-----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, GVA4vGiAc8AWgN1KFBUv6gz1olhA7kBB05STzVsgq5a23LyMkoUP0zkyyaaDYUnu oui/xy7ttz9dx98DwpOkqA== 0000071023-02-000007.txt : 20020701 0000071023-02-000007.hdr.sgml : 20020701 20020701162726 ACCESSION NUMBER: 0000071023-02-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020701 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NELSON THOMAS INC CENTRAL INDEX KEY: 0000071023 STANDARD INDUSTRIAL CLASSIFICATION: BOOKS: PUBLISHING OR PUBLISHING AND PRINTING [2731] IRS NUMBER: 620679364 STATE OF INCORPORATION: TN FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13788 FILM NUMBER: 02693853 BUSINESS ADDRESS: STREET 1: 501 NELSON PLACE 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-K 1 mar2002k.txt FORM 10-K FOR PERIOD ENDED 3/31/2002 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2002 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 identification number) incorporation or organization) 501 Nelson Place, Nashville, Tennessee 37214-1000 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (615) 889-9000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered - -------------------- ------------------------- Common Stock, Par Value $1.00 per share New York Stock Exchange Class B Common Stock, Par Value $1.00 per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 requirement for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of June 24, 2002, the Registrant had outstanding 13,343,765 shares of Common stock and 1,024,795 shares of Class B common stock. On such date the aggregate market value of shares of common stock and Class B common stock held by nonaffiliates was approximately $108.5 million. The market value calculation was determined using the closing sale price of the Registrant's common stock and Class B common stock on June 24, 2002, as reported on The New York Stock Exchange. DOCUMENTS INCORPORATED BY REFERENCE Documents from which portions Part of Form 10-K are incorporated by reference - ------------------------------------ ------------------------------- PART II Item 5 - Market for Company's Common Page 38 of Annual Report to Equity and Related Shareholder Shareholders for year ended Matters March 31, 2002 (market price and dividend information only) Item 6 - Selected Financial Data Page 12 of Annual Report to Shareholders for year ended March 31, 2002 Item 7 - Management's Discussion and Pages 13 to 19 of Annual Report Analysis of Financial Condition Shareholders for year ended and Results of Operations March 31, 2002 Item 7A - Quantitative and Qualitative Page 19 of Annual Report to Disclosures about Market Risk Shareholders for year ended March 31, 2002 Item 8 - Financial Statements and Pages 20 to 35 of Annual Report Supplementary Data to Shareholders for year ended March 31, 2002 PART III Item 10 - Directors and Executive To be included in Company's Officers of the Company Proxy Statement for the Annual Meeting of Shareholders to be held August 22, 2002, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. Item 11 - Executive Compensation To be included in Company's Proxy Statement for the Annual Meeting of Shareholders to be held August 22, 2002, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. Item 12 - Security Ownership of Certain To be included in Company's Beneficial Owners and Proxy Statement for the Annual Management Meeting of Shareholders to be held August 22, 2002, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. Item 13 - Certain Relationships and To be included in Company's Related Transactions Proxy Statement for the Annual Meeting of Shareholders to be held August 22, 2002, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. PART I Item 1. Business - ----------------- Thomas Nelson, Inc. (the "Company") is a leading publisher, producer and distributor of books emphasizing Christian, inspirational and family value themes and believes it is the largest commercial publisher of the Bible in English language translations. The Company believes it is the largest publisher of Christian and inspirational books in the United States. On October 11, 2001, the Company announced that it had entered into a definitive agreement by which the Company would sell and CRG Acquisition Corp. ("CRG") would purchase the Company's gift business, including substantially all of the assets of the Company's wholly-owned subsidiary, The C.R. Gibson Company ("C.R. Gibson"). C.R. Gibson is a designer, marketer and distributor of premium stationery and memory albums. The purchase was consummated on November 7, 2001 by CRG with an effective date of October 31, 2001 at a purchase price of $30.5 million, plus the assumption of certain liabilities. This sale resulted in a loss on disposal of $14.7 million. The Company also recognized a $40.4 million cumulative effect of a change in accounting principle charge to write-off goodwill associated with C.R. Gibson. C.R. Gibson generated an operating income (loss) from discontinued operations of $(0.8) million, $(3.2) million and $0.3 million in fiscal years 2002, 2001 and 2000, respectively. The Company utilized net proceeds from the sale to pay down existing debt. The financial statements reflect the gift business segment as a discontinued operation for all periods presented. During December 2000, the Company determined it would dispose of its Ceres candles operation, formerly a division of its gift business segment. This sale was completed in August 2001 for approximately $1.5 million. This sale resulted in a loss on disposal of $(0.5) million in fiscal 2002 and $(7.3) million in fiscal 2001. Ceres generated an operating loss from discontinued operations of $(1.3) million and $(1.0) million in fiscal years 2001 and 2000, respectively. Effective April 1, 2001, Remuda Ranch Center for Anorexia and Bulimia, Inc. ("Remuda Ranch"), which operates therapeutic centers in Arizona for women with eating disorders, was reflected as a discontinued operation. For periods prior