canada shall have performed and
complied in all material respects with all covenants, agreements, obligations
and conditions required by this Agreement and the Comprehensive Agreement to be
so complied with or performed.
9.3 CERTIFICATES OF WORD CANADA. Word Canada shall have delivered to
Entertainment a Certificate of Word Canada, dated the Closing Date, certifying
as to the fulfilment of the conditions specified in Sections 9.1 and 9.2
hereof.
9.4 OPINION OF COUNSEL FOR WORD CANADA. Entertainment shall have received
a written opinion of Word Canada's counsel, Farris, Vaughan, Wills & Murphy,
Box 10026 Pacific Centre S, 700 W. Georgia Street, Vancouver, British Columbia,
V7Y 1B3, dated the Closing Date, in form and substance reasonably satisfactory
to it, as to certain matters agreed upon by legal counsel of Word Canada and
Entertainment. Such opinion may rely upon the opinion of the Vice President
and General Counsel of Nelson as to such questions of fact and law as Word
Canada's counsel deems appropriate.
9.5 DISTRIBUTION AGREEMENT. The parties will have concluded negotiation
of the Distribution Agreement and Nelson shall have executed it for delivery at
the Word Canada Closing.
9.6 LITIGATION. On the date of the Word Canada Closing, Word Canada shall
not be a party to, nor will there otherwise be pending or threatened in writing
any judicial, administrative, or other action, proceeding or investigation
seeking to enjoin, prohibit, restrain or otherwise prevent the transactions
contemplated hereby.
9.7 COMPREHENSIVE AGREEMENT CLOSING. Consummation of the transactions
contemplated by the Comprehensive Agreement shall occur simultaneously with the
Word Canada Closing.
<PAGE> 22
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ARTICLE 10
CONDITIONS TO WORD CANADA'S OBLIGATIONS
All obligations of Word Canada under this Agreement are subject to the
fulfilment or the waiver in writing thereof, prior to or at the Word Canada
Closing, of each of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by Entertainment in this Agreement shall be true in all material respects
when made and at and as of the time of the Word Canada Closing as though such
representations and warranties were made at and as of such date.
10.2 PERFORMANCE BY ENTERTAINMENT. Entertainment shall have performed and
complied in all material respects with all covenants agreements, obligations
and conditions required by this Agreement to be so complied with or performed.
10.3 CERTIFICATES OF ENTERTAINMENT. Entertainment shall have delivered to
Word Canada a Certificate of Entertainment, dated the Closing Date, certifying
as to the fulfilment of the conditions specified in Sections 10.1 and 10.2
hereof.
10.4 OPINION OF COUNSEL FOR ENTERTAINMENT. Word Canada shall have received
a written opinion of Entertainment's counsel, Stikeman, Elliott, dated the
Closing Date, in form and substance reasonably satisfactory to them, as to
certain matters agreed upon by legal counsel of Word Canada and Entertainment.
Such opinion may rely upon the opinion of the Senior Vice President, Legal
Counsel and Secretary of Gaylord as to such questions of fact and law as
Entertainment's counsel deems appropriate.
10.5 LITIGATION. On the date of the Word Canada Closing, Entertainment
shall not be a party to, nor will there otherwise be pending or threatened in
writing, any judicial, administrative, or other action, proceeding or
investigation seeking to enjoin, prohibit, restrain or otherwise prevent the
transactions contemplated hereby.
10.6 COMPREHENSIVE AGREEMENT CLOSING. Consummation of the transactions
contemplated by the Comprehensive Agreement shall occur simultaneously with the
Word Canada Closing.
<PAGE> 23
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ARTICLE 11
INDEMNIFICATION
11.1 INDEMNIFICATION. The parties hereby mutually agree that the terms and
conditions of Article 11 of the Comprehensive Agreement shall apply to this
Agreement and for that purpose Word Canada is deemed to be a Seller and
Entertainment is deemed to be a Buyer. The rights and obligations of the
parties in respect of matters contained in Article 11 of the Comprehensive
Agreement shall be exclusively governed by the Comprehensive Agreement.
ARTICLE 12
TERMINATION OF AGREEMENT
12.1 TERMINATION EVENTS. This Agreement may be terminated at any time
prior to the Word Canada Closing:
(a) By mutual agreement of Word Canada and Entertainment.
(b) If the Comprehensive Agreement is terminated on the occurrence
of any those events listed in Sections 12.1(b) to (e),
inclusive, of the Comprehensive Agreement.
