-----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, LuG3j7xuLf8lO/JeQjcXCWQKQyJCY72Kx267iy3oLarQEVBaQ/zZGjG+IIUe2b7E w1bGkd5YdGqjx6+FtA83jg== 0000071023-96-000002.txt : 19960530 0000071023-96-000002.hdr.sgml : 19960530 ACCESSION NUMBER: 0000071023-96-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960215 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NELSON THOMAS INC CENTRAL INDEX KEY: 0000071023 STANDARD INDUSTRIAL CLASSIFICATION: 2731 IRS NUMBER: 620679364 STATE OF INCORPORATION: TN FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13788 FILM NUMBER: 96520922 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 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1995 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-4095 THOMAS NELSON, INC. (Exact name of Registrant as specified in its charter) Tennessee 62-0679364 (State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification number) Nelson Place at Elm Hill Pike, Nashville, Tennessee 37214-1000 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (615)889-9000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ At February 13, 1996, the Registrant had outstanding 16,004,368 shares of Common Stock and 1,112,075 shares of Class B Common Stock. Part I Item 1. Financial Statements THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
December 31, March 31, December 31, 1995 1995 1994 ------------ ----------- ------------ (Unaudited) (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 3,368 $ 779 $ 1,564 Accounts receivable, less allowances of $13,571, $9,029 and $13,057 respectively 112,049 85,100 82,673 Inventories 98,479 69,351 65,468 Prepaid expenses 24,746 20,683 17,353 Deferred tax asset 11,649 7,714 12,673 ------------ ----------- ------------ Total Current Assets 250,291 183,627 179,731 PROPERTY, PLANT AND EQUIPMENT 37,157 16,226 17,000 OTHER ASSETS 23,469 14,688 16,469 GOODWILL 75,582 31,179 31,618 DEFERRED CHARGES 4,375 4,149 3,530 ------------ ----------- ------------ TOTAL ASSETS $ 390,874 $ 249,869 $ 248,348 ============ =========== ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 30,285 $ 32,419 $ 22,070 Accrued expenses 28,265 19,558 18,893 Dividends payable 657 537 428 Income taxes currently payable 2,157 -0- 5,050 Current portion of long-term debt and capital lease obligation 2,792 1,672 1,657 ------------ ----------- ------------ Total Current Liabilities 64,156 54,186 48,098 LONG-TERM DEBT 191,160 120,108 126,636 CAPITAL LEASE OBLIGATION 726 80 281 DEFERRED TAX LIABILITY AND OTHER LIABILITIES 7,510 2,766 2,181 SHAREHOLDERS' EQUITY Preferred stock, $1.00 par value, authorized 1,000,000 shares; none issued - - - Common stock, $1.00 par value, authorized 20,000,000 shares; issued 15,305,019, 12,362,377 and 9,895,678 shares, respectively 15,305 12,362 9,896 Class B common stock, $1.00 par value, authorized 5,000,000 shares; issued 1,109,993, 1,067,094 and 795,233 shares, respectively 1,110 1,067 795 Additional paid-in capital 69,678 18,211 20,963 Retained earnings 41,871 40,538 39,017 Deferred Compensation ( 1,050) - - Foreign currency translation adjustments 408 551 481 ------------ ----------- ------------ Total Shareholders' Equity 127,322 72,729 71,152 ------------ ----------- ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 390,874 $ 249,869 $ 248,348 ============ =========== ============ See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data)
Nine Months Ended Three Months Ended December 31, December 31, 1995 1994 1995 1994 ---------- ---------- ---------- --------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) NET REVENUES $ 230,018 $ 190,701 $ 87,446 $ 71,086 COST AND EXPENSES: Cost of goods sold 118,241 96,255 45,921 35,634 Selling, general and administrative 95,715 71,394 35,701 25,251 Amortization of goodwill and non-compete agreements 1,354 1,197 453 320 ---------- ---------- ---------- ---------- Total 215,310 168,846 82,075 61,205 ---------- ---------- ---------- ---------- OPERATING INCOME 14,708 21,855 5,371 9,881 Other income (expense) 658 164 420 66 Interest expense 7,858 6,330 3,178 2,300 ---------- ---------- ---------- ---------- Income before income taxes 7,508 15,689 2,613 7,647 Provision for income taxes 2,776 5,795 967 2,832 ---------- ---------- ---------- ---------- NET INCOME $ 4,732 $ 9,894 $ 1,646 $ 4,815 ========== ========== ========== ========== Weighted average number of shares outstanding: Primary 15,310 13,365 16,484 13,365 ========== ========== ========== ========== Fully-diluted 18,545 16,600 19,719 16,600 ========== ========== ========== ========== NET INCOME PER SHARE: Primary $ 0.31 $ 0.74 $ 0.10 $ 0.36 ========== ========== ========== ========== Fully-Diluted $ 0.31 $ 0.69 $ 0.10 $ 0.32 ========== ========== ========== ========== DIVIDENDS DECLARED PER SHARE $ 0.120 $ 0.096 $ 0.040 $ 0.032 ========== ========== ========== ========== See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Nine Months Ended December 31, 1995 1994 ----------- ----------- (Unaudited) (Unaudited) Cash Flows From Operating Activities: Net Income $ 4,732 $ 9,894 Adjustments to reconcile net income to net cash provided by (used in) operations: Depreciation and amortization 6,110 4,451 Gain on sale of fixed assets ( 502) -0- Changes in assets and liabilities, net of acquisitions: Accounts receivable, net ( 8,535) ( 24,135) Inventories ( 15,683) 1,825 Prepaid expenses ( 6,421) ( 9,601) Accounts payable and accrued expenses ( 8,854) 822 Income taxes currently payable and deferred 2,157 324 ----------- ----------- Net Cash Used In Operating Activities ( 26,996) ( 16,420) ----------- ----------- Cash Flows From Investing Activities: Capital expenditures ( 2,988) ( 1,550) Proceeds from sale of fixed assets 903 ( 2) Purchase of net assets of acquired companies - net of cash ( 69,527) ( 187) Changes in other assets and deferred charges ( 1,965) ( 1,787) ----------- ----------- Net Cash Used in Investing Activities ( 73,577) ( 3,526) ----------- ----------- Cash Flows From Financing Activities: Borrowings under line of credit 59,753 24,350 Payments on capital leases ( 694) ( 537) Payments on long-term debt ( 8,252) ( 408) Dividends paid ( 1,848) ( 1,283) Changes in other liabilities ( 107) ( 1,462) Proceeds from issuance of common stock 54,611 10 Common stock retired ( 158) ( 28) ----------- ----------- Net Cash Provided by Financing Activities 103,305 20,642 ----------- ----------- Effect of Translation Rate Changes ( 143) 80 ----------- ----------- Net Increase in Cash and Cash Equivalents 2,589 776 Cash and Cash Equivalents at Beginning of Period 779 788 ----------- ----------- Cash and Cash Equivalents at End of Period $ 3,368 $ 1,564 =========== =========== Supplemental Disclosures of Non- cash Investing and Financing Activities: Capital lease obligations incurred to lease new equipment $ 830 $ - =========== =========== Dividends accrued and unpaid $ 657 $ 428 =========== =========== See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note A - Basis of Presentation The accompanying unaudited consolidated financial statements reflect all adjustments (which are of a normal recurring nature) that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to SEC rules and regulations. The statements should be read in conjunction with the Summary of Significant Accounting Policies and notes to the consolidated financial statements included in the Company's annual report for the year ended March 31, 1995. The balance sheet and related information in these notes as of March 31, 1995, have been taken from the audited consolidated financial statements as of that date. Certain reclassifications have been made to conform presentation of the fiscal 1995 Financial Statements with fiscal 1996 presentation. Note B - Inventories Components of inventories consisted of the following (in thousands):
December 31, March 31, December 31, 1995 1995 1994 ------------ --------- ------------ Finished goods $ 78,040 $ 59,116 $ 57,767 Raw materials and work in process 20,439 10,235 7,701 ------------ --------- ------------ $ 98,479 $ 69,351 $ 65,468 ============ ========= ============
Note C - Cash Dividend On May 24, 1995, the Company's directors declared a cash dividend of $.04 per share. The dividend was paid August 14, 1995, to shareholders of record on July 31, 1995. On August 24, 1995, the Company's directors declared a cash dividend of $.04 per share. The dividend was paid November 20, 1995, to shareholders of record on November 6, 1995. On November 21, 1995, the Company's directors declared a cash dividend of $.04 per share. The dividend is payable February 19, 1996, to shareholders of record on February 5, 1996. Note D - Sale of Stock On July 24, 1995 the Company sold 2,875,000 shares of Common Stock at $20.00 per share to a group of underwriters in a registered public offering. The net proceeds to the Company of approximately $54.6 million were used to repay amounts outstanding under the Company's bank credit facilities. Note E - Acquisition On November 7, 1995, the Company completed its $9.00 per share cash tender offer for the outstanding shares of common stock of The C.R. Gibson Company ("Gibson") for approximately $67 million. The acquisition was financed primarily by a bridge loan for $60 million from senior bank creditors. On December 13, 1995, the Company amended its bank credit facilities to provide for aggregate facilities of $185 million and used a portion of the proceeds to repay the bridge loan. Gibson, headquartered in Norwalk, Connecticut, manufactures and markets a wide range of paper, gift and stationery products, primarily under the C.R. Gibson , Creative Papers and Clinton Prints brand names. Products include baby and wedding memory books, stationery, giftwrap, greeting cards, and paper tableware. The acquisition has been accounted for as a purchase, and Gibson's results of operations are included in the Company's consolidated financial statements since the date of acquisition. The total acquisition cost has been allocated to the net assets acquired based on the information currently available as to the estimated fair values. An evaluation of the acquired assets and liabilities is in progress. Upon completion of the evaluation, net additions or reduction, if any, in the fair values currently assigned will be credited, or charged, to cost in excess of fair value of assets acquired (goodwill). The following unaudited pro forma information combines the consolidated results of operations of the Company and Gibson as if the acquisition had occurred on April 1, 1994, after giving effect to amortization of goodwill and interest expense on borrowings to finance the acquisition. The pro forma information is not necessarily indicative of the results of operations which would have actually been obtained during such periods. While the Company believes that it will realize certain long-term synergies through the integration of certain operating functions, there can be no assurances that such synergies can be realized, and no amounts have been reflected in the pro forma adjustments to reflect such anticipated synergies.
Nine Months Ended December 31, 1995 1994 ------------ ----------- (Dollars in thousands, except per share data) Net Revenues $ 270,547 $ 241,122 Net Income ($ 1,446) $ 9,037 Net Income Per Share (Primary) ($ .09) $ .68
Note F - Subsequent Event On January 3, 1996, the Company issued $35 million of 6.90% Series A Senior Notes due 2007 (the "Series A Notes") and $15 million of 6.65% Series B Senior Notes due 2005 (the "Series B Notes"). The Series A Notes and Series B Notes are unsecured. Interest on the Series A Notes and Series B Notes is payable semiannually on the last day of June and December of each year commencing June 30, 1996. Principal payments in the amount of $3.5 million are due on the Series A Notes on the last day of each June and December commencing June 30, 2003. Principal payments in the amount of approximately $1.15 million are due on the Series B Notes on the last day of each June and December, of each year commencing December 31, 1999. The Company used the net proceeds of the Series A Notes and Series B Notes to reduce the borrowings outstanding under its bank credit facilities and, in turn, the aggregate amounts available for borrowing pursuant to the bank credit facilities was reduced from $185 million to $135 million on January 3, 1996. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW The following table sets forth certain selected statements of income data expressed as a percentage of net revenues and the percentage change in dollars in such data from the prior fiscal year.
Nine Months Ended Fiscal Year-to-Year December 31, Increase ----------------------- (Decrease) 1995 1994 ---------- ---------- ---------- (%) (%) (%) Net revenues: Publishing: Book 30.7 31.7 17.0 Bible 23.0 22.3 24.5 ---------- ---------- Total publishing 53.7 54.0 20.1 Music 31.3 34.9 8.1 Gift 12.7 8.8 73.0 Other 2.3 2.3 22.2 ---------- ---------- Total revenues 100.0 100.0 20.6 ---------- ---------- Expenses: Cost of goods sold 51.4 50.5 22.8 Selling, general and administrative 41.6 37.4 34.1 Amortization of goodwill and non-compete agreements 0.6 0.6 13.1 ---------- ---------- Total expenses 93.6 88.5 27.5 ---------- ---------- Operating income 6.4 11.5 (32.7) Income before income taxes 3.3 8.2 (52.1) Net income 2.1 5.2 (52.2)
The Company's net revenues fluctuate seasonally, with net revenues in the first fiscal quarter being lower than those for the remainder of the year. This seasonality is the result of increased consumer purchases of the Company's products during the traditional holiday periods. Due to this seasonality, the Company has historically incurred a loss during the first quarter of each fiscal year. In addition, the Company's quarterly operating results may fluctuate significantly due to the seasonality of new product introductions, the timing of selling and marketing expenses and changes in sales and product mixes. Results of Operations Net revenues for the first nine months of fiscal 1996 increased by $39.3 million or 20.6% over the comparable period in fiscal 1995 primarily due to volume increases arising from the introduction of new products in each of the Company's product lines and the purchase of Gibson on October 31, 1995. Net revenues increased for the first nine months of fiscal 1996 over the comparable period in fiscal 1995 as follows: gift products increased by $12.3 million or 73.0%; Bible products increased by $10.4 million or 24.5%; book products increased by $10.2 million or 17.0%; and music products increased by $5.4 million or 8.1%. Net revenues for the third quarter of fiscal 1996 increased by $16.4 million or 16.3% over the same period in fiscal 1995 primarily due to volume increases arising from the introduction of new products in each of the Company's product lines and the purchase of Gibson on October 31, 1995. Net revenues increased for the third quarter of fiscal 1996 over the same period in fiscal 1995 as follows: gift products increased by $10.1 million or 138.5%; Bible products increased by $5.7 million or 35.5%; and book products increased by $1.9 million or 9.4%. Net revenues decreased for the third quarter of fiscal 1996 from fiscal 1995 for music products by $2.2 million or 8.7%. Of the increase in net revenues derived from gift products, approximately $8 million was attributed to Gibson for the first nine months and the third quarter. Price increases did not have a material effect on net revenues. The Company's cost of goods sold for the first nine months of fiscal 1996 increased by $22.0 million or 22.8% over the same period in fiscal 1995 and, as a percentage of net revenues, increased from 50.5% to 51.4%. Cost of goods sold for the third fiscal quarter increased by $10.3 million or 28.9% over the same period in fiscal 1995 and, as a percentage of net revenues, increased from 50.1% to 52.5%. The increase of cost of goods sold, as a percentage of net revenues, was primarily the result of a shift in the mix of sales revenues within the Company's Music Division from proprietary music products to non-proprietary (distributed) music products. Distributed music products have lower gross margins. This distributed product revenue increase resulted from the timing and popularity of distributed product releases. Selling, general and administrative expenses for the first nine months of fiscal 1996 increased by $24.3 million or 34.1% and for the quarter by $10.5 million or 41.4% over the comparable period in fiscal 1995. These expenses, expressed as a percentage of net revenues, increased to 41.6% for the first nine months of fiscal 1996 from 37.4% for the same period in fiscal 1995, and increased to 40.8% for the third quarter from 35.5% for the same period in fiscal 1995. These increases resulted from higher than anticipated sales and marketing program costs within the Music Division incurred to increase sales of proprietary product. In addition, the expansion of certain direct marketing programs beyond the Company's capacity for fulfillment combined with a more competitive direct marketing sales environment resulted in increased advertising, bad debt and freight costs as a percentage of revenues. Costs incurred in connection with the development of alternative media products and channels in the Royal Media Division also adversely impacted selling, general and administrative expenses as a percentage of net revenues. The Company has implemented several initiatives to improve operating margins, including reducing salaries and benefits, suspending the developmental components of the Royal Media Division and limiting the Company's testing of new product offerings and sale of existing product offerings through direct marketing. Interest expense increased 24.1% and 38.2% for the first nine months and third quarter, respectively, over the same period in fiscal 1995 due to increased average borrowings for the first quarter of the fiscal year for working capital needs and for the third quarter for the Gibson acquisition and increased average interest rates. Liquidity and Capital Resources The primary sources of liquidity to meet the Company's future obligations and working capital needs are cash generated from operations and borrowings available under bank credit facilities. At December 31, 1995, the Company had $119.3 million outstanding, and $65.7 million available for borrowing under its credit facilities. Seasonality has a major impact on the Company's revenues which in turn have a direct bearing on the level of borrowings. On July 18, 1995, the Company consummated the sale of 2,875,000 shares of its Common Stock with net proceeds to the Company of approximately $54.6 million. The net proceeds were used to repay a portion of the borrowings under the credit facilities. During the nine months ended December 31, 1995, capital expenditures totaled approximately $3.0 million. The Company has no plans that will require significant capital expenditures for the remainder of fiscal 1996. On October 31, 1995, the Company, through a wholly owned subsidiary, Nelson Acquisition Corp., completed its $9.00 per share cash tender offer for all of the outstanding shares of common stock of The C.R. Gibson Company. The aggregate consideration paid of approximately $67 million was financed pursuant to the Company's bank credit facilities and a bridge loan with the Company's senior lenders in the aggregate principal amount of $60 million. As a result of the Gibson stock purchase and expanding working capital needs, on December 13, 1995 the Company amended its bank credit facilities to provide for aggregate facilities of $185 million and used a portion of the proceeds to repay the $60 million bridge loan. On January 3, 1996, the Company issued $35 million of 6.90% Series A Senior Notes due 2007 (the "Series A Notes") and $15 million of 6.65% Series B Senior Notes due 2005 (the "Series B Notes"). The Series A Notes and Series B Notes are unsecured. Interest on the Series A Notes and Series B Notes is payable semiannually on the last day of June and December of each year commencing June 30, 1996. Principal payments in the amount of $3.5 million are due on the Series A Notes on the last day of each June and December commencing June 30, 2003. Principal payments in the amount of approximately $1.15 million are due on the Series B Notes on the last day of each June and December, of each year commencing December 31, 1999. The Company used the net proceeds of the Series A Notes and Series B Notes to reduce the borrowings outstanding under its bank credit facilities and, in turn, the aggregate amounts available for borrowing pursuant to the bank credit facilities was reduced from $185 million to $135 million on January 3, 1996. PART II Item 6. Exhibits and Reports on Form 8-K (a) Exhibits required by Item 601 of Regulation S-K Exhibit Number ------- 2 - Tender Offer and Merger Agreement, dated as of September 13, 1995, as amended by Amendment No.1, dated as of October 16, 1995, among the Company, Nelson Acquisition Corp. and Gibson (filed as Exhibits (c)(1) and (c)(14) to the Company's joint Tender Offer Statement on Schedule 14D-1/Schedule 13D filed September 19, 1995, as amended, and is incorporated herein by reference). 4.1 - Amended and Restated Credit Agreement, dated as of December 13, 1995 and as amended January 3, 1996, 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. 4.2 - Note Purchase Agreement dated January 3, 1996, among the Company, The Prudential Insurance Company of America and Metropolitan Life Insurance Company. 27 - Financial Data Schedule (b) A Current Report of Form 8-K dated November 21, 1995 (the "Form 8-K"), was filed by the Company on November 21, 1995. The Form 8-K included information required pursuant to Item 2 thereunder relating to the acquisition by the Company of all of the issued and outstanding capital stock of Gibson consummated on November 7, 1995, in accordance with the terms of the Tender Offer and Merger Agreement. Required financial statements and pro forma financial information were not filed with the Form 8-K, in accordance with applicable rules. The following financial statements and pro forma financial information were filed on January 19, 1996, under cover of a Form 8-K/A amending the Form 8-K: i. The C.R. Gibson Company Consolidated Balance Sheets at December 31, 1994 and 1993 ii. The C.R. Gibson Company Consolidated Statements of Operations for the years ended December 31, 1994 and 1993 iii. The C.R. Gibson Company Consolidated Statements of Cash Flows for the years ended December 31, 1994 and 1993 iv. The C.R. Gibson Company Consolidated Statements of Shareholders' Equity at December 31, 1994 and 1993 v. The C.R. Gibson Company Unaudited Condensed Consolidated Balance Sheet at September 30, 1995 vi. The C.R. Gibson Company Unaudited Condensed Consolidated Statement of Income for the nine months ended September 30, 1995 vii. The C.R. Gibson Company Unaudited Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 1995 viii.Thomas Nelson, Inc. and Subsidiaries Unaudited Pro Forma Consolidated Balance Sheet at September 30, 1995 ix. Thomas Nelson, Inc. and Subsidiaries Unaudited Pro Forma Consolidated Statements of Income for the six months ended September 30, 1995 x. Thomas Nelson, Inc. and Subsidiaries Unaudited Pro Forma Consolidated Statements of Income for the six months ended September 30, 1994 xi. Thomas Nelson, Inc. and Subsidiaries Unaudited Pro Forma Consolidated Statements of Income for the twelve months ended March 31, 1995 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Thomas Nelson, Inc. (Registrant) February 14, 1996 BY /s/ Joe L. Powers - - ----------------------- -------------------------- Joe L. Powers Executive Vice President (Chief Accounting Officer) EX-27 2
5 This schedule contains summary financial information extracted from the Company's 10-Q for the period ended 12-31-95 and as qualified in its entirety by reference to such financial statements and the notes thereto. 1,000 9-MOS MAR-31-1996 APR-01-1995 DEC-31-1995 3,368 0 125,620 13,571 98,479 250,291 52,454 15,297 390,874 64,156 191,886 16,415 0 0 110,907 390,874 227,269 230,018 118,241 213,956 1,354 3,820 7,858 7,508 2,776 4,732 0 0 0 4,732 0.31 0.31
EX-4.1 3 EXECUTION COUNTERPART ================================================================= AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 13, 1995 among THOMAS NELSON, INC., THE LENDERS LISTED HEREIN, and SUNTRUST BANK, NASHVILLE, N. A. (formerly known as Third National Bank in Nashville), as Agent ================================================================= TABLE OF CONTENTS Page No. Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE I DEFINITIONS: CONSTRUCTION Section 1.01 Definitions . . . . . . . . . . . . . . . . . . 1 Section 1.02 Accounting Terms and Determination . . . . . . 17 Section 1.03 Other Definitional Terms . . . . . . . . . . . 18 Section 1.04 Exhibits and Schedules . . . . . . . . . . . . 18 ARTICLE II REVOLVING LOANS Section 2.01 Revolving Loan Commitment . . . . . . . . . . 18 Section 2.02 Use of Proceeds . . . . . . . . . . . . . . . 18 Section 2.03 Revolving Credit Notes: Repayment of Principal . . . . . . . . . . . . 19 Section 2.04 Automatic, Mandatory Reduction of Revolving Loan Commitments . . . . . . . . 19 Section 2.05 Mandatory Reduction of Revolving Loan Commitments Regarding Senior Debt . . . . 19 Section 2.06 Mandatory Reduction of Revolving Loan Commitments Regarding Asset Sales . . . . 20 Section 2.07 Voluntary Reduction of Revolving Loan Commitments . . . . . . . . . . . . . . . 20 Section 2.08 Extension of Initial Reduction Date and Final Maturity Date . . . . . . . . . . . 21 ARTICLE III GENERAL REVOLVING LOAN TERMS Section 3.01 Funding Notices . . . . . . . . . . . . . . . 22 Section 3.02 Disbursement of Funds . . . . . . . . . . . . 23 Section 3.03 Interest . . . . . . . . . . . . . . . . . . . 24 Section 3.04 Interest Periods . . . . . . . . . . . . . . . 24 Section 3.05 Fees . . . . . . . . . . . . . . . . . . . . . 25 Section 3.06 Voluntary Prepayments of Borrowings . . . . . . . . . . . . . . . . . . 25 Section 3.07 Payments, etc. . . . . . . . . . . . . . . . . 26 Section 3.08 Interest Rate Not Ascertainable, etc. . . . . 28 Section 3.09 Illegality . . . . . . . . . . . . . . . . . . 29 Section 3.10 Increased Costs . . . . . . . . . . . . . . . 29 Section 3.11 Lending Offices . . . . . . . . . . . . . . . 31 Section 3.12 Funding Losses . . . . . . . . . . . . . . . . 31 Section 3.13 Assumptions Concerning Funding of LIBOR Advances . . . . . . . . . . . . . . 31 Section 3.14 Apportionment of Payments . . . . . . . . . . 32 Section 3.15 Sharing of Payments, Etc. . . . . . . . . . . 32 Section 3.16 Capital Adequacy . . . . . . . . . . . . . . . 32 Section 3.17 Benefits to Guarantors . . . . . . . . . . . . 33 Section 3.18 Limitation on Certain Payment Obligations . . . . . . . . . . . . . . . . . 33 ARTICLE IV CONDITIONS TO BORROWINGS Section 4.01 Conditions Precedent to Initial Revolving Loans . . . . . . . . . . . . . . . 34 Section 4.02 Conditions to Revolving Loans . . . . . . . . 37 ARTICLE V NOTICE PERIOD REGARDING CONDITIONS . . . . . . . . . . . . . 38 ARTICLE VI REPRESENTATIONS AND WARRANTIES Section 6.01 Corporate Existence; Compliance with Law . . . . . . . . . . . . . . . . . . . 40 Section 6.02 Corporate Power; Authorization . . . . . . . . 40 Section 6.03 Enforceable Obligations . . . . . . . . . . . 40 Section 6.04 No Legal Bar . . . . . . . . . . . . . . . . . 41 Section 6.05 No Material Litigation . . . . . . . . . . . . 41 Section 6.06 Investment Company Act, Etc. . . . . . . . . . 41 Section 6.07 Margin Regulations . . . . . . . . . . . . . . 41 Section 6.08 Compliance With Environmental Laws . . . . . . 41 Section 6.09 Insurance . . . . . . . . . . . . . . . . . . 42 Section 6.10 No Default . . . . . . . . . . . . . . . . . . 42 Section 6.11 No Burdensome Restrictions . . . . . . . . . . 42 Section 6.12 Taxes . . . . . . . . . . . . . . . . . . . . 42 Section 6.13 Subsidiaries . . . . . . . . . . . . . . . . . 43 Section 6.14 Financial Statements . . . . . . . . . . . . . 43 Section 6.15 ERISA . . . . . . . . . . . . . . . . . . . . 44 Section 6.16 Patents, Trademarks, Licenses, Etc. . . . . . 45 Section 6.17 Ownership of Property . . . . . . . . . . . . 45 Section 6.18 Indebtedness . . . . . . . . . . . . . . . . . 45 Section 6.19 Financial Condition . . . . . . . . . . . . . 46 Section 6.20 Labor Matters . . . . . . . . . . . . . . . . 46 Section 6.21 Payment or Dividend Restrictions . . . . . . . 47 Section 6.22 Disclosure . . . . . . . . . . . . . . . . . . 47 Section 6.23 Financial Covenants . . . . . . . . . . . . . 47 ARTICLE VII REPRESENTATION AND WARRANTY NOTICE PERIOD . . . . . . . . . . 47 ARTICLE VIII REPRESENTATIONS AND WARRANTIES REGARDING ARTICLE VIII SUBSIDIARIES . . . . . . . . . . . . . . . . . . 48 ARTICLE IX AFFIRMATIVE COVENANTS Section 9.01 Corporate Existence, Etc. . . . . . . . . . . 48 Section 9.02 Compliance with Laws, Etc. . . . . . . . . . . 48 Section 9.03 Payment of Taxes and Claims, Etc. . . . . . . 49 Section 9.04 Keeping of Books . . . . . . . . . . . . . . . 49 Section 9.05 Visitation, Inspection, Etc. . . . . . . . . . 49 Section 9.06 Insurance; Maintenance of Properties . . . . . 49 Section 9.07 Reporting Covenants . . . . . . . . . . . . . 50 Section 9.08 Financial Covenants . . . . . . . . . . . . . 54 Section 9.09 Notices under Certain Other Indebtedness . . . . . . . . . . . . . . 55 Section 9.10 Additional Credit Parties and Collateral . . . . . . . . . . . . . . . . 55 Section 9.11 Gibson Debt . . . . . . . . . . . . . . . . . 55 Section 9.12 Schedule VIII Subsidiaries . . . . . . . . . . 56 ARTICLE X SCHEDULE AMENDMENTS . . . . . . . . . . . . . . . . . . . . . 56 ARTICLE XI NEGATIVE COVENANTS Section 11.01 Indebtedness . . . . . . . . . . . . . . . . . 56 Section 11.02 Liens . . . . . . . . . . . . . . . . . . . . 57 Section 11.03 Mergers, Acquisitions, Sales, Etc. . . . . . . 58 Section 11.04 Dividends, Etc. . . . . . . . . . . . . . . . 58 Section 11.05 Investments, Loans, Etc. . . . . . . . . . . . 59 Section 11.06 Sale and Leaseback Transactions . . . . . . . 60 Section 11.07 Transactions with Affiliates . . . . . . . . . 60 Section 11.08 Optional Prepayments . . . . . . . . . . . . . 60 Section 11.09 Changes in Business . . . . . . . . . . . . . 60 Section 11.10 ERISA . . . . . . . . . . . . . . . . . . . . 61 Section 11.11 Additional Negative Pledges . . . . . . . . . 61 Section 11.12 Limitation on Payment Restrictions Affecting Consolidated Companies . . . . . . . 61 Section 11.13 Actions Under Certain Documents . . . . . . . 61 Section 11.14 Schedule VIII Subsidiaries . . . . . . . . . . 61 ARTICLE XII EVENTS OF DEFAULT Section 12.01 Payments . . . . . . . . . . . . . . . . . . . 62 Section 12.02 Covenants Without Notice . . . . . . . . . . . 62 Section 12.03 Other Covenants . . . . . . . . . . . . . . . 62 Section 12.04 Representations . . . . . . . . . . . . . . . 62 Section 12.05 Non-Payments of Other Indebtedness . . . . . . 62 Section 12.06 Defaults Under Other Agreements . . . . . . . 62 Section 12.07 Bankruptcy . . . . . . . . . . . . . . . . . . 63 Section 12.08 ERISA . . . . . . . . . . . . . . . . . . . . 63 Section 12.09 Money Judgment . . . . . . . . . . . . . . . . 64 Section 12.10 Change in Control of Nelson . . . . . . . . . 64 Section 12.11 Default Under Other Credit Documents . . . . . . . . . . . . . . . . . . 64 Section 12.12 Attachments . . . . . . . . . . . . . . . . . 64 Section 12.13 Schedule VIII Subsidiaries . . . . . . . . . . 65 Section 12.14 Adjustment to Pro Rata Share . . . . . . . . . 65 ARTICLE XIII THE AGENT Section 13.01 Appointment of Agent . . . . . . . . . . . . . 66 Section 13.02 Authorization of Agent with Respect to the Security Documents . . . . . . 67 Section 13.03 Nature of Duties of Agent . . . . . . . . . . 67 Section 13.04 Lack of Reliance on the Agent . . . . . . . . 67 Section 13.05 Certain Rights of the Agent . . . . . . . . . 68 Section 13.06 Reliance by Agent . . . . . . . . . . . . . . 68 Section 13.07 Indemnification of Agent . . . . . . . . . . . 69 Section 13.08 The Agent in its Individual Capacity . . . . . 69 Section 13.09 Holders of Revolving Credit Notes . . . . . . 69 Section 13.10 Successor Agent . . . . . . . . . . . . . . . 70 ARTICLE XIV MISCELLANEOUS Section 14.01 Notices . . . . . . . . . . . . . . . . . . . 70 Section 14.02 Amendments, Etc. . . . . . . . . . . . . . . . 71 Section 14.03 No Waiver; Remedies Cumulative . . . . . . . . 71 Section 14.04 Payment of Expenses, Etc. . . . . . . . . . . 72 Section 14.05 Right of Setoff . . . . . . . . . . . . . . . 73 Section 14.06 Benefit of Agreement . . . . . . . . . . . . . 74 Section 14.07 Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . 76 Section 14.08 Independent Nature of Lenders, Rights . . . . . . . . . . . . . . . 77 Section 14.09 Counterparts . . . . . . . . . . . . . . . . . 77 Section 14.10 Effectiveness; Survival . . . . . . . . . . . 78 Section 14.11 Severability . . . . . . . . . . . . . . . . . 78 Section 14.12 Independence of Covenants . . . . . . . . . . 78 Section 14.13 Change in Accounting Principles, Fiscal Year or Tax Laws . . . . . . . . . . . 78 Section 14.14 Headings Descriptive; Entire Agreement . . . . . . . . . . . . . . . . . . 78 Section 14.15 Interest . . . . . . . . . . . . . . . . . . . 79 EXHIBIT A - Form of Assignment and Acceptance EXHIBIT B - Form of Escrow Letter EXHIBIT C - Document evidencing the name change from International Cassette Corp. to TNI Cassette Corp. EXHIBIT D - Document evidencing the name change from Word (UK) Limited to Nelson Word (UK) Limited EXHIBIT E - Evidence of SunTrust Ten Million Dollar Revolving Credit Facility SCHEDULE 4.01(h) - UCC Search Locations SCHEDULE 6.01 - Organization and Ownership of Subsidiaries SCHEDULE 6.05 - Pending and Threatened Litigation SCHEDULE 6.08(a) - Environmental Compliance SCHEDULE 6.08(b) - Environmental Notices SCHEDULE 6.08(c) - Environmental Permits SCHEDULE 6.11 - Burdensome Restrictions SCHEDULE 6.12 - Tax Filings and Payments SCHEDULE 6.13 - The C. R. Gibson Company and Subsidiaries SCHEDULE 6.14 - Leases SCHEDULE 6.15 - Employee Benefit Matters SCHEDULE 6.16 - Intellectual Property Matters SCHEDULE 6.17 - Ownership of Properties SCHEDULE 6.18 - Refinanced Indebtedness SCHEDULE 6.20 - Labor Matters SCHEDULE 6.21 - Dividend Restrictions SCHEDULE 6.23 - Second Fiscal Quarter 1995 Calculations SCHEDULE VIII - Subsidiaries of Thomas Nelson, Inc. Excluded from Certain Provisions of Amended and Restated Credit Agreement SCHEDULE 11.01(b)- Existing Indebtedness SCHEDULE 11.02 - Existing Liens AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDED AND RESTATED CREDIT AGREEMENT (as it may be amended and/or restated from time to time, this "Agreement") is made and entered into as of the 13th day of December, 1995, by and among THOMAS NELSON, INC., a Tennessee corporation ("Nelson"), SUNTRUST BANK, NASHVILLE, N. A. (formerly known as Third National Bank in Nashville), 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" as provided herein (SunTrust and such other banks, lending institutions and assignees are referred to collectively herein as the "Lenders"), and SUNTRUST BANK, NASHVILLE, N. A. (formerly known as Third National Bank in Nashville), in its capacity as agent for the Lenders and each successor agent for such Lenders as may be appointed from time to time pursuant to Article XIII (the "Agent"). W I T N E S S E T H: WHEREAS, Nelson, Lenders and Agent entered into a Credit Agreement dated as of November 30, 1992, as amended (the "Initial Credit Agreement") governing the terms of certain credit facilities more particularly described in the Initial Credit Agreement; and WHEREAS, Nelson has requested certain revisions to the Initial Credit Agreement, and Lenders and Agent have agreed to the revisions subject to the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, Nelson, the Lenders and the Agent agree upon the terms and subject to the conditions set forth herein as follows: ARTICLE I. DEFINITIONS: CONSTRUCTION Section 1.01. Definitions. In addition to the other terms defined herein, the following terms used herein shall have the meanings herein specified (to be equally applicable to both the singular and plural forms of the terms defined): "Advance" shall mean any principal amount advanced and remaining outstanding at any time under the Revolving Loans, which Advance shall be made or outstanding as a Base Rate Advance or a LIBOR Advance, as the case may be. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by, or under common control with, such Person, whether through the ownership of voting securities, by contract or otherwise. For purposes of this definition, "control," (including with correlative meanings, the terms "controlling," "controlled by," and "under common control with") as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person. "Agent" shall mean SunTrust Bank, Nashville, N. A. (formerly known as Third National Bank in Nashville), a national banking association, and any successor agent appointed pursuant to Section 13.10 hereto. "Agreement" shall mean this Amended and Restated Credit Agreement, as amended, restated or supplemented from time to time. "Applicable LIBOR Rate Margin" shall mean, with respect to all outstanding Borrowings consisting of LIBOR Advances hereunder, the relevant percentage indicated below based upon the percentages indicated for Nelson's Interest Coverage Ratio and Senior Funded Debt to Total Capital as determined on the date that is ninety (90) days after the end of each fiscal year of Nelson based upon the audited financial statements for the immediately preceding fiscal year, with such Applicable LIBOR Rate Margin to be immediately effective as of such date with respect to all outstanding amounts under the Revolving Loans: Percentage of Senior Funded Debt Interest to Total Capital Coverage Ratio -------------------------------- - - -------------- >45% 35%-45% <35% ================================ <2.5:1:0 1.00% .875% .75% 2.5:1.0-3.0:1.0 .875% .75% .625% >3.0:1.0-5.0:1.0 .75% .625% .50% >5.0:1.0 .625% .50% .375% Notwithstanding the foregoing, in the event Nelson does not deliver the audited financial statements for the immediately preceding fiscal year in a manner that permits the determinations required in the definition of Applicable LIBOR Rate Margin within ninety (90) days of the end of Nelson's fiscal year, commencing at the end of such ninety (90) day period and continuing until such audited financial statements are made available, the Applicable LIBOR Rate Margin shall be the highest rate set forth in the preceding chart. "Asset Sale" shall mean any sale or other disposition (or a series of related sales or other dispositions), including without limitation, loss, damage, destruction or taking, by any Consolidated Company to any Person other than a Consolidated Company, of any property or asset (including capital stock but excluding the issuance and sale by Nelson of its own capital stock) having an aggregate Asset Value in excess of $100,000, other than sales or other dispositions made in the ordinary course of business of any Consolidated Company. "Asset Value" shall mean, with respect to any property or asset of any Consolidated Company as of any particular date, an amount equal to the greater of (a) the then book value of such property or asset as established in accordance with GAAP, or (b) the then fair market value of such property or asset as determined in good faith by the board of directors of such Consolidated Company. "Assignment and Acceptance" shall mean an Assignment and Acceptance Agreement entered into by a Lender and an Eligible Assignee in accordance with the terms of this Agreement and substantially in the form of Exhibit A attached hereto. "Bankruptcy Code" shall mean The Bankruptcy Code of 1978, as amended and in effect from time to time (11 U.S.C. Section 101 et seq.). "Base Rate" shall mean the higher of (a) the rate that the Agent publicly announces from time to time to be its prime lending rate, as in effect from time to time, or (b) the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (0.50%) per annum (with any changes in such rates to be effective as of the date of change any change in such rates). The Agent's prime lending rate is a reference rate and does not necessarily represent the lowest or best rate charged to any customers. The Agent may make commercial loans or other loans at rates of interest at, above or below the Agent's prime lending rate. "Base Rate Advance" shall mean an Advance made or outstanding as a Revolving Loan bearing interest based on the Base Rate. "Borrowing" shall mean the incurrence by Nelson under any Revolving Loan Commitment of Advances of one Type concurrently having the same Interest Period or the continuation of an existing Borrowing or Borrowings in whole or in part. "Business Day" shall mean any day excluding Saturday, Sunday and any other day on which banks are required or authorized to close in Nashville, Tennessee or New York, New York. "Change in Control Provision" shall mean any term or provision contained in any indenture, debenture, note or other agreement or document evidencing or governing Indebtedness of Nelson evidencing debt or a commitment to extend loans in excess of $1,000,000.00 which requires or permits the holder(s) of such Indebtedness of Nelson to require that such Indebtedness of Nelson be redeemed, repurchased, defeased, prepaid or repaid, either in whole or in part, or the maturity of such Indebtedness of Nelson to be accelerated in any respect, as a result of a change in ownership of the capital stock of Nelson or voting rights with respect thereto. "Closing Date" shall mean the date on or before December 13, 1995, on which the Revolving Loans are made and the conditions set forth in Article IV are satisfied. "Closing Fee" has the meaning ascribed to it in Section 3.05(a). "Commitment Percentage shall mean the relevant percentage indicated below based upon the percentages indicated for Nelson's Interest Coverage Ratio and Senior Funded Debt to Total Capital as determined on the date that is ninety (90) days after the end of each fiscal year of Nelson based upon the audited financial statements for the immediately preceding fiscal year, with such Commitment Percentage to be immediately effective as of such date with respect to all outstanding amounts under the Revolving Loans: Percentage of Senior Funded Debt Interest to Total Capital Coverage Ratio -------------------------------- - - -------------- >45% 35%-45% <35% ================================ <2.5:1:0 .375% .30% .25% 2.5:1.0-3.0:1.0 .25% .25% .20% >3.0:1.0-5.0:1.0 .25% .20% .15% >5.0:1.0 .20% .15% .125% Notwithstanding the foregoing, in the event Nelson does not deliver the audited financial statements for the immediately preceding fiscal year in a manner that permits the determinations required in the definition of the Commitment Percentage within ninety (90) days of the end of Nelson's fiscal year, commencing at the end of such ninety (90) day period and continuing until such audited financial statements are made available, the Commitment Percentage shall be the highest percentage set forth in the preceding chart. "Consolidated Companies" shall mean, collectively, Nelson and all of its Subsidiaries, including Gibson and its Subsidiaries. "Consolidated EBIT" shall mean, for any fiscal period of Nelson, an amount equal to (a) the sum for such fiscal period of its Consolidated Net Income (Loss) plus, to the extent subtracted in determining such Consolidated Net Income (Loss), provisions for (i) taxes based on income, (ii) Consolidated Interest Expense, and (iii) charges taken in conformity with FASB-106, minus (b) any items of gain (or plus any items of loss) that were (A) not realized in the ordinary course of business, and (B) the result of any sale of assets. "Consolidated Interest Expense" shall mean, for any fiscal period of Nelson, total interest expense of the Consolidated Companies (including without limitation, interest expense attributable to capitalized leases) determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income (Loss)" shall mean, for any fiscal period of Nelson, the net income (or loss) of the Consolidated Companies on a consolidated basis for such period (taken as a single accounting period) determined in conformity with GAAP, but excluding therefrom (to the extent otherwise included therein) any income (or loss) of any Person accrued prior to the date such Person becomes a Subsidiary of Nelson or is merged into or consolidated with any Consolidated Company or all or substantially all of such Person's assets are acquired by any Consolidated Company. "Consolidated Net Worth" shall mean, as of any date of determination, Shareholders' Equity of Nelson. "Contractual Obligation" of any Person shall mean any provision of any security issued by such Person or of any agreement, instrument or undertaking under which such Person is obligated or by which it or any of the property owned by it is bound. "Contribution Agreement" shall mean the Amended and Restated Contribution Agreement executed of even date herewith by each of the Guarantors, as the same may be amended, restated or supplemented from time to time, and in a form acceptable to the Guarantors, Lenders and their respective counsel. "Creditanstalt - Bankverein Adjusted Pro Rata Share" shall equal the quotient of the following formula: (Creditanstalt - Bankverein's Pro Rata Share of the outstanding principal amount under the Revolving Loan Commitments ----------------------------------------------- (Total Outstanding Principal) "Credit Documents" shall mean, collectively, this Agreement, the Revolving Credit Notes, the Guaranty Agreement, the Gibson Pledge Agreement, the Word Pledge Agreement and all other Security Documents, if any. "Credit Parties" shall mean, collectively, each of Nelson, the Guarantors and every other Person who from time to time executes a Security Document with respect to all or any portion of the Obligations. "Default" shall mean any condition or event that, with notice or lapse of time or both, would constitute an Event of Default. "DOL" shall have the meaning ascribed to it in Section 9.07(i)(iv). "Dollar" and "U.S. Dollar" and the sign "$" shall mean lawful money of the United States of America. "Eligible Assignee" shall mean (a) a commercial bank organized under the laws of the United States, or any state thereof, having total assets in excess of $1,000,000,000 or any commercial finance or asset based lending Affiliate of any such commercial bank and (b) any Lender or any Affiliate of any Lender. "Environmental Laws" shall mean all federal, state and local statutes, laws, codes, regulations, rules and ordinances, and all orders or decrees issued, promulgated or approved thereunder, now or hereafter in effect (including, without limitation, those with respect to asbestos or asbestos containing material or exposure to asbestos or asbestos containing material), relating to, regulating or imposing liability or standards of conduct concerning (a) pollution or protection of the environment, (b) emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals or industrial toxic or hazardous constituents, substances or wastes, including without limitation, any Hazardous Substance, petroleum including crude oil or any fraction thereof, any petroleum product or other waste, chemicals or substances regulated by any Environmental Law into the environment (including without limitation, ambient air, surface water, ground water, land surface or subsurface strata), (c) the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of any Hazardous Substance, petroleum including crude oil or any fraction thereof, any petroleum product or other waste, chemicals or substances regulated by any Environmental Law, or (d) underground storage tanks and related piping, and emissions, discharges and releases or threatened releases therefrom, such Environmental Laws to include, without limitation (i) the Clean Air Act (42 U.S.C. Section 7401 et seq.), (ii) the Clean Water Act (33 U.S.C. Section 1251 et sea.), (iii) the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), (iv) the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), (v) the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act (42 U.S.C. Section 9601 et seq.), (vi) any "Superfund" or "Superlien" law, including without limitation the Tennessee Hazardous Waste Management Acts of 1977 and of 1983 and the Tennessee Hazardous Waste Reduction Act of 1990, as amended, Tennessee Code Annotated Section 68-212-101 et seq., Section 68-212-201 et seq. and Section 68-212-301 et seq., and (vii) all applicable national and local laws or regulations with respect to environmental control. