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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 XXXXXX XXXXXX, INC.,
a Tennessee corporation ("Xxxxxx"), WORD, INCORPORATED, a Delaware corporation
("Word"), WORD DIRECT PARTNERS, L.P., a Texas limited partnership ("Word
Direct")(Xxxxxx, Word and Word Direct are each sometimes referred to as a
"Seller" and collectively as the "Sellers") and XXXXXXX 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,
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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
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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 Xxxxxx 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
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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:
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"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:
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"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 Xxxxxx 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
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(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 0000 Xxxxxxxxxxx Xxx,
Xxxxxxxx, Xxxxxxx Xxxxxxxx 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.
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IN WITNESS WHEREOF, the parties have executed this Amendment
as of the date first above written.
BUYER:
XXXXXXX ENTERTAINMENT COMPANY
By: /s/ Xxxxx X. London
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Title: Chief Financial and Administrative Officer
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SELLERS:
XXXXXX XXXXXX, INC.
By: /s/ Xxx X. Xxxxxx
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Title: Executive Vice President and Secretary
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WORD, INCORPORATED
By: /s/ Xxx X. Xxxxxx
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Title: Executive Vice President and Secretary
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WORD DIRECT PARTNERS, L.P.
By Word Direct, Inc., as general partner
By: /s/ Xxx X. Xxxxxx
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Title: Treasurer and Secretary
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