(c) By Entertainment, (i) if Word Canada has violated or breached
in any material respect any of the agreements, representations
or warranties contained in this Agreement or the Comprehensive
Agreement which has not been waived in writing and Word Canada
has not cured such violation or breach within thirty business
days after Entertainment delivers written notice thereof, or
(ii) if any of the conditions set forth in Article 9 hereof
have not been satisfied in all material respects by the Word
Canada Closing or have not been waived in writing by
Entertainment.
(d) By Word Canada, (i) if Entertainment has violated or breached
in any material respect any of the agreements, representations
or warranties contained in this Agreement which has not been
waived in writing and Entertainment has not cured such
violation or breach within thirty business days after Word
Canada delivers written notice thereof, or (ii) if any of the
conditions set forth in Article 10 hereof have not been
satisfied in all material respects by the BC Closing or have
not been waived in writing by Word Canada.
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(e) By either Entertainment or Word Canada if the other makes an
assignment for the benefit of creditors, files a voluntary
petition in bankruptcy or seeks or consents to any
reorganization or similar relief under any present or future
bankruptcy act or similar law,or is adjudicated a bankrupt or
insolvent, or if a third party commences any bankruptcy,
insolvency, reorganization or similar proceeding involving the
other.
12.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 12.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections
14.2 and 14.11 will survive. Nothing in this Section 12.2 shall relieve any
party to this Agreement of Liability for breach of this Agreement or for breach
of the Confidentiality Agreement.
ARTICLE 13
COLLECTION OF RECEIVABLES AND INVENTORY RETURNS
13.1 COLLECTION OF WORD CANADA RECEIVABLES. Entertainment hereby agrees to
act as Word Canada's agent to collect the Word Canada Receivables. Such
collections shall be made in the normal and ordinary course or Entertainment's
business. In connection therewith, Entertainment shall be entitled to issue
credits to customers and otherwise engage in ordinary and customary collection
practices. On or before the tenth day of each of the first four full months
following the Word Canada Closing Date, Entertainment shall pay to Word Canada
by cheque of immediately available funds an amount equal to one-fourth of the
Word Canada Receivables less (i) in the case of the first such payment, the
amount of actual returns of products credited to customer's accounts applicable
to the Word Canada Receivables between the Word Canada Closing Date and the end
of the calendar month immediately preceding such payment and (ii) in the case
of the second, third and fourth such payments, the amount of actual returns of
products credited to customer's accounts applicable to the Word Canada
Receivables during the calendar month immediately preceding such payment until
120 days of returns credits have been issued. For its collection services
under this Section 13.1, Word Canada agrees to pay Entertainment a servicing
fee equal to 0.5% of funds remitted by Entertainment in respect of Word Canada
Receivables. The parties hereto acknowledge that Entertainment shall remit the
foregoing amounts notwithstanding actual collections on Word Canada Receivables
as a matter of administrative convenience only and, pursuant to adjustments
made under the Comprehensive Agreement, Word Canada and its affiliates shall
bear the entire risk of non-collectibility.
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13.2 INVENTORY RETURNS.
(a) Entertainment will purchase from Word Canada any inventory of
the Word Canada Music Business sold to and then returned by
customers of Word Canada, provided such returned inventory is
not damaged or obsolete and is capable of being sold in the
ordinary course of business at normal profit margins. The
price payable by Entertainment to Word Canada for the returned
inventory that Entertainment is obligated to purchase
hereunder shall be its cost.
(b) In respect of any returns of inventory other than as set out
in Section 13.2(b) above, Entertainment shall not be obligated
to purchase same and shall, unless otherwise instructed by
Nelson in writing, ship such inventory to Nelson at Nelson's
address shown in Section 14.10 hereof or such other address as
Nelson shall provide to Entertainment in writing, at Nelson's
sole cost.
ARTICLE 14
MISCELLANEOUS
14.1 SURVIVAL OF REPRESENTATIONS. The parties hereto agree that, all
representations, warranties, covenants, conditions and agreements contained
herein or in any instrument or other document delivered pursuant to this
Agreement or in connection with the transactions contemplated hereby shall
survive the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and any investigation or audit made by any
party hereto and that such representations and warranties shall expire on the
third anniversary of the Closing Date.
14.2 EXPENSES. All fees and expenses incurred by Word Canada, without
limitation, legal fees and expenses, in connection with this Agreement, will be
borne by Word Canada and all fees and expenses incurred by Entertainment,
including without limitation legal fees and expenses in connection with this
Agreement, will be borne by Entertainment.