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended and in effect from time to time. "ERISA Affiliate" shall mean, with respect to any Person, each trade or business (whether or not incorporated) that is a member of a group of which that Person is a member and that is under common control within the meaning of the regulations promulgated under Section 414 of the Tax Code. "Escrow Letter" shall mean a letter agreement between Nelson and the Agent substantially in the form of Exhibit B attached hereto. "Event of Default" shall have the meaning ascribed to it in Article XII. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time, and any successor statute thereto. "Executive Officer" shall mean with respect to any Person, the president, vice presidents, chief financial officer, treasurer, secretary and any Person holding comparable offices or duties. "FASB-106" shall mean Financial Accounting Standards Board Statement No. 106, as in effect on the date of this Agreement, specifying applicable accounting principles with respect to accrual of the expected cost of providing post retirement benefits to employees or their dependents. "Federal Funds Rate" shall mean for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with member banks of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of Atlanta, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three (3) Federal funds brokers of recognized standing selected by the Agent. "Final Maturity Date" shall mean the earlier of (a) December 13, 2002, and (b) the date on which all amounts outstanding under this Agreement have been declared or have automatically become due and payable pursuant to the provisions of Article XII. "First American National Bank Adjusted Pro Rata Share" shall equal the quotient of the following formula: (First American National Bank's Pro Rata Share of the outstanding principal amount under the Revolving Loan Commitments ------------------------------------------------- (Total Outstanding Principal) "Funded Debt" shall mean all Indebtedness for money borrowed, Indebtedness evidenced or secured by purchase money Liens, capitalized leases, conditional sales contracts and similar title retention debt instruments, including any current maturities of such Indebtedness that by its terms matures more than one year from the date of any calculation thereof and/or that is renewable or extendable at the option of the obligor to a date beyond one (1) year from such date of calculation. The calculation of Funded Debt shall include all Funded Debt of the Consolidated Companies, plus all Funded Debt of other Persons to the extent guaranteed by a Consolidated Company, to the extent supported by a letter of credit issued for the account of a Consolidated Company, or as to which and to the extent which a Consolidated Company or its assets otherwise have become liable for payment thereof. "GAAP" shall mean generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination. "Gibson shall mean The C. R. Gibson Company, a Delaware corporation. "Gibson Corrections" shall have the meaning ascribed to it in Article VII. "Gibson Debt" shall mean certain indebtedness (consisting of two term loans) currently owed by Gibson to MetLife in the aggregate outstanding principal amount of Twelve Million and No/100 Dollars ($12,000,000.00) evidenced by two long-term loan agreements. "Gibson Information" shall have the meaning ascribed to it in Article V. "Gibson Pledge Agreement" shall mean that certain Pledge Agreement executed of even date herewith by Nelson in favor of the Agent providing for the grant of a first- priority Lien on all outstanding common stock of Gibson, as the same may be amended, restated or supplemented from time to time, and in a form acceptable to Nelson, the Lenders and their respective counsel. "Guarantors" shall mean, collectively, all of Nelson's Subsidiaries, including without limitation, Gibson (upon its acquisition by Nelson), and their respective successors and permitted assigns, but excluding those Subsidiaries of Nelson set forth on Schedule VIII. "Guaranty" shall mean any contractual obligation, contingent or otherwise, of a Person with respect to any Indebtedness or other obligation or liability of another Person, including without limitation, any such Indebtedness, obligation or liability directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable, including Contractual Obligations (contingent or otherwise) arising through any agreement to purchase, repurchase or otherwise acquire such Indebtedness, obligation or liability or any security therefor, or any agreement to provide funds for the payment or discharge thereof (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income or other financial condition or to make any payment other than for value received. The amount of any Guaranty shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which guaranty is made or, if not so stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Guaranty Agreement" shall mean the joint and several Amended and Restated Guaranty Agreement executed of even date herewith by each of the Guarantors in favor of the Lenders and the Agent, as the same may be amended, restated or supplemented from time to time, and in a form acceptable to the Guarantors, Lenders and their respective counsel. "Hazardous Substance" shall have the meaning assigned to that term in the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Acts of 1986. "Indebtedness" of any Person shall mean, without duplication (a) all obligations of such Person that in accordance with GAAP would be shown on the balance sheet of such Person as a liability (including, without limitation, obligations for borrowed money and for the deferred purchase price of property or services, and obligations evidenced by bonds, debentures, notes or other similar instruments); (b) all rental obligations under leases required to be capitalized under GAAP; (c) all Guaranties of such Person (including contingent reimbursement obligations under undrawn letters of credit); (d) Indebtedness of others secured by any Lien upon property owned by such Person, whether or not assumed; and (e) obligations or other liabilities under currency contracts, interest rate hedging contracts or similar agreements or combinations thereof. "Indemnitee" shall have the meaning ascribed to it in Section 14.04(c). "Indenture" means that certain Indenture dated as of November 30, 1992, between Nelson and Boatmen's Trust Company, as Trustee, evidencing Subordinated Debt. "Initial Reduction Date" shall mean December 13, 1998, unless further extended in accordance with Section 2.08. "Interest Coverage Ratio" shall mean, as of the end of any fiscal period of Nelson, the ratio of (a) Consolidated EBIT to (b) the sum of Consolidated Interest Expense. "Interest Period" shall have the meaning ascribed to it in Section 3.04. "Investment" shall mean, when used with respect to any Person, any direct or indirect advance (excluding advances made to authors or artists in the ordinary course of business), loan or other extension of credit (other than the creation of receivables in the ordinary course of business) or capital contribution by such Person (by means of transfers of property to others or payments for property or services for the account or use of others, or otherwise) to any Person, or any direct or indirect purchase or other acquisition by such Person of, or of a beneficial interest in, capital stock, partnership interests, bonds, notes, debentures or other securities issued by any other Person. "IRS" shall have the meaning ascribed to it in Section 9.07(i)(iv). "Lender" or "Lenders" shall mean SunTrust, the other banks and lending institutions listed on the signature pages hereof and each assignee thereof, if any, pursuant to Section 14.06(c). "Lending Office" shall mean for each Lender the office such Lender may designate in writing from time to time to Nelson and the Agent with respect to each Type of Revolving Loan. "LIBOR" shall mean, for any Interest Period, the offered rates for deposits in U.S. Dollars for a period comparable to the Interest Period and in an amount comparable to the Agent's portion of such Advances determined by the Agent from Telerate Page 3750 as of 11:00 A.M. (London, England time) on the day that is two Business Days prior to the first day of the Interest Period. If two or more of such rates appear on the Telerate Page, the rate for that Interest Period shall be the arithmetic mean of such rates, rounded, if necessary, to the next higher 1/16 of 1.0%, if the rate is not such a multiple, and in either case as such rates may be adjusted for any applicable reserve requirements. If such rate is unavailable on such service, then such rate shall be determined by and based on any other interest rate reporting service of recognized standing designated in writing by the Agent to Nelson and the other Lenders. "LIBOR Advance" shall mean any Advance made or outstanding as a Revolving Loan bearing interest at LIBOR. "Lien" shall mean any mortgage, pledge, security interest, lien, charge, hypothecation, assignment, deposit arrangement, title retention, preferential property right, trust or other arrangement having the practical effect of the foregoing and shall include the interest of a vendor or lessor under any conditional sale agreement, capitalized lease or other title retention agreement. "Margin Regulations" shall mean Regulation G, Regulation T, Regulation U and Regulation X of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time. "Materially Adverse Effect" shall mean any materially adverse change in (a) the business, results of operations, financial condition, assets or prospects of the Consolidated Companies, taken as a whole, (b) the ability of Nelson to perform its obligations under this Agreement, or (c) the ability of the other Credit Parties (taken as a whole) to perform their respective obligations under the Credit Documents. "MetLife" means Metropolitan Life Insurance Company. "Multiemployer Plan" shall have the meaning ascribed to it in Section 4001(a)(3) of ERISA. "National City Bank, Kentucky (formerly known as First National Bank of Louisville) Adjusted Pro Rata Share" shall equal the quotient of the following formula: (National City Bank, Kentucky's (formerly known as First National Bank of Louisville) Pro Rata Share of the outstanding principal amount under the Revolving Loan Commitments the outstanding principal amount under the National City Bank, Kentucky (formerly known as First National Bank of Louisville) Letter of Credit Facility ------------------------------------------- (Total Outstanding Principal) "National City Bank, Kentucky (formerly known as First National Bank of Louisville) Letter of Credit Facility" shall mean that certain $8,000,000 commercial letter of credit facility pursuant to which National City Bank, Kentucky (formerly known as First National Bank of Louisville) issues commercial trade letters of credit for the account of Nelson, which facility shall mature July 31, 1996. "NationsBank of Texas, N.A. Adjusted Pro Rata Share" shall equal the quotient of the following formula: (NationsBank of Texas, N.A.'s Pro Rata Share of the outstanding principal amount under the Revolving Loan Commitments ------------------------------------------- (Total Outstanding Principal) "Nelson" shall mean Thomas Nelson, Inc., a Tennessee corporation, its successors and permitted assigns. "Net Proceeds" shall mean, with respect to any Asset Sale, all cash, including (a) cash receivables (when received) by way of deferred payment pursuant to a promissory note, a receivable or otherwise (other than interest payable thereon), and (b) with respect to Asset Sales resulting from the loss, damage, destruction or taking of property, the proceeds of insurance settlements and condemnation awards (other than the portion of the proceeds of such settlements and such awards that are used to repair, replace, improve or restore the item of property in respect of which such settlement or award was paid provided that the recipient of such proceeds enters into a binding contractual obligation to effect such repair, replacement, improvement or restoration within six (6) months of such loss, damage or destruction and completes such repair, replacement, improvement or restoration within twelve (12) months of such loss, damage, destruction or taking) as and when received in cash, in either case, received by any Consolidated Company as a result of or in connection with such transaction, net of reasonable sale expenses, fees and commissions incurred, and taxes paid or expected to be payable within the succeeding 12-month period in connection therewith, and net of any payment required to be made with respect to the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Revolving Loans) secured by a Lien (to the extent permitted by Section 11.02) upon the asset sold in such Asset Sale. "Notice of Borrowing" shall have the meaning ascribed to it in Section 3.01(a). "Notice of Change" shall have the meaning ascribed to it in Article X. "Notice of Conversion/Continuation" shall have the meaning ascribed to it in Section 3.01(b). "Notice of Extension" shall have the meaning ascribed to it in Section 2.08(a). "Notice Period" shall have the meaning ascribed to it in Article V. "Obligations" shall mean all amounts owing to the Agent or any Lender pursuant to the terms of this Agreement or any other Credit Document, including without limitation, all Revolving Loans (including all principal and interest payments due thereunder), fees, expenses, indemnification and reimbursement payments, indebtedness, liabilities, and obligations of the Credit Parties, direct or indirect, absolute or contingent, liquidated or unliquidated, now existing or hereafter arising, together with all renewals, extensions, modifications or refinancings thereof. "Payment Office" shall mean, at any time for any Lender, the Payment Office set forth opposite such Lender's name on the signature pages hereof, as the same may be amended pursuant to Section 14.02. "PBGC" shall mean the Pension Benefit Guaranty Corporation, or any successor thereto. "Person" shall mean any individual, partnership, firm, corporation, association, limited liability company, joint venture, trust or other entity, or any government or political subdivision or agency, department or instrumentality thereof. "Plan" shall mean any "employee benefit plan" (as defined in Section 3(3) of ERISA), including, but not limited to, any defined benefit pension plan, profit sharing plan, money purchase pension plan, savings or thrift plan, stock bonus plan, employee stock ownership plan, Multiemployer Plan, or any plan, fund, program, arrangement or practice providing for medical (including post-retirement medical), hospitalization, accident, sickness, disability, or life insurance benefits. "Prescribed Forms" shall mean such duly executed forms or statements, and in such number of copies, which may, from time to time, be prescribed by law and which, pursuant to applicable provisions of (a) an income tax treaty between the United States and the country of residence of the Lender providing the form or statement, (b) the Tax Code, or (c) any applicable rule or regulation under the Tax Code, permit Nelson to make payments hereunder for the account of such Lender free, or subject to a reduced rate, of deduction or withholding of income or similar taxes. "Pro Rata Share" shall mean, with respect to each of the Revolving Loan Commitments of each Lender and each Revolving Loan to be made by and each payment (including, without limitation, any payment of principal, interest or fees) to be made to each Lender, the percentage designated as such Lender's Pro Rata Share of such Revolving Loan Commitments, such Revolving Loans or such payments, as applicable, set forth under the name of such Lender on the respective signature page for such Lender, in each case as such Pro Rata Share may change from time to time as a result of assignments or amendments made pursuant to this Agreement. "Reduction Amount" shall mean a constant amount equal to fifteen percent (15%) of the amount of the Revolving Loan Commitments outstanding on the Initial Reduction Date. "Refinanced Indebtedness" shall mean the Indebtedness of the Consolidated Companies to be paid on the Closing Date with the proceeds of the initial Borrowings under the Revolving Loan Commitments as more particularly described on Schedule 6.18. "Required Lenders" shall mean at any time Lenders holding at least sixty-six and two-thirds percent (66-2/3%) of the then aggregate amount of the Revolving Loan Commitments. "Requirement of Law" for any Person shall mean the articles or certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation, or determination of an arbitrator or a court or other governmental authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Revolving Credit Notes" shall mean, collectively, the Consolidated, Amended and Restated Revolving Credit Notes evidencing the Revolving Loans executed of even date herewith by Nelson to the order of Lenders as they may be amended and/or restated from time to time, and in a form acceptable to Nelson, Lenders and their respective counsel. "Revolving Loan Commitment" shall mean, at any time for any Lender, the amount of the Revolving Loan Commitment set forth opposite such Lender's name on the signature pages hereof, as the same may be increased or decreased 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, any assignment thereof pursuant to Section 14.06, or any amendment thereof pursuant to Section 14.02. "Revolving Loans" shall mean, collectively, the revolving credit loans made to Nelson by the Lenders pursuant to Section 2.01. "Security Documents" shall mean, collectively, the Guaranty Agreement, the Gibson Pledge Agreement, Word Pledge Agreement and each other guaranty agreement, mortgage, deed of trust, security agreement, pledge agreement or other security or collateral document guaranteeing or securing the Obligations, as the same may be amended, restated or supplemented from time to time. "Senior Debt" shall mean other Indebtedness of Nelson not to exceed $62,000,000, which Indebtedness shall be (a) on a parity with the obligations of Nelson and any other Credit Party arising under this Agreement, the Revolving Credit Notes, the Guaranty Agreement and all other Credit Documents, and (b) issued upon terms and conditions (including without limitation matters regarding interest rates, payment terms, maturities, amortization schedules, covenants, defaults and remedies) satisfactory in all respects to the Agent and the Required Lenders, as evidenced by the written approval of the Agent and Required Lenders; provided, however that the Consolidated Companies, Lenders and Agent acknowledge and agree that (i) the terms and conditions of the Senior Debt shall be no more restrictive than the terms and conditions of the Revolving Loans, (ii) all Senior Debt shall provide for the payment of interest only for at least seven (7) years from the date of issuance (except for Senior Debt in the principal amount not to exceed $15,000,000 owed to MetLife, which shall provide for the payment of interest only for at least three and one-half (3 1/2) years from the date of issuance), and (iii) the average life of the Senior Debt shall at all times be greater than seven (7) years. In no event shall the Senior Debt be deemed to include the SunTrust Letter of Credit Facility or the National City Bank, Kentucky (formerly known as First National Bank of Louisville) Letter of Credit Facility. The Gibson Debt is included in and shall be a part of the Senior Debt. "Senior Funded Debt" shall mean all Funded Debt minus the Subordinated Debt. "Shareholders' Equity" shall mean, with respect to any Person as at any date of determination, shareholders' equity of such Person determined in accordance with GAAP. "Subordinated Debt" shall mean other Indebtedness of Nelson subordinated to all obligations of Nelson or any other Credit Party arising under this Agreement, the Revolving Credit Notes, the Guaranty Agreement and all other Credit Documents on terms and conditions satisfactory in all respects to the Agent and the Required Lenders, including without limitation, with respect to interest rates, payment terms, maturities, amortization schedules, covenants, defaults, remedies and subordination provisions, as evidenced by the written approval of the Agent and Required Lenders. "Subsidiary" shall mean, with respect to any Person, any corporation or other entity (including, without limitation, partnerships, joint ventures, and associations) regardless of its jurisdiction of organization or formation, at least a majority of the total combined voting power of all classes of voting stock or other ownership interests of which shall, at the time as of which any determination is being made, be owned by such Person, either directly or indirectly through one or more other Subsidiaries. "SunTrust" shall mean SunTrust Bank, Nashville, N. A. (formerly known as Third National Bank in Nashville), a national banking association. "SunTrust Adjusted Pro Rata Share" shall equal the quotient of the following formula: (SunTrust's Pro Rata Share of the outstanding principal amount under the Revolving Loan Commitments + the outstanding principal amount under the SunTrust Ten Million Dollar Revolving Credit Facility + the outstanding principal amount under the SunTrust Letter of Credit Facility -------------------------------------------------------- (Total Outstanding Principal) "SunTrust Letter of Credit Facility" shall mean that certain $4,000,000 commercial letter of credit facility pursuant to which SunTrust issues commercial trade letters of credit for the account of Nelson, which facility shall mature September 30, 1996. "SunTrust Ten Million Dollar Revolving Credit Facility" shall have the meaning ascribed to it in Section 11.01(f). "Tax Code" shall mean the Internal Revenue Code of 1986, as amended and in effect from time to time. "Taxes" shall mean any present or future taxes, levies, imposts, duties, fees, assessments, deductions, withholdings or other charges of whatever nature, including without limitation, income, receipts, excise, property, sales, transfer, license, payroll, withholding, social security and franchise taxes now or hereafter imposed or levied by the United States, or any state, local or foreign government or by any department, agency or other political subdivision or taxing authority thereof or therein and all interest, penalties, additions to tax and similar liabilities with respect thereto. "Telerate" shall mean, when used in connection with any designated page and LIBOR, the display page so designated on the Dow Jones Telerate Service (or such other page as may replace that page on that service for the purpose of displaying rates comparable to LIBOR). "Total Capital" shall mean the sum of Funded Debt and Consolidated Net Worth of the Consolidated Companies. "Total Commitment" shall mean, for any Lender at any time, such Lender's Revolving Loan Commitment, and "Total Commitments" shall mean, for all Lenders at any time, the sum of the Total Commitment of all Lenders. "Total Outstanding Principal" shall mean the outstanding principal amount under the Revolving Loan Commitments, plus the outstanding principal amount under the SunTrust Ten Million Dollar Revolving Credit Facility, plus the outstanding principal amount under the SunTrust Letter of Credit Facility, plus the outstanding principal amount under the National City Bank, Kentucky (formerly known as First National Bank of Louisville) Letter of Credit Facility. "Type" of Borrowing shall mean a Borrowing consisting of Base Rate Advances or LIBOR Advances. "UCC Information" shall have the meaning ascribed to it in Article V. "Word Pledge Agreement" shall mean that certain Amended and Restated Pledge Agreement of even date herewith executed by Nelson in favor of the Agent providing for the grant of a first- priority Lien on all outstanding common stock of Word, Incorporated, as the same may be amended, restated or supplemented from time to time, and in a form acceptable to Nelson, the Lenders and their respective counsel. Section 1.02. Accounting Terms and Determination. Unless otherwise defined or specified herein, all accounting terms shall be construed herein, all accounting determinations hereunder shall be made, all financial statements required to be delivered hereunder shall be prepared, and all financial records shall be maintained in accordance with GAAP; provided, however, that compliance with the financial covenants and calculations set forth in Section 9.08, Article XI and elsewhere herein, and in the definitions used in such covenants and calculations, shall be calculated, made and applied in accordance with GAAP as in effect on the date of this Agreement applied on a basis consistent with the preparation of the financial statements referred to in Section 6.14 unless and until Nelson and the Required Lenders enter into an agreement with respect thereto in accordance with Section 14.13. Section 1.03. Other Definitional Terms. The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and the words Article, Section, Schedule, Exhibit and like references are to this Agreement unless otherwise specified. Section 1.04. Exhibits and Schedules. All Exhibits and Schedules attached hereto are by reference made a part hereof. ARTICLE II. REVOLVING LOANS Section 2.01. Revolving Loan Commitment. (a) Subject to and upon the terms and conditions herein set forth, each Lender severally agrees to make to Nelson from time to time on and after the Closing Date, but prior to the Final Maturity Date, Revolving Loans in an aggregate amount outstanding at any time not to exceed such Lender's Revolving Loan Commitment. Nelson shall be entitled to repay and reborrow Revolving Loans in accordance with the provisions hereof. (b) Each Revolving Loan shall, at the option of Nelson, be made, continued as or converted into part of one or more Borrowings that shall consist entirely of Base Rate Advances and LIBOR Advances. Each Borrowing of Revolving Loans comprised of LIBOR Advances shall not be less than $2,000,000 or a greater integral multiple of $500,000, and each Borrowing of Revolving Loans comprised of Base Rate Advances shall be not less than $250,000 or a greater integral multiple of $100,000. Section 2.02. Use Of Proceeds. The proceeds of the Revolving Loans shall be used solely for the following purposes: (a) Approximately $43,000,000 shall be used initially to repay Refinanced Indebtedness of the Consolidated Companies on the Closing Date; and (b) Approximately $74,000,000 shall be used initially to acquire all of the outstanding common stock of Gibson, including the cost of such common stock and any and all acquisition costs associated therewith, including severance costs, corporate finance fees and expenses and attorneys' fees and expenses. (c) All other amounts shall be used as working capital and for other general corporate purposes, including acquisitions and capital expenditures of the Consolidated Companies. Section 2.03. Revolving Credit Notes: Repayment of Principal. (a) Nelson's obligations to pay the principal of and interest on the Revolving Loans to each Lender shall be evidenced by the records of the Agent and such Lender and by the Revolving Credit Note payable to such Lender (or the assignor of such Lender) completed in conformity with this Agreement. (b) All outstanding principal amounts under the Revolving Loans shall be due and payable in full on the Final Maturity Date. Section 2.04. Automatic, Mandatory Reduction of Revolving Loan Commitments. Commencing on the Initial Reduction Date and continuing thereafter on each one (1) year anniversary thereof until the Final Maturity Date, the Revolving Loan Commitments shall be permanently and ratably reduced by an amount equal to the Reduction Amount plus interest accrued and unpaid on the amount of such prepayment. Any such reduction of the Revolving Loan Commitments shall apply as a proportional and permanent reduction of the Revolving Loan Commitments of each of the Lenders. If the aggregate outstanding amount of the Revolving Loans exceeds the amount of the Revolving Loan Commitments as so reduced, Nelson shall immediately repay the Revolving Loans by an amount equal to such excess. Each mandatory prepayment of Revolving Loans pursuant to this Section 2.04 shall be applied first to Base Rate Advances to the full extent thereof before application to LIBOR Advances; provided, however, that, so long as no Default or Event of Default has occurred and is continuing, in lieu of application of such prepayment to LIBOR Advances prior to the expiration of the respective Interest Periods with respect thereto, Nelson, at its option, may execute an Escrow Letter with respect to such prepayment and deposit with the Agent funds equal to the amount of such prepayment for application in accordance with the terms of such Escrow Letter. Section 2.05. Mandatory Reduction of Revolving Loan Commitments Regarding Senior Debt. Upon the issuance of any Senior Debt, the Revolving Loan Commitments shall be permanently and ratably reduced by an amount equal to one hundred percent (100%) of the amount of such Senior Debt issued plus interest accrued and unpaid on the amount of such prepayment. Any such reduction of the Revolving Loan Commitments shall apply as a proportional and permanent reduction of the Revolving Loan Commitments of each of the Lenders. If the aggregate outstanding amount of the Revolving Loans exceeds the amount of the Revolving Loan Commitments as so reduced, Nelson shall immediately repay the Revolving Loans by an amount equal to such excess. Nothing in this Section 2.05 shall be deemed to authorize the issuance of any Indebtedness not constituting Senior Debt. Each mandatory prepayment of Revolving Loans pursuant to this Section 2.05 shall be applied first to Base Rate Advances to the full extent thereof before application to LIBOR Advances; provided, however, that, so long as no Default or Event of Default has occurred and is continuing, in lieu of application of such prepayment to LIBOR Advances prior to the expiration of the respective Interest Periods with respect thereto, Nelson, at its option, may execute an Escrow Letter with respect to such prepayment and deposit with the Agent funds equal to the amount of such prepayment for application in accordance with the terms of such Escrow Letter. Section 2.06. Mandatory Reduction of Revolving Loan Commitments Regarding Asset Sales. No mandatory reduction shall be required pursuant to this Section 2.06 until the aggregate amount of Asset Sales (based on the Asset Values thereof but excluding Asset Sales resulting from loss, damage, destruction or taking where the proceeds thereof are utilized so as to be excluded from the definition of Net Proceeds) occurring after December 13, 1995, exceeds $2,500,000. Within ten (10) Business Days after each date on which any Consolidated Company receives any Net Proceeds as a result of or in connection with an Asset Sale by any Consolidated Company, the Revolving Loan Commitments shall be permanently and ratably reduced by an amount equal to one hundred percent (100%) of such Net Proceeds plus interest accrued and unpaid on the amount of such prepayment. Any such reduction of the Revolving Loan Commitments shall apply as a proportional and permanent reduction of the Revolving Loan Commitments of each of the Lenders. If the aggregate outstanding amount of the Revolving Loans exceeds the amount of the Revolving Loan Commitments as so reduced, Nelson shall immediately repay the Revolving Loans by an amount equal to such excess. Nothing in this Section 2.06 shall be deemed to authorize any Asset Sale not permitted by Section 11.03. Each mandatory prepayment of Revolving Loans pursuant to this Section 2.06 shall be applied first to Base Rate Advances to the full extent thereof before application to LIBOR Advances; provided, however, that, so long as no Default or Event of Default has occurred and is continuing, in lieu of application of such prepayment to LIBOR Advances prior to the expiration of the respective Interest Periods with respect thereto, Nelson, at its option, may execute an Escrow Letter with respect to such prepayment and deposit with the Agent funds equal to the amount of such prepayment for application in accordance with the terms of such Escrow Letter. Section 2.07. Voluntary Reduction of Revolving Loan Commitments. Upon at least three (3) Business Days prior telephonic notice (promptly confirmed in writing) to the Agent, Nelson shall have the right, without premium or penalty, to terminate the Revolving Loan Commitments, in part or in whole, provided that (a) any such termination shall apply to proportionately and permanently reduce the Revolving Loan Commitments of each of the Lenders, (b) any prepayment of LIBOR Advances must be in minimum principal amounts of $2,000,000 and in multiples of $500,000, and any prepayment of Base Rate Advances must be in minimum principal amounts of $250,000 and in multiples of $100,000, and (c) no such reduction shall be permitted that would require a prepayment that is not permitted by Section 3.06. If the aggregate outstanding amount of the Revolving Loans exceeds the amount of the Revolving Loan Commitments as so reduced, Nelson shall immediately repay the Revolving Loans by an amount equal to such excess, together with all accrued but unpaid interest on such excess amount and any amounts due under Section 3.12. Section 2.08. Extension of Initial Reduction Date and Final Maturity Date. (a) As long as no Default or Event of Default has occurred and is continuing, Nelson shall have the right to notify Agent in writing at its Payment Office at least sixty (60) Business Days prior to the Initial Reduction Date of Nelson's desire to extend the Initial Reduction Date for a one (1) year period (a "Notice of Extension"). Each Notice of Extension shall request an extension to the Initial Reduction Date of a one (1) year period, no more, no less, provided, however, Nelson may, but shall not be obligated to, submit an unlimited number of Notices of Extensions to Agent prior to the Initial Reduction Date provided such Notices of Extension comply with this Section 2.08. (b) The Agent shall promptly give each Lender notice in writing of its receipt of any Notice of Extension. Within twenty (20) Business Days of Agent's receipt of the Notice of Extension, Agent shall notify Nelson in writing of the Lenders' acceptance or rejection of such Notice of Extension. The Notice of Extension shall only be accepted upon Agent's receipt from one hundred percent (100%) of the Lenders of their approval of the Notice of Extension. The Lenders' determination shall be final, conclusive and binding upon all parties hereto. (c) Once Nelson's Notice of Extension has been agreed to and accepted by one hundred percent (100%) of the Lenders and the Agent has advised Nelson of such determination in accordance with Section 2.08(b), such Notice of Extension shall be irrevocable. (d) In the event there is a one (1) year extension in the Initial Reduction Date pursuant to the terms of this Section 2.08, there shall be a corresponding one (1) year extension to the Final Maturity Date automatically without further amendment to this Agreement, provided the Obligations are unsecured. (e) The Agent's and Lenders' review of any Notice of Extension shall in no way obligate the Lenders to agree to extend the Initial Reduction Date in accordance with such Notice of Extension. The acceptance of any one (1) Notice of Extension by the Lenders shall in no way obligate the Lenders to agree to or accept any future Notices of Extensions received by Agent from Nelson. ARTICLE III. GENERAL REVOLVING LOAN TERMS Section 3.01. Funding Notices. (a) Whenever Nelson desires to make a Borrowing with respect to the Revolving Loan Commitments (other than one resulting from a conversion or continuation pursuant to Section 3.01(b)), it shall give the Agent prior written notice (or telephonic notice promptly confirmed in writing) of such Borrowing (a "Notice of Borrowing"), such Notice of Borrowing to be given prior to 11:00 A.M. (local time for the Agent) at its Payment Office (i) one (1) Business Day prior to the requested date of such Borrowing in the case of Base Rate Advances, and (ii) two (2) Business Days prior to the requested date of such Borrowing in the case of LIBOR Advances. Notices received after 11:00 A.M. shall be deemed received on the next Business Day. Each Notice of Borrowing shall be irrevocable and shall specify the aggregate principal amount of the Borrowing, the date of Borrowing (which shall be a Business Day), and whether the Borrowing is to consist of Base Rate Advances or LIBOR Advances. (b) Whenever Nelson desires to convert all or a portion of an outstanding Borrowing under the Revolving Loan Commitments, which Borrowing consists of Base Rate Advances or LIBOR Advances, into one or more Borrowings consisting of Advances of another Type, or to continue outstanding a Borrowing consisting of LIBOR Advances for a new Interest Period, it shall give the Agent at least one (1) Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of each such Borrowing being converted into or continued as Base Rate Advances, and at least two (2) Business Days prior written notice (or telephonic notice promptly confirmed in writing) of each such Borrowing to be converted into or continued as LIBOR Advances. Such notice (a "Notice of Conversion/Continuation") shall be given prior to 11:00 A.M (local time for the Agent) on the date specified at the Payment Office of the Agent. Each such Notice of Conversion/Continuation shall be irrevocable and shall specify the aggregate principal amount of the Advances to be converted or continued, the date of such conversion or continuation, whether the Advances are being converted into or continued as Base Rate Advances or LIBOR Advances and (in the case of LIBOR Advances) the Interest Period applicable thereto. If, upon the expiration of any Interest Period in respect of any Borrowing, Nelson shall have failed to deliver the Notice of Conversion/Continuation, Nelson shall be deemed to have elected to convert or continue such Borrowing to a Borrowing consisting of Base Rate Advances. So long as any Executive Officer of Nelson has knowledge that any Default or Event of Default shall have occurred and be continuing, no Borrowing may be converted into or continued as (upon expiration of the current Interest Period) LIBOR Advances unless the Agent and each of the Lenders shall have otherwise consented in writing. No conversion of any Borrowing of LIBOR Advances shall be permitted except on the last day of the Interest Period in respect thereof. (c) Without in any way limiting Nelson's obligation to confirm in writing any telephonic notice, the Agent may act without liability upon the basis of telephonic notice believed by the Agent in good faith to be from Nelson prior to receipt of written confirmation. In each such case, Nelson hereby waives the right to dispute the Agent's record of the terms of such telephonic notice. (d) The Agent shall promptly give each Lender notice by telephone (confirmed in writing) or by telex, telecopy or facsimile transmission of the matters covered by the notices given to the Agent pursuant to this Section 3.01 with respect to the Revolving Loan Commitments. Section 3.02. Disbursement of Funds. (a) No later than noon (local time for the Agent) on the date of each Borrowing pursuant to the Revolving Loan Commitments (other than one resulting from a conversion or continuation pursuant to Section 3.01(b)), each Lender will make available its Pro Rata Share of the amount of such Borrowing in immediately available funds at the Payment Office of the Agent. The Agent will make available to Nelson the aggregate of the amounts (if any) so made available by the Lenders to the Agent in a timely manner by crediting such amounts to Nelson's demand deposit account maintained with the Agent or at Nelson's option, to effect a wire transfer of such amounts to Nelson's account specified by an authorized representative of Nelson by the close of business on such Business Day. (b) Unless the Agent shall have been notified by any Lender prior to the date of a Borrowing that such Lender does not intend to make available to the Agent such Lender's portion of the Borrowing to be made on such date, the Agent may assume that such Lender will make such amount available to the Agent on such date and the Agent may make available to Nelson a corresponding amount. If such corresponding amount is not in fact made available to the Agent by such Lender on the date of Borrowing, the Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest at the Federal Funds Rate. If such Lender does not pay such corresponding amount forthwith upon the Agent's demand therefor, the Agent shall promptly notify Nelson, and Nelson shall immediately pay such corresponding amount to the Agent together with interest at the rate specified for the Borrowing which includes such amount paid and any amounts due under Section 3.12. Nothing in this Section 3.02(b) shall be deemed to relieve any Lender from its obligation to fund its Total Commitments hereunder or to prejudice any rights that Nelson may have against any Lender as a result of any default by such Lender hereunder. (c) All Borrowings under the Revolving Loan Commitments shall be loaned by the Lenders on the basis of their Pro Rata Share of the Revolving Loan Commitments. No Lender shall be responsible for any default by any other Lender in its obligations hereunder, and each Lender shall be obligated to make the Revolving Loans provided to be made by it hereunder, regardless of the failure of any other Lender to fund its Total Commitments hereunder. Section 3.03. Interest. (a) Nelson agrees to pay interest in respect of all unpaid principal amounts of the Revolving Loans from the respective dates such principal amounts were advanced to maturity (whether by acceleration, notice of prepayment or otherwise) at rates per annum equal to the applicable rates indicated below: (i) For Base Rate Advances -- The Base Rate; (ii) For LIBOR Advances -- LIBOR plus the Applicable LIBOR Rate Margin. (b) Overdue principal and, to the extent not prohibited by applicable law, overdue interest, in respect of the Revolving Loans and all other overdue amounts owing hereunder shall bear interest from each date that such amounts are overdue at a rate equal to the higher of (i) the Base Rate plus an additional two percent (2.0%) per annum, or (ii) the interest rate otherwise applicable to such amount plus two percent (2.0%) per annum. (c) Interest on each Revolving Loan shall accrue from and including the date of such Revolving Loan to but excluding the date of any repayment thereof; provided that, if a Loan is repaid on the same day made, one day's interest shall be paid on such Revolving Loan. Interest on all outstanding Base Rate Advances shall be payable monthly in arrears on the last calendar day of each calendar month each year. Interest on all outstanding LIBOR Advances shall be payable on the last day of each Interest Period applicable thereto, and, in the case of LIBOR Advances having an Interest Period in excess of three (3) months, on each day that occurs every three (3) months after the initial date of such Interest Period. Interest on all Revolving Loans shall be payable on any conversion of any Advances comprising such Revolving Loans into Advances of another Type, prepayment (on the amount prepaid), at maturity (whether by acceleration, notice of prepayment or otherwise) and, after maturity, on demand. Section 3.04. Interest Periods. In connection with the making or continuation of, or conversion into, each Borrowing of LIBOR Advances, Nelson shall select an interest period (each an "Interest Period") to be applicable to such LIBOR Advances, which Interest Period shall be either a one (1), two (2), three (3) or six (6) month period; provided that: (a) The initial Interest Period for any Borrowing of LIBOR Advances shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing consisting of Advances of another