-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B3eyzoW9iSzN++BNkltsNOdomOmYdkG65/4kYK0g8xEg9oEwzFPA11kRgHjuYC8G uts1nRcuqT6UA0my4Uwx2A== 0000950144-97-000503.txt : 19970122 0000950144-97-000503.hdr.sgml : 19970122 ACCESSION NUMBER: 0000950144-97-000503 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19970106 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970121 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NELSON THOMAS INC CENTRAL INDEX KEY: 0000071023 STANDARD INDUSTRIAL CLASSIFICATION: BOOKS: PUBLISHING OR PUBLISHING AND PRINTING [2731] IRS NUMBER: 620679364 STATE OF INCORPORATION: TN FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13788 FILM NUMBER: 97508501 BUSINESS ADDRESS: STREET 1: P O BOX 141000 CITY: NASHVILLE STATE: TN ZIP: 37214-1000 BUSINESS PHONE: 6158899000 MAIL ADDRESS: STREET 1: P O BOX 141000 CITY: NASHVILLE STATE: TN ZIP: 37214-1000 FORMER COMPANY: FORMER CONFORMED NAME: ROYAL PUBLISHERS INC DATE OF NAME CHANGE: 19721019 8-K 1 THOMAS NELSON, INC. FORM 8-K 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 - ------------------------------------------------------------------------------- (Address of Principal (Zip Code) Executive Offices) Registrant's telephone number, including area code: 615/889-9000 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 3 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 4 THOMAS NELSON, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1996 (Dollars in thousands)
Disposed Historical Business (a) Adjustments Pro Forma ---------- --------- ----------- --------- 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 ======== ======== ======== ========
See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet. 4 5 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 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)
Disposed Historical Business (a) Adjustments Pro Forma ---------- ----------- ----------- --------- 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 ======== ========
See Accompanying Notes to Unaudited Pro Forma Consolidated Statements of Operations. 6 7 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)
Disposed Historical Business (a) Adjustments Pro Forma ---------- -------- ----------- --------- 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) ======== ========
See Accompanying Notes to Unaudited Pro Forma Consolidated Statements of Operations. 7 8 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 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 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 11 INDEX TO EXHIBITS
Exhibit Page Numbers Number - ------- ------ 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.
EX-2.1 2 ASSET PURCHASE AGREEMENT DATED NOVEMBER 21, 1996 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 2 2 3
TABLE OF CONTENTS ----------------- ARTICLE HEADING PAGE - ------- ------- ---- 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
3 4 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.
4 5 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.
5 6 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
6 7 SCHEDULES 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
7 8 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
8 9 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, 1 10 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 2 11 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. 3 12 (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 4 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. 5 14 (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. 6 15 (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. 7 16 (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). 8 17 (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). 9 18 (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, 10 19 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. 11 20 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 12 21 (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 13 22 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; 14 23 (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; 15 24 (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. 16 25 (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 17 26 (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 18 27 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 19 28 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, 20 29 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. 21 30 (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 22 31 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; 23 32 (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. 24 33 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: 25 34 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 26 35 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; 27 36 (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. 28 37 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 29 38 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 30 39 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 31 40 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 32 41 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 33 42 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. 34 43 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. 35 44 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: 36 45 (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, 37 46 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 38 47 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 39 48 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 40 49 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 41 50 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) 42 51 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 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 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 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 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 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 EX-2.2 3 AMENDMENT NO.1 TO THE ASSET PURCHASE AGREEMENT 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, 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 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 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 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 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 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 8 [THIS SPACE INTENTIONALLY LEFT BLANK] 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 --------------------------------------- EX-2.3 4 ASSET PURCHASE AGREEMENT DATED JANUARY 6, 1997 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 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 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 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; 4 5 "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 5 6 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 6 7 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; 7 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; 8 9 "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 9 10 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 10 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 11 12 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 11 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; 12 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:- 13 15 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. 14 16 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 15 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 16 18 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 17 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 18 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 19 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. 20 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 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 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 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 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 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 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 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 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 ----------------------------------- EX-2.4 5 SUBSIDIARY PURCHASE AGREEMENT 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 2 TABLE OF CONTENTS
PAGE 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
3 -ii- 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
4 -iii- 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
5 -iv- 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
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 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: 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 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, 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. 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. 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; 12 - 7 - (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 13 - 8 - 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) 14 - 9 - 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. 15 - 10 - (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 16 - 11 - 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 17 - 12 - 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 18 - 13 - 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 19 - 14 - (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 20 - 15 - (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: 21 - 16 - 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. 22 - 17 - 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. 23 - 18 - 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. 24 - 19 - (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. 25 - 20 - 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 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 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 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 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. 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 EX-4.1 6 SECOND AMENDMENT TO CREDIT AGREEMENT 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 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 - 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 - 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 - 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 - 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 - EX-4.2 7 THIRD AMENDMENT TO CREDIT AGREEMENT 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. 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 - 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 - 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 - 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 - 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 - 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 - 8
EXHIBIT A Music Asset Sales 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)
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