14.3 ASSIGNABILITY: PARTIES IN INTEREST.
(a) This Agreement may not be assigned by Word Canada without the
prior written consent of Entertainment. Entertainment may
assign any or all of their respective rights hereunder to any
of direct or indirect majority-owned subsidiaries of Gaylord
provided that Entertainment shall continue to remain obligated
for the performance of its obligations hereunder and Gaylord
shall
<PAGE> 26
- 21 -
remain liable for its obligations under the Comprehensive
Agreement. Entertainment shall advise Nelson of any such
assignment and shall designate the assignee and transferee of
the assets purchased. Any such assignee shall assume all
duties, obligations and undertakings of its assignor
hereunder, but the assignor shall remain liable thereunder.
(b) All the terms and provisions of this Agreement shall be
binding upon, shall inure to the benefit of and shall be
enforceable by the respective successors, assigns and legal
representatives of the parties hereto.
14.4 ALLOCATION OF WORD CANADA PURCHASE PRICE. The Word Canada Purchase
Price shall be allocated among the Word Canada Assets in the manner provided by
Schedule H attached hereto. Word Canada and Entertainment shall file their
respective tax returns prepared in accordance with such allocation.
14.5 PAYMENT OF TAXES. Entertainment shall be liable for and shall pay all
applicable federal and provincial sales taxes, land transfer taxes, goods and
services taxes, excise taxes and all other taxes (other than income taxes of
Word Canada), duties and other like charges properly payable upon and in
connection with the conveyance and transfer of the Word Canada Assets to
Entertainment. Word Canada will do and cause to be done such things as are
reasonably requested to enable Entertainment to comply with such obligation in
an efficient manner.
14.6 GOODS AND SERVICES TAX EXEMPTION.
(a) Word Canada hereby represents and warrants to Entertainment
that:
(i) Word Canada is registered for purposes of Part IX of
the Excise Tax Act (Canada) (hereinafter, in this
section, called the "GST LEGISLATION"); and
(ii) the Word Canada Assets comprise all or substantially
all of the property used by Word Canada in the Word
Canada Music Business.
(b) Entertainment hereby represents and warrants to Word Canada
that Entertainment is registered for purposes of the GST
Legislation.
(c) Word Canada and Entertainment will jointly execute in
prescribed form, and Entertainment will file within the
required time, an election under s.167(1) of the Excise Tax
Act (Canada) that no tax be payable pursuant to the GST
<PAGE> 27
- 22 -
Legislation with respect to the purchase and sale of the Word
Canada Assets hereunder.
14.7 ENTIRE AGREEMENT: AMENDMENTS. This Agreement and the Comprehensive
Agreement, including the Exhibits, Schedules referred to herein or therein or
delivered pursuant hereto or thereto, together with the Confidentiality
Agreement, contain the entire understanding of the parties with respect to
their subject matter. There are no restrictions, agreements, promises,
warranties, covenants or undertakings other than those expressly set forth
herein or therein. Except for the Comprehensive Agreement and as otherwise
specifically provided herein, this Agreement supersedes all prior agreements
and understandings between the parties with respect to its subject matter.
This Agreement may be amended only by a written instrument, duly executed by
Word Canada and Entertainment or their respective successors, assigns or legal
representatives. Any condition to a party's obligations hereunder may be
waived but only by a written instrument signed by the party entitled to the
benefits thereof. The failure or delay of any party at any time or times to
require performance of any provision or to exercise its rights with respect to
any provision hereof, shall in no manner operate as a waiver of or affect such
party's right at a later time to enforce the same.
14.8 HEADINGS. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretations of this Agreement.
14.9 SEVERABILITY. The invalidity of any term or terms of this Agreement
shall not affect any other term of this Agreement, which shall remain in full
force and effect.
14.10 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed (registered or certified mail, postage
prepaid, return receipt requested) or if sent by telecopy as follows:
If to Word Canada:
c/o Thomas Nelson, Inc.
Nelson Place at Elm Hill Pike
P.O. Box 14100
Nashville, Tennessee 37214-1000
Attn: Joe L. Powers, Executive Vice President and
Chief Financial Officer
Telecopy Number: (615) 883-6353
<PAGE> 28
- 23 -
with a copy to:
Thomas Nelson, Inc.
Nelson Place at Elm Hill Pike
P.O. Box 14100
Nashville, Tennessee 37214-1000
Attn: Stuart A. Heaton, Esq.
Telecopy Number: (615) 889-5940
and
Bass, Berry & Sims PLC
2700 First American Center
Nashville, Tennessee 37238
Attn: James H. Cheek, III, Esq.
Telecopy Number: (615) 742-6298
and
Farris, Vaughan, Wills & Murphy
Barristers and Solicitors
Box 10026 Pacific Centre S
700 W. Georgia Street
Vancouver, British Columbia
V7Y 1B3
Attn: Elizabeth J. Harrison, Q.C.