Type) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires; (b) If any Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, provided that if any Interest Period in respect of LIBOR Advances would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (c) Any Interest Period in respect of LIBOR Advances that begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall expire on the last Business Day of such calendar month; (d) No Interest Period with respect to the Revolving Loans shall extend beyond the Final Maturity Date. Section 3.05. Fees. (a) Nelson shall pay to the Agent, for the account of and distribution of the respective Pro Rata Share to each Lender, a closing fee equal to .10% of the commitment amount of the Revolving Loan Commitments closed on the Closing Date in accordance with the terms of this Agreement (collectively, the "Closing Fee"). The Closing Fee shall be paid on the Closing Date. (b) Nelson shall pay to the Agent, for the account of and distribution of the respective Pro Rata Share to each Lender, a commitment fee for the period commencing on the Closing Date and continuing up to but excluding the Final Maturity Date, computed at the applicable Commitment Percentage on the average daily unused portion of the Revolving Loan Commitments of such Lenders, computed quarterly, such fee being payable quarterly in arrears on the last calendar day of each fiscal quarter of Nelson and on the Final Maturity Date. (c) Nelson shall pay to the Agent an annual administrative fee in an amount equal to Fifty Thousand and No/100 Dollars ($50,000.00) per annum, payable quarterly in advance on the Closing Date and on the first day of each quarter thereafter as long as any of the Obligations remain outstanding. Section 3.06. Voluntary Prepayments of Borrowings. (a) Nelson may, at its option, prepay Borrowings consisting of Base Rate Advances at any time in whole, or from time to time in part, in amounts aggregating $250,000 or any greater integral multiple of $100,000, by paying the principal amount to be prepaid together with interest accrued and unpaid thereon to the date of prepayment. Those Borrowings consisting of LIBOR Advances may be prepaid, at Nelson's option, in whole, or from time to time in part, in amounts aggregating $2,000,000 or any greater integral multiple of $500,000, by paying the principal amount to be prepaid, together with interest accrued and unpaid thereon to the date of prepayment, and all compensation payments pursuant to Section 3.12 if such prepayment is made on a date other than the last day of an Interest Period applicable thereto. Each such optional prepayment shall be applied in accordance with Section 3.06(c). (b) Nelson shall give written notice (or telephonic notice confirmed in writing) to the Agent of any intended prepayment of the Revolving Loans (i) not less than one (1) Business Day prior to any prepayment of Base Rate Advances, and (ii) not less than two (2) Business Days prior to any prepayment of LIBOR Advances. Such notice, once given, shall be irrevocable. Upon receipt of such notice of prepayment pursuant to the first sentence of this Section 3.06(b), the Agent shall promptly notify each Lender of the contents of such notice and of such Lender's share of such prepayment. (c) Nelson, when providing notice of prepayment pursuant to Section 3.06(b), may designate the Types of Advances and the specific Borrowing or Borrowings that are to be prepaid, provided that (i) if any prepayment of LIBOR Advances made pursuant to a single Borrowing of the Revolving Loans shall reduce the outstanding Advances made pursuant to such Borrowing to an amount less than $2,000,000, such Borrowing shall immediately be converted into Base Rate Advances; and (ii) each prepayment made pursuant to a single Borrowing shall be applied pro rata among the Revolving Loans comprising such Borrowing. In the absence of a designation by Nelson, the Agent shall, subject to the foregoing, make such designation in its sole discretion. All voluntary prepayments shall be applied to the payment of interest before application to principal. Section 3.07. Payments, etc. (a) Except as otherwise specifically provided herein, all payments under this Agreement and the other Credit Documents shall be made without defense, set-off or counterclaim to the Agent, for the account of and distribution of the respective Pro Rata Share to each Lender except in the case of payments made under Section 3.05(c), which shall be made solely to Agent, not later than 11:00 A.M. (local time for the Agent) on the date when due and shall be made in Dollars in immediately available funds at its Payment Office. (b)(i) All such payments shall be made free and clear of and without deduction or withholding for any Taxes in respect of this Agreement, the Revolving Credit Notes or other Credit Documents, or any payments of principal, interest, fees or other amounts payable hereunder or thereunder (but excluding, except as provided in Section 3.07(b)(iii), (A) any Taxes imposed on the overall net or gross income of the Lenders pursuant to the laws of the jurisdictions with taxing authority over such Lenders, (B) any franchise or similar taxes imposed on the Lenders pursuant to the laws of the jurisdictions with taxing authority over such Lenders (other than the state of Tennessee), but only where such franchise or similar taxes are imposed in lieu of Taxes on the overall net or gross income of the Lenders, and (C) any franchise or similar taxes imposed on the Lenders pursuant to the laws of the state of Tennessee). If any Taxes are so levied or imposed, Nelson agrees (I) to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every net payment of all amounts due hereunder and under the Revolving Credit Notes and other Credit Documents, after withholding or deduction for or on account of any such Taxes (including additional sums payable under this Section 3.07), will not be less than the full amount provided for herein had no such deduction or withholding been required, (II) to make such withholding or deduction, and (III) to pay the full amount deducted to the relevant authority in accordance with applicable law. Nelson will furnish to the Agent and each Lender, within thirty (30) days after the date the payment of any Taxes is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by Nelson. Nelson will indemnify and hold harmless the Agent and each Lender and reimburse the Agent and each Lender upon written request for the amount of any Taxes so levied or imposed and paid by the Agent or Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or illegally asserted. A certificate as to the amount of such payment by such Lender or the Agent, absent manifest error, shall be final, conclusive and binding for all purposes. (ii) Notwithstanding Section 3.07(b)(i), Nelson shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or other similar Taxes imposed by the United States of America from interest, fees or other amounts payable hereunder for the account of any Lender other than a Lender who (A) is a domestic corporation (as such term is defined in Section 7701 of the Tax Code) for federal income tax purposes, or (B) has the Prescribed Forms on file with Nelson for the applicable year to the extent deduction or withholding of such Taxes is not required as a result of the filing of such Prescribed Forms, provided that if Nelson shall so deduct or withhold any such Taxes, it shall provide a statement to the Agent and such Lender setting forth the amount of such Taxes so deducted or withheld, the applicable rate and any other information or documentation that such Lender may reasonably request for assisting such Lender to obtain any allowable credits or deductions for the Taxes so deducted or withheld in the jurisdiction or jurisdictions in which such Lender is subject to tax. (iii) Nelson shall also reimburse the Agent and each Lender, upon written request, for any Taxes imposed (including, without limitation, Taxes imposed on the overall gross or net income of the Agent or such Lender pursuant to the laws of the jurisdictions with taxing authority over Agent or such Lender) as the Agent or such Lender shall determine are payable by the Agent or such Lender in respect of amounts paid by or on behalf of Nelson to or on behalf of the Agent or such Lender pursuant to Section 3.07(b)(i). (c) Subject to Section 3.04(b), whenever any payment to be made hereunder or under any Revolving Credit Note shall be stated to be due on a day that is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the applicable rate during such extension. (d) All computations of interest and fees shall be made on the basis of a year of three hundred and sixty (360) days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable (to the extent computed on the basis of days elapsed). Interest on Base Rate Advances shall be calculated based on the Base Rate from and including the date of such Revolving Loan to but excluding the date of the repayment or conversion thereof. Interest on LIBOR Advances shall be calculated as to each Interest Period from and including the first day thereof to but excluding the last day thereof. Each determination by the Agent of an interest rate or fee hereunder shall be made in good faith and, except for manifest error, shall be final, conclusive and binding for all purposes. (e) Payment by Nelson to the Agent in accordance with the terms of this Agreement shall, as to Nelson, constitute payment to the Lenders under this Agreement. Section 3.08. Interest Rate Not Ascertainable, etc. In the event that the Agent, in the case of LIBOR, shall have determined (which determination shall be made in good faith and, absent manifest error, shall be final, conclusive and binding upon all parties) that on any date for determining LIBOR for any Interest Period, by reason of any changes arising after the date of this Agreement affecting the London interbank market or the Agent's position in such market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of LIBOR, then, and in any such event, the Agent shall forthwith give notice (by telephone confirmed in writing) to Nelson and to the Lenders of such determination and a summary of the basis for such determination. Until the Agent notifies Nelson that the circumstances giving rise to the notice described herein no longer exist, the obligations of the Lenders to make or permit portions of the Revolving Loans to remain outstanding past the last day of then current Interest Periods as LIBOR Advances shall be suspended, and such affected Advances shall bear the same interest as Base Rate Advances. Section 3.09. Illegality. (a) In the event that any Lender shall have determined (which determination shall be made in good faith and, absent manifest error, shall be final, conclusive and binding upon all parties) at any time that the making or continuance of any LIBOR Advance has become unlawful by compliance by such Lender in good faith with any applicable law, governmental rule, regulation, guideline or order (whether or not having the force of law and whether or not failure to comply therewith would be unlawful), then, in any such event, the Lender shall give prompt notice (by telephone confirmed in writing) to Nelson and to the Agent of such determination and a summary of the basis for such determination (which notice the Agent shall promptly transmit to the other Lenders). (b) Upon the giving of the notice to Nelson referred to in Section 3.09(a), (i) Nelson's right to request and such Lender's obligation to make LIBOR Advances shall be immediately suspended, and such Lender shall make an Advance as part of the requested Borrowing of LIBOR Advances as a Base Rate Advance, which Base Rate Advance shall, for all other purposes, be considered part of such Borrowing, and (ii) if the affected LIBOR Advance or Advances are then outstanding, Nelson shall immediately, or if permitted by applicable law, no later than the date permitted thereby, upon at least one Business Days written notice to the Agent and the affected Lender, convert each such Advance into a Base Rate Advance or Advances, provided that if more than one Lender is affected at any time, then all affected Lenders must be treated the same pursuant to this Section 3.09(b). Section 3.10. Increased Costs. (a) If by reason of (i) after the date hereof, the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation of any law or regulation, or (ii) the compliance with any guideline or request from any central bank or other governmental authority or quasi-governmental authority exercising control over banks or financial institutions generally (whether or not having the force of law): (A) any Lender (or its applicable Lending Office) shall be subject to any tax, duty or other charge with respect to its LIBOR Advances or its obligation to make LIBOR Advances, or the basis of taxation of payments to any Lender of the principal of or interest on its LIBOR Advances or its obligation to make LIBOR Advances shall have changed (except for changes in the tax on the overall gross or net income of such Lender imposed by the jurisdictions with taxing authority over such Lender); or (B) any reserve (including, without limitation, any reserve imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender's applicable Lending Office shall be imposed or deemed applicable or any other condition affecting its LIBOR Advances or its obligation to make LIBOR Advances shall be imposed on any Lender or its applicable Lending Office or the London interbank market; and as a result thereof there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining LIBOR Advances (except to the extent already included in the determination of LIBOR for LIBOR Advances), or there shall be a reduction in the amount received or receivable by such Lender or its applicable Lending office, then Nelson shall from time to time (subject, in the case of certain Taxes, to the applicable provisions of Section 3.07(b)), upon written notice from and demand by such Lender on Nelson (with a copy of such notice and demand to the Agent), pay to the Agent for the account of such Lender within ten (10) days after the date of such notice and demand, additional amounts sufficient to indemnify such Lender against such increased cost. A certificate as to the amount of such increased cost, submitted to Nelson and the Agent by such Lender in good faith and accompanied by a statement prepared by such Lender describing in reasonable detail the basis for and calculation of such increased cost, shall, except for manifest error, be final, conclusive and binding for all purposes. (b) If any Lender shall advise the Agent that at any time, because of the circumstances described in Section 3.10(a)(i) or Section 3.10(a)(ii) or any other circumstances beyond such Lender's reasonable control arising after the date of this Agreement affecting such Lender or the London interbank market or such Lender's position in such market, LIBOR as determined by the Agent will not adequately and fairly reflect the cost to such Lender of funding its LIBOR Advances, then, and in any such event: (i) the Agent shall forthwith give notice (by telephone confirmed in writing) to Nelson and to the other Lenders of such advice; (ii) Nelson's right to request and such Lender's obligation to make or permit portions of the Revolving Loans to remain outstanding past the last day of the then current Interest Periods as LIBOR Advances shall be immediately suspended; and (iii) such Lender shall make a Revolving Loan as part of the requested Borrowing of LIBOR Advances as a Base Rate Advance, which such Base Rate Advance shall, for all other purposes, be considered part of such Borrowing. Section 3.11. Lending Offices. Each Lender agrees that, if requested by Nelson, it will use reasonable efforts (subject to overall policy considerations of such Lender) to designate an alternate Lending Office with respect to any of its LIBOR Advances affected by the matters or circumstances described in Section 3.07(b), Section 3.08, Section 3.09 or Section 3.10 to reduce the liability of Nelson or avoid the results provided thereunder, so long as such designation is not disadvantageous to such Lender as determined by such Lender, which determination if made in good faith, shall be conclusive and binding on all parties hereto. Nothing in this Section 3.11 shall affect or postpone any of the obligations of Nelson or any right of any Lender provided hereunder. Section 3.12. Funding Losses. Nelson shall compensate each Lender, upon its written request to Nelson (which request shall set forth the basis for requesting such amounts in reasonable detail and which request shall be made in good faith and, absent manifest error, shall be final, conclusive and binding upon all of the parties hereto), for all losses, expenses and liabilities (including, without limitation, any interest paid by such Lender to lenders of funds borrowed by it to make or carry its LIBOR Advances, in either case to the extent not recovered by such Lender in connection with the reemployment of such funds), which the Lender may sustain: (a) if for any reason (other than a default by such Lender) a borrowing of, or conversion to or continuation of, LIBOR Advances to Nelson does not occur on the date specified therefor in a Notice of Borrowing or Notice of Conversion/Continuation (whether or not withdrawn), (b) if any repayment (including mandatory prepayments and any conversions pursuant to Section 3.09(b)) of any LIBOR Advances to Nelson occurs on a date that is not the last day of an Interest Period applicable thereto, or (c), if, for any reason, Nelson defaults in its obligation to repay its LIBOR Advances when required by the terms of this Agreement. Section 3.13. Assumptions Concerning Funding of LIBOR Advances. Calculation of all amounts payable to a Lender under this Article III shall be made as though that Lender had actually funded its relevant LIBOR Advances through the purchase of deposits in the relevant market bearing interest at the rate applicable to such LIBOR Advances in an amount equal to the amount of the LIBOR Advances and having a maturity comparable to the relevant Interest Period; provided, however, that each Lender may fund each of its LIBOR Advances in any manner it sees fit and the foregoing assumption shall be used only for calculation of amounts payable under this Article III. Section 3.14. Apportionment of Payments. Aggregate principal and interest payments in respect of Revolving Loans and payments in respect of facility fees and commitment fees shall be apportioned among all outstanding Total Commitments and Revolving Loans to which such payments relate proportionately to the Lenders' respective Pro Rata Share of such Total Commitments and outstanding Revolving Loans. The Agent shall use its reasonable efforts to distribute promptly to each Lender at its Payment Office its share of all such payments received by the Agent on the same Business Day such payments are received by Agent, but not later than the next succeeding Business Day following receipt by Agent of such payments if such payments are received by Agent later than 11:00 A.M. (local time for the Agent). Section 3.15. Sharing of Payments, Etc. If any Lender shall obtain any payment or reduction (including, without limitation, any amounts received as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code) of the Obligations (whether voluntary, involuntary, through the exercise of any right of set-off or otherwise) in excess of its Pro Rata Share of payments or reductions of such Obligations obtained by all the Lenders, such Lender shall forthwith (a) notify each of the other Lenders and Agent of such receipt, and (b) purchase from the other Lenders such participations in the affected Obligations as shall be necessary to cause such purchasing Lender to share the excess payment or reduction, net of costs incurred in connection therewith, ratably with each of them, provided that if all or any portion of such excess payment or reduction is thereafter recovered from such purchasing Lender or additional costs are incurred, the purchase shall be rescinded and the purchase price restored to the extent of such recovery or such additional costs, but without interest unless the Lender obligated to return such funds is required to pay interest on such funds. Nelson agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 3.15 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of Nelson in the amount of such participation. Section 3.16. Capital Adequacy. Without limiting any other provision of this Agreement, in the event that any Lender shall have determined that any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy not currently in effect or fully applicable as of the Closing Date, or any change therein or in the interpretation or application thereof after the Closing Date, or compliance by such Lender with any request or directive regarding capital adequacy not currently in effect or fully applicable as of the Closing Date (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) from a central bank or governmental authority or body having jurisdiction, does or shall have the effect of reducing the rate of return on such Lender's capital as a consequence of its obligations hereunder to a level below that which such Lender could have achieved but for such law, treaty, rule, regulation, guideline or order, or such change or compliance (taking into consideration such Lender's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then within ten (10) Business Days after written notice and demand by such Lender (with copies thereof to the Agent), Nelson shall from time to time pay to such Lender additional amounts sufficient to compensate such Lender for such reduction (but, in the case of outstanding Base Rate Advances, without duplication of any amounts already recovered by such Lender by reason of an adjustment in the applicable Base Rate). Each certificate as to the amount payable under this Section 3.16 (which certificate shall set forth the basis for requesting such amounts in reasonable detail), submitted to Nelson by any Lender in good faith, shall, absent manifest error, be final, conclusive and binding for all purposes. Section 3.17. Benefits to Guarantors. In consideration for the execution and delivery by the Guarantors of their Guaranty Agreement, Nelson agrees to make the benefit of extensions of credit hereunder available to the Guarantors. Section 3.18. Limitation on Certain Payment Obligations. (a) Each Lender or Agent shall make written demand on Nelson for indemnification or compensation pursuant to Section 3.07 no later than ninety (90) days after the earlier of (i) the date on which such Lender or Agent makes payment of such Taxes, or (ii) the date on which the relevant taxing authority or other governmental authority makes written demand upon such Lender or Agent for payment of such Taxes. (b) Each Lender or Agent shall make written demand on Nelson for indemnification or compensation pursuant to Section 3.12 no later than ninety (90) days after the event giving rise to the claim for indemnification or compensation occurs. (c) Each Lender or Agent shall make written demand on Nelson for indemnification or compensation pursuant to Section 3.10 and Section 3.16 no later than three hundred sixty-five (365) days after the occurrence giving rise to a claim pursuant to such sections. (d) In the event that the Lenders or Agent fail to give Nelson notice within the time limitations prescribed in Section 3.18(a) or Section 3.18(b), Nelson shall not have any obligation to pay such claim for compensation or indemnification. In the event that the Lender or Agent fail to give Nelson notice within the time limitation prescribed in Section 3.18(c), Nelson shall not have any obligation to pay any amount with respect to claims accruing prior to the ninetieth (90th) day preceding such written demand. ARTICLE IV. CONDITIONS TO BORROWINGS The obligations of each Lender to make Advances to Nelson hereunder is subject to the satisfaction of the following conditions: Section 4.01. Conditions Precedent to Initial Revolving Loans. At the time of the funding of the initial Revolving Loans hereunder, all obligations of Nelson hereunder incurred prior to the initial Revolving Loans (including, without limitation, Nelson's obligations to reimburse the reasonable fees and expenses of counsel to the Agent and any fees and expenses payable to the Agent and the Lenders as previously agreed with Nelson), shall have been paid in full, and the Agent shall have received the following, in form and substance reasonably satisfactory in all respects to the Agent: (a) the duly executed counterparts of this Agreement; (b) the duly completed Revolving Credit Notes evidencing the Revolving Loan Commitments; (c) the Guaranty Agreement, the Contribution Agreement, the Word Pledge Agreement, the Gibson Pledge Agreement (all of which as to Gibson and its Subsidiaries shall be deemed delivered immediately following the consummation of the acquisition referenced in Section 4.01(r)) and any and all other Credit Documents required by Agent; (d) closing certificate of Nelson in a form acceptable to Nelson, Lenders and their respective counsel and appropriately completed; (e) certificates of the Secretary or Assistant Secretary of each of the Credit Parties (all of which as to Gibson and its Subsidiaries shall be deemed delivered immediately following the consummation of the acquisition referenced in Section 4.01(r)) attaching and certifying copies of the resolutions of the boards of directors of the Credit Parties, authorizing as applicable (i) the execution, delivery and performance of the Credit Documents and (ii) the granting of the pledges and security interests granted pursuant to the Word Pledge Agreement and the Gibson Pledge Agreement; (f) certificates of the Secretary or an Assistant Secretary of each of the Credit Parties (all of which as to Gibson and its Subsidiaries shall be deemed delivered immediately following the consummation of the acquisition referenced in Section 4.01(r)) certifying (i) the name, title and true signature of each officer of such entities executing the Credit Documents, and (ii) the bylaws or comparable governing documents of such entities; (g) certified copies of the certificate or articles of incorporation of each Credit Party certified by the Secretary of State, together with certificates of good standing or existence, as may be available from the Secretary of State of the jurisdiction of incorporation or organization of such Credit Party; (h) examination reports from the Uniform Commercial Code records of those locations set forth on Schedule 4.01(h) attached hereto, showing no outstanding liens or security interests granted by any Credit Party other than (i) Liens permitted by Section 11.02, and (ii) Liens securing the Refinanced Indebtedness which are being released on the Closing Date; (i) copies of all documents and instruments, including all consents, approvals, authorizations, registrations and filings required or advisable under any Requirement of Law or by any material Contractual Obligation of the Credit Parties, in connection with the execution, delivery, performance, validity and enforceability of the Credit Documents and the other documents to be executed and delivered hereunder, and such consents, approvals, authorizations, registrations and filings shall be in full force and effect and all applicable waiting periods shall have expired; (j) agreement by the lenders of the Refinanced Indebtedness to accept payment in full of all obligations outstanding under the Refinanced Indebtedness and termination of all credit facilities relating thereto and to release all Liens securing Refinanced Indebtedness, and the establishment of escrow or other arrangements for such repayment and release of Liens acceptable to the Agent and the Lenders; (k) certified copies of indentures, credit agreements, instruments and other documents evidencing or securing Indebtedness of any Consolidated Company described on Schedule 11.01(b), in any single case in an amount not less than $500,000; (l) certificates, reports and other information as the Agent may reasonably request from any Consolidated Company in order to satisfy the Lenders as to the absence of any material liabilities or obligations arising from matters relating to employees of the Consolidated Companies, including employee relations, collective bargaining agreements, Plans, and other compensation and employee benefit plans; (m) certificates, reports, environmental audits and investigations, and other information as the Agent may reasonably request from any Consolidated Company in order to satisfy the Lenders as to the absence of any material liabilities or obligations arising from Environmental Laws, including without limitation, OSHA laws and regulations to which the Consolidated Companies may be subject, and the plans of the Consolidated Companies with respect thereto; (n) certificates, reports and other information as the Agent may reasonably request from any Consolidated Company in order to satisfy the Lenders as to the absence of any material liabilities or obligations arising from litigation (including without limitation, products liability and patent infringement claims) pending or threatened against the Consolidated Companies; (o) a summary set forth in format and detail reasonably acceptable to the Agent of the types and amounts of insurance (property and liability) maintained by the Consolidated Companies; (p) the favorable opinion of Bass, Berry & Sims and in- house counsel to Nelson, counsel to the Credit Parties, in a form acceptable to Nelson, Lenders and their respective counsel and addressed to the Agent and each of the Lenders; and (q) financial statements of the Consolidated Companies for their most recently completed fiscal quarter on a consolidated basis. (r) evidence that Nelson's acquisition of all of the outstanding common stock of Gibson pursuant to the terms of the Tender Offer and Merger Agreement between Nelson Acquisition Corp. and Gibson dated September 13, 1995, as amended October 16, 1995, will be closed prior to or contemporaneously with the funding of the Revolving Loans. In addition to the foregoing, the following conditions shall have been satisfied or shall exist, all to the satisfaction of the Agent, as of the time the initial Revolving Loans are made hereunder: (x) the Revolving Loans to be made on the Closing Date and the use of proceeds thereof shall not contravene, violate or conflict with, or involve the Agent or any Lender in a violation of, any law, rule, injunction or regulation, or determination of any court of law or other governmental authority; and (y) all corporate proceedings and all other legal matters in connection with the authorization, legality, validity and enforceability of the Credit Documents shall be reasonably satisfactory in form and substance to the Required Lenders. Section 4.02. Conditions to Revolving Loans. At the time of the making of all Revolving Loans (before as well as after giving effect to such Revolving Loans and to the proposed use of the proceeds thereof), the following conditions shall have been satisfied or shall exist: (a) there shall exist no Default or Event of Default; (b) all representations and warranties by Nelson contained herein shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Revolving Loans (except that the representations and warranties set forth in Section 6.19 shall not be deemed to relate to any time subsequent to the date of the initial Revolving Loans hereunder); (c) since the date of the most recent financial statements of the Consolidated Companies described in Section 6.14, there shall have been no change that has had or could reasonably be expected to have a Materially Adverse Effect in any Consolidated Company's financial condition, properties, business, operations or prospects (whether or not any notice with respect to such change has been furnished to the Lenders pursuant to Section 9.07); (d) there shall be no action or proceeding instituted or pending before any court or other governmental authority or, to the knowledge of Nelson, threatened that reasonably could be expected to have a Materially Adverse Effect in any Consolidated Company's financial condition, properties, business, operations or prospects, including without limitation any action or proceeding seeking to prohibit or restrict one or more Credit Party's ownership or operation of any portion of its business or assets, or to compel one or more Credit Party to dispose of or hold separate all or any portion of its businesses or assets, where such portion or portions of such business(es) or assets, as the case may be, constitute a material portion of the total businesses or assets of the Consolidated Companies; (e) the Revolving Loans to be made and the use of proceeds thereof shall not contravene, violate or conflict with, or involve the Agent or any Lender in a violation of, any law, rule, injunction or regulation, or determination of any court of law or other governmental authority applicable to Nelson; and (f) the Agent shall have received such other documents or legal opinions as the Agent or any Lender may reasonably request, all in form and substance reasonably satisfactory to the Agent. Each request for a Borrowing and the acceptance by elson of the proceeds thereof shall constitute a representation and warranty by Nelson, as of the date of the Revolving Loans comprising such Borrowing, that the applicable conditions specified in Section 4.01 and Section 4.02 have been satisfied. ARTICLE V. NOTICE PERIOD REGARDING CONDITIONS Nelson, Agent and the Lenders hereby acknowledge that prior to or contemporaneously with the funding of the Revolving Loans, Nelson is acquiring all of the outstanding common stock of Gibson. Pursuant to Section 4.01(d), Section 4.01(f)(ii), Section 4.01(g), Section 4.01(h), Section 4.01(i), Section 4.01(k), Section 4.01(l), Section 4.01(m), Section 4.01(n), Section 4.01(o) and Section 4.01(q) and Section 4.02(b), Section 4.02(c) and Section 4.02(d), Nelson is required to provide and confirm to Agent certain information with respect to the Consolidated Companies, including Gibson and its Subsidiaries. Although Nelson has performed certain due diligence in connection with its acquisition of Gibson, Nelson has not owned or been in control of Gibson and its Subsidiaries prior to the funding of the Revolving Loans. Consequently, in order to provide Nelson with an opportunity to further review the records and affairs of Gibson and its Subsidiaries in connection with the information to be provided and confirmed pursuant to Section 4.01(d), Section 4.01(f)(ii), Section 4.01(g), Section 4.01(h), Section 4.01(i), Section 4.01(k), Section 4.01(l), Section 4.01(m), Section 4.01(n), Section 4.01(o) and Section 4.01(q) and Section 4.02(b), Section 4.02(c) and Section 4.02(d), Nelson, Agent and the Lenders agree that beginning on the Closing Date and continuing for the three (3) month period thereafter (the "Notice Period"), Nelson shall have the right to provide and confirm the information required by Section 4.01(d), Section 4.01(f)(ii), Section 4.01(g), Section 4.01(h), Section 4.01(i), Section 4.01(k), Section 4.01(l), Section 4.01(m), Section 4.01(n), Section 4.01(o) and Section 4.01(q) and Section 4.02(b), Section 4.02(c) and Section 4.02(d) with respect to Gibson and any of its Subsidiaries (the "Gibson Information"). During the Notice Period, any information provided or confirmed pursuant to Section 4.01(d), Section 4.01(f)(ii), Section 4.01(g), Section 4.01(h), Section 4.01(i), Section 4.01(k), Section 4.01(l), Section 4.01(m), Section 4.01(n), Section 4.01(o) and Section 4.01(q) and Section 4.02(b), Section 4.02(c) and Section 4.02(d) with respect to Gibson and its Subsidiaries shall not be subject to the provisions of Section 12.03 hereto. All Gibson Information must be in writing and received by Agent during the Notice Period. Agent's receipt of the Gibson Information prior to the end of the Notice Period shall not constitute an Event of Default hereunder. In no event shall any Gibson Information be permitted with respect to Nelson or any of its Subsidiaries other than Gibson and its Subsidiaries. Upon termination of the Notice Period, all information provided and confirmed pursuant to Section 4.01(d), Section 4.01(f)(ii), Section 4.01(g), Section 4.01(h), Section 4.01(i), Section 4.01(k), Section 4.01(l), Section 4.01(m), Section 4.01(n), Section 4.01(o) and Section 4.01(q) and Section 4.02(b), Section 4.02(c) and Section 4.02(d), as amended by any Gibson Information, if any, shall be subject to the provisions of Section 12.03. In addition to the foregoing, Nelson, Agent and the Lenders agree that during the Notice Period, Nelson shall have the right to provide and confirm the information required by Section 4.01(h) with respect to Nelson and any of its Subsidiaries (the "UCC Information"). Any UCC Information delivered to Agent during the Notice Period shall be added to Schedule 11.02. During the Notice Period, any information provided or confirmed pursuant to Section 4.01(h) shall not be subject to the provisions of Section 12.03 hereto. All UCC Information must be in writing and received by Agent during the Notice Period. Agent's receipt of the UCC Information prior to the end of the Notice Period shall not constitute an Event of Default hereunder. Upon termination of the Notice Period, all information provided and confirmed pursuant to Section 4.01(h), as amended by any UCC Information, shall be subject to the provisions of Section 12.03. ARTICLE VI. REPRESENTATIONS AND WARRANTIES Nelson (as to itself and all other Consolidated Companies) represents and warrants (subject to the provisions of Article VII) as follows: Section 6.01. Corporate Existence; Compliance with Law. Each of the Credit Parties is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. Each of the Credit Parties (a) has the corporate power and authority and the legal right to own and operate its property and to conduct its business, (b) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership of property or the conduct of its business requires such qualification, and (c) is in compliance with all Requirements of Law, where (i) the failure to have such power, authority and legal right as set forth in Section 6.01(a), (ii) the failure to be so qualified or in good standing as set forth in Section 6.01(b), or (iii) the failure to comply with Requirements of Law as set forth in Section 6.01(c), would reasonably be expected, in the aggregate, to have a Materially Adverse Effect. The jurisdiction of incorporation or organization, and the ownership of all issued and outstanding capital stock, for each Credit Party (other than Nelson) as of the date of this Agreement is accurately described on Schedule 6.01. Section 6.02. Corporate Power; Authorization. Each of the Credit Parties has the corporate power and authority to make, deliver and perform the Credit Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of such Credit Documents. No consent or authorization of, or filing with, any Person (including, without limitation, any governmental authority), is required in connection with the execution, delivery or performance by any Credit Party, or the validity or enforceability against any Credit Party, of the Credit Documents, other than such consents, authorizations or filings that have been made or obtained. Section 6.03. Enforceable Obligations. This Agreement has been duly executed and delivered, and each other Credit Document will be duly executed and delivered, by the respective Credit Parties, and this Agreement constitutes, and each other Credit Document when executed and delivered will constitute, legal, valid and binding obligations of the Credit Parties, respectively, enforceable against the Credit Parties in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity. Section 6.04. No Legal Bar. The execution, delivery and performance by the Credit Parties of the Credit Documents will not violate any Requirement of Law or cause a breach or default under any of their respective Contractual Obligations which would have a Materially Adverse Effect. Section 6.05. No Material Litigation. Except as set forth on Schedule 6.05, no litigation, investigations or proceedings of or before any courts, tribunals, arbitrators or governmental authorities are pending or, to the knowledge of Nelson, threatened by or against any of the Consolidated Companies, or against any of their respective properties or revenues, whether such properties or revenues currently exist or may exist in the future, (a) with respect to any Credit Document, or any of the transactions contemplated hereby or thereby, or (b) which, if adversely determined, would reasonably be expected to have a Materially Adverse Effect. Section 6.06. Investment Company Act, Etc. None of the Credit Parties is an "investment company" or a company "controlled" by an "investment company" (as each of the quoted terms is defined or used in the Investment Company Act of 1940, as amended). None of the Credit Parties is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, or any foreign, federal or local statute or regulation limiting its ability to incur indebtedness for money borrowed, guarantee such indebtedness, or pledge its assets to secure such indebtedness, as contemplated hereby or by any other Credit Document. Section 6.07. Margin Regulations. No part of the proceeds of any of the Revolving Loans will be used for any purpose that violates, or that would be inconsistent or not in compliance with, the provisions of the applicable Margin Regulations. Section 6.08. Compliance With Environmental Laws. (a) The Consolidated Companies have received no notices of claims or potential liability under, and are in compliance with, all applicable Environmental Laws, where such claims and liabilities under, and failures to comply with, such statutes, regulations, rules, ordinances, laws or licenses, would reasonably be expected to result in penalties, fines, claims or other liabilities to the Consolidated Companies in amounts in excess of $1,000,000, either individually or in the aggregate (including any such penalties, fines, claims, or liabilities relating to the matters set forth on Schedule 6.08(a)), except as set forth on Schedule 6.08(a). (b) Except as set forth on Schedule 6.08(b), none of the Consolidated Companies has received any notice of violation, or notice of any action, either judicial or administrative, from any governmental authority (whether United States or foreign) relating to the actual or alleged violation of any Environmental Law, including, without limitation, any notice of any actual or alleged spill, leak or other release of any Hazardous Substance, waste or hazardous waste by any Consolidated Company or its employees or agents, or as to the existence of any contamination on any properties owned by any Consolidated Company, where any such violation, spill, leak, release or contamination would reasonably be expected to result in penalties, fines, claims or other liabilities to the Consolidated Companies in amounts in excess of $1,000,000, either individually or in the aggregate. (c) Except as set forth on Schedule 6.08(c), the Consolidated Companies have obtained all necessary governmental permits, licenses and approvals that are material to the operations conducted on their respective properties, including without limitation, all required material permits, licenses and approvals for (i) the emission of air pollutants or contaminants, (ii) the treatment or pretreatment and discharge of waste water or storm water, (iii) the treatment, storage, disposal or generation of hazardous wastes, (iv) the withdrawal and usage of ground water or surface water, and (v) the disposal of solid wastes. Section 6.09. Insurance. The Consolidated Companies currently maintain insurance with respect to their respective properties and businesses, with financially sound and reputable insurers, having coverages against losses or damages of the kinds customarily insured against by reputable companies in the same or similar businesses, such insurance being in amounts no less than those amounts that are customary for such companies under similar circumstances. The Consolidated Companies have paid all material amounts of insurance premiums now due and owing with respect to such insurance policies and coverages, and such policies and coverages are in full force and effect. Section 6.10. No Default. None of the Consolidated Companies is in default under or with respect to any Contractual Obligation in any respect that has had or is reasonably expected to have a Materially Adverse Effect. Section 6.11. No Burdensome Restrictions. Except as set forth on Schedule 6.11, none of the Consolidated Companies is a party to or bound by any Contractual Obligation or Requirement of Law that has had or would reasonably be expected to have a Materially Adverse Effect. Section 6.12. Taxes. Except as set forth on Schedule 6.12, each of the Consolidated Companies has filed or caused to be filed all declarations, reports and tax returns or tax extensions that are required to have been filed, and has paid all taxes, custom duties, levies, charges and similar contributions ("taxes" in this Section 6.12) shown to be due and payable on said returns or on any assessments made against them or their properties, and all other taxes, fees or other charges imposed on them or any of their properties by any governmental authority (other than those the amount or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided in its books); and no tax liens have been filed and, to the knowledge of Nelson, no claims are being asserted with respect to any such taxes, fees or other charges. Section 6.13. Subsidiaries. Except as disclosed on Schedule 6.13, on the date of this Agreement, Nelson has no Subsidiaries and neither Nelson nor any Subsidiary is a joint venture partner or general partner in any partnership. After the date of this Agreement and funding of the Obligations, except as disclosed on Schedule 6.13, Nelson shall have no Subsidiaries. PrintPlus Publications, Inc., a Tennessee corporation and previously a Subsidiary of Nelson, is no longer a Subsidiary of Nelson. Nelson has no interest in PrintPlus Publications, Inc. TNI Cassette Corp., a validly existing Texas corporation and Subsidiary of Nelson, was previously known as International Cassette Corp. prior to its name