Telecopy Number: (604) 661-9431
If to Entertainment:
c/o Gaylord Entertainment Company
One Gaylord Drive
Nashville, Tennessee 37214
Attn: F. M. Wentworth, Jr., Esq.
Telecopy Number: (615) 316-6530
<PAGE> 29
- 24 -
with a copy to:
Loeb & Loeb LLP
45 Music Square West
Nashville, Tennessee 37203
Attn: Malcolm L. Mimms, Jr., Esq.
Telecopy Number: (615) 749-8308
and
Stikeman, Elliott
Barristers & Solicitors
Suite 1700, Park Place
666 Burrard Street
Vancouver, British Columbia
V6C 2X8
Attn: Jonathan S. Drance
Telecopy Number: (604) 681-1825
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
14.11 GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the Province of British Columbia applicable to
agreements made and to be performed wholly within that jurisdiction. Each of
the parties hereto hereby irrevocably and unconditionally consents to submit to
the non-exclusive jurisdiction of the courts of the Province of British
Columbia, for any litigation arising out of or relating to this Agreement and
the transactions contemplated hereby (and agrees not to commence any litigation
relating thereto except in such courts), and further agrees that service of any
process, summons, notice, or document by registered mail to its respective
address set forth in Section 14.11 shall be effective service of process for
any litigation brought against it in any court.
14.12 PUBLIC ANNOUNCEMENTS. Neither Word Canada nor Entertainment shall
make any public statements, including, without limitation, any press releases,
with respect to this Agreement or the Comprehensive Agreement and the
transactions contemplated hereby without the prior written consent of the other
party (which consent shall not be unreasonably withheld) except as may be
required by law. If a public statement is required to be made by law, the
parties shall consult with each other in advance as to the contents and timing
thereof.
<PAGE> 30
- 25 -
14.13 NO THIRD PARTY BENEFICIARIES. This Agreement is intended and agreed
to be for the benefit of the parties hereto, Sellers and Gaylord and no other
party shall accrue any benefit, claim or right of any kind whatsoever pursuant
to, under, by or through this Agreement.
14.14 INTERPRETIVE PROVISIONS. Whenever used in this Agreement, "to Word
Canada's knowledge" or "to the knowledge of Word Canada" shall mean the actual
knowledge of the corporate officers of Word Canada.
14.15 COUNTERPARTS. This Agreement may be executed simultaneously in one or
more counterparts, with the same effect as if the signatories executing the
several counterparts had executed one counterpart. All such executed
counterparts shall together constitute one and the same instrument. Either of
the parties hereto may deliver this Agreement by telecopy transmission to the
other of them in the manner specified in Section 14.10 hereof.
14.16 BEST EFFORTS TO RESOLVE DISCREPANCIES. The parties agree that, in the
event that any event or condition occurs under this Agreement which would give
rise to a failure of Word Canada to meet Entertainment's conditions to closing
pursuant to Article 8 or, in the event of a Word Canada Closing, a right of
indemnification by Entertainment against Sellers pursuant to Article 11 hereto
or Article 11 of the Comprehensive Agreement, the parties hereto agree to
negotiate in good faith to find a mutually satisfactory basis for proceeding
with the transactions contemplated hereby, in order that the Word Canada
Closing may occur prior to the occurrence of a termination event in Article
12.1(e).
14.17 REFERENCE DATE. This Agreement is dated for purposes of reference
only as November 21, 1996 but was actually executed on January 6, 1997.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officers, of Buyer and by each of Sellers on the date first
above written.
WORD COMMUNICATIONS LTD.
By:/s/ Joe L. Powers
---------------------------------
Title: Secretary
WORD ENTERTAINMENT (CANADA), INC.
By:/s/ Terry E. London
----------------------------------
Title: President
<PAGE> 1
Exhibit 4.1
SECOND AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"Second Amendment") is entered into effective as of the 15th day of November,
1996, by and among THOMAS NELSON, INC., a Tennessee corporation ("Nelson"),
SUNTRUST BANK, NASHVILLE, N.A., a national banking association ("SunTrust"),
the other banks and lending institutions listed on the signature pages hereof
and any assignees of SunTrust or such other banks and lending institutions that
become "Lenders" (SunTrust and such other banks, lending institutions and
assignees are referred to collectively herein as the "Lenders"), and SUNTRUST
BANK, NASHVILLE, N.A., in its capacity as agent for the Lenders (the "Agent").
WHEREAS, Lenders and Agent have entered into an Amended and Restated
Credit Agreement dated as of December 13, 1995 with Nelson, as amended by that
certain First Amendment to Amended and Restated Credit Agreement dated January
3, 1996 (as amended or otherwise modified from time to time, the "Credit
Agreement") wherein Lenders agreed to extend certain financial accommodations
to Nelson.
WHEREAS, Nelson has requested that Lenders consent to a certain asset
sale transaction, and Lenders are willing to consent to such transaction, and
to modify the application of certain provisions of the Credit Agreement with
respect to such transaction, upon the terms contained herein.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and adequacy of which are mutually
acknowledged, the parties hereby agree as follows:
Nelson has requested that the Lenders consent to the sale of the
assets of Nelson's music divisions, which include Word Music, Unison Music and
certain subsidiaries and affiliates of Word Music. Nelson has requested that
the Lenders consent to such asset sale and that, with respect to such asset
sale only, the Lenders waive the provisions of Section 11.03 of the Credit
Agreement. Nelson also has requested that the net proceeds of such asset sales
not be subject to the mandatory reduction of revolving loan commitments
provisions under Section 2.06 of the Credit Agreement.
The Lenders consent to Nelson's request with respect to such asset
sales and application of proceeds resulting from such sales, but only in
accordance with the terms of this Second Amendment, and conditioned on
satisfaction by Nelson of each of the following conditions:
1. The only assets of Nelson to be sold pursuant to the proposed
transaction (the "Asset Sales") are the music assets of the
subsidiaries and divisions of Nelson listed on Exhibit A
<PAGE> 2
attached hereto, which Exhibit A is hereby incorporated by this
reference.
2. The purchase price of the Asset Sales will aggregate at least
$100,000,000 and the net proceeds of the Asset Sales, after payment of
applicable taxes, will aggregate at least $82,000,000 (the "Net
Proceeds").
3. The Asset Sales shall be consummated, and the Net Proceeds shall be
applied as set forth below, on or prior to January 5, 1997 (the
"Closing Date").
4. On the Closing Date, the Credit Documents shall be amended (the
"Amendments") to reflect that the Revolving Loan Commitments shall be
permanently reduced to Seventy Five Million and No/100 Dollars
($75,000,000.00), subject to any increase or decrease from time to
time as a result of any reduction thereof pursuant to Section 2.04,
Section 2.05, Section 2.06 or Section 2.07 of the Credit Agreement,
any assignment thereof pursuant to Section 14.06 of the Credit
Agreement, or any amendment thereof pursuant to Section 14.02 of the
Credit Agreement, and subject to further revision as Nelson and
Lenders may agree in writing (the "Revolving Loan Commitments"). On
the Closing Date, the Net Proceeds shall be applied to repay the
Revolving Loans by the amount by which the Revolving Loans exceed the
amount of the Revolving Loan Commitments as reduced by this Section 4
(the "Repayment Amount"). Nelson intends to retire long-term debt with
the Net Proceeds and Nelson agrees that the debt to be retired and the
terms of such retirement shall be discussed with and approved in
writing by all of the Lenders. Nelson agrees that any breach of the
agreement set forth in the immediately preceding sentence shall be an
Event of Default under the Credit Agreement. Each Lenders' Pro Rata
Share of the Revolving Loan Commitments shall remain as set forth in
the Credit Agreement unless the Lenders otherwise agree in writing.
Nelson represents and warrants that any and all consents required to
be obtained by Nelson in connection with the Asset Sales and the application of
Net Proceeds have been obtained and delivered to Agent.
This Amendment shall be governed by and construed in accordance with
the laws of the State of Tennessee.
All defined terms used and not otherwise defined herein shall have the
meaning ascribed to such term in the Credit Agreement.
- 2 -
<PAGE> 3
Except as expressly stated herein, no other waiver of any term or
provision of the Credit Agreement shall be inferred to implied.
THOMAS NELSON, INC.
By: /s/ Joe L. Powers
-----------------------------------------
Title: Executive Vice President
--------------------------------------
ACCEPTED AND AGREED TO:
SUNTRUST BANK, NASHVILLE, N.A., as Agent
By: /s/ J. Fred Turner
-------------------------------------
Title: Executive Vice President
----------------------------------
Acceptance Date: November 19, 1996
------------------------
SUNTRUST BANK, NASHVILLE, N.A.
By: /s/ J. Fred Turner
-------------------------------------
Title: Executive Vice President
----------------------------------
Acceptance Date: November 19, 1996
------------------------
NATIONSBANK OF TEXAS, N.A.