change. Attached hereto as Exhibit C is a true and correct copy of the document evidencing the name change from International Cassette Corp. to TNI Cassette Corp. Nelson Word Limited, a validly existing United Kingdom corporation and Subsidiary of Nelson, was previously known as Word (UK) Limited prior to its name change. Attached hereto as Exhibit D is a true and correct copy of the document evidencing the name change from Word (UK) Limited to Nelson Word Limited. Section 6.14. Financial Statements. Nelson has furnished to the Agent and the Lenders (a) the audited consolidated balance sheet as of March 31, 1995 of the Consolidated Companies and the related consolidated statements of income, shareholders' equity and cash flows for the fiscal year then ended, including in each case the related schedules and notes, and (b) the unaudited balance sheet of the Consolidated Companies presented on a consolidated basis as at the end of the second fiscal quarter of 1995, and the related unaudited consolidated statements of income, shareholders' equity and cash flows presented on a consolidated basis for the year-to-date period then ended, setting forth in each case in comparative form the figures for the corresponding quarter of the Consolidated Companies' previous fiscal year. The foregoing financial statements fairly present in all material respects the consolidated financial condition of the Consolidated Companies as at the dates thereof and results of operations for such periods in conformity with GAAP consistently applied (subject, in the case of the quarterly financial statements, to normal year-end audit adjustments and the absence of certain footnotes). The Consolidated Companies taken as a whole do not have any material contingent obligations, material contingent liabilities, or material liabilities for known taxes, long-term leases (except leases as set forth on Schedule 6.14 hereto) or unusual forward or long-term commitments not reflected in the foregoing financial statements or the notes thereto. Since March 31, 1995, there have been no changes with respect to the Consolidated Companies that has had or would reasonably be expected to have a Materially Adverse Effect. Section 6.15. ERISA. Except as disclosed on Schedule 6.15: (a) Identification of Plans. None of the Consolidated Companies nor any of their respective ERISA Affiliates maintains or contributes to, or has during the past two years maintained or contributed to, any Plan that is subject to Title IV of ERISA. (b) Compliance. Each Plan maintained by the Consolidated Companies has at all times been maintained by its terms and in operation in compliance with all applicable laws, and the Consolidated Companies are subject to no tax or penalty with respect to any Plan of such Consolidated Company or any ERISA Affiliate thereof, including without limitation, any tax or penalty under Title I or Title IV of ERISA or under Chapter 43 of the Tax Code, or any tax or penalty resulting from a loss of deduction under Sections 162, 404 or 419 of the Tax Code, where the failure to comply with such laws, and such taxes and penalties, together with all other liabilities referred to in this Section 6.15 (taken as a whole), would in the aggregate have a Materially Adverse Effect; (c) Liabilities. The Consolidated Companies are subject to no liabilities (including withdrawal liabilities) with respect to any Plans of such Consolidated Companies or any of their ERISA Affiliates, including without limitation, any liabilities arising from Titles I or IV of ERISA, other than obligations to fund benefits under an ongoing Plan and to pay current contributions, expenses and premiums with respect to such Plans where such liabilities, together with all other liabilities referred to in this Section 6.15 (taken as a whole), would in the aggregate have a Materially Adverse Effect; (d) Funding. The Consolidated Companies and, with respect to any Plan that is subject to Title IV of ERISA, each of their respective ERISA Affiliates, have made full and timely payment of all amounts (i) required to be contributed under the terms of each Plan and applicable law, and (ii) required to be paid as expenses (including PBGC or other premiums) of each Plan, where the failure to pay such amounts (when taken as a whole, including any penalties attributable to such amounts) would have a Materially Adverse Effect. No Plan subject to Title IV of ERISA has an "amount of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA), determined as if such Plan terminated on any date on which this representation and warranty is deemed made, in any amount that, together with all other liabilities referred to in this Section 6.15 (taken as a whole), would have a Materially Adverse Effect if such amount were then due and payable. The Consolidated Companies are subject to no liabilities with respect to post- retirement medical benefits in any amounts that, together with all other liabilities referred to in this Section 6.15 (taken as a whole), would have a Materially Adverse Effect if such amounts were then due and payable. Section 6.16. Patents, Trademarks, Licenses, Etc. Except as set forth on Schedule 6.16, (a) the Consolidated Companies have obtained and hold in full force and effect all material patents, trademarks, service marks, trade names, copyrights, licenses and other such rights, free from burdensome restrictions, that are necessary for the operation of their respective businesses as presently conducted, and (b) to the best of Nelson's knowledge, no product, process, method, service or other item presently sold by or employed by any Consolidated Company in connection with such business infringes any patents, trademark, service mark, trade name, copyright, license or other right owned by any other Person and there is not presently pending, or to the knowledge of Nelson, threatened, any claim or litigation against or affecting any Consolidated Company contesting such Person's right to sell or use any such product, process, method, substance or other item where the result of such failure to obtain and hold such benefits or such infringement would have a Materially Adverse Effect. Section 6.17. Ownership of Property. Except as set forth on Schedule 6.17, each Consolidated Company has good and marketable fee simple title to or a valid leasehold interest in all of its real property and good title to, or a valid leasehold interest in, all of its other property, as such properties are reflected in the consolidated balance sheet of the Consolidated Companies as of March 31, 1995 referred to in Section 6.14, other than properties disposed of in the ordinary course of business since such date or as otherwise permitted by the terms of this Agreement, subject to no Lien or title defect of any kind, except Liens permitted hereby and title defects not constituting material impairments in the intended use for such properties. The Consolidated Companies enjoy peaceful and undisturbed possession under all of their respective leases. Those locations set forth on Schedule 4.01(h) are all of the locations (a) at which property owned or leased by the Consolidated Companies is located other than property in transit in the ordinary course of business, and (b) representing each of the Consolidated Companies' place of business if only one (1) exists or chief executive office if more than one (1) place of business exists. Section 6.18. Indebtedness. (a) Except as set forth on Schedule 6.18 and Schedule 11.01(b), none of the Consolidated Companies is an obligor in respect of any Indebtedness for borrowed money, or any commitment to create or incur any Indebtedness for borrowed money, in an amount not less than $500,000 in any single case, and such Indebtedness and commitments for amounts less than $500,000 do not exceed $2,000,000 in the aggregate for all such Indebtedness and commitments of the Consolidated Companies. (b) The Indebtedness listed on Schedule 6.18 (the "Refinanced Indebtedness") and accrued and unpaid interest thereon and fees in respect thereof have been paid in full or provision for restructuring such Indebtedness hereunder has been made such that, in accordance with the express provisions of the instruments governing the same, upon funding of the initial Revolving Loans hereunder, the Consolidated Companies will be released from all liability and contractual obligations with respect thereto other than indemnifications contained therein, and releases in recordable form of any and all Liens previously securing the Refinanced Indebtedness will be obtained, including terminations of all financing statements and other filings in respect thereof. Section 6.19. Financial Condition. On the Closing Date and after giving effect to the transactions contemplated by this Agreement and the other Credit Documents, including without limitation, the use of the proceeds as provided in Section 2.02, (a) the assets of each Credit Party at fair valuation and based on their present fair saleable value (including, without limitation, the fair and realistic value of any contribution or subrogation rights in respect of any Guaranty Agreement given by such Credit Party) will exceed such Credit Party's debts, including contingent liabilities (as such liabilities may be limited under the express terms of any Guaranty Agreement of such Credit Party), (b) the remaining capital of such Credit Party will not be unreasonably small to conduct the Credit Party's business, and (c) such Credit Party will not have incurred debts, or have intended to incur debts, beyond the Credit Party's ability to pay such debts as they mature. For purposes of this Section 6.19, "debt" means any liability on a claim, and "claim" means (A) the right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (B) the right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. Section 6.20. Labor Matters. Except as set forth in Schedule 6.20, the Consolidated Companies have experienced no strikes, labor disputes, slow downs or work stoppages due to labor disagreements that have had, or would reasonably be expected to have, a Materially Adverse Effect, and, to the best knowledge of Nelson, there are no such strikes, disputes, slow downs or work stoppages threatened against any Consolidated Company. The hours worked and payment made to employees of the Consolidated Companies have not been in violation in any material respect of the Fair Labor Standards Act or any other applicable law dealing with such matters. All payments due from the Consolidated Companies, or for which any claim may be made against the Consolidated Company, on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as liabilities on the books of the Consolidated Companies where the failure to pay or accrue such liabilities would reasonably be expected to have a Materially Adverse Effect. Section 6.21. Payment or Dividend Restrictions. Except as set forth in Section 11.04 or described on Schedule 6.21, none of the Consolidated Companies is party to or subject to any agreement or understanding restricting or limiting the payment of any dividends or other distributions by any such Consolidated Company. Section 6.22. Disclosure. No factual information, representation or warranty contained in this Agreement (including the Schedules attached hereto) or in any other document furnished from time to time pursuant to the terms of this Agreement, when viewed in conjunction with all such other factual information, representations or warranties in this Agreement or in any other document furnished pursuant to the terms of this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary to make the statements herein or therein not misleading in any material respect as of the date made or deemed to be made. Except as may be set forth herein (including the Schedules attached hereto) or in any notice furnished to the Lenders pursuant to Section 9.07 at or prior to the respective times the representations and warranties set forth in this Section 6.22 are made or deemed to be made hereunder, there is no fact known to Nelson that has had, or is reasonably expected to have, a Materially Adverse Effect. Section 6.23. Financial Covenants. Schedule 6.23 sets forth the true and correct calculation of the financial covenant amounts, ratios, and percentages required by Section 9.08(a) through Section 9.08(c) calculated as of September 30, 1995. ARTICLE VII. REPRESENTATION AND WARRANTY NOTICE PERIOD Nelson, Agent and the Lenders hereby acknowledge that prior to or contemporaneously with the funding of the Revolving Loans, Nelson is acquiring all of the outstanding common stock of Gibson. Pursuant to Article VI, Nelson is making certain representations and warranties with respect to the Consolidated Companies, including Gibson and its Subsidiaries. Although Nelson has performed certain due diligence in connection with its acquisition of Gibson, Nelson has not owned or been in control of Gibson and its Subsidiaries prior to the funding of the Revolving Loans. Consequently, in order to provide Nelson with an opportunity to further review the records and affairs of Gibson and its Subsidiaries in connection with the representations and warranties made in Article VI, Nelson, Agent and the Lenders agree that during the Notice Period, Nelson shall have the right to modify this Agreement by adding to Article VI any schedules that Nelson deems necessary to correct, clarify and/or modify any representation or warranty made with respect to Gibson and any of its Subsidiaries (the "Gibson Corrections"). During the Notice Period, any representations and warranties contained in Article VI with respect to Gibson and its Subsidiaries shall not be subject to the provisions of Section 12.04. All Gibson Corrections must be in writing and received by Agent during the Notice Period. Agent's receipt of a Gibson Correction prior to the end of the Notice Period shall not constitute an Event of Default hereunder. In no event shall any Gibson Correction be permitted with respect to Nelson or any of its Subsidiaries other than Gibson and its Subsidiaries. Upon termination of the Notice Period, all representations and warranties contained in Article VI, as amended by any Gibson Corrections, if any, shall be subject to the provisions of Section 12.04. ARTICLE VIII. REPRESENTATIONS AND WARRANTIES REGARDING ARTICLE VIII SUBSIDIARIES Nelson represents and warrants that the market value of the assets owned by those Subsidiaries of Nelson set forth on Schedule VIII are within the ranges set forth opposite the respective names of such Subsidiaries on Schedule VIII. Any Subsidiary that executes a Guaranty Agreement and related documents as set forth in Section 9.12 or Section 12.13 shall be deemed removed from Schedule VIII. ARTICLE IX. AFFIRMATIVE COVENANTS So long as any Revolving Loan Commitment remains in effect hereunder or any Revolving Credit Note shall remain unpaid, Nelson will: Section 9.01. Corporate Existence, Etc. Preserve and maintain, and cause each of the Credit Parties to preserve and maintain, its corporate existence, its material rights, franchises, and licenses, and its material patents and copyrights (for the scheduled duration thereof), trademarks, trade names, and service marks, necessary or desirable in the normal conduct of its business, and its qualification to do business as a foreign corporation in all jurisdictions where it conducts business or other activities making such qualification necessary, where the failure to be so qualified would reasonably be expected to have a Materially Adverse Effect. Section 9.02. Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply with all Requirements of Law (including, without limitation, the Environmental Laws subject to the exception set forth in Section 6.08 where the penalties, claims, fines, and other liabilities resulting from noncompliance with such Environmental Laws do not involve amounts in excess of $1,000,000 in the aggregate) and Contractual Obligations applicable to or binding on any of them where the failure to comply with such Requirements of Law and Contractual Obligations would reasonably be expected to have a Materially Adverse Effect. Section 9.03. Payment of Taxes and Claims, Etc. Pay, and cause each of its Subsidiaries to pay, (a) all taxes, assessments and governmental charges imposed upon it or upon its property, and (b) all claims (including, without limitation, claims for labor, materials, supplies or services) that might, if unpaid, become a Lien upon its property, unless, in each case, the validity or amount thereof is being contested in good faith by appropriate proceedings and adequate reserves are maintained with respect thereto. Section 9.04. Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, containing complete and accurate entries in all material respects of all their respective financial and business transactions. Section 9.05. Visitation, Inspection, Etc. Permit, and cause each of its Subsidiaries to permit, any representative of the Agent or any Lender to visit and inspect any of its property, to examine its books and records and to make copies and take extracts therefrom, and to discuss its affairs, finances and accounts with its officers, all at such reasonable times and as often as the Agent or such Lender may reasonably request after reasonable prior notice to Nelson; provided, however, that at any time following the occurrence and during the continuance of a Default or an Event of Default, no prior notice to Nelson shall be required. Section 9.06. Insurance; Maintenance of Properties. (a) Maintain or cause to be maintained with financially sound and reputable insurers, insurance with respect to its properties and business, and the properties and business of its Subsidiaries, against loss or damage of the kinds customarily insured against by reputable companies in the same or similar businesses, such insurance to be of such types and in such amounts as is customary for such companies under similar circumstances; provided, however, that in any event Nelson shall use its best efforts to maintain, or cause to be maintained, insurance in amounts and with coverages not materially less favorable to any Consolidated Company as in effect on the date of this Agreement, except where the costs of maintaining such insurance would, in the judgment of both Nelson and the Agent, be excessive. (b) Cause, and cause each of the Consolidated Companies to cause, all properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, settlements and improvements thereof, all as in the judgment of Nelson may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 9.06(b) shall prevent Nelson from discontinuing the operation or maintenance of any such properties if such discontinuance is, in the judgment of Nelson, desirable in the conduct of its business or the business of any Consolidated Company. Section 9.07. Reporting Covenants. Furnish to each Lender: (a) Annual Financial Statements. As soon as available and in any event within ninety (90) days after the end of each fiscal year of Nelson, balance sheets of the Consolidated Companies as at the end of such year, presented on a consolidated and consolidating basis, and the related statements of income, shareholders' equity, and cash flows of the Consolidated Companies for such fiscal year, presented on a consolidated and consolidating basis (which consolidating report need not be audited), setting forth in each case in comparative form the figures for the previous fiscal year as then reported, all in reasonable detail and accompanied by a report thereon of Arthur Andersen & Co. or other independent public accountants of comparable recognized national standing, which such report shall be unqualified as to going concern and scope of audit and shall state that such financial statements present fairly in all material respects the financial condition as at the end of such fiscal year on a consolidated basis, and the results of operations and statements of cash flows of the Consolidated Companies for such fiscal year in accordance with GAAP and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; (b) Quarterly Financial Statements. As soon as available and in any event within sixty (60) days after the end of each fiscal quarter of Nelson (other than the fourth fiscal quarter), balance sheets of the Consolidated Companies as of the end of such quarter presented on a consolidated basis and the related statements of income, shareholders' equity, and cash flows of the Consolidated Companies for such fiscal quarter and for the portion of Nelson's fiscal year ended at the end of such quarter, presented on a consolidated basis setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of Nelson's previous fiscal year, all in reasonable detail and certified by the chief financial officer or principal accounting officer of Nelson that such financial statements fairly present in all material respects the financial condition of the Consolidated Companies as of the end of such fiscal quarter on a consolidated basis, and the results of operations and statements of cash flows of the Consolidated Companies for such fiscal quarter and such portion of Nelson's fiscal year, in accordance with GAAP consistently applied (subject to normal year-end audit adjustments and the absence of certain footnotes); (c) No Default/Compliance Certificate. Together with the financial statements required pursuant to Section 9.07(a) and Section 9.07(b), a certificate of the president, chief financial officer or principal accounting officer of Nelson (i) to the effect that, based upon a review of the activities of the Consolidated Companies and such financial statements during the period covered thereby, there exists no Event of Default and no Default under this Agreement, or if there exists an Event of Default or a Default hereunder, specifying the nature thereof and the proposed response thereto, and (ii) demonstrating in reasonable detail compliance as of the end of such fiscal year or such fiscal quarter with Section 9.08 and Section 11.01 through Section 11.05; (d) Auditor's No Default Certificate. Together with the financial statements required pursuant to Section 9.07(a), a certificate of the accountants who prepared the report referred to therein, to the effect that, based upon their audit, there exists no Default or Event of Default under this Agreement, or if there exists a Default or Event of Default hereunder, specifying the nature thereof; (e) Notice of Default. Promptly after any Executive Officer of Nelson has notice or knowledge of the occurrence of an Event of Default or a Default, a certificate of the chief financial officer or principal accounting officer of Nelson specifying the nature thereof and the proposed response thereto; (f) Asset Sales. Together with the financial statements required pursuant to Section 9.07(a), a certificate of the chief financial officer or principal accounting officer of Nelson reporting all Asset Sales effected by the Consolidated Companies during the fiscal year covered by such financial statements which involved Asset Values in excess of $100,000 in any single transaction or related series of transactions, including the Asset Value of such assets and the amounts received by the Consolidated Companies with respect to such sales, and such other information regarding such transactions as the Agent or any Lender may reasonably request; (g) Litigation. Promptly after (i) the occurrence thereof, notice of the institution of or any material adverse development in any material action, suit or proceeding or any governmental investigation or any arbitration, before any court or arbitrator or any governmental or administrative body, agency or official, against any Consolidated Company, or any material property of any thereof, or (ii) actual knowledge thereof, notice of the threat of any such action, suit, proceeding, investigation or arbitration; (h) Environmental Notices. Promptly after receipt thereof, notice of any actual or alleged violation, or notice of any action, claim or request for information, either judicial or administrative, from any governmental authority relating to any actual or alleged claim, notice of potential liability under or violation of any Environmental Law, or any actual or alleged spill, leak, disposal or other release of any waste, petroleum product, or hazardous waste or Hazardous Substance by any Consolidated Company that could result in penalties, fines, claims or other liabilities to any Consolidated Company in amounts in excess of $250,000; (i) ERISA. (i) Promptly after Nelson has knowledge or should have had knowledge of the occurrence thereof with respect to any Plan of any Consolidated Company or any ERISA Affiliate thereof, or any trust established thereunder, notice of (A) a "reportable event" described in Section 4043 of ERISA and the regulations issued from time to time thereunder (other than a "reportable event" not subject to the provisions for 30-day notice to the PBGC under such regulations), or (B) any other event which could reasonably be expected to subject any Consolidated Company to any tax, penalty or liability under Title I or Title IV of ERISA or Chapter 43 of the Tax Code, or any tax or penalty resulting from a loss of deduction under Sections 162, 404 or 419 of the Tax Code, or any tax, penalty or liability under any Requirement of Law applicable, where any such taxes, penalties or liabilities exceed or could reasonably be expected to exceed $250,000 in the aggregate; (ii) Promptly after such notice must be provided to the PBGC, or to a Plan participant, beneficiary or alternative payee, any notice referred to or required under Section 101(d), 302(f)(4), 303, 307 or 4041(c)(1)(A) of ERISA or under Section 412 of the Tax Code with respect to any Plan of any Consolidated Company or any ERISA Affiliate thereof; (iii) Promptly after receipt, (A) any notice received by any Consolidated Company or any ERISA Affiliate thereof concerning the intent of the PBGC or any other governmental authority to terminate a Plan of such Consolidated Company or ERISA Affiliate thereof that is subject to Title IV of ERISA, (B) any notice received by any Consolidated Company or any ERISA Affiliate thereof concerning the intent of the PBGC or any other governmental authority to impose any liability on such Consolidated Company or ERISA Affiliate thereof under Title IV of ERISA, or (C) any notice received by any Consolidated Company or any ERISA Affiliate thereof concerning the intent of the Internal Revenue Service or any other governmental authority to impose any liability on such Consolidated Company or ERISA Affiliate thereof under Chapter 43 of the Tax Code, which action under Section 9.07(i)(iii)(C) could reasonably be expected to have a Materially Adverse Effect; (iv) Upon the request of the Agent, promptly upon the filing thereof with the Internal Revenue Service ("IRS") or the Department of Labor ("DOL"), a copy of IRS Form 5500 or annual report for each Plan of any Consolidated Company or ERISA Affiliate thereof that is subject to Title IV of ERISA; (v) Upon the request of the Agent, (A) true and complete copies of any and all documents, government reports and IRS determination or opinion letters or rulings for any Plan of any Consolidated Company from the IRS, PBGC or DOL, (B) any reports filed with the IRS, PBGC or DOL with respect to a Plan of the Consolidated Companies or any ERISA Affiliate thereof, or (C) a current statement of withdrawal liability for each Multiemployer Plan of any Consolidated Company or any ERISA Affiliate thereof; (j) Liens. Promptly upon any Consolidated Company becoming aware thereof, notice of the filing of any federal statutory Lien, tax or other state or local government Lien or any other Lien affecting their respective properties, other than those Liens expressly permitted by Section 11.02; (k) Public Filings, Etc. Promptly upon the filing thereof or otherwise becoming available, copies of all financial statements, annual, quarterly and special reports, proxy statements and notices sent or made available generally by Nelson to its public security holders, of all regular and periodic reports and all registration statements and prospectuses, if any, filed by any of them with any securities exchange, and of all financial press releases and other statements made available generally to the public containing material developments in the business or financial condition of Nelson and the other Consolidated Companies; (l) Accountants' Reports. Promptly upon receipt thereof, copies of all financial statements of, and all reports submitted by, independent public accountants to any of the Consolidated Companies in connection with each annual, interim or special audit of the Consolidated Companies' financial statements, including without limitation, the comment letter submitted by such accountants to management in connection with their annual audit; (m) Burdensome Restrictions, Etc. Promptly upon the existence or occurrence thereof, notice of the existence or occurrence of (i) any Contractual Obligation or Requirement of Law described in Section 6.11, (ii) failure of any Consolidated Company to hold in full force and effect those material trademarks, service marks, patents, trade names, copyrights, licenses and similar rights necessary in the normal conduct of its business, and (iii) any strike, labor dispute, slow down or work stoppage as described in Section 6.20; (n) New Subsidiaries. Within thirty (30) days after the formation or acquisition of any Subsidiary, or any other event resulting in the creation of a new Subsidiary, notice of the formation or acquisition of such Subsidiary or such occurrence, including a description of the assets of such entity, the activities in which it will be engaged, and such other information as the Agent may request; (o) Intercompany Asset Transfers. Promptly upon the occurrence thereof, notice of the transfer of any assets from any Consolidated Company to any other Consolidated Company (in any transaction or series of related transactions), excluding sales or other transfers of assets in the ordinary course of business, where the Asset Value of such assets is greater than $1,000,000; (p) Asset sales. At any time that the aggregate amount of Asset Sales made by the Consolidated Companies after December 13, 1995 exceeds $2,500,000 (based on the Asset Values), prompt notice of any additional Asset Sale or related series of Asset Sales involving Asset Values of $100,000 or more; and (q) Other Information. With reasonable promptness, such other information about the Consolidated Companies as the Agent or any Lender may reasonably request from time to time. Section 9.08. Financial Covenants. (a) Interest Coverage Ratio. Maintain as of the last day of each fiscal quarter, a minimum Interest Coverage Ratio, calculated for the immediately preceding four fiscal quarters, as shown below for each fiscal quarter indicated: Fiscal Quarter Minimum Ratio -------------- ------------- Through March 31, 1997 2.00:1.00 Thereafter 2.50:1.00 (b) Funded Debt to Total Capital. Cause the Consolidated Companies to maintain on a consolidated basis as of the last day of each fiscal quarter, a maximum ratio of Funded Debt to Total Capital, calculated quarterly, as shown below for each fiscal quarter ending during the fiscal quarters indicated: Fiscal Quarter Maximum Ratio -------------- ------------- Through March 31, 1997 .65:1.00 Thereafter .60:1.00 (c) Senior Funded Debt to Total Capital. Cause the Consolidated Companies to maintain on a consolidated basis as of the last day of each fiscal quarter, a maximum ratio, expressed as a percentage, of Senior Funded Debt to Total Capital, calculated quarterly, of 50% (.50:1.00) for each fiscal quarter. Section 9.09. Notices under Certain Other Indebtedness. Immediately upon Nelson's receipt thereof, furnish the Agent a copy of any notice received by it or any other Consolidated Company from the holder(s) of Indebtedness referred to in Section 11.01(b), Section 11.01(e) or Section 11.01(f) (or from any trustee, agent, attorney, or other party acting on behalf of such holder(s)) in an amount that exceeds $500,000, where such notice states or claims (a) the existence or occurrence of any actual or alleged default or event of default with respect to such Indebtedness under the terms of any indenture, loan or credit agreement, debenture, note or other document evidencing or governing such Indebtedness, or (b) the existence or occurrence of any event or condition that requires or permits holder(s) of any Indebtedness to exercise rights under any Change in Control Provision. Nelson agrees to take such actions as may be necessary to require the holder(s) of any Indebtedness (or any trustee or agent acting on their behalf) incurred pursuant to documents executed or amended and restated after the Closing Date, to furnish copies of all such notices directly to the Agent simultaneously with the furnishing thereof to Nelson, and that such requirement may not be altered or rescinded without the prior written consent of the Agent. Section 9.10. Additional Credit Parties and Collateral. Promptly after the formation, creation or acquisition (provided that nothing in this Section 9.10 shall be deemed to authorize the acquisition of any entity) of any Subsidiary not listed on Schedule 6.13 or the name change of any Subsidiary listed on Schedule 6.01, Nelson shall execute and deliver, and cause to be executed and delivered a Guaranty Agreement from each such Subsidiary, together with related documents of the kind described in Article IV as Agent shall require, all in form and substance satisfactory to the Agent and the Required Lenders. Section 9.11. Gibson Debt. On or before January 5, 1996, assume the Gibson Debt on terms (a) with respect to negative covenants and financial covenants, that conform to the remaining Senior Debt, and (b) with respect to the remaining terms of the Gibson Debt, that remain as those terms exist as of the date of this Agreement. Gibson shall be released from its obligation to repay the Gibson Debt. Section 9.12. Schedule VIII Subsidiaries. If any one of the Subsidiaries listed on Part A of Schedule VIII ever owns assets having a market value of greater than $50,000, execute and deliver, and cause to be executed and delivered a Guaranty Agreement from each such Subsidiary, together with related documents of the kind described in Article IV as Agent shall require, all in form and substance satisfactory to the Agent and the Required Lenders. Nelson shall review the market value of the assets held by each of the Subsidiaries listed on Part A of Schedule VIII quarterly and shall promptly notify Agent in writing if the market value of the assets owned by any Subsidiary listed on Part A of Schedule VIII exceeds $50,000 and provide Agent with the documentation required by this Section 9.12. If any one of the Subsidiaries listed on Part B of Schedule VIII ever owns assets having a market value of greater than $250,000, execute and deliver, and cause to be executed and delivered a Guaranty Agreement from each such Subsidiary, together with related documents of the kind described in Article IV as Agent shall require, all in form and substance satisfactory to the Agent and the Required Lenders. Nelson shall review the market value of the assets held by each of the Subsidiaries listed on Part B of Schedule VIII quarterly and shall promptly notify Agent in writing if the market value of the assets owned by any Subsidiary listed on Part B of Schedule VIII exceeds $250,000 and provide Agent with the documentation required by this Section 9.12. Nelson's failure to comply with the terms of this Section 9.12 shall constitute an Event of Default under Section 12.03. ARTICLE X. SCHEDULE AMENDMENTS In the event notice is provided by Nelson pursuant to the terms of Article IX ("Notice of Change"), any information contained in a Notice of Change shall become a part of the Schedule relating to such information only upon the written approval of the Required Lenders as evidenced by an amendment to this Agreement. ARTICLE XI. NEGATIVE COVENANTS So long as any Revolving Loan Commitment remains in effect hereunder or any Revolving Credit Note shall remain unpaid, Nelson will not and will not permit any Subsidiary to: Section 11.01. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, other than: (a) Indebtedness evidenced by the Revolving Credit Notes; (b) Indebtedness outstanding on the date hereof or pursuant to lines of credit in effect on the date hereof, all as described on Schedule 11.01(b) attached hereto (excluding Refinanced Indebtedness); (c) purchase money Indebtedness acceptable to Agent and Lenders not to exceed an aggregate amount of $1,000,000 outstanding at any one time; (d) unsecured current liabilities (other than liabilities for borrowed money or liabilities evidenced by promissory notes, bonds or similar instruments) incurred in the ordinary course of business and either (i) not more than sixty (60) days past due, or (ii) being disputed in good faith by appropriate proceedings with reserves for such disputed liability maintained in conformity with GAAP; (e) Subordinated Debt not to exceed $55,000,000; (f) Indebtedness owed to Agent by Nelson, which Indebtedness is evidenced by an Amended and Restated Revolving Credit Promissory Note in the principal amount of $10,000,000 substantially in the form attached hereto as Exhibit E (the "SunTrust Ten Million Dollar Revolving Credit Facility"); (i) Senior Debt; (j) Gibson Debt, subject to the terms of Section 9.11; (k) Other Indebtedness not to exceed $1,000,000 at any one time outstanding. Section 11.02. Liens. Create, incur, assume or suffer to exist any Lien on any of its property now owned or hereafter acquired to secure any Indebtedness other than: (a) any Lien required under this Agreement; (b) Liens existing on the date hereof disclosed on Schedule 11.02 (excluding Liens securing Refinanced Indebtedness); (c) any Liens securing purchase money Indebtedness described in Section 11.01(c); (d) Liens for taxes not yet due (and in the case of Liens on real property in Tennessee, not then delinquent), and Liens for taxes that are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained; (e) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law created in the ordinary course of business for amounts not yet due or that are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained; (f) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); and (g) Liens (other than those permitted by Section 11.02(a) through Section 11.02(f) encumbering assets having an Asset Value not greater than $1,000,000 in the aggregate at any one time. Section 11.03. Mergers, Acquisitions, Sales, Etc. Merge or consolidate with any other Person, or sell, lease or otherwise dispose of its accounts, property or other assets (including capital stock of Subsidiaries), or purchase, lease or otherwise acquire all or any substantial portion of the property or assets (including capital stock) of any Person; provided, however, that the foregoing restrictions on asset sales shall not be applicable to (a) sales of equipment or other personal property being replaced by other equipment or other personal property purchased as a capital expenditure item, (b) other sales of assets (including stock of Subsidiaries) in an aggregate amount not to exceed ten percent (10%) of Consolidated Net Worth computed as of March 31, 1996 subject to Section 2.06, and (c) sales of inventory in the ordinary course of business; provided further, that the foregoing restrictions on mergers shall not apply to mergers between Subsidiaries or Nelson provided that upon consummation of such merger, Nelson is in compliance with Section 9.08 and is the surviving corporation of such merger; provided, however, that no transaction pursuant to Section 11.03(a) or Section 11.03(b) or the second proviso in this Section 11.03 shall be permitted if any Default or Event of Default otherwise exists at the time of such transaction or would otherwise exist as a result of such transaction. Section 11.04. Dividends, Etc. Declare or pay any dividend on its capital stock, or make any payment to purchase, redeem, retire or acquire any of its Subordinated Debt or capital stock or any option, warrant, or other right to acquire such Subordinated Debt or capital stock, other than: (a) dividends payable solely in shares of capital stock; (b) cash dividends declared and paid, and all other such payments made, after March 31, 1995 in an aggregate amount at any time not to exceed the sum of (i) $5,000,000, plus (ii) fifty percent (50%) of Consolidated Net Income (or minus one hundred percent (100%) of Consolidated Net Loss) earned during Nelson's 1995 fiscal year and thereafter on a cumulative basis (such period to be treated as one accounting period); (c) redemption of Subordinated Debt upon the exercise of conversion rights contained in the Indenture; and (d) payment of Subordinated Debt at maturity as set forth in the Indenture, provided, however, no such dividend or other payment may be declared or paid pursuant to Section 11.04(b) unless (A) the full amount of any mandatory prepayment required by Article II has been made, and (B) no Default or Event of Default exists at the time of such declaration or payment, or would exist as a result of such declaration or payment. Section 11.05. Investments, Loans, Etc. Make, permit or hold any Investments in any Person, or otherwise acquire or hold any Subsidiaries, other than: (a) Investments in (i) Subsidiaries that are Guarantors under this Agreement, whether such Subsidiaries are Guarantors on the Closing Date or become Guarantors in accordance with Section 9.10 after the Closing Date and (ii) Subsidiaries that are listed on Part B of Schedule VIII; provided, however, nothing in this Section 11.05 shall be deemed to authorize an investment pursuant to this Section 11.05(a) in any entity that is not (A) a Subsidiary and a Guarantor or (B) a Subsidiary that is listed on Part B of Schedule VIII prior to such investment; (b) direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof, in each case supported by the full faith and credit of the United States and maturing within one year from the date of creation thereof; (c) commercial paper maturing within one year from the date of creation thereof rated in the highest grade by a nationally recognized credit rating agency; (d) time deposits maturing within one (1) year from the date of creation thereof with, including certificates of deposit issued by, any office located in the United States of any bank or trust company that is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $500,000,000, including without limitation, any such deposits in eurodollars issued by a foreign branch of any such bank or trust company; (e) those loans or extensions of credit made by any Consolidated Company to another Consolidated Company; and (f) Investments (other than those permitted by Section 11.05(a) through Section 11.05(e)) in an aggregate amount not to exceed $10,000,000. Section 11.06. Sale and Leaseback Transactions. Sell or transfer any property, real or personal, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that any Consolidated Company intends to use for substantially the same purpose or purposes as the property being sold or transferred. Section 11.07. Transactions with Affiliates. Enter into any material transaction or series of related transactions with any Affiliate of any Consolidated Company (but excluding any Affiliate that is also a Consolidated Company), other than on terms and conditions substantially as favorable to such Consolidated Company as would be obtained by such Consolidated Company at the time in a comparable arm's-length transaction with a Person other than an Affiliate. Section 11.08. Optional Prepayments. Directly or indirectly, prepay, purchase, redeem, retire, defease or otherwise acquire or make any optional payment on account of any principal of, interest on, or premium payable in connection with the optional prepayment, redemption or retirement of, any of its Indebtedness, or give a notice of redemption with respect to any such Indebtedness, or make any payment in violation of the subordination provisions of any Subordinated Debt, except with respect to (a) the Obligations under this Agreement and the Revolving Credit Notes, (b) those loans or extensions of credit made by any Consolidated Company to another Consolidated Company, (c) the Indebtedness more particularly described in Section 11.01(f), and (d) redemption of Subordinated Debt upon the exercise of conversion rights contained in the Indenture; provided, however, that no prepayment pursuant to this Section 11.08 shall be permitted if any Default or Event of Default otherwise exists at the time of such prepayment or would otherwise exist as a result of such prepayment. Section 11.09. Changes in Business. Enter into any business that is substantially different from that presently conducted by the Consolidated Companies taken as a whole (which includes the publishing, distribution and sale of bibles, music and other books and periodicals, the manufacture, sale and distribution of gift products, and the design and production of multi-media programming, including television and radio production and broadcasting), except where the aggregate Investment made and other funds expended or committed with respect to such business does not exceed $2,500,000; provided, however, that any Investment permitted by this Section 11.09 shall be included in the calculation of Investments as set forth in Section 11.05(f). Section 11.10. ERISA. Take or fail to take any action with respect to any Plan or any Consolidated Company or, with respect to its ERISA Affiliates, any Plans which are subject to Title IV of ERISA or to continuation health care requirements for group health plans under the Tax Code, including without limitation (a) establishing any such Plan, (b) amending any such Plan (except where required to comply with applicable law), (c) terminating or withdrawing from any such Plan, or (d) incurring an amount of unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA, or any withdrawal liability under Title IV of ERISA with respect to any such Plan, without first obtaining the written approval of the Required Lenders, where such actions or failures could reasonably be expected to have a Materially Adverse Effect. Section 11.11. Additional Negative Pledges. Create or otherwise cause or suffer to exist or become effective, directly or indirectly, any prohibition or