By: /s/ Jennifer Zydney
-------------------------------------
Title: Vice President
----------------------------------
Acceptance Date: November 20, 1996
------------------------
- 3 -
<PAGE> 4
CREDITANSTALT-BANKVEREIN
By: /s/ Joseph P. Longosz
-------------------------------------
Title: Vice President
----------------------------------
By: /s/ Scott Krag
-------------------------------------
Title: Senior Associate
----------------------------------
Acceptance Date: November 19, 1996
------------------------
NATIONAL CITY BANK, KENTUCKY
By: /s/ Kevin L. Anderson
-------------------------------------
Title: Vice President
----------------------------------
Acceptance Date: November 19, 1996
------------------------
FIRST AMERICAN NATIONAL BANK
By: /s/ Scott Bane
-------------------------------------
Title: Senior Vice President
----------------------------------
Acceptance Date: November 19, 1996
------------------------
The undersigned join in the execution of this Second Amendment in
order to acknowledge their consent to the terms and provisions of this Second
Amendment and to confirm that the execution of this Second Amendment by the
parties hereto in no way affects the undersigneds' respective obligations under
the Amended and Restated Guaranty Agreement executed as of December 13, 1995 by
Word, Incorporated, a corporation organized and existing under the laws of the
State of Delaware, PPC, Inc., a corporation organized and existing under the
laws of the State of North Carolina, Editorial Caribe, Inc., a corporation
organized and existing under the laws of the State of Florida, Morningstar
Radio Network, Inc., a corporation organized and existing under the laws of the
State of Texas, Nelson Word Limited, a corporation organized and existing
under the laws of the United Kingdom, Word Communications, Ltd., a corporation
organized and existing under the laws of British Columbia, Canada, Word Direct,
Inc., a corporation organized and existing under the laws of the State of
Texas, Word Direct Partners, L.P., a limited partnership organized and existing
under the laws of the State of Texas, The C.R. Gibson Company, a corporation
organized and existing under the laws of the State of Delaware, 855673 Ontario
Limited, a corporation organized and existing under the laws of Ontario,
Canada, in favor of SunTrust
- 4 -
<PAGE> 5
Bank, Nashville, N.A., a national banking association, in its capacity as agent
for banks and other lending institutions parties to the Credit Agreement and
each assignee thereof becoming a "Lender" as provided therein. Each person
executing this Amendment on behalf of each of the undersigned is duly
authorized to so execute and deliver this Amendment on behalf of each of the
undersigned entities.
WORD, INCORPORATED
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
PPC, INC.
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
EDITORIAL CARIBE, INC.
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
MORNINGSTAR RADIO NETWORK, INC.
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
NELSON WORD LIMITED
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
- 5 -
<PAGE> 6
WORD COMMUNICATIONS, LTD.
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
WORD DIRECT, INC.
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
WORD DIRECT PARTNERS, L.P.
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
THE C. R. GIBSON COMPANY
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
855763 ONTARIO LIMITED
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
- 6 -
<PAGE> 1
Exhibit 4.2
THIRD AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the
"Third Amendment") is entered into as of the 7th day of January, 1997, by and
among THOMAS NELSON, INC., a Tennessee corporation ("Nelson"), SUNTRUST BANK,
NASHVILLE, N.A., a national banking association ("SunTrust"), the other banks
and lending institutions listed on the signature pages hereof and any assignees
of SunTrust or such other banks and lending institutions that become "Lenders"
(SunTrust and such other banks, lending institutions and assignees are referred
to collectively herein as the "Lenders"), and SUNTRUST BANK, NASHVILLE, N.A.,
in its capacity as agent for the Lenders (the "Agent").
R E C I T A L S:
WHEREAS, Lenders, Agent and Nelson entered into an Amended and
Restated Credit Agreement dated as of December 13, 1995, as amended by that
certain First Amendment to Amended and Restated Credit Agreement dated as of
January 3, 1996, and as further amended by that certain Second Amendment to
Amended and Restated Credit Agreement dated as of November 15, 1996 (the
"Second Amendment") (as amended or otherwise modified from time to time, the
"Credit Agreement"), wherein Lenders agreed to extend certain financial
accommodations to Nelson; and
WHEREAS, Nelson previously requested that Lenders consent to the sale
of all of the music assets of the subsidiaries and divisions of Nelson listed
on Exhibit A attached hereto and incorporated herein by this reference (the
"Music Asset Sales"), which consent was granted by Lenders pursuant to the
Second Amendment; and
WHEREAS, the Second Amendment requires Nelson and Lenders to amend the
Credit Documents (as defined in the Credit Agreement) in accordance with the
terms and provisions of the Second Amendment; and
WHEREAS, Nelson and Lenders desire to further amend the terms of the
Credit Documents in accordance with the terms contained herein.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and adequacy of which are mutually
acknowledged, the parties hereby agree as follows:
1. Defined Terms. All defined terms used and not otherwise
defined herein shall have the meaning ascribed to such terms in the Credit
Agreement.