restriction on the creation or existence of any Lien upon any asset of any Consolidated Company, other than pursuant to (a) Section 11.02, (b) the terms of any agreement, instrument or other document pursuant to which any Indebtedness, permitted by Section 11.01(c) is incurred by any Consolidated Company, so long as such prohibition or restriction applies only to the property or asset being financed by such Indebtedness and (c) any requirement of applicable law or any regulatory authority having jurisdiction over any of the Consolidated Companies. Section 11.12. Limitation on Payment Restrictions Affecting Consolidated Companies. Create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Consolidated Company to (a) pay dividends or make any other distributions on such Consolidated Company's stock, (b) pay any indebtedness owed to Nelson or any other Consolidated Company, or (c) transfer any of its property or assets to Nelson or any other Consolidated Company, except any consensual encumbrance or restriction existing under the Credit Documents. Section 11.13. Actions Under Certain Documents. Without the prior written consent of the Agent (which consent shall not be unreasonably withheld), modify, amend, cancel or rescind any agreements or documents evidencing or governing Subordinated Debt, except that current interest accrued thereon as of the date of this Agreement and all interest subsequently accruing thereon (whether or not paid currently) may be paid unless a Default or Event of Default has occurred and is continuing. Section 11.14. Schedule VIII Subsidiaries. Notwithstanding any other provision set forth in this Agreement, as long as any Revolving Loan Commitment remains in effect hereunder or any Revolving Credit Note shall remain unpaid, permit any Subsidiary listed on Schedule VIII to receive any proceeds of the Revolving Loans, either directly or indirectly. ARTICLE XII. EVENTS OF DEFAULT Upon the occurrence and during the continuance of any of the following specified events (each an "Event of Default"): Section 12.01. Payments. Nelson shall fail to make promptly when due (including, without limitation, by mandatory prepayment) any principal payment with respect to the Revolving Loans, or Nelson shall fail to make within three (3) days after the due date thereof any payment of interest, fee or other amount payable hereunder; Section 12.02. Covenants Without Notice. Nelson shall fail to observe or perform any covenant or agreement contained in Section 9.07(e), Section 9.08, Section 11.01 through Section 11.06, Section 11.08, Section 11.09 and Section 11.11 through Section 11.13; Section 12.03. Other Covenants. Nelson shall fail to observe or perform any covenant or agreement contained in this Agreement, other than those referred to in Section 12.01 and Section 12.02, and, if capable of being remedied, such failure shall remain unremedied for thirty (30) days after the earlier of (a) Nelson's obtaining knowledge thereof, or (b) written notice thereof shall have been given to Nelson by Agent or any Lender; Section 12.04. Representations. Any representation or warranty made or deemed to be made by Nelson or any other Credit Party or by any of its officers under this Agreement or any other Credit Document (including the Schedules attached thereto), or any certificate or other document submitted to the Agent or the Lenders by any such Person pursuant to the terms of this Agreement or any other Credit Document, shall be incorrect in any material respect when made or deemed to be made or submitted; Section 12.05. Non-Payments of Other Indebtedness. Any Consolidated Company shall fail to make when due (whether at stated maturity, by acceleration, on demand or otherwise, and after giving effect to any applicable grace period) any payment of principal, interest or any other amount owed on any Indebtedness (other than the Obligations) exceeding $1,000,000 in the aggregate; Section 12.06. Defaults Under Other Agreements. Any Consolidated Company shall fail to observe or perform within any applicable grace period any covenants or agreements contained in any agreements or instruments relating to any of its Indebtedness (other than the Obligations) exceeding $1,000,000 in the aggregate, or any other event shall occur if the effect of such failure or other event is to accelerate, or to permit the holder of such Indebtedness or any other Person to accelerate, the maturity of such Indebtedness, or any such Indebtedness shall be required to be prepaid (other than by a regularly scheduled required prepayment) in whole or in part prior to its stated maturity; Section 12.07. Bankruptcy. Nelson or any other Consolidated Company shall commence a voluntary case concerning itself under the Bankruptcy Code; or an involuntary case for bankruptcy is commenced against any Consolidated Company and the petition is not controverted within ten (10) days, or is not dismissed within sixty (60) days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or any substantial part of the property of any Consolidated Company; or any Consolidated Company commences proceedings of its own bankruptcy or to be granted a suspension of payments or any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction, whether now or hereafter in effect, relating to any Consolidated Company or there is commenced against any Consolidated Company any such proceeding that remains undismissed for a period of sixty (60) days; or any Consolidated Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or any Consolidated Company suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of sixty (60) days; or any Consolidated Company makes a general assignment for the benefit of creditors; or any Consolidated Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or any Consolidated Company shall call a meeting of its creditors with a view to arranging a composition or adjustment of its debts; or any Consolidated Company shall by any act or failure to act indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate action is taken by any Consolidated Company for the purpose of effecting any of the foregoing; Section 12.08. ERISA. A Plan of a Consolidated Company or a Plan subject to Title IV of ERISA of any of its ERISA Affiliates (a) shall fail to be funded in accordance with the minimum funding standard required by applicable law, the terms of such Plan, Section 412 of the Tax Code or Section 302 of ERISA for any plan year or a waiver of such standard is sought or granted with respect to such Plan under applicable law, the terms of such Plan or Section 412 of the Tax Code or Section 303 of ERISA; or (b) is terminated, or is the subject of termination proceedings under applicable law or the terms of such Plan; or (c) shall require a Consolidated Company to provide security under applicable law, the terms of such Plan, Section 412 of the Tax Code or Section 306 or 307 of ERISA; and any such failure, waiver, termination or other event shall result in a liability of a Consolidated Company to the PBGC or a Plan that would have a Materially Adverse Effect. Section 12.09. Money Judgment. A judgment or order for the payment of money in excess of $1,000,000 (for which the Consolidated Company is not insured) or otherwise having a Materially Adverse Effect shall be rendered against any Consolidated Company and such judgment or order shall continue unsatisfied (in the case of a money judgment) and in effect for a period of thirty (30) days during which execution shall not be effectively stayed or deferred (whether by action of a court, by agreement or otherwise); Section 12.10. Change in Control of Nelson. (a) Any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than Sam Moore or his estate, heirs or beneficiaries, shall become the "beneficial owner(s)" (as defined in said Rule 13d-3) of more than twenty five percent (25%) of the shares of the outstanding common stock of Nelson entitled to vote for members of Nelson's board of directors, or (b) any event or condition shall occur or exist that, pursuant to the terms of any Change in Control Provision, requires or permits the holder(s) of Indebtedness of any Consolidated Company to require that such Indebtedness be redeemed, repurchased, defeased, prepaid or repaid, in whole or in part, or the maturity of such Indebtedness to be accelerated in any respect; Section 12.11. Default Under Other Credit Documents. There shall exist or occur any "Event of Default" as provided under the terms of any other Credit Document, or any Credit Document ceases to be in full force and effect or the validity or enforceability thereof is disaffirmed by or on behalf of Nelson or any other Credit Party, or at any time it is or becomes unlawful for Nelson or any other Credit Party to perform or comply with its obligations under any Credit Document, or the obligations of Nelson or any other Credit Party under any Credit Document are not or cease to be legal, valid and binding on Nelson or any such Credit Party; Section 12.12. Attachments. An attachment or similar action shall be made on or taken against any of the assets of any Consolidated Company with an Asset Value exceeding $1,000,000 in aggregate and is not removed, suspended or enjoined within thirty (30) days of the same being made or any suspension or injunction being lifted; then, and in any such event, and at any time thereafter if any Event of Default shall then be continuing, the Agent may, and upon the written or telex request of the Required Lenders, shall, by written notice to Nelson, take any or all of the following actions, without prejudice to the rights of the Agent, any Lender or the holder of any Revolving Credit Note to enforce its claims against Nelson or any other Credit Party: (a) declare the Total Commitments terminated, whereupon the pro rata Total Commitments of each Lender shall terminate immediately and any commitment fee shall forthwith become due and payable without any other notice of any kind; and (b) declare the principal of and any accrued interest on the Revolving Loans, and all other Obligations owing hereunder, to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Nelson; provided, that, if an Event of Default specified in Section 12.07 shall occur, the result which would occur upon the giving of written notice by the Agent to any Credit Party, as specified in clauses (a) and (b) of this Section, shall occur automatically without the giving of any such notice. Section 12.13. Schedule VIII Subsidiaries. Nelson may cure an Event of Default caused by a breach of Section 9.12 or Section 11.14 as provided in this Section 12.13. Nelson may execute and deliver, and cause to be executed and delivered a Guaranty Agreement from each Subsidiary causing a violation under Section 9.12 or Section 11.14, as applicable, together with related documents of the kind described in Article IV as Agent shall require, all in form and substance satisfactory to the Agent and the Required Lenders, whereupon such Subsidiary causing such violation shall be deemed removed from Schedule VIII. Section 12.14. Adjustment to Pro Rata Share. Upon the occurrence of any Event of Default, the Pro Rata Share of each Lender shall be amended to the amount designated opposite such Lender's name below in the following chart in order to recognize the outstanding indebtedness evidenced by (a) the SunTrust Ten Million Dollar Revolving Credit Facility, (b) the SunTrust Letter of Credit Facility, and (c) the National City Bank, Kentucky (formerly known as First National Bank of Louisville) Letter of Credit Facility: SunTrust Bank, Nashville, N. A. (formerly known as Third National Bank in Nashville): SunTrust Adjusted Pro Rata Share as of the occurrence of such Event of Default. National City Bank, Kentucky (formerly known as First National Bank of Louisville): National City Bank, Kentucky (formerly known as First National Bank of Louisville) Adjusted Pro Rata Share as of the occurrence of such Event of Default. First American National Bank: First American National Bank Adjusted Pro Rata Share as of the occurrence of such Event of Default. NationsBank of Texas, N.A.: NationsBank of Texas, N.A. Adjusted Pro Rata Share as of the occurrence of such Event of Default. Creditanstalt - Bankverein: Creditanstalt - Bankverein Adjusted Pro Rata Share as of the occurrence of such Event of Default. ARTICLE XIII. THE AGENT Section 13.01. Appointment of Agent. Each Lender hereby designates SunTrust as Agent to administer all matters concerning the Revolving Loans and to act as herein specified. Each Lender hereby irrevocably authorizes, and each holder of any Revolving Credit Note by the acceptance of a Revolving Credit Note shall be deemed irrevocably to authorize, the Agent to take such actions on its behalf under the provisions of this Agreement, the other Credit Documents and all other instruments and agreements referred to herein or therein, and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Agent may perform any of its duties hereunder by or through its agents or employees. Section 13.02. Authorization of Agent with Respect to the Security Documents. (a) Each Lender hereby authorizes the Agent to enter into each of the Security Documents, and to take all action contemplated thereby. All rights and remedies under the Security Documents may be exercised by the Agent for the benefit of the Agent and the Lenders and the other beneficiaries thereof upon the terms thereof. The Lenders further agree that the Agent may assign its rights and obligations under any of the Security Documents to any Affiliate of the Agent or to any trustee, if necessary or appropriate under applicable law, which assignee in each such case shall (subject to compliance with any requirements of applicable law governing the assignment of such Security Documents) be entitled to all the rights of the Agent under and with respect to the applicable Security Document. (b) In each circumstance where, under any provision of any Security Document, the Agent shall have the right to grant or withhold any consent, exercise any remedy, make any determination or direct any action by the Agent under such Security Document, the Agent shall act in respect of such consent, exercise of remedies, determination or action, as the case may be, with the consent of and at the direction of the Required Lenders; provided, however, that no such consent of the Required Lenders shall be required with respect to any consent, determination or other matter that is, in the Agent's reasonable judgment, ministerial or administrative in nature. In each circumstance where any consent of or direction from the Required Lenders is required, the Agent shall send to the Lenders a notice setting forth a description in reasonable detail of the matter as to which consent or direction is requested and the Agent's proposed course of action with respect thereto. In the event the Agent shall not have received a response from any Lender within five (5) Business Days after such Lender's receipt of such notice, such Lender shall be deemed to have agreed to the course of action proposed by the Agent. Section 13.03. Nature of Duties of Agent. The Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Credit Documents. None of the Agent nor any of its respective officers, directors, employees or agents shall be liable for any action taken or omitted by it as such hereunder or in connection herewith, unless caused by its or their gross negligence or willful misconduct. The duties of the Agent shall be ministerial and administrative in nature; the Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender; and nothing in this Agreement, express or implied, is intended to or shall be so construed as to impose upon the Agent any obligations in respect of this Agreement or the other Credit Documents except as expressly set forth herein. Section 13.04. Lack of Reliance on the Agent. (a) Independently and without reliance upon the Agent, each Lender, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Credit Parties in connection with the taking or not taking of any action in connection herewith, and (ii) its own appraisal of the creditworthiness of the Credit Parties, and, except as expressly provided in this Agreement, the Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Revolving Loans or at any time or times thereafter. (b) The Agent shall not be responsible to any Lender for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, collectibility, priority or sufficiency of this Agreement, the Revolving Credit Notes, the Guaranty Agreement, the Gibson Pledge Agreement, the Word Pledge Agreement or any other documents contemplated hereby or thereby, or the financial condition of the Credit Parties, or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement, the Revolving Credit Notes, the Guaranty Agreement, the Gibson Pledge Agreement, the Word Pledge Agreement or the other documents contemplated hereby or thereby, or the financial condition of the Credit Parties or the existence or possible existence of any Default or Event of Default; provided, however, to the extent that the Agent has been advised that a Lender has not received any information formally delivered to the Agent pursuant to Section 9.07, the Agent shall deliver or cause to be delivered such information to such Lender. Section 13.05. Certain Rights of the Agent. If the Agent shall request instructions from the Required Lenders with respect to any action or actions (including the failure to act) in connection with this Agreement, the Agent shall be entitled to refrain from such act or taking such act, unless and until the Agent shall have received instructions from the Required Lenders; and the Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders. Section 13.06. Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cable gram, radiogram, order or other documentary, teletransmission or telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper Person. The Agent may consult with legal counsel (including counsel for any Credit Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. Section 13.07. Indemnification of Agent. To the extent the Agent is not reimbursed and indemnified by the Credit Parties, each Lender will reimburse and indemnify the Agent, ratably according to the respective amounts of the Revolving Loans outstanding under all Revolving Loan Commitments (or if no amounts are outstanding, ratably in accordance with the Total Commitments), in either case, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against the Agent in performing its duties hereunder, in any way relating to or arising out of this Agreement or the other Credit Documents; provided that no Lender shall be liable to the Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct; provided further, that a Lender shall not be liable to the Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's negligence, if such Lender shall have given the Agent timely written notice of the Lender's objections to the act or omission constituting negligence on the Agent's part. Section 13.08. The Agent in its Individual Capacity. With respect to its obligation to lend under this Agreement, the Revolving Loans made by it and the Revolving Credit Notes issued to it, the Agent shall have the same rights and powers hereunder as any other Lender or holder of a Revolving Credit Note and may exercise the same as though it were not performing the duties of Agent specified herein; and the terms "Lenders," "Required Lenders," "holders of Revolving Credit Notes," or any similar terms shall, unless the context clearly otherwise indicates, include the Agent in its individual capacity. The Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust, financial advisory or other business with the Consolidated Companies or any Affiliate of the Consolidated Companies as if it were not performing the duties specified herein as Agent, and may accept fees and other consideration from the Consolidated Companies for services in connection with this Agreement and otherwise without having to account for the same to the Lenders. Section 13.09. Holders of Revolving Credit Notes. The Agent may deem and treat the payee of any Revolving Credit Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with the Agent. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Revolving Credit Note shall be conclusive and binding on any subsequent holder, transferee or assignee of such Revolving Credit Note or of any Revolving Credit Note or Revolving Credit Notes issued in exchange therefor. Section 13.10. Successor Agent. (a) The Agent may resign at any time by giving written notice thereof to the Lenders and Nelson and may be removed at any time with or without cause by the Required Lenders; provided, however, the Agent may not resign or be removed until a successor Agent has been appointed and shall have accepted such appointment. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent subject to Nelson's prior written approval. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within thirty (30) days after the retiring Agent's giving of notice of resignation or the Required Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent subject to Nelson's prior written approval, which shall be a bank that maintains an office in the United States, or a commercial bank organized under the laws of the United States of America or any State thereof, or any Affiliate of such bank, having a combined capital and surplus of at least $100,000,000. If at any time SunTrust is removed as a Lender pursuant to Section 14.06(g), SunTrust shall simultaneously resign as Agent. (b) Upon the acceptance of any appointment as the Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article XIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement. ARTICLE XIV. MISCELLANEOUS Section 14.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, telecopy or similar teletransmission or writing) and shall be given to such party at its address or applicable teletransmission number set forth opposite such party's name on the signature pages hereof, or such other address or applicable teletransmission number as such party may hereafter specify by notice to the Agent and Nelson. Each such notice, request or other communication shall be effective (a) if given by telex, when such telex is transmitted to the telex number specified in this Section 14.01 and the appropriate answerback is received, (b) if given by mail, seventy-two (72) hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (c) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section 14.01 and the appropriate confirmation is received, or (d) if given by any other means (including, without limitation, by air courier), when delivered or received at the address specified in this Section 14.01; provided that notices to the Agent shall not be effective until received. Section 14.02. Amendments, Etc. No amendment or waiver of any provision of this Agreement or the other Credit Documents, nor consent to any departure by any Credit Party therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders do any of the following: (a) waive any of the conditions specified in Section 4.01 or Section 4.02 or amend either such Section or, for the purposes of such Sections, the definition of any term contained in, or otherwise material to, either Section, (b) increase any of the Total Commitments or other contractual obligations to Nelson under this Agreement, (c) reduce the principal of, or interest on, the Revolving Credit Notes or any fees hereunder, (d) postpone any date fixed for the payment in respect of principal of, or interest on, the Revolving Credit Notes or any fees hereunder, (e) change the percentage of any of the Total Commitments or of the aggregate unpaid principal amount of the Revolving Credit Notes, or the number or identity of Lenders that shall be required for the Lenders or any of them to take any action hereunder, (f) agree to release (i) any of the outstanding common stock of Gibson (except pursuant to the terms of the Gibson Pledge Agreement) from the Lien of the Security Documents to the extent securing the Obligations, (ii) any of the outstanding common stock of Word, Incorporated (except pursuant to the terms of the Word Pledge Agreement) from the Lien of the Security Documents to the extent securing the Obligations, or (iii) any Guarantor from its obligations under any Guaranty Agreement, (g) modify the definition of "Required Lenders," or (h) modify this Section 14.02. Notwithstanding the foregoing, no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders required hereinabove to take such action, affect the rights or duties of the Agent under this Agreement or under any other Credit Document. Section 14.03. No Waiver; Remedies Cumulative. No failure or delay on the part of the Agent, any Lender or any holder of a Revolving Credit Note in exercising any right or remedy hereunder or under any other Credit Document, and no course of dealing between any Credit Party and the Agent, any Lender or the holder of any Revolving Credit Note shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right or remedy hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies that the Agent, any Lender or the holder of any Revolving Credit Note would otherwise have. No notice to or demand on any Credit Party not required hereunder or under any other Credit Document in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agent, the Lenders or the holder of any Revolving Credit Note to any other or further action in any circumstances without notice or demand. Section 14.04. Payment of Expenses, Etc. Nelson shall: (a) whether or not the transactions hereby contemplated are consummated, pay all reasonable, out-of-pocket costs and expenses of the Agent in the administration (both before and after the execution hereof and including reasonable expenses actually incurred relating to advice of counsel as to the rights and duties of the Agent and the Lenders with respect thereto) of, and in connection with the preparation, execution and delivery of, preservation of rights under, enforcement of, and, after a Default or Event of Default, refinancing, renegotiation or restructuring of, this Agreement and the other Credit Documents and the documents and instruments referred to therein, and any amendment, waiver or consent relating thereto (including, without limitation, the reasonable fees actually incurred and disbursements of counsel for the Agent), and in the case of enforcement of this Agreement or any Credit Document after an Event of Default, all such reasonable, out-of-pocket costs and expenses (including, without limitation, the reasonable fees actually incurred and disbursements of counsel), for any of the Lenders; provided, however, that in no event shall Nelson be obligated to pay any attorneys' fees and related expenses incurred by any Lender other than Agent prior to the occurrence of an Event of Default; (b) subject, in the case of certain Taxes, to the applicable provisions of Section 3.07(b), pay and hold each of the Lenders harmless from and against any and all present and future stamp, documentary, and other similar Taxes with respect to this Agreement, the Revolving Credit Notes and any other Credit Documents, any collateral described therein, or any payments due thereunder, and save each Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such Taxes; and (c) indemnify the Agent and each Lender, and their respective officers, directors, employees, representatives and agents from, and hold each of them harmless against, any and all costs, losses, liabilities, claims, damages or expenses incurred by any of them (whether or not any of them is designated a party thereto) (an "Indemnitee") arising out of or by reason of any investigation, litigation or other proceeding related to any actual or proposed use of the proceeds of any of the Revolving Loans or any Credit Party's entering into and performing of the Agreement, the Revolving Credit Notes or the other Credit Documents, including, without limitation, the reasonable fees actually incurred and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding; provided, however, Nelson shall not be obligated to indemnify any Indemnitee for any of the foregoing arising out of such Indemnitee's gross negligence or willful misconduct; (d) without limiting the indemnities set forth in Section 14.04(c), indemnify each Indemnitee for any and all expenses and costs (including without limitation, remedial, removal, response, abatement, cleanup, investigative, closure and monitoring costs), losses, claims (including claims for contribution or indemnity and including the cost of investigating or defending any claim and whether or not such claim is ultimately defeated, and whether such claim arose before, during or after any Credit Party's ownership, operation, possession or control of its business, property or facilities or before, on or after the date hereof, and including also any amounts paid incidental to any compromise or settlement by the Indemnitee or Indemnitees to the holders of any such claim), lawsuits, liabilities, obligations, actions, judgments, suits, disbursements, encumbrances, liens, damages (including without limitation damages for contamination or destruction of natural resources), penalties and fines of any kind or nature whatsoever (including without limitation in all cases the reasonable fees actually incurred, other charges and disbursements of counsel in connection therewith) incurred, suffered or sustained by that Indemnitee based upon, arising under or relating to Environmental Laws based on, arising out of or relating to in whole or in part, the existence or exercise of any rights or remedies by any Indemnitee under this Agreement, any other Credit Document or any related documents. If and to the extent that the obligations of Nelson under this Section 14.04 are unenforceable for any reason, Nelson hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations that is permissible under applicable law. Section 14.05. Right of Setoff. In addition to and not in limitation of all rights of offset that any Lender or other holder of a Revolving Credit Note may have under applicable law, each Lender or other holder of a Revolving Credit Note shall, upon the occurrence of any Event of Default and whether or not such Lender or such holder has made any demand or any Credit Party's obligations are matured, have the right to appropriate and apply to the payment of any Credit Party's obligations hereunder and under the other Credit Documents owed to such Lender or other holder of a Revolving Credit Note, all deposits of any Credit Party (general or special, time or demand, provisional or final) then or thereafter held by and other Indebtedness or property then or thereafter owing by such Lender or other holder to any Credit Party, whether or not related to this Agreement or any transaction hereunder. Each Lender shall promptly notify Nelson of any offset hereunder. Section 14.06. Benefit of Agreement. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, provided that Nelson may not assign or transfer any of its interest hereunder without the prior written consent of the Lenders. (b) Any Lender may make, carry or transfer Revolving Loans at, to or for the account of, any of its branch offices or the office of an Affiliate of such Lender. (c) Each Lender may assign all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of any of its Total Commitments and the Revolving Loans at the time owing to it and the Revolving Credit Notes held by it) to any Eligible Assignee; provided, however, that (i) the Agent and Nelson must give their prior written consent to such assignment (which consent shall not be unreasonably withheld) unless such assignment is to an Affiliate of the assigning Lender, (ii) the amount of any of the Total Commitments of the assigning Lender subject to each assignment (determined as of the date the assignment and acceptance with respect to such assignment is delivered to the Agent) shall not be less than $5,000,000, and (iii) the parties to each such assignment shall execute and deliver to the Agent an Assignment and Acceptance, together with a Revolving Credit Note or Revolving Credit Notes subject to such assignment and, unless such assignment is to an Affiliate of such Lender, a processing and recordation fee of $2,500 payable to Agent by such Eligible Assignee. Nelson shall not be responsible for such processing and recordation fee or any costs or expenses incurred by any Lender or the Agent in connection with such assignment. From and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, the assignee thereunder shall be a party hereto and to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement. Notwithstanding the foregoing, the assigning Lender must retain after the consummation of such Assignment and Acceptance, a minimum aggregate amount of Total Commitments of $10,000,000; provided, however, no such minimum amount shall be required with respect to any such assignment made at any time there exists an Event of Default hereunder. Within five (5) Business Days after receipt of the notice and the Assignment and Acceptance, Nelson, at its own expense, shall execute and deliver to the Agent, in exchange for the surrendered Revolving Credit Note or Revolving Credit Notes, a new Revolving Credit Note or Revolving Credit Notes to the order of such assignee in a principal amount equal to the applicable Total Commitments assumed by it pursuant to such Assignment and Acceptance and new Revolving Credit Note or Revolving Credit Notes to the assigning Lender in the amount of its retained Total Commitments. Such new Revolving Credit Note or Revolving Credit Notes shall be dated the date of the surrendered Revolving Credit Note or Revolving Credit Notes that they replace, and shall otherwise be in substantially the forms of the appropriate Revolving Credit Notes described herein. (d) Each Lender may, without the consent of Nelson or the Agent, sell participations to one or more banks or other entities in all or a portion of its post- assignment rights and obligations under this Agreement (including all or a portion of its Total Commitments in the Revolving Loans owing to it and the Revolving Credit Notes held by it), provided, however, that (i) no Lender may sell a participation in its aggregate Total Commitments (after giving effect to any permitted assignment hereof) in an amount in excess of fifty percent (50%) of such aggregate Total Commitments and any such Lender must retain after consummation of the sale of such participation a minimum aggregate amount of Total Commitments of $10,000,000, provided, however, sales of participations to an Affiliate of such Lender shall not be included in such calculations; provided, however, no such limitation shall be applicable to any such participation sold at any time there exists an Event of Default hereunder, (ii) such Lender's obligations under this Agreement shall remain unchanged, (iii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iv) the participating bank or other entity shall not be entitled to the benefit (except through its selling Lender) of the cost protection provisions contained in Article III of this Agreement, and (v) Nelson and the Agent and other Lenders shall continue to deal solely and directly with each Lender in connection with such Lender's rights and obligations under this Agreement and the other Credit Documents, and such Lender shall retain the sole right to enforce the obligations of Nelson relating to the Revolving Loans and to approve any amendment, modification or waiver of any provisions of this Agreement. Any Lender selling a participation hereunder shall provide prompt written notice to Nelson of the name of such participant. (e) Any Lender or participant may, in connection with the assignment or participation or proposed assignment or participation, pursuant to this Section 14.06(e), disclose to the assignee or participant or proposed assignee or participant any information relating to Nelson or the other Consolidated Companies furnished to such Lender by or on behalf of Nelson or any other Consolidated Company. With respect to any disclosure of confidential, non-public, proprietary information, such proposed assignee or participant shall agree to use the information only for the purpose of making any necessary credit judgments with respect to the Revolving Loan Commitments and not to use the information in any manner prohibited by any law, including without limitation, the securities laws of the United States. The proposed participant or assignee shall agree not to disclose any of such information except (i) to directors, employees, auditors or counsel to whom it is necessary to show such information, each of whom shall be informed of the confidential nature of the information, (ii) in any statement or testimony pursuant to a subpoena or order by any court, governmental body or other agency asserting jurisdiction over such entity, or as otherwise required by law (provided prior notice is given to Nelson and the Agent unless otherwise prohibited by the subpoena, order or law), and (iii) upon the request or demand of any regulatory agency or authority with proper jurisdiction. The proposed participant or assignee shall further agree to return all documents or other written material and copies thereof received from any Lender, the Agent or Nelson relating to such confidential information unless otherwise properly disposed of by such entity. (f) Any Lender may at any time assign all or any portion of its rights in this Agreement and the Revolving Credit Notes issued to it to a Federal Reserve Bank; provided that no such assignment shall release the Lender from any of its obligations hereunder. (g) If (i) any Taxes referred to in Section 3.07(b) have been levied or imposed so as to require withholdings or deductions by Nelson and payment by Nelson of additional amounts to any Lender as a result thereof, (ii) any Lender shall make demand for payment of any material additional amounts as compensation for increased costs pursuant to Section 3.10 or for its reduced rate of return pursuant to Section 3.16, or (iii) any Lender shall decline to consent to a modification or waiver of the terms of this Agreement or the other Credit Documents requested by Nelson, then and in such event, upon request from Nelson delivered to such Lender and the Agent, such Lender shall assign, in accordance with the provisions of Section 14.06(c), all of its rights and obligations under this Agreement and the other Credit Documents to another Lender or an Eligible Assignee selected by Nelson, in consideration for the payment by such assignee to the Lender of the principal of, and interest on, the outstanding Revolving Loans accrued to the date of such assignment, and the assumption of such Lender's Total Commitment hereunder, together with any and all other amounts owing to such Lender under any provisions of this Agreement or the other Credit Documents accrued to the date of such assignment. Section 14.07. Governing Law; Submission to Jurisdiction. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND UNDER THE REVOLVING CREDIT NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF) OF THE STATE OF TENNESSEE. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE REVOLVING CREDIT NOTES OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE CHANCERY COURTS FOR DAVIDSON COUNTY, TENNESSEE OR IN THE FEDERAL COURTS FOR THE MIDDLE DISTRICT OF TENNESSEE, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, NELSON HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND NELSON HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. (c) NELSON IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO NELSON AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. (d) Nothing herein shall affect the right of the Agent, any Lender, any holder of a Revolving Credit Note or any Credit Party to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against Nelson in any other jurisdiction. Section 14.08. Independent Nature of Lenders, Rights. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights pursuant to this Agreement and its Revolving Credit Notes, and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. Section 14.09. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Section 14.10. Effectiveness; Survival. (a) This Agreement shall become effective on the date on which all of the parties hereto shall have executed a copy hereof (whether the same or different copies) and shall have delivered the same to the Agent pursuant to Section 14.01 or, in the case of the Lenders, shall have given to the Agent written or telex notice (actually received) that the same has been executed and mailed to them. (b) The obligations of Nelson under Section 3.07(b), Section 3.10, Section 3.12, Section 3.16 and Section 14.04 shall survive the payment in full of the Revolving Credit Notes after the Final Maturity Date. All representations and warranties made herein, in the certificates, reports, notices and other documents delivered pursuant to this Agreement shall survive the execution and delivery of this Agreement, the other Credit Documents, and such other agreements and documents, the making of the Revolving Loans hereunder, and the execution and delivery of the Revolving Credit Notes. Section 14.11. Severability. In case any provision in or obligation under this Agreement or the other Credit Documents shall be invalid, illegal or unenforceable, in whole or in part, in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. Section 14.12. Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitation of, another covenant, shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. Section 14.13. Change in Accounting Principles, Fiscal Year or Tax Laws. If (a) any preparation of the financial statements referred to in Section 9.07 hereafter occasioned by the promulgation of rules, regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants (or successors thereto or agencies with similar functions) (other than changes mandated by FASB-106) result in a material change in the method of calculation of financial covenants, standards or terms found in this Agreement, (b) there is any change in Nelson's fiscal quarter or fiscal year, or (c) there is a material change in federal tax laws that materially affects any of the Consolidated Companies' ability to comply with the financial covenants, standards or terms found in this Agreement, Nelson and the Required Lenders agree to enter into negotiations in order to amend such provisions so as to equitably reflect such changes with the desired result that the criteria for evaluating any of the Consolidated Companies' financial condition shall be the same after such changes as if such changes had not been made. Unless and until such provisions have been so amended, the provisions of this Agreement shall govern. Section 14.14. Headings Descriptive; Entire Agreement. The headings of the several Sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. This Agreement, the other Credit Documents, and the agreements and documents required to be delivered pursuant to the terms of this Agreement constitute the entire agreement among the parties hereto and thereto regarding the subject matters hereof and thereof and supersede all prior agreements, representations and understandings related to such subject matters. Section 14.15. Interest. The parties to this Agreement intend to conform strictly to applicable usury laws as presently in effect. Accordingly, if the transactions contemplated hereby would be usurious under applicable law (including the laws of the United States of America and the State of Tennessee), then, in that event, notwithstanding anything to the contrary in any Credit Document or agreement executed in connection with or as security for any of the Revolving Credit Notes, Nelson and Lenders agree as follows: (a) the aggregate of all consideration that constitutes interest under applicable law which is contracted for, charged or received under any of the Revolving Credit Notes, this Agreement or any of the other Credit Documents or agreements, or otherwise in connection with the Revolving Credit Notes, shall under no circumstances exceed the maximum lawful rate of interest permitted by applicable law, and any excess shall be credited on the applicable Revolving Credit Notes by the holder thereof (or, if the Revolving Credit Notes shall have been paid in full, refunded to Nelson); and (b) in the event that the maturity of any of the Revolving Credit Notes is accelerated by reason of an election of the holder resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest may never include more than the maximum amount of interest permitted by applicable law, and excess interest, if any, for which this Agreement provides, or otherwise, shall be cancelled automatically as of the date of such acceleration or prepayment and, if previously paid, shall be credited on the applicable Revolving Credit Notes (or, if the Revolving Credit Notes shall have been paid in full, refunded to Nelson). IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in Nashville, Tennessee, by their duly authorized officers as of the day and year first above written. Address for Notices: THOMAS NELSON, INC. P.O. Box 141000 Nashville, Tennessee 37214 By: /s/ Joe L. Powers Attention: Joe L. Powers, Executive Vice Title: Executive Vice President President and Chief Financial Officer Address for Notices: SUNTRUST BANK, NASHVILLE, N. A. (formerly known as Third National Bank in Nashville), As Agent P.O. Box 305110 Nashville, TN 37230-5110 By: /s/ J. Fred Turner Attention: Fred Turner Title: First Vice President Telecopy No.: 615-748-5161 Payment Office: P.O. Box 305110 Nashville, TN 37230-5110 Attention: Fred Turner Address for Notices: SUNTRUST BANK, NASHVILLE, N. A. (formerly known as Third National Bank in Nashville) P.O. Box 305110 Nashville, TN 37230-5110 By: /s/ J. Fred Turner Attention: Fred Turner Title: First Vice President Telecopy No.: 615-748-5161 Payment Office: P.O. Box 305110 Nashville, TN 37230-5110 Attention: Fred Turner REVOLVING LOAN COMMITMENT: $45,500,000 PRO RATA SHARE OF REVOLVING LOAN COMMITMENTS: 26% Address for Notices: NATIONAL CITY BANK, KENTUCKY (formerly known as First National Bank of Louisville) 101 South Fifth St. 7th Floor By: /s/ Cheryl Mennen Louisville, KY 40202 Attention: Cheryl L. Mennen Title: Assistant Vice President Telecopy No.: 502-581-5122 Payment Office: 101 South Fifth St. 7th Floor Louisville, KY 40202 Attention: Cheryl L. Mennen REVOLVING LOAN COMMITMENT: $29,750,000 PRO RATA SHARE OF REVOLVING LOAN COMMITMENTS: 17% Address for Notices: FIRST AMERICAN NATIONAL BANK National Division Nashville, TN 37237-0310 By: /s/ Scott M. Bane Attention: Scott M. Bane Vice President Title: Senior Vice President Telex No.: 6823023 Telephone No.: 615-736-6206 Telecopy No.: 615-748-2485 Payment Office: 327 Union Street Nashville, TN 37237-0310 Attention: Fernisa Joy Commercial Loan Operations Telephone No.: 615-736-6747 Telecopy No.: 615-748-2184 REVOLVING LOAN COMMITMENT: $35,000,000 PRO RATA SHARE OF REVOLVING LOAN COMMITMENTS: 20% Address for Notices: NATIONSBANK OF TEXAS, N.A. 901 Main Street, 64th Floor Dallas, TX 75283 By: /s/ Jay S. Tweed or Title: Vice President P.O. Box 831000 Dallas, TX 75283 Attention: Gregory Meador Telex No.: 6829317 Answerback: NationsBK DAL Telecopy No.: 214-508-0944 Payment Office: 901 Main Street, 64th Floor Dallas, TX 75283 or P.O. Box 831000 Dallas, TX 75283 Attention: Gregory Meador REVOLVING LOAN COMMITMENT: $35,000,000 PRO RATA SHARE OF REVOLVING LOAN COMMITMENTS: 20% Address for Notices: CREDITANSTALT - BANKVEREIN 245 Park Avenue, 27th Floor New York, New York 10167-0096 Attention: Donato R. Giuseppi By: /s/ Robert Biringer Telecopy No.: 212/856-1234 Title: Senior Vice President With a copy to: By: /s/ Joseph R. Longosz Two Ravinia Drive Title: Vice President Suite 1680 Atlanta, Georgia 30346 Attention: Joseph P. Longosz Telecopy No.: 404/390-1851 Payment Office: 245 Park Avenue, 27th Floor New York, NY 10167-0096 Attention: Sophie Ziegler Telephone No.: 212/856-1000 Telecopy No.: 212/856-1234 REVOLVING LOAN COMMITMENT: $29,750,000 PRO RATA SHARE OF REVOLVING LOAN COMMITMENTS: 17% EXHIBIT A FORM OF ASSIGNMENT AND ACCEPTANCE Reference is made to that certain Amended and Restated Credit Agreement dated as of December 13, 1995 (as may be amended, modified or supplemented to the date hereof, the "Credit Agreement"), among THOMAS NELSON, INC. as borrower ("Nelson"), the lenders listed on the signature pages thereof (collectively, the "Lenders"), and SUNTRUST BANK, NASHVILLE, N. A. (formerly known as Third National Bank in Nashville) as Agent. Terms defined in the Credit Agreement are used herein with the same meanings. 1. Assignor (as identified below) hereby sells and assigns to Assignee (as identified below), without recourse against Assignor, and Assignee hereby purchases and assumes from Assignor, without recourse against Assignor, effective as of the Effective Date (as identified below) the interests set forth below (collectively, the "Assigned Interest"), in Assignor's rights and obligations under the Credit Agreement, including without limitation, the below specified Revolving Loan Commitment of Assignor on the Effective Date, and the below specified Revolving Loans owing to Assignor that are outstanding on the Effective Date, together with unpaid interest accrued on the assigned Revolving Loans to the Effective Date, and the amount (if any) set forth below of the fees referred to in Section 3.05(b) of the Credit Agreement accrued to the Effective Date for the account of Assignor. From and after the Effective Date, (a) Assignee shall be a party to and be bound by the provisions of the Credit Agreement, and to the extent of the Assigned Interest, have the rights and obligations of a Lender thereunder and under the Credit Documents (except for any such obligations that are due and payable on, or that become due and payable before, the Effective Date), and (b) Assignor shall, to the extent of the Assigned Interest and otherwise to the extent set forth in the foregoing clause (a), relinquish its rights and be released from its obligations under the Credit Agreement and the Credit Documents. 2. Each of the Assignor and the Assignee represents, warrants and agrees to and with the other and the Agent as follows: (a) Assignor warrants that it is the legal and beneficial owner of the Assigned Interest free and clear of any adverse claim and that its Revolving Loan Commitment and the outstanding balances of its Revolving Loans under the Revolving Loan Commitment, in each case, without giving effect to assignments thereof which have not become effective, are as set forth below, (b) except as set forth in (a), Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other Credit Document or any instrument or documents furnished pursuant thereto, or the financial condition of Nelson or any other Credit Party or the performance or observance by any Credit Party of any of its obligations under the Credit Documents; (c) the Assignee represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (d) Assignee confirms that it has received a copy of the Credit Agreement, such financial statements and other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (e) Assignee agrees that it will perform its obligations as a Lender under the Credit Documents as required by the terms thereof; and (f) Assignee appoints and authorizes the Agent to take such actions as agent on its behalf and to exercise such powers under the Credit Agreement and the other Credit Documents as are delegated to the Agent by the terms of the Credit Agreement and the other Credit Documents, together with such powers as are reasonably incidental thereto. 3. This Assignment and Acceptance is being delivered to the Agent, together with (a) the Revolving Credit Notes evidencing the Revolving Loans included in the Assigned Interest, and (b) a copy of this Assignment and Acceptance after it is duly executed by each of the Assignee and the Assignor. 4. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of Tennessee, without regard to the conflict of laws principles thereof. Date of Assignment: Legal Name of Assignor: Legal Name of Assignee: Assignee's Address (Including Telex and Telecopy Numbers) for Notices: Assignee's Lending Office: Effective Date of Assignment (may not be fewer than five (5) Business Days after the date of the Assignment and Acceptance): Percentage of Principal Amount Facility Facility Assigned Assigned - - - ------- ---------------- ------------- Revolving Loan Facility $ % Immediately after giving effect to this Assignment and Acceptance: (a) The aggregate amount of the Revolving Loan Commitment of Assignor is . The terms set forth herein are hereby agreed to by , as Assignor. By: Name: Title: As Assignor The terms set forth herein are hereby agreed to by , as Assignee. By: Name: Title: As Assignee CONSENTED TO: SUNTRUST BANK, NASHVILLE, N. A. (formerly known as Third National Bank in Nashville), as Agent By: Name: Title: THOMAS NELSON, INC. By: Name: Title: EXHIBIT B FORM OF ESCROW LETTER [Date] Thomas Nelson, Inc. - - --------------------------- - - --------------------------- Attention: Ladies and Gentlemen: Reference is made to that certain Amended and Restated Credit Agreement dated as of December 13, 1995 (as it may be amended and/or restated from time to time, the "Credit Agreement") by and among Thomas Nelson, Inc. ("Nelson"), SunTrust Bank, Nashville, N. A. (formerly known as Third National Bank in Nashville) as Agent (the "Escrow Agent"), and each of the financial institutions listed on the signature pages thereto, together with their successors and assigns (collectively, the "Lenders"). All capitalized terms used herein without definition shall have the meanings assigned to those terms in the Credit Agreement. By signing in the space provided below, each of Nelson and the Escrow Agent agree as follows: 1. Nelson hereby establishes with Escrow Agent an account (Account No. _________) (the "Escrow Account") at its office in _____________________ and hereby transfers to the Escrow Agent the sole and exclusive dominion over and control of the Escrow Account and all property from time to time deposited therein. 2. The Escrow Agent hereby acknowledges receipt from Nelson of $________________ (the "Delivered Funds") in immediately available funds in the Escrow Account, which delivery is made pursuant to the requirements of the Credit Agreement. 3. The Delivered Funds shall be deemed to be mandatory prepayments under the Credit Agreement for purposes of ownership and to have been relinquished forever by Nelson. The Escrow Agent shall hold the Delivered Funds for the account of Lenders pending release pursuant to Paragraph 4 and the Delivered Funds shall be subject to a lien in favor of the Escrow Agent for the benefit of the Lenders. The Escrow Agent shall invest the Delivered Funds; provided, however, the Escrow Agent may invest the Delivered Funds only in investments described in Section 11.05(b), Section 11.05(c) and Section 11.05(d) of the Credit Agreement or other deposits with any Lender ("Permitted Investments"). All earnings on the Delivered Funds (the "Investment Earnings") shall be for the account of Nelson. The Escrow Agent shall not be liable to Nelson for any loss suffered in connection with any investment of funds made by it in accordance with this letter agreement. 4. On the earliest date following the date hereof on which an Interest Period with respect to a LIBOR Advance pursuant to the relevant Revolving Loan Commitment ends, the Escrow Agent shall release the Delivered Funds or relevant portion thereof to the Escrow Agent or the Lender, as appropriate, for application to the prepayment of the relevant Revolving Loan Commitment in accordance with the terms thereof. If after such application the full amount of the required prepayment has not been made, the Escrow Agent shall hold the remaining Delivered Funds until the next occurring ending date(s) for Interest Period(s) on LIBOR Advances under the relevant Revolving Loan Commitment, on which date(s) the Escrow Agent shall similarly release such remaining Delivered Funds for application as aforesaid. Such application by the Escrow Agent shall continue until the full amount of the required prepayment has been made, at which time all remaining Investment Earnings shall be distributed to Nelson for application as Nelson may determine. 5. Nelson agrees to indemnify the Escrow Agent, and its officers, directors, employees and agents, in connection with any actions taken or omitted to be taken by it in its capacity as Escrow Agent under this letter agreement, to the same extent that each Lender is indemnified pursuant to Section 14.04 of the Credit Agreement. The provisions of this Paragraph 5 shall survive the termination of this letter agreement. 6. In order to induce the Escrow Agent to act hereunder, Nelson agrees that: (a) The duties and obligations of the Escrow Agent are those herein specifically provided and no other. The Escrow Agent shall not have any liability under, nor duty to inquire into, the terms and provisions of any agreement or instrument, other than this letter agreement and the Credit Agreement. Escrow Agent's duties are ministerial in nature and the Escrow Agent shall not incur any liability whatsoever other than for its own willful misconduct or gross negligence. (b) The Escrow Agent shall not incur any liability for following the instructions herein contained or expressly provided for in written instructions given by all of the parties hereto. (c) The Escrow Agent shall not have any responsibility for the genuineness or validity of any document or other material presented to or deposited with Escrow Agent nor any liability for any action taken, suffered or omitted in accordance with any written instructions or certificates given to Escrow Agent hereunder and believed by Escrow Agent to be signed by the proper party or parties. (d) The Escrow Agent may consult with counsel of its choice, including in-house counsel, and shall not be liable for any action taken, suffered or omitted by Escrow Agent in accordance with the advice of such counsel; provided, however, that the Escrow Agent shall be liable for its own gross negligence or wilful misconduct. (e) If the Escrow Agent shall be uncertain as to its duties or rights hereunder or shall receive instructions, claims or demands from any party hereto which, in its opinion, conflict with any of the provisions of this letter agreement, Escrow Agent shall be entitled to refrain from taking any action and its sole obligation shall be to keep all property held in escrow until Escrow Agent shall be directed otherwise in writing by all of the other parties hereto and the Required Lenders or by a final order or judgment of a court of competent jurisdiction. (f) The Escrow Agent shall not be required to institute legal proceedings of any kind and shall not be required to initiate or defend any legal proceedings that may be instituted against it in respect of the subject matter of this letter agreement. If the Escrow Agent does elect to act, Escrow Agent will do so only to the extent that Escrow Agent is indemnified to its satisfaction against the cost and expense of such defense or initiation. (g) The Escrow Agent shall not be bound by any modification, amendment, termination, cancellation, rescission or supersession of this letter agreement unless the same shall be in writing and signed by all of the other parties hereto and the Required Lenders and, if Escrow Agent's rights, duties, immunities or indemnities as Escrow Agent are affected thereby, unless Escrow Agent shall have given its prior written consent thereto. (h) This letter agreement sets forth exclusively the duties of the Escrow Agent with respect to any and all matters pertinent hereto and no implied duties or obligations shall be read into this letter agreement against the Escrow Agent. 7. The Escrow Agent shall have all rights and remedies with respect to the Delivered Funds of a secured party under applicable law. 8. THIS LETTER AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TENNESSEE. 9. This letter agreement may be executed and accepted in any number of counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same agreement. Very truly yours, ESCROW AGENT SUNTRUST BANK, NASHVILLE, N.A. (formerly known as Third National Bank in Nashville) By:_____________________________ Name:___________________________ Title:__________________________ AGREED TO THIS ____ DAY OF __________________, 19__: THOMAS NELSON, INC. By:_____________________________ Name:___________________________ Title:__________________________ Exhibit C Document evidencing the name change from International Cassette Corp. to TNI Cassette Corp. Exhibit D Document evidencing the name change From Word (UK) Limited to Nelson Word Limited See Exhibit A to the Secretary's Certificate for Nelson Word Limited required by Section 4.01 of the Amended and Restated Credit Agreement to which this Exhibit D is attached. EXHIBIT E Evidence of SunTrust Ten Million Dollar Revolving Credit Facility AMENDED AND RESTATED REVOLVING CREDIT PROMISSORY NOTE Nashville, Tennessee $10,000,000.00 November 30, 1992 Amended November 30, 1993 Amended May 17, 1994 Amended May 24, 1995 Amended and restated December 13, 1995 to be effective as of July 25, 1995 WHEREAS, THOMAS NELSON, INC., a Tennessee corporation (the "Borrower"), executed a certain Revolving Credit Promissory Note in the original principal amount of up to $5,000,000.00 dated November 30, 1992 and payable to the order of SunTrust Bank, Nashville, N. A. (formerly known as Third National Bank in Nashville) ("Lender"), as amended by First Amendment to Revolving Credit Promissory Note dated November 30, 1993, as further amended by Second Amendment to Revolving Credit Promissory Note dated May 17, 1994, and as further amended by Third Amendment to Revolving Credit Promissory Note dated May 24, 1995 (as amended to date, the "Original Note"); WHEREAS, Borrower has requested that Lender modify the Original Note to increase the amount available under the Original Note from $5,000,000.00 to up to $10,000,000.00, and Lender is willing to modify the Original Note upon the terms contained herein. The parties therefore wish to amend and restate the Original Note in its entirety as follows: NOW, THEREFORE, FOR VALUE RECEIVED, THOMAS NELSON, INC., a Tennessee corporation (the "Borrower"), promises and agrees to pay to the order of SUNTRUST BANK, NASHVILLE, N. A. (formerly known as Third National Bank in Nashville) (the "Lender") at its offices in Nashville, Tennessee, or at such other place as may be designated in writing by the holder, in lawful money of the United States of America, the principal sum of up to Ten Million and No/100 Dollars ($10,000,000.00), together with interest on the unpaid principal balance outstanding from time to time hereon computed from the date hereof until the Maturity Date (as hereinafter defined), at a varying rate of interest that is equal to the base rate of interest from time to time charged by Lender. Interest for each year shall be computed based upon a 360-day year. The "base rate of interest" is defined as that rate of interest established from time to time and announced by Lender as its "base rate," such rate being an interest rate used as an index for establishing interest rates on loans. The rate of interest provided herein shall be determined daily to reflect changes in the base rate of interest charged by Lender as such base rate of interest may change from time to time. Interest shall be paid to the Lender on the first (1st) day of each month for the preceding month (or portion thereof) following the date of execution until the Maturity Date. This Note shall mature July 30, 1997 (the "Maturity Date"), at which time all outstanding principal, accrued interest and other amounts owed hereunder shall be due and payable in full to Lender in immediately available funds. This Note may be renewed for a subsequent period of one (1) year at Lender's sole option. Provided Borrower is not in default under the terms of this Note, the Letter Agreement (as hereinafter defined) or the Credit Agreement (as hereinafter defined), prior to the Maturity Date, Borrower may borrow, repay, reborrow and repay hereunder up to the principal amount of this Note. Notwithstanding any provision to the contrary, it is the intent of the Lender, the Borrower, and all parties liable on this Note, that neither the Lender nor any subsequent holder shall be entitled to receive, collect, reserve or apply, as interest, any amount in excess of the maximum lawful rate of interest permitted to be charged by applicable law or regulations, as amended or enacted from time to time. In the event the Note calls for an interest payment that exceeds the maximum lawful rate of interest then applicable, such interest shall not be received, collected, charged, or reserved until such time as that interest, together with all other interest then payable, falls within the then applicable maximum lawful rate of interest. In the event the Lender, or any subsequent holder, receives any such interest in excess of the then maximum lawful rate of interest, such amount which would be excessive interest shall be deemed a partial prepayment of principal and treated hereunder as such, or, if the principal indebtedness evidenced hereby is paid in full, any remaining excess funds shall immediately be paid to the Borrower. In determining whether or not the interest paid or payable, under any specific contingency, exceeds the maximum lawful rate of interest, the Borrower and the Lender shall, to the maximum extent permitted under applicable law, (a) exclude voluntary prepayments and the effects thereof, and (b) amortize, prorate, allocate, and spread, in equal parts, the total amount of interest throughout the entire term of the indebtedness; provided that if the indebtedness is paid in full prior to the end of the full contemplated term hereof, and if the interest received for the actual period of existence hereof exceeds the maximum lawful rate of interest, the holder of the Note shall refund to the Borrower the amount of such excess or credit the amount of such excess against the principal portion of the indebtedness as of the date it was received, and, in such event, the Lender shall not be subject to any penalties provided by any laws for contracting for, charging, reserving, collecting or receiving interest in excess of the maximum lawful rate of interest. Privilege is reserved to pay all or part of the indebtedness at any time before the Maturity Date without penalty. Any such payment shall be applied first to accrued interest and secondly to principal. Principal and unpaid interest bear interest following any default in payment of principal and interest as herein provided at the maximum lawful rate of interest permitted by law until paid. In case of suit, or if this obligation is placed in an attorney's hands for collection, or to protect the security for its payment, the undersigned will pay all costs of collection and litigation, including a reasonable attorney's fee. In the event that (a) there occurs any breach of any promise made in this Note, in the Letter Agreement by and between Borrower and Lender of even date herewith (as it may be amended and/or restated from time to time, the "Letter Agreement"), in the Amended and Restated Credit Agreement by and among Borrower, the lenders listed therein and Lender, as Agent, of even date herewith (as it may be amended and/or restated from time to time, the "Credit Agreement"), or in any other document relating to, securing, or otherwise executed in connection with the Note; or (b) any party liable hereon shall (i) petition any court for an order of relief under any Chapter of the Federal Bankruptcy Code or (ii) be generally unable to pay its debts as they become due, (iii) file, or consent to the filing against it of, a petition for relief or reorganization or arrangement or any petition in bankruptcy for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, (iv) make an assignment for the benefit of its creditors, (v) consent to the appointment of a custodian, receiver, trustee, or other officer with similar powers of any substantial part of its property, or (vi) initiate any action for the purpose of the foregoing; or (c) a court or governmental authority of competent jurisdiction shall enter an order, without the consent of any party liable hereon, appointing a custodian, receiver, trustee, or other officer with similar powers with respect to such party or with respect to any substantial part of its property, or constituting an Order for Relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction; or (d) the dissolution, winding-up or liquidation of any partnership or corporation liable hereon; or (e) any party liable hereon becomes insolvent (each, an "Event of Default"); then, in any of such Events of Default, at the option of the holder, the entire indebtedness hereby evidenced shall become due, payable and collectible then or thereafter, without notice, as the holder may elect regardless of the Maturity Date. The holder may waive any Event of Default before or after the same has been declared and restore this Note to full force and effect without impairing any rights hereunder, such right of waiver being a continuing one. The makers, endorsers, guarantors and all parties to his Note and all who may become liable for same, ointly and severally waive presentment for payment, protest, notice of protest, notice of nonpayment of this Note, demand and all legal diligence in enforcing collection, and hereby expressly agree that the lawful owner or holder of this Note may defer or postpone collection of the whole or any part thereof, either principal and/or interest, or may extend or renew the whole or any part thereof, either principal and/or interest, or may accept additional collateral or security for the payment of this Note, or may release the whole or any part of any collateral security and/or liens given to secure the payment of this Note, or may release from liability on account of this Note any one or more of the makers, endorsers, guarantors and/or other parties thereto, all without notice to them or any of them; and such deferment, postponement, renewal, extension, acceptance of additional collateral or security and/or release shall not in any way affect or change the obligation of any such maker, endorser, guarantor or other party to this Note, or of any who may become liable for the payment thereof. The Borrower shall pay a "late charge" of five percent (5%) of any payments of principal and/or interest due when paid after the due date thereof (provided that in no event shall said "late charge" result in the payment of interest in excess of the maximum lawful rate of interest permitted by applicable law), to cover the extra expenses involved in handling delinquent payments. The term "maximum lawful rate of interest" as used herein shall mean a rate of interest equal to the higher or greater of the following: (a) the "applicable formula rate" defined in Tennessee Code Annotated Section 47-14-102(2), or (b) such other rate of interest as may be charged under other applicable laws or regulations. This Note is an unsecured Note. This Note amends and restates that certain Revolving Credit Promissory Note in the original principal amount of up to $5,000,000.00 executed November 30, 1992 by Borrower and payable to Lender, as amended by First Amendment to Revolving Credit Promissory Note dated November 30, 1993, as further amended by Second Amendment to Revolving Credit Promissory Note dated May 17, 1994, and as further amended by Third Amendment to Revolving Credit Promissory Note dated May 24, 1995, and does not constitute a novation of such original note or the indebtedness evidenced thereby. This Note has been executed and delivered in, and shall be governed by and construed according to the laws of the State of Tennessee except to the extent pre-empted by applicable laws of the United States of America. This Note may not be changed or terminated without the prior written approval of the Lender and the Borrower. No waiver of any term or provision hereof shall be valid unless in writing signed by the holder. Executed as of the 13th day of December, 1995 to be effective as of July 25, 1995. THOMAS NELSON, INC. By: Title: Agreed to by: SunTrust Bank, Nashville, N.A. (formerly known as Third National Bank in Nashville) By: Title: SCHEDULE 4.01(h) UCC Search Locations 1. Nashville, Davidson County, Tennessee 2. Atlanta, Fulton County, Georgia 3. Miami, Dade County, Florida 4. Camden, Camden County, New Jersey 5. Winona Lake, Kosciasko County, Indiana 6. Waco, McLennan County, Texas 7. Dallas, Dallas County, Texas 8. Richmond, British Columbia, Canada 9. Milton Keynes, England, U.K. 10. Cherryville, Gaston County, North Carolina 11. Beacon Falls, New Haven County, Connecticut 12. Guilford, New Haven County, Connecticut 13. Clifton, Passaic County, New Jersey 14. Norwalk, Fairfield County, Connecticut 15. Scarborough, Ontario, Canada 16. New York City, New York County, New York SCHEDULE 6.01 Material Subsidiaries Percent of Capital Jurisdiction Stock Owned by Nelson or Subsidiary Organization a Subsidiary Thereof - - ---------- ------------ ------------------------ Word, Incorporated Delaware 100% PPC, Inc. North Carolina 100% Editorial Caribe, Inc. Florida 100% Morningstar Radio Network, Inc. Texas 80% Nelson Word Limited United Kingdom 100% Word Communications, Ltd. Canada, British 100% Columbia Word Direct, Inc. Texas 100% Word Direct Partners, L.P. Texas 100% The C.R. Gibson Company Delaware 100% 855763 Ontario Limited Canada, Ontario 100% SCHEDULE 6.05 Pending or Threatened Litigation NONE SCHEDULE 6.08(a) Environmental Compliance NONE SCHEDULE 6.08(b) Environmental Notices NONE SCHEDULE 6.08(c) Environmental Permits NONE SCHEDULE 6.11 Burdensome Restrictions NONE SCHEDULE 6.12 Tax Filings and Payments Nelson is in the process of registering for all necessary Canadian General Sales Tax ("G.S.T.") and Provincial Sales Tax ("P.S.T.") certifications necessary for Nelson's third party fulfillment vendors in the U.S. to collect Canadian GST and/or PST on mail order shipments to Canadian customers. Annual remittance under these registrations is anticipated to be less than $80,000 (Canadian), and any amounts collected to date are reflected on the U.S. consolidated books and records of Nelson. SCHEDULE 6.13 Subsidiaries Word, Incorporated PPC, Inc. Editorial Caribe, Inc. Morningstar Radio Network, Inc. Nelson Word Limited Word Communications, Ltd. Word Direct, Inc. Word Direct Partners, L.P. The C.R. Gibson Company 855763 Ontario Limited Elm Hill Press, Inc. Nelson Acquisition Corp. Triunity, Inc. Thomas Nelson Export, Inc. Thomas Nelson Service Corp. Royal Publishers, Inc. Dominion Publishers, Inc. Nelson Media, Inc. Nelson Communications, Inc. TNI Cassette Corporation C.R. Gibson Catalogue, Inc. American Sings, Inc. American Bible Company, Inc. Lars Desert Oasis Suncare Products, Inc. CRG Acquisition, Inc. Word Direct Marketing Services, Inc. SCHEDULE 6.14 Leases Premises Landlord Documents - - -------- -------- --------- 13670 North Meridian Flynn & Zinkan Lease Meridian Village Plaza Realty Co. 4/29/94 Carmel, IN 46032 15 Merwin Street R. C. Bigelow, Month to Norwalk, CT 06850 Inc. Month 796 Bloomfield Ave. P.L.C. Realty Lease Clifton, NJ 46032 Associates 11/1/93 3400 Pharmacy Ave. Atlantis Real Lease Unit #12 Estate Corp. 6/1/93 Scarborough, Ontario Canada M1W3J8 Atlanta Gift Mart Atlanta Gift Lease 230 Spring Street Market, L.P. 9/26/89 Suite 1521 Amend. Atlanta, GA 30303 4/16/90 Dallas Trade Mart Dallas Market Lease Room 1058 Center Company, 10/19/94 2100 Stemmons Freeway Ltd. Dallas, TX 75207 225 Fifth Avenue Chrysantheum First Lease Suites 303-305 Operating 10/19/93 New York, NY 10010 Corporation SCHEDULE 6.15 Employee Benefit Matters Gibson has, through its subsidiary, CRG Acquisition, Inc., administrative and trustee responsibility for the Rytex Company Employees Pension Plan, a defined benefit pension plan. Gibson also administers for its employees the C.R. Gibson Company Employee Stock Ownership Plan and the C.R. Gibson Company 401(k) Savings and Investment Plan. SCHEDULE 6.16 Intellectual Property Matters NONE SCHEDULE 6.17 Ownership of Properties NONE SCHEDULE 6.18 Refinanced Indebtedness NONE SCHEDULE 6.20 Labor Matters NONE SCHEDULE 6.21 Dividend Restrictions NONE SCHEDULE 6.23 Second Fiscal Quarter 1995 Calculations (calculated as of September 30, 1995) (a) Interest Coverage Ratio 2.6 : 1.00 (b) Funded Debt to Total Capital .445 : 1.00 (c) Senior Funded Debt to Total Capital .210 : 1.00 SCHEDULE VIII Subsidiaries of Thomas Nelson, Inc. Excluded from Certain Provisions of Amended and Restated Credit Agreement Subsidiary Approximate Market Value of Assets Owned ---------- ------------------------ PART A Elm Hill Press, Inc. $40,000 Nelson Acquisition Corp. $-0- Triunity, Inc. $-0- Thomas Nelson Export, Inc. $-0- Thomas Nelson Service Corp. $-0- Royal Publishers, Inc. $-0- Dominion Publishers, Inc. $-0- Nelson Media, Inc. $-0- Nelson Communications, Inc. $-0- American Sings, Inc. $-0- CRG Acquisition, Inc. $-0- Word Direct Marketing Services, Inc. $-0- PART B American Bible Company, Inc. $-0- Lars Desert Oasis Suncare Products, Inc. $-0- TNI Cassette Corporation $200,000 C.R. Gibson Catalogue, Inc. $-0- SCHEDULE 11.01(b) Existing Indebtedness 1. Indebtedness of Nelson in connection with $2,850,000 Industrial Development Revenue Refunding Bonds, Series 1990 (Thomas Nelson, Inc. Project) of the Industrial Development Board of the Metropolitan Government of Nashville and Davidson County (the "Board"), as evidenced by: (a) Loan Agreement dated as of May 1, 1990 from the Board to Nelson; and (b) Reimbursement Agreement dated as of May 1, 1990 between Nelson and SunTrust. 2. $5,000,000 Construction Loan from SunTrust to Nelson, made pursuant to a Construction Loan Agreement dated as of March 31, 1992 and evidenced by a $5,000,000 Promissory note of the same date. 3. Indebtedness of Nelson in connection with $1,215,000 Industrial Development Revenue Refunding Bonds, Series 1976 (Thomas Nelson, Inc. Project) of the Board, as evidenced by Loan Agreement dated as of December 1, 1976 from the Board to Nelson. 4. Capitalized lease for computer equipment between Comdisco, Inc. and Nelson dated December 21, 1990 in the approximate amount of $1,600,000. 5. The SunTrust Letter of Credit Facility. 6. The National City Bank, Kentucky (formerly known as First National Bank of Louisville) Letter of Credit Facility. 7. Promissory note dated June 26, 1989 in the aggregate principal amount of $2,250,000 from Word Communications Limited (a British Columbia corporation) and Word, Incorporated (the parent corporation of Word Communications Limited). 8. $10,000,000 Loan from Metropolitan Life Insurance Company to Gibson (to be assumed by Nelson) made pursuant to a Loan Agreement dated September 21, 1989. 9. $5,000,000 Loan from Metropolitan Life Insurance Company to Gibson (to be assumed by Nelson) made pursuant to a Loan Agreement dated June 23, 1994. 10. $55,000,000 of Subordinated Debt evidenced by that certain Indenture dated as of November 30, 1992, between Nelson and Boatmen's Trust Company, as Trustee. SCHEDULE 11.02 Existing Liens 1. Liens securing the indebtedness described in Item 1 of Schedule 11.01(b), including: a. Deed of Trust from Nelson to A. Stuart Campbell, as Trustee dated as of May 1, 1990, of record in Book 8111, page 986, Register's Office for Davidson County, Tennessee ("RODCT") b. Collateral Assignment of Rents and Leases dated as of May 1, 1990 between Nelson and the Board and Third National Bank in Nashville, of record in Book 8112, page 1, RODCT. c. UCC-1 Financing Statement showing Nelson as Debtor and Third National Bank in Nashville as Secured Party, filed with the Tennessee Secretary of State as #971857. 2. Liens securing the indebtedness described in Item 2 of Schedule 11.01(b), including: a. Tennessee Deed of Trust, Assignment of Rents and Fixture Filing (Construction Mortgage) dated March 31, 1992 from Nelson to A. Stuart Campbell, Trustee, for the benefit of Third National Bank in Nashville, of record in Book 8589, page 428, RODCT. b. Security Agreement dated as of March 31, 1992 between Nelson and Third National Bank in Nashville. c. UCC-1 Financing Statement showing Nelson as Debtor and Third National Bank in Nashville as secured party, of record in Book 8589, page 448, RODCT. d. UCC-1 Financing Statement showing Nelson as Debtor and Third National Bank in Nashville as secured party, filed with the Tennessee Secretary of State as #971857. 3. Liens securing the indebtedness described in Item 3 of Schedule 11.01(b), including: a. Deed of Trust from Nelson to Third National Bank in Nashville, as Trustee, dated as of December 1, 1976, of record in Book 5099, page 628, RODCT. b. UCC-1 Financing Statement showing Nelson as Debtor and Third National Bank in Nashville as Secured Party, filed with the Tennessee Secretary of State as #919595. c. UCC-1 Financing Statement showing Nelson as Debtor and Third National Bank in Nashville as Secured Party, of record in Book 5099, page 724, RODCT. 4. UCC-1 Financing Statement showing Word, Incorporated as Debtor and Banc One Leasing Corporation as Secured Party, filed with the Tennessee Secretary of State as #920537. 5. UCC-1 Financing Statement showing Word, Incorporated as Debtor and Banc One Leasing Corporation as Secured Party, filed with the Tennessee Secretary of State as #956590. 6. UCC-1 Financing Statement showing Word, Incorporated as Debtor and Vanguard Financial Service Corp. as Secured Party, filed with the Tennessee Secretary of State as #898863. 7. UCC-1 Financing Statement showing Printplus Publications, Inc. as Debtor and Capital Leasing and Financial, Inc. as Secured Party, filed with the Tennessee Secretary of State as #949193. 8. UCC-1 Financing Statement showing Nelson as the Debtor and Comdisco, Inc. (Hitachi Credit as assignee) as Secured Party, filed with the Tennessee Secretary of State as #857974. 9. UCC-1 Financing Statement showing Nelson as Debtor and Comdisco, Inc. as Secured Party, filed with the Tennessee Secretary of State as #864520. 10. UCC-1 Financing Statement showing Nelson as Debtor and Capitol Systems, Inc. (Contel Credit Corporation as assignee) as Secured Party, filed with the Tennessee Secretary of State as #688961. 11. UCC-1 Financing Statement showing Editorial Caribe, Inc. as the Debtor and Latin America Mission Publications, Incorporated as the Secured Party, filed with the Florida Secretary of State as # 91 0000186292. 12. UCC-1 Financing Statement showing Editorial Caribe, Inc. as the Debtor and Garborg's Heart'n Home, Inc. as the Secured Party, filed with the Florida Secretary of State as 92 0000164003. 13. UCC-1 Financing Statement showing Morning Star as the Debtor and John Deere Co. as the Secured Party, filed with the Florida Secretary of State as #91 0000084244. 14. Liens disclosed in UCC Searches of Nelson in Dade County, Florida and the Secretary of State of New Jersey. EX-4.1 4 FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT This FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this "First Amendment") is entered into effective as of the 3rd day of January, 1996, by and among THOMAS NELSON, INC., a Tennessee corporation ("Nelson"), SUNTRUST BANK, NASHVILLE, N. A. (formerly known as Third National Bank in Nashville), 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. (formerly known as Third National Bank in Nashville), 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 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 amend the Credit Agreement, and Lenders are willing to modify the Credit Agreement, 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 amend the Credit Agreement as follows: 1. Defined Terms. All capitalized terms not otherwise defined in this First Amendment, including its preamble and recitals, shall have the meanings set forth in the Credit Agreement. All capitalized terms shall be equally applicable to the singular and plural forms thereof and to any gender form thereof. 2. Dividend Amendment. Section 11.04 of the Credit Agreement is hereby deleted in its entirety and the following inserted in its place: "Section 11.04. Dividends, Etc. Declare or pay any dividend on its capital stock, or make any payment to purchase, redeem, retire or acquire any of its Subordinated Debt or capital stock or any option, warrant, or other right to acquire such Subordinated Debt or capital stock, other than: (a) dividends payable solely in shares of capital stock; (b) cash dividends declared and paid, and all other such payments made, after March 31, 1995 in an aggregate amount at any time not to exceed the sum of (i) $5,000,000, plus (ii) fifty percent (50%) of Consolidated Net Income (or minus one hundred percent (100%) of Consolidated Net Loss) earned during Nelson's 1995 fiscal year and thereafter on a cumulative basis (such period to be treated as one accounting period); (c) dividends payable solely to Nelson by any Subsidiary of Nelson, provided that the payment of such dividends to Nelson shall in no event affect the limitations imposed upon Nelson as set forth in Section 11.04(b); (d) redemption of Subordinated Debt upon the exercise of conversion rights contained in the Indenture; and (e) payment of Subordinated Debt at maturity as set forth in the Indenture, provided, however, no such dividend or other payment may be declared or paid pursuant to Section 11.04(b) unless (A) the full amount of any mandatory prepayment required by Article II has been made, and (B) no Default or Event of Default exists at the time of such declaration or payment, or would exist as a result of such declaration or payment." 3. Note Purchase Agreement Amendment. Section 9.07(p) and Section 9.07 (q) of the Credit Agreement are hereby deleted in their entirety and the following inserted in their place: "(p) Asset sales. At any time that the aggregate amount of Asset Sales made by the Consolidated Companies after December 13, 1995 exceeds $2,500,000 (based on the Asset Values), prompt notice of any additional Asset Sale or related series of Asset Sales involving Asset Values of $100,000 or more; (q) Note Purchase Agreement. True and complete copies of that certain Note Purchase Agreement by and among Nelson, The Prudential Insurance Company of America and MetLife dated as of January 3, 1996, together with true and complete copies of any amendments thereto, promptly upon execution of same; and (r) Other Information. With reasonable promptness, such other information about the Consolidated Companies as the Agent or any Lender may reasonably request from time to time." 4. Senior Debt Amendment. The definition of Senior Debt set forth in Article I of the Credit Agreement is hereby deleted in its entirety and the following inserted in its place: ""Senior Debt" shall mean other Indebtedness of Nelson not to exceed $62,000,000, which Indebtedness shall be (a) on a parity with the obligations of Nelson and any other Credit Party arising under this Agreement, the Revolving Credit Notes, the Guaranty Agreement and all other Credit Documents, and (b) issued upon terms and conditions (including without limitation matters regarding interest rates, payment terms, maturities, amortization schedules, covenants, defaults and remedies) satisfactory in all respects to the Agent and the Required Lenders, as evidenced by the written approval of the Agent and Required Lenders; provided, however that the Consolidated Companies, Lenders and Agent acknowledge and agree that (i) the terms and conditions of the Senior Debt shall be no more restrictive than the terms and conditions of the Revolving Loans, (ii) all Senior Debt shall provide for the payment of interest only for at least seven (7) years from the date of issuance (except for Senior Debt in the principal amount not to exceed $15,000,000 owed to MetLife, which shall provide for the payment of interest only for at least three and one-half (3 1/2) years from the date of issuance), and (iii) the average life of the Senior Debt shall on the date of issuance be greater than seven (7) years. In no event shall the Senior Debt be deemed to include the SunTrust Letter of Credit Facility or the National City Bank, Kentucky (formerly known as First National Bank of Louisville) Letter of Credit Facility. The Gibson Debt is included in and shall be a part of the Senior Debt." 5. Guarantors. Guarantors join in the execution of this First Amendment for the purpose of consenting to the terms of this First Amendment, to acknowledge their agreement that the terms of the Guaranty Agreement shall remain in full force and effect and to state that no event has occurred and no claim, offset or other condition exists that would relieve them of their obligations to Lenders under the Guaranty Agreement. 6. Authority. Nelson and Guarantors represent that the terms of this First Amendment have been authorized by a duly adopted resolution of the Board of Directors of Nelson and Guarantors, respectively. 7. No other Modification. Except as herein modified and amended, the terms and conditions of the Credit Agreement shall remain in full force and effect, and nothing herein is intended to, nor shall it, release, diminish or waive any rights of Lenders under the Credit Agreement or any other loan documents executed in connection therewith. 8. Governing Law. This First Amendment shall be governed by and construed in accordance with the laws of the State of Tennessee. 9. Counterparts. This Agreement may be executed in multiple counterparts, and all such executed counterparts shall constitute the same agreement. It shall not be necessary that the signatures of all parties be contained on any one counterpart. It shall be necessary to account for only one such counterpart in proving the existence or terms of this Agreement. THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the date first written above. THOMAS NELSON, INC. By: /s/ Joe L. Powers Title: Executive Vice President SUNTRUST BANK, NASHVILLE, N. A. (formerly known as Third National Bank in Nashville), As Agent By: /s/ J. Fred Turner Title: First Vice President SUNTRUST BANK, NASHVILLE, N. A. (formerly known as Third National Bank in Nashville) By: /s/ J. Fred Turner Title: First Vice President NATIONAL CITY BANK, KENTUCKY (formerly known as First National Bank of Louisville) By: /s/ Randall J. Rawe Title: Sr. Vice President FIRST AMERICAN NATIONAL BANK By: /s/ Scott M. Bane Title: Senior Vice President NATIONSBANK OF TEXAS, N.A. By: /s/ Jay S. Tweed Title: Vice President CREDITANSTALT - BANKVEREIN By: /s/ Robert Biringer Title: Sr. Vice President By: /s/ Scott Kray Title: Sr. Associate GUARANTORS: WORD, INCORPORATED By: /s/ Joe L. Powers Title: Secretary PPC, INC. By: /s/ Joe L. Powers Title: Secretary EDITORIAL CARIBE, INC. By: /s/ Joe L. Powers Title: Secretary MORNINGSTAR RADIO NETWORK, INC. By: /s/ Joe L. Powers Title: Secretary NELSON WORD LIMITED (formerly known as Word (UK) Limited) By: /s/ Joe L. Powers Title: Director WORD COMMUNICATIONS, LTD. By: /s/ Joe L. Powers Title: Secretary WORD DIRECT, INC. By: /s/ Joe L. Powers Title: Secretary WORD DIRECT PARTNERS, L.P. By: Word Direct, Inc., as general partner By: /s/ Joe L. Powers Title: Secretary THE C. R. GIBSON COMPANY By: /s/ Joe L. Powers Title: Secretary 855763 ONTARIO LIMITED By: /s/ Joe L. Powers Title: Secretary EX-4.2 5 ========================================================================= THOMAS NELSON, INC. $50,000,000 $35,000,000 6.90% SERIES A SENIOR NOTES DUE DECEMBER 31, 2007 $15,000,000 6.68% SERIES B SENIOR NOTES DUE DECEMBER 31, 2005 ---------------- NOTE PURCHASE AGREEMENT ---------------- Dated as of January 3, 1996 TABLE OF CONTENTS Section Page - - ------- ------ 1. Authorization of Notes . . . . . . . . . . . . . 1 2. Sale and Purchase of Notes . . . . . . . . . . . 2 3. Closing . . . . . . . . . . . . . . . . . . . . 2 4. Conditions to Closing . . . . . . . . . . . . . 2 4.1. Representations and Warranties . . . . . . 2 4.2. Performance; No Default . . . . . . . . . . 3 4.3. Compliance Certificates; Certificates of Good Standing/Qualification to Do Business . . . . . . . . . . . . . . . . . 3 4.4. Opinions of Counsel . . . . . . . . . . . . 3 4.5. Purchase Permitted By Applicable Law, etc. 4 4.6. Payment of Special Counsel Fees . . . . . . 4 4.7. Private Placement Number . . . . . . . . . 4 4.8. Changes in Corporate Structure . . . . . . 4 4.9. Proceedings and Documents . . . . . . . . . 4 4.10.Related Documents . . . . . . . . . . . . . 4 4.11.Bank Agreements . . . . . . . . . . . . . . 5 5. Representations and Warranties of the Company . 5 5.1. Organization; Power and Authority . . . . . 5 5.2. Authorization, etc. . . . . . . . . . . . . 5 5.3. Disclosure . . . . . . . . . . . . . . . . 