<PAGE> 2
2. Extension of Closing Date. Section 3 of the Second Amendment
is hereby deleted in its entirety. The Music Asset Sales shall be consummated,
and the Actual Net Proceeds (as defined in Section 3 of this Third Amendment)
shall be applied as set forth in this Third Amendment, on or prior to January
31, 1997 (the "Closing Date").
3. Actual Net Proceeds. Nelson hereby represents and warrants to
Lenders that the actual net proceeds to Nelson resulting from the Music Asset
Sales shall be approximately $90,000,000.00 (the "Actual Net Proceeds").
4. Section 2.06 of the Credit Agreement. Lenders hereby agree
that the provisions of Section 2.06 of the Credit Agreement shall not apply to
Nelson's application of the Actual Net Proceeds. Lenders and Nelson agree that
Lenders' waiver of Section 2.06 of the Credit Agreement as set forth in this
Section 4 shall apply only to the application of the Actual Net Proceeds
resulting from the Music Asset Sales and shall not extend to any future Asset
Sales that may be contemplated by Nelson, without the express written consent
of Lenders.
5. Section 11.03 of the Credit Agreement. Lenders hereby agree
that the provisions of Section 11.03 of the Credit Agreement shall not apply to
the Music Asset Sales. Lenders and Nelson agree that Lender's waiver of Section
11.03 of the Credit Agreement as set forth in this Section 5 shall apply only
to the Music Asset Sales and shall not extend to any future Asset Sales that
may be contemplated by Nelson, without the express written consent of Lenders.
6. Prudential Debt. Notwithstanding any provision to the contrary
set forth in the Credit Agreement, Lenders hereby agree that approximately
$35,000,000.00 of the Actual Net Proceeds (the "Prudential Payment") shall be
utilized by Nelson to pay in full the indebtedness evidenced by the
$35,000,000.00 6.90% Series A Senior Notes executed by Nelson to The Prudential
Insurance Company of America dated January 3, 1996 and due December 31, 2007
(collectively the "Prudential Notes"). Nelson hereby represents and warrants
that no prepayment penalty is included in the Prudential Payment.
7. Balance of Actual Net Proceeds. Nelson and Lenders hereby
agree that the balance of the Actual Net Proceeds remaining after payment in
full of the Prudential Notes shall be applied to repay all of the outstanding
indebtedness evidenced by the Revolving Credit Notes on the Closing Date (the
"Revolver Paydown"). Nelson and Lenders further agree that the balance of the
Actual Net Proceeds remaining after payment in full of the Prudential Notes and
the Revolver Paydown, if any, shall be used by Nelson for working capital needs
and for other general corporate purposes
- 2 -
<PAGE> 3
(which shall include acquisitions and capital expenditures of the Consolidated
Companies).
8. Revolving Loan Commitments. Lenders and Nelson hereby agree
that the Revolving Loan Commitments are hereby permanently reduced to Seventy
Five Million and No/100 Dollars ($75,000,000.00), subject to any increase or
decrease from time to time as a result of any reduction thereof pursuant to
Section 2.04, Section 2.05, Section 2.06 or Section 2.07 of the Credit
Agreement, any assignment thereof pursuant to Section 14.06 of the Credit
Agreement, or any amendment thereof pursuant to Section 14.02 of the Credit
Agreement, and subject to further revision as Nelson and Lenders may agree in
writing (the "Revolving Loan Commitments"). Notwithstanding the provisions of
Section 2.06 of the Credit Agreement, the application of the Revolver Paydown
described in Section 7 hereof shall not result in a permanent reduction to the
Revolving Loan Commitments. After the application of the Revolver Paydown, the
Revolving Loan Commitments shall be Seventy Five Million and No/100 Dollars
($75,000,000.00), subject to the increases and decreases as set forth in the
first sentence of this Section 8.
9. Future Borrowings under Revolving Loan Commitments. Lenders
and Nelson hereby agree that any future reborrowings by Nelson under the
Revolving Loan Commitments, as reduced by Section 8 hereof, for any use other
than for working capital and for other general corporate purposes (which shall
include acquisitions and capital expenditures of the Consolidated Companies)
shall not be permitted without the express written consent of Lenders.
10. Governing Law. This Third Amendment shall be governed by and
construed in accordance with the laws of the State of Tennessee.
11. Full Force and Effect. Except as specifically amended by this
Third Amendment, all other terms and provisions of the Credit Agreement shall
remain in full force and effect.