5 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates . . . . . . . . . 6 5.5. Financial Statements . . . . . . . . . . . 7 5.6. Compliance with Laws, Other Instruments, etc. . . . . . . . . . . . . . . . . . . . 7 5.7. Governmental Authorizations, etc. . . . . . 7 5.8. Litigation; Observance of Agreements, Statutes and Orders . . . . . . . . . . . . 8 5.9. Taxes . . . . . . . . . . . . . . . . . . . 8 5.10.Title to Property; Leases . . . . . . . . . 8 5.11.Licenses, Permits, etc. . . . . . . . . . . 9 5.12.Compliance with ERISA . . . . . . . . . . . 9 5.13.Private Offering by the Company . . . . . . 10 5.14.Use of Proceeds; Margin Regulations . . . . 11 5.15.Existing Indebtedness; Future Liens . . . . 11 5.16.Foreign Assets Control Regulations, etc. . . . . . . . . . . . . . . . . . . . 12 5.17.Status under Certain Statutes . . . . . . . 12 5.18.Environmental Matters . . . . . . . . . . . 12 6. Representations of the Purchasers . . . . . . . 12 6.1. Purchase for Investment . . . . . . . . . . 12 6.2. Source of Funds . . . . . . . . . . . . . . 13 7. Information as to Company . . . . . . . . . . . 14 7.1. Financial and Business Information . . . . 14 7.2. Officer s Certificate . . . . . . . . . . . 17 7.3. Inspection . . . . . . . . . . . . . . . . 17 7.4. Bank Agreements . . . . . . . . . . . . . . . . 18 8. Prepayment of the Notes . . . . . . . . . . . . 18 8.2. Optional Prepayments with Yield Maintenance Amount . . . . . . . . . . . . . . . . . . 19 8.3. Allocation of Partial Prepayments . . . . . 19 8.4. Maturity; Surrender, etc. . . . . . . . . . 20 8.5. Purchase of Notes . . . . . . . . . . . . . 20 8.6. Yield Maintenance Amount . . . . . . . . . 20 9. Affirmative Covenants . . . . . . . . . . . . . 22 9.1. Compliance with Law . . . . . . . . . . . . 22 9.2. Insurance . . . . . . . . . . . . . . . . . 22 9.3. Maintenance of Properties . . . . . . . . . 22 9.4. Payment of Taxes and Claims . . . . . . . . 22 9.5. Corporate Existence, etc. . . . . . . . . . 23 9.6. Covenant to Secure Notes Equally . . . . . 23 9.7. Guaranteed Obligations . . . . . . . . . . 23 9.8. Parity With Bank Agreements . . . . . . . . 23 9.9. Information Required by Rule 144A . . . . . 24 9.10.No Integration . . . . . . . . . . . . . . 24 10. Negative Covenants . . . . . . . . . . . . . . . 24 10.1. Transactions with Affiliates . . . . . . . 24 10.2. Merger, Consolidation, etc . . . . . . . . 24 10.3. Liens . . . . . . . . . . . . . . . . . . 26 10.4. Loans, Advances and Investments . . . . . 28 10.5. Restricted Payments . . . . . . . . . . . 29 10.6. Nature of Business . . . . . . . . . . . . 29 10.7. Sale of Property . . . . . . . . . . . . . 29 10.8. Certain Financial Limits . . . . . . . . . 30 11. Events of Default . . . . . . . . . . . . . . . 31 12. Remedies on Default, Etc. . . . . . . . . . . . 34 12.1. Acceleration . . . . . . . . . . . . . . . 34 12.2. Other Remedies . . . . . . . . . . . . . . 34 12.3. Rescission . . . . . . . . . . . . . . . . 35 12.4. No Waivers or Election of Remedies, Expenses, etc. . . . . . . . . . . . . . . 35 13. Registration; Exchange; Substitution of Notes. . 35 13.1. Registration of Notes . . . . . . . . . . 35 13.2. Transfer and Exchange of Notes . . . . . . 36 13.3. Replacement of Notes . . . . . . . . . . . 36 14. Payments on Notes . . . . . . . . . . . . . . . 37 14.1. Place of Payment . . . . . . . . . . . . . 37 14.2. Home Office Payment . . . . . . . . . . . 37 15. Expenses, Etc . . . . . . . . . . . . . . . . . 37 15.1. Transaction Expenses . . . . . . . . . . . 38 15.2. Survival . . . . . . . . . . . . . . . . . 38 16. Survival of Representations and Warranties; Entire Agreement . . . . . . . . . . . . . . . . . . . 38 17. Amendment and Waiver . . . . . . . . . . . . . . 38 17.1. Requirements . . . . . . . . . . . . . . . 38 17.2. Solicitation of Holders of Notes . . . . . 39 17.3. Binding Effect, etc. . . . . . . . . . . . 39 17.4. Notes held by Company, etc. . . . . . . . 40 18. Notices . . . . . . . . . . . . . . . . . . . . 40 19. Reproduction of Documents . . . . . . . . . . . 40 20. Confidential Information . . . . . . . . . . . . 41 21. Miscellaneous . . . . . . . . . . . . . . . . . 42 21.1. Successors and Assigns . . . . . . . . . . 42 21.2. Payments Due on Non-Business Days . . . . 42 21.3. Severability . . . . . . . . . . . . . . . 42 21.4. Construction . . . . . . . . . . . . . . . 42 21.5. Counterparts . . . . . . . . . . . . . . . 42 21.6. Governing Law . . . . . . . . . . . . . . 43 21.7. Waiver of Trial by Jury . . . . . . . . . 43 SCHEDULE A -- INFORMATION RELATING TO PURCHASERS SCHEDULE B -- DEFINED TERMS SCHEDULE 5.3 -- Disclosure Materials SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of Subsidiary Stock SCHEDULE 5.5 -- Financial Statements SCHEDULE 5.14 -- Use of Proceeds SCHEDULE 5.15 -- Existing Indebtedness SCHEDULE 5.18 -- Environmental Matters EXHIBIT 1-A -- Form of Series A Notes EXHIBIT 1-B -- Form of Series B Notes EXHIBIT 4.4(a) -- Form of Opinion of Counsel for the Company EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Company EXHIBIT 4.4(c) -- Form of Opinion of Special Counsel for the Purchasers THOMAS NELSON, INC. Nelson Place at Elm Hill Pike P.O. Box 141000 Nashville, Tennessee 37214-1000 January 3, 1996 TO EACH OF THE PURCHASERS LISTED IN THE ATTACHED SCHEDULE A Ladies and Gentlemen: Thomas Nelson, Inc., a Tennessee corporation (the "Company"), agrees with you as follows: 1. Authorization of Notes. The Company will authorize the issue and sale of its senior promissory notes in the aggregate principal amount of $50,000,000 as follows: (i) $35,000,000, to be dated the issue date thereof, to mature on December 31, 2007, to bear interest on the unpaid principal balance thereof from the date thereof until the principal thereof shall have become due and payable at the rate of 6.90% per annum and on overdue payments at the rate specified therein (the "Series A Notes", such term to include any notes issued in substitution therefor pursuant to Section 13 of this Agreement), and (ii) $15,000,000, to be dated the issue date thereof, to mature on December 31, 2005, to bear interest on the unpaid principal balance thereof from the date thereof until the principal thereof shall have become due and payable at the rate of 6.68% per annum and on overdue payments at the rate specified therein (the "Series B Notes", such term to include any notes issued in substitution therefor pursuant to Section 13 of this Agreement, and together with the Series A Notes, the "Notes"). The term "Series" shall mean either the Series A Notes or the Series B Notes, as applicable. The Series A Notes shall be substantially in the form set out in Exhibit 1-A, and the Series B Notes shall be substantially in the form set out in Exhibit 1-B, in each case, with such changes, if any, as may be approved by you and the Company. Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an Exhibit are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement. 2. Sale and Purchase of Notes. Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and, subject to the terms and conditions herein, you will purchase from the Company, at the Closing provided for in Section 3, the Notes specified opposite your name in Schedule A in the principal amount so specified at the purchase price of 100% of the principal amount thereof. Your obligations hereunder are several and not joint obligations and you shall have no obligation and no liability to any Person for the performance or non-performance by any other Person hereunder. 3. Closing. The sale and purchase of the Notes to be purchased by you shall occur at the offices of King & Spalding, 120 West 45th Street, New York, New York 10036, at 10:00 a.m., New York time, (the "Closing") on January 3, 1996 or on such other Business Day thereafter as may be agreed upon by the Company and you. At the Closing the Company will deliver to you (i) the Series A Notes to be purchased by you in the form of a single Series A Note (or such greater number of Series A Notes in denominations of at least $2,000,000 as you may request), and (ii) the Series B Notes to be purchased by you in the form of a single Series B Note (or such greater number of Series B Notes in denominations of at least $2,000,000 as you may request). In each case, the Notes will be dated the date of the Closing and the Notes purchased by you will be registered in your name (or in the name of your nominee), against delivery by you to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to SunTrust Bank, Nashville, N.A., P.O. Box 305110, Nashville, Tennessee 37250-5110, ABA No. 064000046; Account No. 5885027. If at the Closing, the Company shall fail to tender such Notes to you as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment. 4. Conditions to Closing. Your obligation to purchase and pay for the Notes to be sold to you at the Closing is subject to the fulfillment to your satisfaction, prior to or at the Closing, of the following conditions: 4.1. Representations and Warranties. The representations and warranties of the Company in this Agreement shall be correct when made and at the time of the Closing. 4.2. Performance; No Default. The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Schedule 5.14) no Default or Event of Default shall have occurred and be continuing unless waived by you. Neither the Company nor any Subsidiary shall have entered into any transaction since the date of the Memorandum that would have been prohibited by Sections 10.1, 10.2, 10.3, 10.5, 10.6, 10.7 and 10.8 hereof had such Sections applied since such date. 4.3. Compliance Certificates; Certificates of Good Standing/ Qualification to Do Business. (a) Officer's Certificate. The Company shall have delivered to you an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2, 4.8, 4.10 and 4.11 have been fulfilled. (b) Secretary s Certificate. The Company shall have delivered to you a certificate certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes and this Agreement. (c) Certificates of Good Standing/Qualification to Do Business. The Company shall have delivered to you good standing certificates issued by the Secretary of State of the state of incorporation of the Company and each Material Subsidiary and good standing or other certificates of qualification to do business as a foreign corporation for the Company and each Material Subsidiary in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, each dated as of a date not more than twenty days prior to the Closing. 4.4. Opinions of Counsel. You shall have received opinions in form and substance satisfactory to you, dated the date of the Closing (a) from Stuart Heaton, Esq., counsel for the Company, covering the matters set forth in Exhibit 4.4(a) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to you), (a) from Bass, Berry & Sims, special counsel for the Company, covering the matters set forth in Exhibit 4.4(b) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company hereby instructs its special counsel to deliver such opinion to you) and (a) from King & Spalding, your special counsel in connection with such transactions, substantially in the form set forth in Exhibit 4.4(c) and covering such other matters incident to such transactions as you may reasonably request. 4.5. Purchase Permitted By Applicable Law, etc. On the date of the Closing your purchase of Notes shall (i) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (i) not violate any applicable law or regulation (including, without limitation, Regulation G, T or X of the Board of Governors of the Federal Reserve System) and (i) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted. 4.6. Payment of Special Counsel Fees. Without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing the fees, charges and disbursements of your special counsel referred to in Section 4.4. 4.7. Private Placement Number. A Private Placement number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for each of the Series A Notes and the Series B Notes. 4.8. Changes in Corporate Structure. The Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5 other than in connection with the Company's acquisition of The C.R. Gibson Company, a Wholly-Owned Subsidiary. 4.9. Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request. 4.10.Related Documents. Each of the Guaranty Agreements, the Pledge Agreements and the Intercreditor Agreement shall be in full force and effect on the Closing Date and each party thereto shall be in full compliance with their respective obligations thereunder. 4.11.Bank Agreements. You shall have received a true, correct and duly executed copy of each of the Bank Agreements including all schedules and exhibits thereto and side letters, if any, affecting the terms thereof or otherwise delivered in connection therewith, together with all amendments and waivers thereto and any material agreements executed in connection therewith. The transactions described in the Bank Agreements which are to occur prior to the date of Closing shall have been consummated in all material respects in accordance with the terms and provisions thereof, and no material provision of the Bank Agreements shall have been amended, supplemented or otherwise modified or waived without your prior written consent. 5. Representations and Warranties of the Company. The Company represents and warrants to you that: 5.1. Organization; Power and Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Notes and to perform the provisions hereof and thereof. 5.2. Authorization, etc. This Agreement and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (i) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5.3. Disclosure. The Company, through its agent, SunTrust Capital Markets, Inc., has delivered to you a copy of a Private Placement Memorandum, dated November 16, 1995 (together with the documents attached as addendums thereto, collectively, the "Memorandum"), relating to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries. Except as disclosed in Schedule 5.3, this Agreement, the Memorandum, the documents, certificates or other writings delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in Schedule 5.3, or in one of the documents, certificates or other writings identified therein, or in the financial statements listed in Schedule 5.5, since March 31, 1995, there has been no change in the financial condition, operations, business, properties or prospects of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact peculiar to the Company known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other writings delivered to you by or on behalf of the Company specifically for use in connection with the transactions contemplated hereby. 5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates. (a) Schedule 5.4 contains (except as noted therein) complete and correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its Capital Stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (i) of the Company's Affiliates, other than Subsidiaries, and (i) of the Company's directors and senior officers. (b) All of the outstanding shares of Capital Stock or similar equity interests of each Guarantor shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 5.4). (c) Each Guarantor is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. (d) No Material Subsidiary is a party to, or otherwise subject to any legal restriction or any agreement (other than the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Material Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of Capital Stock or similar equity interests of such Material Subsidiary. 5.5. Financial Statements. The Company has delivered to you copies of the financial statements of the Company and its Subsidiaries listed on Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any quarterly financial statements, to normal year-end adjustments and the absence of notes). 5.6. Compliance with Laws, Other Instruments, etc. Neither the Company nor any Subsidiary is a party to any contract or agreement or subject to any charter or other corporate restriction which materially and adversely affects the business, property, assets, or financial condition of the Company and its Subsidiaries taken as a whole. Neither the execution nor delivery of this Agreement or the Notes, nor the offering, issuance and sale of the Notes, nor fulfillment of nor compliance with the terms and provisions hereof and of the Notes, will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, or result in the creation of any Lien (except for Liens under the Pledge Agreements) upon any of the properties or assets of the Company or any Subsidiary pursuant to, the charter or by-laws of the Company or any Subsidiary, any award of any arbitrator or any agreement (including any agreement with stockholders), instrument, order, judgment, decree, statute, law, rule or regulation to which the Company or any Subsidiary is subject. Except for the Bank Agreements, neither the Company nor any Subsidiary is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of the Company or such Subsidiary, any agreement relating thereto or any other contract or agreement (including its charter) which limits the amount of, or otherwise imposes restrictions on the incurring of, Indebtedness of the Company of the type to be evidenced by the Notes. 5.7. Governmental Authorizations, etc. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement or the Notes. 5.8. Litigation; Observance of Agreements, Statutes and Orders. (a) There are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (b) Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 5.9. Taxes. The Company and its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (i) the amount of which is not individually or in the aggregate Material or (i) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of the Company and its Subsidiaries have been determined by the Internal Revenue Service and paid, or the statute of limitations applicable to such Federal income tax liabilities of the Company and its Subsidiaries has expired, for all fiscal years up to and including the fiscal year ended March 31, 1992. 5.10. Title to Property; Leases. The Company and its Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects. 5.11. Licenses, Permits, etc. (a) The Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others; (b) to the best knowledge of the Company, no product of the Company infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and (c) to the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company or any of its Subsidiaries. 5.12. Compliance with ERISA. (a) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material. No liability to the Pension Benefit Guaranty Corporation has been or is expected by the Company to be incurred with respect to any Plan (other than Multiemployer Plan) by the Company or any of its Subsidiaries which is or would be materially adverse to the Company and its Subsidiaries taken as a whole. Neither the Company nor any of its Subsidiaries has incurred or presently expects to incur any withdrawal liability under Title IV of ERISA with respect to any Multiemployer Plan which is or would be materially adverse to the Company and its Subsidiaries taken as a whole. (b) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan s most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities by such amount that could reasonably be expected to have a Material Adverse Effect. The term "benefit liabilities" has the meaning specified in section 4001 of ERISA and the terms "current value" and "present value" have the meaning specified in section 3 of ERISA. (c) The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material. (d) The expected postretirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material. (e) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of your representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by you and subject to the assumptions that (i) neither you nor your affiliates are engaging in a nonexempt prohibited transaction described in section 406(b) of ERISA by acquiring the Notes purchased by you hereunder and (ii) that with respect to the Series A Notes, either (A) the Source described in Section 6.2 is an insurance company general account within the meaning of Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995) or (B) the record keeping requirements of PTE 90-1 (issued January 29, 1990) are satisfied and with respect to the Series B Notes, the Source described in Section 6.2 is an insurance company general account within the meaning of PTE 95-60 (issued July 12, 1995). 5.13. Private Offering by the Company. Neither the Company nor any agent acting on its behalf has, directly or indirectly, offered the Notes or any similar security of the Company for sale to, or solicited any offers to buy the Notes or any similar security of the Company from, or otherwise approached or negotiated with respect thereto with, any Person other than you and not more than 50 Institutional Investors, each of which has been offered the Notes at a private sale for investment. Neither the Company nor any agent acting on its behalf has taken, or will take, any action which would subject the issuance or sale of the Notes to the provisions of section 5 of the Securities Act or to the provisions of any securities or Blue Sky law of any applicable jurisdiction. Within the preceding twelve months, neither the Company nor any other Person acting on behalf of the Company has offered or sold to any Person (other than institutional investors at a private sale for investment) any Notes, or any securities of the same or a similar class as the Notes, or any other substantially similar securities of the Company. 5.14. Use of Proceeds; Margin Regulations. The Company will apply the proceeds of the sale of the Notes as set forth in Schedule 5.14. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation G of the Board of Governors of the Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 25% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 25% of the value of such assets. As used in this Section, the terms "margin stock" and "purpose of buying or carrying" shall have the meanings assigned to them in said Regulation G. 5.15. Existing Indebtedness; Future Liens. (a) Schedule 5.15 sets forth a complete and correct list of all outstanding Indebtedness of the Company and its Subsidiaries as of the date hereof, since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Company or its Subsidiaries. Neither the Company nor any Subsidiary is in default (unless such default has been waived; provided, however, to the best of the Company's knowledge, no waiver of any such default is currently in effect) in the payment of any principal or interest on any Indebtedness of the Company or such Subsidiary and no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment. (b) Except as disclosed in Schedule 5.15, neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.3. 5.16. Foreign Assets Control Regulations, etc. Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. 5.17. Status under Certain Statutes. Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the Federal Power Act, as amended. 5.18. Environmental Matters. Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as disclosed in Schedule 5.18: (a) neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect; (b) neither the Company nor any of its Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and (c) all buildings on all real properties now owned, leased or operated by the Company or any of its Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect. 6. Representations of the Purchasers. Each Purchaser hereby represents as to itself as follows: 6.1. Purchase for Investment. Such Purchaser is purchasing the Notes for its own account or for one or more separate accounts maintained by it or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of such Purchaser's property shall at all times be within its control. Such Purchaser understands that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such exemption is required by law, and that the Company is not required to register the Notes. 6.2. Source of Funds. With respect to such Purchaser, at least one of the following statements is an accurate representation as to each source of funds (a "Source") to be used by such Purchaser to pay the purchase price of the Notes to be purchased by such Purchaser hereunder: (a) the Source is an "insurance company general account" within the meaning of PTE 95-60 (issued July 12, 1995) and the purchase of such Notes by such Purchaser is eligible for and satisfies the requirements of PTE 95-60; or (b) the Source is (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990) or (ii) a bank collective investment fund, within the meaning of PTE 91-38 (issued June 12, 1991), and, except as you have disclosed to the Company in writing pursuant to this paragraph (b), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (c) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceeds 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this paragraph (c); or (d) the Source is a governmental plan; or (e) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this paragraph (e); or (f) the Source does not include assets of any employee benefit plan as determined in accordance with Department of Labor Regulation Section 2510.3-101, other than a plan exempt from the coverage of ERISA. As used in this Section 6.2 the terms "employee benefit plan", "governmental plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 7. Information as to Company. 7.1. Financial and Business Information. The Company shall deliver to each holder of Notes that is an Institutional Investor: (a) Quarterly Statements -- within 60 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of, (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and (ii) consolidated statements of income, changes in shareholders equity and cash flows of the Company and its Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a); (b) Annual Statements -- within 90 days after the end of each fiscal year of the Company, duplicate copies of, (i) a consolidated balance sheet of the Company and its Subsidiaries, as at the end of such year, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, provided that the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission, shall be deemed to satisfy the requirements of this Section 7.1(b); (c) SEC and Other Reports -- promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (i) each regular or periodic report, each registration statement other than any registration statements on Form S-8 or any similar form (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Subsidiary with the Securities and Exchange Commission and of all press releases and other statements made available generally by the Company or any Subsidiary to the public concerning developments that are Material; (d) Notice of Default or Event of Default -- promptly, and in any event within five Business Days after a Responsible Officer becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto; (e) ERISA Matters -- promptly, and in any event within five Business Days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: (i) with respect to any Plan, any reportable event, as defined in section 4043(c) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; (f) Notices from Governmental Authority -- promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; and (g) Requested Information -- with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes. 7.2. Officer s Certificate. Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth: (a) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Sections 10.3(j), 10.4(e), 10.5, 10.7(b) and 10.8 hereof during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and (b) Event of Default -- a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto. 7.3. Inspection. The Company shall permit the representatives of each holder of a Note that is an Institutional Investor: (a) No Default -- if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company's officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and (b) Default -- if a Default or Event of Default then exists, at the expense of the Company, to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested in writing. 7.4. Bank Agreements. The Company shall provide to each holder of any Note true, correct and complete copies of any and all amendments, waivers and other modifications to each of the Bank Agreements promptly after the execution and delivery thereof by the parties thereto. 8. Prepayment of the Notes. The Notes must be prepaid by the Company as specified in Section 8.1 and may, at the Company's option, be prepaid as specified in Section 8.2. 8.1. Required Prepayments. The Company shall make the following prepayments of the Notes, without premium: (i) on the Series A Notes, the Company shall prepay $3,500,000 principal amount (or such lesser principal amount as shall then be outstanding) on the last day of each June and December beginning June 30, 2003, to and including June 30, 2007; and such principal amount of the Series A Notes, together with interest thereon to the prepayment dates, shall become due on such dates; and (ii) on the Series B Notes, the Company shall prepay $1,153,850 principal amount (or such lesser principal amount as shall then be outstanding) on the last day of each June and December beginning December 31, 1999 to and including June 30, 2005, and such principal amount of the Series B Notes, together with interest thereon to the prepayment dates, shall become due on such dates. The remaining unpaid principal amount of the Series A Notes, together with interest accrued thereon, shall become due on December 31, 2007, the maturity date of the Series A Notes. The remaining unpaid principal amount of the Series B Notes, together with interest accrued thereon, shall become due on December 31, 2005, the maturity date of the Series B Notes. Any prepayment made by the Company under Section 8.2 shall not reduce or affect its obligations to make the prepayments required by this Section 8.1 unless the prepayment to be made by the Company under Section 8.1 is less than the principal amount as shall then be outstanding. 8.2. Optional Prepayments with Yield Maintenance Amount. The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes, on a pro rata basis between the Series A Notes and the Series B Notes, in each case at 100% of the principal amount so prepaid, plus accrued and unpaid interest thereon to the prepayment date and the Yield Maintenance Amount determined for the prepayment date with respect to such principal amount. Any partial prepayment with respect to the Notes shall be not less than $5,000,000 and in integral multiples of $1,000,000 in excess thereof and applied against required prepayments pursuant to Section 8.1 and the payments due at maturity in inverse order of their scheduled due dates. The Company will give each holder of Notes being prepaid written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify the date of prepayment, the aggregate principal amount of Notes and the Notes of each Series to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount of each Series being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Yield Maintenance Amount with respect to each Series due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of the Notes being prepaid a certificate of a Senior Financial Officer specifying the calculation of such Yield Maintenance Amount with respect to each Series of Notes as of the specified prepayment date. 8.3. Allocation of Partial Prepayments. In the case of each partial prepayment of the Series A Notes made pursuant to Section 8.1 and in the case of each partial prepayment allocated to the Series A Notes pursuant to Section 8.2, the principal amount of the Series A Notes to be prepaid shall be allocated among all of the Series A Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment. In the case of each partial prepayment of the Series B Notes made pursuant to Section 8.1 and in the case of each partial prepayment allocated to the Series B Notes pursuant to Section 8.2, the principalamount of the Series B Notes to be prepaid shall be allocated among all of the Series B Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment. 8.4. Maturity; Surrender, etc. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Yield Maintenance Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Yield Maintenance Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and canceled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. 8.5. Purchase of Notes. The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes. 8.6. Yield Maintenance Amount. The term Yield Maintenance Amount means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Yield Maintenance Amount may in no event be less than zero. For the purposes of determining the Yield Maintenance Amount, the following terms have the following meanings: "Called Principal" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "Discounted Value" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. "Reinvestment Yield" means, with respect to the Called Principal of any Note, the sum of (a) 50 basis points and (b) the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "Page 678" on the Telerate Access Service (or such other display as may replace Page 678 on Telerate Access Service) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (i) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (a) interpolating linearly between (1) the actively traded U.S. Treasury security with the duration closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security with the duration closest to and less than the Remaining Average Life. "Remaining Average Life" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (i) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (a) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "Remaining Scheduled Payments" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or 12.1. "Settlement Date" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. 9. Affirmative Covenants. The Company covenants that so long as any of the Notes are outstanding: 9.1. Compliance with Law. The Company will and will cause each of its Subsidiaries to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non- compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.2. Insurance. The Company will and will cause each of its Subsidiaries to maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is consistent with sound business practices customary in the case of entities of similar size engaged in the same or a similar business and similarly situated. 9.3. Maintenance of Properties. The Company will and will cause each of its Subsidiaries to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.4. Payment of Taxes and Claims. The Company will and will cause each of its Subsidiaries to file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claim if (i) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (i) the nonpayment of all such taxes, assessments and claims in the aggregate could not reasonably be expected to have a Material Adverse Effect. 9.5. Corporate Existence, etc. Subject to Section 10.2, the Company will at all times preserve and keep in full force and effect its corporate existence. The Company will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (unless merged into or consolidated with the Company or a Subsidiary in compliance with Section 10.2(i) and all licenses, permits, rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect. 9.6. Covenant to Secure Notes Equally. The Company covenants that, if it or any Subsidiary shall create or assume any Lien upon any of its property or assets, whether now owned or hereafter acquired, other than Liens permitted by the provisions of Section 10.3 (unless prior written consent to the creation or assumption thereof shall have been obtained pursuant to Section 17), it will make or cause to be made effective provision whereby the Notes will be secured by such Lien equally and ratably with any and all other Indebtedness thereby secured so long as any such other Indebtedness shall be so secured. 9.7. Guaranteed Obligations. The Company covenants that if, at any time, any of its Subsidiaries executes a Guaranty of or collateralizes in any other manner any obligation of the Company under the Bank Agreements, the Company will simultaneously cause such Subsidiary or Subsidiaries, as the case may be, to execute and deliver to each holder of any Note a similar Guaranty in form and substance reasonably satisfactory to such holder with respect to payment of the principal amount of the Notes and any premium and interest thereon, which bears the same ratio to the total unpaid principal amount of the Notes as the amount of such other obligation which is subject to a Guaranty bears to the total unpaid principal amount of such other obligation, or if such other obligation is collateralized, to collateralize the Notes equally and ratably with the obligations of the Company under the Bank Agreements. 9.8. Parity With Bank Agreements. The Company will, and will cause its Subsidiaries to, execute all such documents and take such other actions as the Required Holders may reasonably request in order to assure that at all times the Notes shall rank pari passu in right of payment with the obligations of the Company under the Bank Agreements, including, without limitation, the waiver of set-off rights or the execution of a set-off and collateral sharing agreement in favor of the holders of the Notes. 9.9. Information Required by Rule 144A. The Company covenants that it will, upon the request of the holder of any Note, provide such holder, and any qualified institutional buyer designated by such holder, such financial and other information as such holder may reasonably determine to be necessary in order to permit compliance with the information requirements of Rule 144A under the Securities Act in connection with the resale of Notes, except at such times as the Company is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act. For the purpose of this Section 9.9, the term "qualified institutional buyer" shall have the meaning specified in Rule 144A under the Securities Act. 9.10. No Integration. The Company covenants that it has taken and will continue to take all necessary steps so that the issuance of the Notes has not and will not require registration under the Securities Act. The Company covenants that no future offer and sale of debt securities of the Company of any class will be made if, as a result of the doctrine of "integration", there is a reasonable possibility that such offer and sale would result in the loss of the entitlement of the offer and sale of the Notes to an exemption from the registration requirements of the Securities Act. 10. Negative Covenants. The Company covenants that so long as any of the Notes are outstanding: 10.1. Transactions with Affiliates. The Company will not and will not permit any Subsidiary to enter into directly or indirectly any transaction or group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Subsidiary), except in the ordinary course and pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate; provided, however, this Section 10.1 shall not apply to any individual transaction which does not exceed $250,000 or any series of related transactions which in the aggregate do not exceed $250,000. 10.2. Merger, Consolidation, etc. The Company shall not, and shall not permit any of its Subsidiaries to, consolidate with or merge with any other Person or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to any Person except that: (i) any Subsidiary may merge or consolidate with the Company or a Material Subsidiary that is a Wholly-Owned Subsidiary, provided immediately after such merger or consolidation, no Default or Event of Default shall have occurred or exist and, in the case of any transaction involving the Company, the surviving corporation or the continuing corporation (if not the Company) shall be a solvent corporation organized and existing under the laws of the United States or any State thereof (including the District of Columbia), and such corporation (if not the Company) (A) shall have executed and delivered to each holder of any Note its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement and the Notes, (A) shall have executed and delivered, or caused to be executed and delivered, to each holder of any Note a reaffirmation of the Pledge Agreements and the Guaranty Agreements by each party thereto, and (A) shall have caused to be delivered to each holder of any Note (1) an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the holders of the Notes, to the effect that all agreements or instruments effecting such assumption and reaffirmation are enforceable in accordance with their terms and comply with the terms hereof which opinion shall be reasonably satisfactory to the holders of the Notes in all respects and (2) such other agreements and instruments which the holders of the Notes may reasonably request; (ii) the Company may merge or consolidate with any other corporation (including a Material Subsidiary that is a Wholly-Owned Subsidiary) if (A) the continuing or surviving corporation (if not the Company) shall be a solvent corporation existing under the laws of the United States or any State thereof (including the District of Columbia), and such corporation (1) shall have executed and delivered to each holder of any Note its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement and the Notes, (2) shall have executed and delivered, or caused to be executed and delivered, to each holder of any Note a reaffirmation of the Pledge Agreements and the Guaranty Agreements by each party thereto, and (3) shall have caused to be delivered to each holder of any Note a) an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the holders of the Notes, to the effect that all agreements or instruments effecting such assumption and reaffirmation are enforceable in accordance with their terms and comply with the terms hereof which opinion shall be reasonably satisfactory to the holders of the Notes in all respects and b) such other agreements and instruments which the holders of the Notes may reasonably request, and (A) immediately after such merger or consolidation, no Default or Event of Default shall have occurred or exist; (iii) any Subsidiary may convey, transfer or lease all or substantially all of its assets to the Company or a Material Subsidiary that is a Wholly-Owned Subsidiary, provided immediately after such transaction, no Default or Event of Default shall have occurred or exist; and (iv) the Company may convey, transfer or lease all or substantially all of its assets to any other corporation (including a Material Subsidiary that is a Wholly-Owned Subsidiary), provided (A) the acquiring corporation shall be a solvent corporation existing under the laws of the United States or any State thereof (including the District of Columbia), and such corporation (1) shall have executed and delivered to each holder of any Note its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement and the Notes, (2) shall have executed and delivered, or caused to be executed and delivered, to each holder of any Note a reaffirmation of the Pledge Agreements and the Guaranty Agreements by each party thereto, and (3) shall have caused to be delivered to each holder of any Note a) an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption and reaffirmation are enforceable in accordance with their terms and comply with the terms hereof which opinion shall be reasonably satisfactory to the holders of the Notes in all respects and b) such other agreements and instruments which the holders of the Notes may reasonably request, and (B) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred or exist. 10.3. Liens. The Company will not and will not permit any Subsidiary to create, assume, incur or suffer to exist any Lien upon any of its property or assets, whether now owned or hereafter acquired (whether or not provision is made for the equal and ratable securing of the Notes pursuant to Section 9.6), except: (a) Liens existing on the date of Closing and specified on Schedule 10.3, provided, in the case of Liens securing the Company s obligations under the Bank Agreements, all Persons party to the Bank Agreements shall have executed and delivered the Intercreditor Agreement and the Intercreditor Agreement shall be in full force and effect so long as such Liens exist; (b) Liens for taxes (including ad valorem and property taxes) and assessments (other than any Liens and assessments imposed under ERISA) or governmental charges or levies which are not yet due (and not then delinquent) or which are being actively contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained; (c) landlord liens and statutory liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law, created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained, and, in any case (i) were not incurred in connection with the borrowing of money, and (ii) do not, individually or in the aggregate, materially detract from the value of the property or assets of the Company or any Material Subsidiary, or the Company and its Subsidiaries taken as a whole; (d) Liens (other than any Lien imposed under ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases (other than Capitalized Leases), government contracts, performance and return of money bonds and similar obligations which (i) were not incurred in connection with the borrowing of money, and (ii) do not, individually or in the aggregate, materially detract from the value of the property or assets of the Company or any Material Subsidiary, or the Company and its Subsidiaries taken as a whole; (e) Liens arising in the ordinary course of business (including easements, rights-of-way, zoning restrictions of record and similar restrictions and other similar charges or encumbrances) which are not incurred in connection with Debt, and which do not, individually or in the aggregate, (a) materially interfere with the ordinary conduct of the business of the Company, or the Company and its Subsidiaries taken as a whole, or (b) materially detract from the value of the property or assets of the Company or any Material Subsidiary, or the Company and its Subsidiaries taken as a whole; (f) any right of setoff or banker s lien arising (whether by law, contract or otherwise) in connection with ordinary course of business deposit arrangements maintained by the Company or its Subsidiaries with its banks or other financial institutions so long as any such bank or other financial institution (A) shall not at any time make loans or otherwise extend credit to the Company or any Subsidiary, (B) does not maintain accounts (for the deposit of cash or otherwise) for the benefit of the Company or any Subsidiary, (C) shall have waived in writing for the benefit of each holder of a Note such right of setoff or banker s lien or (D) holds no more than $1,000,000 of obligations owed to the Company or any Subsidiary and the total of all such obligations permitted solely by this clause (D) shall not exceed $3,000,000; (g) any Lien renewing, extending, or refunding any outstanding obligations secured by a Lien described in clause (a), (b), (c), (d), (f), (h) and (i) of this Section 10.3; provided (A) with respect to Debt described in clause (a), such renewal, extension or refunding shall relate solely to Debt under the Bank Agreements, so long as all Persons party to the Bank Agreements shall have executed and delivered the Intercreditor Agreement and the Intercreditor Agreement shall be in full force and effect so long as such Lien exists, (B) after giving effect to such renewal, extension or refunding of the obligations described in clauses (b), (c), (d), (f), (h) and (i), such obligations shall remain subject to the conditions and provisions set forth in clauses (b), (c), (d), (f), (h) and (i), respectively, and (C) except for Debt under the Bank Agreements, the principal amount secured is not increased and such Lien is not extended to any other property of the Company or its Subsidiaries; (h) Liens securing judgments rendered against the Company or any of its Subsidiaries or arising in connection with any court proceedings, provided (i) such Liens are being contested in good faith by appropriate proceedings and (ii) no action has been taken by any Person to execute or otherwise collect on such Lien; (i) Liens securing Debt held by the Company in any Subsidiary or Debt held by any Subsidiary in any other Subsidiary; and (j) Liens securing Debt permitted by clause (ii) of the definition of Priority Debt, provided that after giving effect to such Liens, Consolidated Priority Debt shall not exceed 25% of Shareholders' Equity at any time. 10.4. Loans, Advances and Investments. The Company will not and will not permit any Subsidiary to make or permit to remain outstanding any Investments, except that the Company or any Subsidiary may: (a) make or own Investments in any Subsidiary or any Person which immediately after giving effect to such Investment will be a Subsidiary; (b) own, purchase or otherwise acquire notes or accounts receivable arising from transactions with customers, suppliers and employees in the ordinary course of business; (c) execute Guaranties of Debt of Subsidiaries, provided that after giving effect to any such Guaranty the Company will be in compliance with Sections 10.8(a), (b) and (e); (d) own, purchase or acquire (A) prime commercial paper of an issuer rated A-1 or P-1 or better by Moody s or S&P or certificates of deposit in U.S. commercial banks (having capital and surplus in excess of $500,000,000), in each case, due within one year from the date of purchase, or (B) obligations of the United States Government or any agency thereof for which the full faith and credit of the United States Government is pledged due within one year from the date of purchase, or (C) obligations guaranteed by the United States Government due within one year from the date of purchase; (e) make or permit to remain outstanding any other Investments which in the aggregate do not exceed at any time 15% of Shareholders Equity. 10.5. Restricted Payments. The Company will not, and will not permit any Subsidiary to : (a) pay or declare any dividend on any class of its Capital Stock or make any other distribution on account of any class of its Capital Stock; or (b) redeem, purchase or otherwise acquire, directly or indirectly (through a Subsidiary or otherwise), any shares of its Capital Stock (all of the foregoing events set forth in subsections (a) and (b), whether made in cash or property, being herein called "Restricted Payments"); unless (A) the aggregate amount of all Restricted Payments made since September 30, 1995 would not exceed the sum of (1) $20,000,000, plus (2) 50% of cumulative Consolidated Net Income since September 30, 1995 (or minus 100% of cumulative Consolidated Net Income since September 30, 1995 if such cumulative Net Income for such period is a loss), plus (3) the aggregate net proceeds of the issuance or sale of the Company's Capital Stock after September 30, 1995 and (B) no Default or Event of Default shall have occurred and be continuing, and no Default or Event of Default would occur as a result of such Restricted Payment; provided, however, any Subsidiary may make Restricted Payments to the Company or any Material Subsidiary. For purposes of this Section 10.5, the conversion of the Company's Convertible Subordinated Notes due 1999 shall not constitute an issuance of the Company's Capital Stock. 10.6. Nature of Business. The Company will not and will not permit any Subsidiary to engage in any business, if as a result, when taken as a whole, the general nature of the business then engaged in by the Company and its Subsidiaries would be substantially changed from the nature of the business of the Company and its Subsidiaries on the date hereof. 10.7. Sale of Property. The Company will not, and will not permit any Subsidiary to, Dispose of any property or assets (including, without limitation, Subsidiary Stock), except, so long as no Default or Event of Default shall exist: (a) the Company or any Subsidiary may Dispose of inventory in the ordinary course of business at Fair Market Value; provided, however, the Company and its Subsidiaries may Dispose of inventory at less than Fair Market Value, provided such Disposition is in the ordinary course of business of the Company and its Subsidiaries which shall be consistent with the practice of the industry of the Company and the Subsidiaries at the time of such Disposition; and (b) the Company or any Subsidiary may Dispose of any of its assets so long as, immediately after giving effect to such proposed Disposition: (i) the cumulative net book value of all assets so Disposed of by the Company and its Subsidiaries during any fiscal year does not exceed 15% of the net book value of the Consolidated Assets of the Company and its Subsidiaries determined after giving effect to any such Disposition; (ii) the consideration for such assets represents the Fair Market Value of such assets at the time of such Disposition; and (iii)in the case of the Disposition of Subsidiary Stock, the following additional conditions shall apply: (A) in connection with such Disposition of Subsidiary Stock, the entire Investment (whether represented by stock, Debt, claims or otherwise) of the Company and its other Subsidiaries in such Subsidiary is Disposed of to a Person other than (1) the Company, (2) another Subsidiary not being simultaneously Disposed of, or (3) an Affiliate, and (B) the Subsidiary being Disposed of has no continuing Investment in any other Subsidiary of the Company not being simultaneously Disposed of or in the Company. For purposes of this Section 10.7, "Disposition" means the sale, lease, transfer or other disposition of property, and "Disposed of" has a corresponding meaning to Disposition. The term "Disposition" shall not include an exchange of assets, provided that the assets involved in such exchange are similar in function in that after giving effect to such exchange there has not been (A) a Material Adverse Effect, (B) any Material deterioration of cash flow generation, or (C) any deterioration in the overall quality of plant, property and equipment of the Company and its Subsidiaries taken as a whole. An "exchange" shall be deemed to have occurred if each of the transactions involved shall have been consummated within a six month period. 10.8. Certain Financial Limits. The Company will not permit: (a) Consolidated Senior Funded Debt to exceed 60% of Total Capitalization at any time; (b) Total Funded Debt to exceed 65% of Total Capitalization at any time; (c) The ratio of Consolidated Income Available for Fixed Charges for the four fiscal quarters most recently ended to Consolidated Fixed Charges for such four fiscal quarter period to be less than 1.75 to 1.0 on the last day of any fiscal quarter; (d) Shareholders' Equity to be less than $100,000,000 at any time; and (e) Consolidated Priority Debt to exceed 25% of Shareholders' Equity at any time. 11. Events of Default. An "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing: (a) the Company defaults in the payment of any principal or Yield Maintenance Amount, if any, on any Note for more than three Business Days after the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (b) the Company defaults in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or (c) the Company defaults in the performance of or compliance with any term contained in Sections 10.1, 10.2, 10.3, 10.5, 10.6, 10.7 and 10.8; or (d) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 11) and such default is not remedied within 45 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (i) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a "notice of default" and to refer specifically to this paragraph (d) of Section 11); or (e) any representation or warranty made in writing by or on behalf of the Company or by any officer of the Company in this Agreement or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or (f) (i) the Company or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $5,000,000 beyond any period of grace provided with respect thereto, or (ii) the Company or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal amount of at least $5,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared (or one or more Persons are entitled to declare such Indebtedness to be), due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests), (x) the Company or any Subsidiary has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $5,000,000, or (y) one or more Persons have the right to require the Company or any Subsidiary so to purchase or repay such Indebtedness; or (g) the Company or any Material Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or (h) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any of its Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any of its Subsidiaries, or any such petition shall be filed against the Company or any of its Subsidiaries and such petition shall not be stayed or dismissed within 60 days; or (i) a final judgment or judgments for the payment of money aggregating in excess of $5,000,000 (exclusive of any insurance coverage for which the insurance company issuing such coverage shall have acknowledged in writing liability with respect thereto) rendered against one or more of the Company and its Subsidiaries and (A) action has been taken by a Person within 90 days after entry thereof to collect on such judgment or to secure such judgment with any property or assets of the Company or its Subsidiaries or (B) such judgments are not, within 90 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 90 days after the expiration of such stay; or (j) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed $5,000,000, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect; or (k) any Guarantor shall disavow the validity or enforceability of or attempt to terminate any or all of the Guaranty Agreements; or any or all of the Guaranty Agreements shall cease to be in full force and effect in whole or in part for any reason whatsoever (other than pursuant to Section 8(a) of the Intercreditor Agreement); or (l) the security interests granted pursuant to any Pledge Agreement shall fail at any time to constitute a first priority security interest in or assignment of the collateral described in such Pledge Agreement (other than pursuant to Section 8(a) of the Intercreditor Agreement); or any Pledge Agreement shall cease to be in full force and effect in whole or in part for any reason whatsoever (other than pursuant to Section 8(a) of the Intercreditor Agreement); or the Company shall disavow the validity or enforceability of or attempt to terminate any or all of the Pledge Agreements. As used in Section 11(j), the terms "employee benefit plan" and "employee welfare benefit plan" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 12. Remedies on Default, Etc. 12.1. Acceleration. (a) If an Event of Default with respect to the Company or any Material Subsidiary described in paragraph (g) or (h) of Section 11 (other than an Event of Default described in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact that such clause encompasses clause (i) of paragraph (g) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (b) If any other Event of Default has occurred and is continuing (including, without limitation, an Event of Default described in paragraph (h) with respect to a Subsidiary which is not a Material Subsidiary), any holder or holders of 51% or more in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable. (c) If any Event of Default described in paragraph (a) or (b) of Section 11 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon and (y) the Yield Maintenance Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Yield Maintenance Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. 12.2. Other Remedies. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. 12.3. Rescission. At any time after any Notes have been declared due and payable pursuant to clause (b) or (c) of Section 12.1, the holders of not less than 66 2/3% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Yield Maintenance Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Yield Maintenance Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. 12.4. No Waivers or Election of Remedies, Expenses, etc. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder s rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys fees, expenses and disbursements. 13. Registration; Exchange; Substitution of Notes. 13.1. Registration of Notes. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes. 13.2. Transfer and Exchange of Notes. (a) Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Company shall execute and deliver, at the Company's expense (except as provided below), one or more new Notes of the same Series (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $5,000,000, in the case of the Series A Notes, and $2,000,000, in the case of the Series B Notes (or, in the case of each Series of Notes, such lesser denominations equal to either (i) the outstanding principal amount of such Note being transferred or (ii) in the case of the initial Notes issued under this Agreement, the face amount of such Note. Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 6, provided, however, any transferee acquiring such Note pursuant to a transfer under Rule 144 under the Securities Act or Rule 144A under the Securities Act shall not be deemed to have made the representation set forth in Section 6.1. (b) Prior to due presentment for registration of transfer, the Company may treat the person in whose name any Note is registered as the owner and holder of such Note for the purpose of receiving payment of principal of, interest on and any Yield-Maintenance Amount, if any, and for all other purposes whatsoever, whether or not such Note shall be overdue, and the Company shall not be affected by notice to the contrary. Subject to the preceding sentence, the holder of any Note may from time to time grant participations in all or any part of such Note to any Person on such terms and conditions as may be determined by such holder in its sole and absolute discretion. 13.3. Replacement of Notes. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of an unsecured agreement of indemnity reasonably satisfactory to it, or (b) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note of the same Series, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. 14. Payments on Notes. 14.1. Place of Payment. Subject to Section 14.2, payments of principal, Yield Maintenance Amount, if any, and interest becoming due and payable on the Notes shall be made by wire transfer in immediately available funds for credit (no later than 1:00 p.m., New York City time, on the date due) to your account or accounts as specified on Schedule A attached hereto, or such other accounts you may designate in writing. 14.2. Home Office Payment. So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Yield Maintenance Amount, if any, and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or to such other account or address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office. Prior to any sale or other disposition of any Note held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes of the same Series pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this Section 14.2. 15. Expenses, Etc. 15.1. Transaction Expenses. Whether or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by you and each other holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement, the Notes, the Pledge Agreements, the Guaranty Agreements or the Intercreditor Agreement (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement, the Notes, the Pledge Agreements, the Guaranty Agreements or the Intercreditor Agreement or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement, the Notes, the Pledge Agreements, the Guaranty Agreements or the Intercreditor Agreement, or by reason of being a holder of any Note, and (a) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby, and by the Notes, the Pledge Agreements, the Guaranty Agreements and the Intercreditor Agreement. The Company will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by you). 15.2. Survival. The obligations of the Company under this Section 15 will survive the payment or transfer of, or the grant of any participation in, any Note, the enforcement, amendment or waiver of any provision of this Agreement, the Notes, the Pledge Agreements, the Guaranty Agreements and the Intercreditor Agreement, and the termination of any thereof. 16. Survival of Representations and Warranties; Entire Agreement. All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between you and the Company and supersede all prior agreements and understandings relating to the subject matter hereof. 17. Amendment and Waiver. 17.1. Requirements. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that no amendment or waiver may, without the written consent of the holder of each Note at the time outstanding (or, prior to the Closing, without your consent), (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or change the rate or time of payment or method of computation of interest or of the Yield Maintenance Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 1 through 6, 8, 11(a), 11(b), 12, 14.2, 17 and 20 (or any defined terms as used therein). 17.2. Solicitation of Holders of Notes. (a) Solicitation. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. (b) Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes or any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment. 17.3. Binding Effect, etc. Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "this Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 17.4. Notes held by Company, etc. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding. 18. Notices. All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (a) by registered or certified mail with return receipt requested (postage prepaid), or (a) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing, (ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or (iii) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of Joe L. Powers, Executive Vice President and Chief Financial Officer, or at such other address as the Company shall have specified to the holder of each Note in writing. Notices under this Section 18 will be deemed given only when actually received. 19. Reproduction of Documents. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (a) documents received by you at the Closing (except the Notes themselves), and (a) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. 20. Confidential Information. For the purposes of this Section 20, "Confidential Information" means information delivered to you by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Company or any Subsidiary or (d) constitutes financial statements delivered to you under Section 7.1 that are otherwise publicly available. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, provided that you may deliver or disclose Confidential Information to (i) your directors, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which you offer to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 20. 21. Miscellaneous. 21.1. Successors and Assigns. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not. 21.2. Payments Due on Non-Business Days. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Yield Maintenance Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. 21.3. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. 21.4. Construction. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. 21.5. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 21.6. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, EXCLUDING CHOICE- OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. THE COMPANY HEREBY SUBMITS TO THE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK LOCATED IN NEW YORK COUNTY, NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO THE SOLE AND ABSOLUTE ELECTION OF THE REQUIRED HOLDERS AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OTHER RELATED DOCUMENT SHALL BE LITIGATED IN SUCH COURTS, AND THE COMPANY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURTS. 21.7. Waiver of Trial by Jury. THE PARTIES HERETO ACKNOWLEDGE THAT ANY DISPUTE ARISING OUT OF THIS AGREEMENT OR THE NOTES WILL BE BASED ON DIFFICULT AND COMPLEX FACTS. ACCORDINGLY, EACH OF THE PARTIES HERETO HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY DISPUTE, CONTROVERSY, SUIT, HEARING OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE NOTES OR THE OBLIGATIONS, DUTIES AND RIGHTS OF THE COMPANY OR OF THE HOLDER OF ANY NOTE AS SET FORTH HEREIN OR IN THE NOTES. * * * * * S-1 If you are in agreement with the foregoing, please sign the form of acceptance set forth below and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Company. Very truly yours, THOMAS NELSON, INC. By /s/ Joe L. Powers ---------------------- Joe L. Powers Executive Vice President and Chief Financial Officer The foregoing is hereby agreed to as of the date thereof. THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By /s/ Catherine A. Cates --------------------------------- Catherine A. Cates Vice-President METROPOLITAN LIFE INSURANCE COMPANY By /s/ Robert B. Bodett -------------------------------- Robert B. Bodett Assistant Vice-President SCHEDULE B-1 DEFINED TERMS As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: "Affiliate" means, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (a) any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of the Company or any Subsidiary or any corporation of which the Company and its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests. As used in this definition, "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an "Affiliate" is a reference to an Affiliate of the Company. "Assets" means, at any time, assets of any Person as determined in accordance with GAAP. "Bank Agreements" means (i) the Amended and Restated Credit Agreement, dated December 13, 1995, among the Company, the Lenders listed therein, and SunTrust Bank, Nashville, N.A., as agent, and any refinancing thereof or substitution therefor, as it may be amended, modified or supplemented from time to time in accordance with its terms, (ii) the Amended and Restated Revolving Credit Promissory Note dated as of December 13, 1995 (effective as of July 25, 1995) given by the Company to SunTrust Bank, Nashville, N.A. in the original principal amount of $10,000,000, and any refinancing thereof or substitution therefor, as it may be amended, modified or supplemented from time to time in accordance with its terms, and the Amended and Restated Letter Agreement dated as of December 13, 1995 from SunTrust Bank, Nashville, N.A., to the Company delivered in connection therewith, as it may be amended, modified or supplemented from time to time in accordance with its terms, (iii) the SunTrust LOC Facility (as defined in the Intercreditor Agreement) and (iv) the NCB LOC Facility (as defined in the Intercreditor Agreement). "Business Day" means any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed. "Capital Stock" means, with respect to any Person, the outstanding capital stock (or any options or warrants to purchase capital stock or other securities exchangeable for or convertible into capital stock) of such Person. "Capitalized Lease" means, at any time, and with respect to any Person, a lease which the lessee is required to capitalize on the balance sheet of such lessee in accordance with GAAP. "Capitalized Lease Obligations" means the amount at which the aggregate rentals due and to become due under all Capitalized Leases under which the Company or any Subsidiary is the lessee, would be required to be reflected as a liability on its consolidated balance sheet. "Closing" is defined in Section 3. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "Company" is defined in the preamble of this Agreement. "Confidential" Information is defined in Section 20. "Consolidated" means the consolidation of accounts of the Company and its Subsidiaries determined in accordance with GAAP giving effect to the elimination of any intercompany items and any minority interests in Subsidiaries. "Consolidated Net Income" shall mean, for any period, the consolidated net income (or loss) of the Company and its Subsidiaries for such period (taken as a single accounting period) determined in conformity with GAAP, but excluding therefrom (to the extent otherwise included therein) (i) any gains or losses, together with any related provision for taxes, realized upon any sale of assets other than in the ordinary course of business, and (ii) any income or loss of any Person accrued prior to the date such Person becomes a Subsidiary of the Company or is merged into or consolidated with the Company or any Subsidiary or all or substantially all of such Person s assets are acquired by the Company or any Subsidiary. "Current Debt" means, with respect to any Person, all Debt of such Person which by its terms matures on demand or within one year from the date of the creation thereof and is not directly or indirectly renewable or extendible at the option of the obligor in respect thereto to a date one year or more from the date of creation thereof, provided that (i) Debt outstanding under an agreement which obligates the lender or lenders to extend credit over a period of one year or more and (ii) Current Maturities of Funded Debt shall constitute Funded Debt and not Current Debt. "Current Maturities of Funded Debt" means the portion of Funded Debt outstanding which by its terms is due on demand or within one year from the date of determination and is not directly or indirectly renewable, extendible or refundable at the option of the obligor to a date one year or more from such time. "Debt" with respect to any Person means, at any time, without duplication, (a) its liabilities for borrowed money; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including, without limitation, all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) its Capitalized Lease Obligations; (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); and (e) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (d) hereof. Debt of any Person shall include all obligations of such Person of the character described in clauses (a) through (e) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "Default" means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "Default Rate" means that rate of interest that is the greater of (i) 2% per annum above the rate of interest stated in clause (a) of the first paragraph of the Notes or (ii) 2% over the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time in New York City as its prime rate. "Disposition" is defined in Section 10.7. "Environmental Laws" means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. "ERISA" Affiliate means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code. "Event of Default" is defined in Section 11. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" means, at any time, the sale value of property that would be realized in an arm's-length sale at such time between an informed and willing buyer, and an informed and willing seller, under no compulsion to buy or sell, respectively. "Fixed Charges" means, for any period, the sum of (i) Interest Expense and (ii) Operating Rents for such period. "Funded Debt" means, with respect to any Person, all Debt of such Person which by its terms matures, or which is otherwise payable or unpaid, one year or more from the date of creation thereof, or is directly or indirectly renewable or extendible at the option of the obligor in respect thereof to a date one year or more from the date of creation thereof, provided that Funded Debt shall also include, as at any time of determination, Current Maturities of Funded Debt and the minimum daily average level of Current Debt outstanding for any sixty day period during the twelve month period immediately preceding such time of determination. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States of America, consistently applied. "Governmental Authority" means (a) the government of (i) the United States of America or any State or other political subdivision thereof, or (ii) any jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. "Guarantor" means each Subsidiary identified in Schedule 5.4 as a "Guarantor Subsidiary," and any other Subsidiary which executes a Guaranty pursuant to Section 9.7 or Section 9.8. "Guaranty" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person: (i) to purchase such indebtedness or obligation or any property constituting security therefor; (ii) to advance or supply funds (a) for the purchase or payment of such indebtedness or obligation, or (b) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation; (iii) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or (iv) otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof. In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor. "Guaranty Agreements" means (i) the Guaranty Agreement, dated as of the date hereof, made by each Guarantor in favor of The Prudential Insurance Company of America, (ii) the Guaranty Agreement, dated as of the date hereof, made by each Guarantor in favor of Metropolitan Life Insurance Company and (iii) any other Guaranty executed by a Subsidiary pursuant to Section 9.7 or Section 9.8, as any such guaranty agreement may be amended, restated, modified, or supplemented from time to time in accordance with its terms. "Hazardous Material" means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls). "Holder" means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 13.1. "Income Available For Fixed Charges" means, for any period, the sum of (i) Consolidated Net Income, (ii) taxes, (iii) Interest Expense, (iv) Operating Rents, and (v) amortization charges, of the Company and its Subsidiaries for such period, all as determined in accordance with GAAP. "Indebtedness" with respect to any Person means, at any time, without duplication, (a) its liabilities for borrowed money; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including, without limitation, all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) its Capitalized Lease Obligations; (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); (e) all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); (f) Swaps of such Person; and (g) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof. Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (g) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "Institutional Investor" means (a) any original purchaser of a Note, (b) any holder of a Note holding more than 10% of the aggregate principal amount of the Notes of either Series then outstanding, and (c) any other holder of a Note which is a bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. "Intercreditor Agreement" means that certain intercreditor agreement, dated as of the date hereof, among The Prudential Insurance Company of America, Metropolitan Life Insurance Company, SunTrust Bank, Nashville, N.A., First American National Bank, National City Bank, Kentucky, Nationsbank of Texas, N.A. and Creditanstalt- Bankverein, as it may be amended, restated, modified or supplemented from time to time in accordance with its terms. "Interest Expense" means, for any period, all interest expense in respect of Debt (including imputed interest in respect of Capitalized Lease Obligations) of the Company and its Subsidiaries for such period as determined in accordance with GAAP. "Investment" shall mean, when used with respect to any Person, any direct or indirect advance, loan or other extension of credit or capital contribution by such Person (by means of transfers of property to others or payments for property or services for the account or use of others, or otherwise) to any other Person, or any direct or indirect purchase or other acquisition or beneficial ownership by such Person of, or of a beneficial interest in, Capital Stock, partnership interests, bonds, notes, debentures or other securities issued by any other Person. "Lien" means any mortgage, pledge, security interest, encumbrance, lien (statutory or otherwise), or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any Capitalized Lease, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction) or any other type of preferential arrangement for the purpose, or having the effect, of protecting a creditor against loss or securing the payment or performance of an obligation, including any rights of setoff (whether by statute, common law, contract or otherwise). "Material" means material in relation to the business, operations, affairs, financial condition, assets, properties, or prospects of the Company and its Subsidiaries taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Company and its Subsidiaries taken as a whole, or (b) the ability of the Company to perform its obligations under this Agreement and the Notes, or (c) the validity or enforceability of this Agreement or the Notes, or (d) the ability of the Company and its Subsidiaries (taken as a whole) to perform their respective obligations under the Pledge Agreements or the Guaranty Agreements. "Material Subsidiary" means a Subsidiary having (i) Assets with an aggregate book value in excess of $5,000,000 at the time of determination or (ii) Revenues in excess of 5% of Consolidated Revenues for the fiscal year most recently ended prior to the time of determination. "Memorandum" is defined in Section 5.3. "Moody's" means Moody's Investors Service, Inc. or any successor thereto. "Multiemployer Plan" means any Plan that is a multiemployer plan (as such term is defined in section 4001(a)(3) of ERISA). "Notes" is defined in Section 1. "Officer's Certificate" means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate. "Operating Rents" means, for any period, noncapitalized lease obligations of the Company and its Subsidiaries for such period but shall exclude all leases related to vehicles, computer and office equipment. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. "Person" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. "Plan" means an "employee benefit plan" (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability. "Pledge Agreements" means (i) the Amended and Restated Pledge Agreement, dated as of the date hereof, among the Company, as pledgor, SunTrust Bank, Nashville, N.A., National City Bank, Kentucky, First American National Bank, Nationsbank of Texas, N.A., Creditanstalt - Bankverein, Metropolitan Life Insurance Company and The Prudential Insurance Company of America, as pledgees, and SunTrust Bank, Nashville, N.A., as agent, pursuant to which the Company has, among other things, pledged to the pledgees a security interest in the outstanding common stock of Word, Incorporated owned by the Company, (ii) the Amended and Restated Pledge Agreement, dated as of the date hereof, among the Company, as pledgor, SunTrust Bank, Nashville, N.A., National City Bank, Kentucky, First American National Bank, Nationsbank of Texas, N.A., Creditanstalt - Bankverein, Metropolitan Life Insurance Company and the Prudential Insurance Company of America, as pledgees, and SunTrust Bank, Nashville, N.A., as agent, pursuant to which the Company has, among other things, pledged to the pledgees a security interest in the outstanding common stock of The C.R. Gibson Company owned by the Company and (iii) any other pledge agreement or other similar security agreement executed by the Company or any Subsidiary pursuant to Sections 9.6, 9.7 or 9.8, as any such agreement may be amended, restated, modified, or supplemented from time to time in accordance with its terms. "Preferred Stock" means any class of Capital Stock of a corporation that is preferred over any other class of Capital Stock of such corporation as to the payment of dividends or the payment of any amount upon liquidation or dissolution of such corporation. "Priority Debt" means with respect any Person, at any time, without duplication, the sum of (i) Debt of each Subsidiary (other than Debt held by the Company or another Subsidiary); (ii) Debt secured by any Lien other than a Lien described in clauses (a) through (i) of Section 10.3; (iii) all Preferred Stock of Subsidiaries owned by a Person other than the Company or a Subsidiary; and (iv) any obligation or liability arising in connection with a Receivables Financing. "Purchasers" means, with respect to any Notes, the Persons who are purchasing the Notes on the date of Closing pursuant to this Agreement. "QPAM Exemption" means Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor. "Receivables Financing" means a transaction pursuant to which funds are advanced to either Company and/or any of its Subsidiaries in exchange for which such Company and/or any of its Subsidiaries shall pledge, sell or otherwise transfer any or all of its notes or accounts receivable to secure, in whole or in part, the repayment of such funds. "Required Holders" means, at any time, the holders of at least 66 2/3% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates). "Responsible Officer" means the chief executive officer, any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this Agreement. "Restricted Payment" is defined in Section 10.5. "Revenues" means, at any time, and with respect to any Person, revenues as determined in accordance with GAAP. "S&P" means Standard & Poor's Rating Group or any successor thereto. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Senior Financial Officer" means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company. "Senior Funded Debt" means (i) all Funded Debt of the Company other than Subordinated Funded Debt, and (ii) all Funded Debt of the Subsidiaries. "Series" is defined in Section 1. "Series A Notes" is defined in Section 1. "Series B Notes" is defined in Section 1. "Shareholders' Equity" means Shareholders' Equity of the Company and its Subsidiaries on a consolidated basis as set forth in the Company's consolidated balance sheet prepared in accordance with GAAP. "Subordinated Funded Debt" means all Funded Debt of the Company which is expressly subordinate to other Funded Debt of the Company on terms and conditions approved by the Required Holders, which approval (or disapproval) shall be given within ten (10) Business Days of receipt by the holders of the Notes of the subordination terms of such Funded Debt. The Company's Convertible Subordinated Notes due 1999 shall constitute Subordinated Funded Debt. "Subsidiary" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a Subsidiary is a reference to a Subsidiary of the Company. "Subsidiary Stock" means the outstanding Capital Stock of any Subsidiary. For purposes of Section 10.7, the book value of Subsidiary Stock that is sold or otherwise disposed of shall be equal to that percentage of book value of the assets of the Subsidiary that issued such stock as is equal to the percentage that the book value of such Subsidiary Stock represents of the book value of all of the outstanding Capital Stock of such Subsidiary (assuming, in making such calculations, that all securities convertible into such Capital Stock are so converted and giving full effect to all transactions that would occur or be required in connection with such conversion). "Swaps" means, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For the purposes of this Agreement, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined. "Total Capitalization" means the sum of (i) Total Funded Debt and (ii) Shareholders Equity. "Total Funded Debt" means the sum of (i) Consolidated Senior Funded Debt and (ii) Consolidated Subordinated Funded Debt. "Wholly-Owned Subsidiary" means, at any time, any Subsidiary one hundred percent (100%) of all of the equity interests (except directors qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company s other Wholly- Owned Subsidiaries at such time. "Yield Maintenance Amount" is defined in Section 8.6. END OF SCHEDULE B EXHIBIT 1-A [FORM OF SERIES A NOTE] THOMAS NELSON, INC. 6.90% SERIES A SENIOR NOTE DUE DECEMBER 31, 2007 No. [_____] [Date] $[_______] PPN[______________] FOR VALUE RECEIVED, the undersigned, THOMAS NELSON, INC. (herein called the "Company"), a corporation organized and existing under the laws of the State of Tennessee, hereby promises to pay to [__________], or registered assigns, the principal sum of [_________] DOLLARS on December 31, 2007, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.90% per annum from the date hereof, payable semiannually, on the last day of June and December in each year, commencing June 30, 1996 until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Yield Maintenance Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.90% or (ii) 2.0% over the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time in New York City as its prime rate. Payments of principal of, interest on and any Yield Maintenance Amount with respect to this Note are to be made in lawful money of the United States of America at Morgan Guaranty Trust Company of New York, or as specified in the Note Purchase Agreement referred to below and Schedule A thereto for the holder of this Note or at such other place as the holder of this Note shall have designated by written notice to the Company as provided in the Note Purchase Agreement referred to below. This Note is one of the Series A Senior Notes (herein called the "Series A Notes") issued pursuant to the Note Purchase Agreement, dated January 3, 1996, in the aggregate principal amount of $35,000,000 (as from time to time amended, the "Note Purchase Agreement"), between the Company and the respective purchasers named therein and is entitled to the benefits thereof. Pursuant to the Note Purchase Agreement, the Company has also issued a series of Series B Senior Notes in the aggregate principal amount of $15,000,000. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) except as provided in Section 13.2(a) of the Note Purchase Agreement, to have made the representation set forth in Section 6 thereof. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Series A Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Yield Maintenance Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. THOMAS NELSON, INC. By:________________________ Name: Title: EXHIBIT 1-B [FORM OF SERIES B NOTE] THOMAS NELSON, INC. 6.68% SERIES B SENIOR NOTE DUE DECEMBER 31, 2005 No. [_____] [Date] $[_______] PPN[______________] FOR VALUE RECEIVED, the undersigned, THOMAS NELSON, INC. (herein called the "Company"), a corporation organized and existing under the laws of the State of Tennessee, hereby promises to pay to [__________], or registered assigns, the principal sum of [__________] DOLLARS on December 31, 2005, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.68% per annum from the date hereof, payable semiannually, on the last day of June and December in each year, commencing June 30, 1996 until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Yield Maintenance Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.68% or (ii) 2.0% over the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time in New York City as its prime rate. Payments of principal of, interest on and any Yield Maintenance Amount with respect to this Note are to be made in lawful money of the United States of America at Morgan Guaranty Trust Company of New York, or as specified in the Note Purchase Agreement referred to below and Schedule A thereto for the holder of this Note or at such other place as the holder of this Note shall have designated by written notice to the Company as provided in the Note Purchase Agreement referred to below. This Note is one of the Series B Senior Notes (herein called the "Series B Notes") issued pursuant to the Note Purchase Agreement, dated January 3, 1996, in the aggregate principal amount of $15,000,000 (as from time to time amended, the "Note Purchase Agreement"), between the Company and the respective purchasers named therein and is entitled to the benefits thereof. Pursuant to the Note Purchase Agreement, the Company has also issued a Series of Series A Senior Notes in the aggregate principal amount of $35,000,000. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) except as provided in Section 13.2(a) of the Note Purchase Agreement, to have made the representation set forth in Section 6 of the Note Purchase Agreement. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Series B Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreement. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreement, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Yield Maintenance Amount) and with the effect provided in the Note Purchase Agreement. This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. THOMAS NELSON, INC. By: ______________________ Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----