12. No Other Waiver. Except as expressly stated herein, no other
waiver of any term or provision of the Credit Agreement shall be inferred or
implied.
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be
duly executed as of the date first above written.
THOMAS NELSON, INC.
By: /s/ Joe L. Powers
-------------------------------------
Title: Executive Vice President
----------------------------------
- 3 -
<PAGE> 4
ACCEPTED AND AGREED TO:
SUNTRUST BANK, NASHVILLE, N.A., as Agent
By: /s/ J. Fred Turner
--------------------------------------
Title: Executive Vice President
-----------------------------------
Acceptance Date: January 6, 1997
-------------------------
SUNTRUST BANK, NASHVILLE, N.A.
By: /s/ J. Fred Turner
--------------------------------------
Title: Executive Vice President
-----------------------------------
Acceptance Date: January 6, 1997
-------------------------
NATIONSBANK OF TEXAS, N.A.
By: /s/ Pamela S. Kurtzman
--------------------------------------
Title: Vice President
-----------------------------------
Acceptance Date: January 6, 1997
-------------------------
CREDITANSTALT-BANKVEREIN
By: /s/ Robert M. Biringer
--------------------------------------
Title: Executive Vice President
-----------------------------------
By: /s/ Joseph P. Longosz
--------------------------------------
Title: Vice President
-----------------------------------
Acceptance Date: January 6, 1997
-------------------------
NATIONAL CITY BANK, KENTUCKY
By: /s/ Kevin L. Anderson
--------------------------------------
Title: Vice President
-----------------------------------
Acceptance Date: January 6, 1997
-------------------------
- 4 -
<PAGE> 5
FIRST AMERICAN NATIONAL BANK
By: /s/ Scott M. Bane
--------------------------------------
Title: Senior Vice President
-----------------------------------
Acceptance Date: January 6, 1997
-------------------------
The undersigned join in the execution of this Third Amendment in order
to acknowledge their consent to the terms and provisions of this Third
Amendment and to confirm that the execution of this Third Amendment by the
parties hereto in no way affects the undersigneds' respective obligations under
the Amended and Restated Guaranty Agreement executed as of December 13, 1995 by
Word, Incorporated, a corporation organized and existing under the laws of the
State of Delaware, PPC, Inc., a corporation organized and existing under the
laws of the State of North Carolina, Editorial Caribe, Inc., a corporation
organized and existing under the laws of the State of Florida, Morningstar
Radio Network, Inc., a corporation organized and existing under the laws of the
State of Texas, Nelson Word Ltd., a corporation organized and existing under
the laws of the United Kingdom, Word Communications, Ltd., a corporation
organized and existing under the laws of British Columbia, Canada, Word Direct,
Inc., a corporation organized and existing under the laws of the State of
Texas, Word Direct Partners, L.P., a limited partnership organized and existing
under the laws of the State of Texas, The C.R. Gibson Company, a corporation
organized and existing under the laws of the State of Delaware, 855673 Ontario
Limited, a corporation organized and existing under the laws of Ontario,
Canada, in favor of SunTrust Bank, Nashville, N.A., a national banking
association, in its capacity as agent for banks and other lending institutions
parties to the Credit Agreement and each assignee thereof becoming a "Lender"
as provided therein. Each person executing this Amendment on behalf of each of
the undersigned is duly authorized to so execute and deliver this Amendment on
behalf of each of the undersigned entities.
WORD, INCORPORATED
By: /s/ Joe L. Powers
--------------------------------------
Title: Executive Vice President
-----------------------------------
PPC, INC.
By: /s/ Joe L. Powers
--------------------------------------
Title: Executive Vice President
-----------------------------------
- 5 -
<PAGE> 6
EDITORIAL CARIBE, INC.
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
MORNINGSTAR RADIO NETWORK, INC.
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
NELSON WORD LTD.
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
WORD COMMUNICATIONS, LTD.
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
WORD DIRECT, INC.
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
WORD DIRECT PARTNERS, L.P.
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
- 6 -
<PAGE> 7
THE C. R. GIBSON COMPANY
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
855763 ONTARIO LIMITED
By: /s/ Joe L. Powers
---------------------------------------
Title: Executive Vice President
------------------------------------
- 7 -
<PAGE> 8
<TABLE>
<CAPTION>
EXHIBIT A
Music Asset Sales
<S> <C>
1. Word Incorporated Music Assets
2. Unison Division Music Assets
3. Word Direct Partners, L.P. Music Assets
4. Nelson Word Ltd. Music Assets
5. Word Communications, Ltd. Music Assets
6. Word Non-Music Trademarks (Registration #'s 1,130,259 and
1,953,046)
</TABLE>
- 8 -