to April 1, 2001, Remuda Ranch net assets are reflected as assets held for sale in accordance with Emerging Issues Task Force Issue No. 87-11, "Allocation of Purchase Price to Assets to be Sold." Remuda Ranch was a wholly owned subsidiary of New Life Treatment Center, Inc., acquired during fiscal 2000, and was considered as an asset held for sale from the acquisition date through March 31, 2001. The Company closed the sale of the Remuda Ranch net assets in July 2001 for approximately $7.2 million in cash and a $2 million note receivable. This sale resulted in a loss on disposal of $0.3 million during fiscal 2002. The operations of Remuda Ranch have been accounted for as discontinued operations and accordingly, their assets, liabilities and results of operations are segregated in the accompanying consolidated statements of operations, balance sheets and statements of cash flows and have been reclassified for all periods presented, except Remuda Ranch net assets for periods prior to April 1, 2001 which were classified as assets held for sale. During fiscal 2000, the Company completed three business acquisitions. On June 24, 1999, the Company acquired substantially all of the assets of Ceres LLC for approximately $6.2 million, which included the assumption of certain liabilities. On December 30, 1999, the Company acquired substantially all of the assets of Rutledge Hill Press, Inc. for approximately $4.5 million including the assumption of certain liabilities. Rutledge Hill Press is a Nashville, Tennessee-based publisher that specializes in cooking, quilting, regional interest and Civil War titles. On January 28, 2000, the Company acquired approximately 70% of the outstanding shares of New Life Treatment Centers, Inc. ("NLTC") from a group of investors for approximately $15.4 million in cash. NLTC, headquartered in Plano, Texas, operates two businesses. One, Women of Faith, Inc., hosts inspirational conferences for women at venues throughout the United States, and the other, Remuda Ranch Center for Anorexia and Bulimia, Inc. ("Remuda Ranch"), operates therapeutic centers in Arizona for women with eating disorders. At the NLTC acquisition date, Remuda Ranch was identified as an asset held for sale. During fiscal 2001, the Company paid approximately $0.8 million in cash and issued approximately 108,000 shares of the Company's Common stock to acquire an additional 10% of the outstanding shares of NLTC, and has accepted additional shares of NLTC in lieu of debt payments from a third party. At March 31, 2002, the Company owned approximately 99% of the outstanding shares of NLTC. PUBLISHING The Company's book publishing division publishes and distributes hardcover and trade paperback books emphasizing Christian, inspirational and family value themes. The Company believes it is the largest publisher of Christian and inspirational books in the United States. Books are published by the Company under several imprints including Thomas Nelson(R), W Publishing, J. Countryman(R), Tommy Nelson(R) , Rutledge Hill PressTM and Cool Springs PressTM, and consist generally of inspirational, trade, gift, children's and reference books emphasizing Christian and family value themes. The Company distributes books primarily through Christian bookstores, general bookstores, mass merchandisers and direct sales to consumers. The Company also distributes books published by other companies on a limited basis to complement its marketing and distribution capabilities. In fiscal 2002, publishing net revenues realized from the distribution of books published by other companies was immaterial. Women of Faith(R), acquired in the fourth quarter of fiscal 2000, hosts inspirational conferences and has an Internet portal, womenoffaith.com. Both are designed to foster a community setting for Christian women and to provide a forum for them to explore and strengthen their faith. The Company benefits through seminar attendance fees and the sale of Christian products at seminars. In fiscal year 2002, Women of Faith hosted 26 conferences throughout the United States, which attracted over 332,000 participants. Womenoffaith.com is an on-line community of women who gather to build relationships with one another. Founded in June 1999, Womenoffaith.com created a place where Christian women from all over the world come to share their life experiences and faith with one another. The events and the Internet site both provide opportunities to market and sell inspirational products. In fiscal 2002, 2001 and 2000, the Company released over 200 new book titles annually. The Company publishes and distributes some of the best known communicators in Christian and inspirational publishing, including Carolyn Arends, Dr. Don Colbert, John Eldredge, Billy Graham, John Hagee, Hank Hanegraaf, Jack Hayford, Cynthia Heald, Barbara Johnson, Thomas Kinkade, Anne Graham Lotz, Max Lucado, Catherine Marshall, John C. Maxwell, Nicole C. Mullen, Frank Peretti, Mary Lou Retton, Michael W. Smith, Dr. Charles Stanley, Tommy Tenney, Stephanie Grace Whitson and Bruce Wilkinson. In addition, the Company maintains a backlist of approximately 1,100 titles, which provide a stable base of recurring revenues as many popular titles continue to generate significant sales from year to year. Backlist titles accounted for approximately 50% of the book division's net revenues in fiscal 2002. Authors and titles are supported through radio, television, cooperative advertising, author appearances, in-store promotions, print advertising and other means. The Company's book publishing business is enhanced by the breadth of its marketing and distribution channels. In addition to enhancing sales of its products, the Company believes its ability to sign and renew contracts with popular authors is improved because the Company's marketing and distribution capabilities provide exposure for the authors' books to a broader audience than its competitors. (see "Marketing, Distribution and Production"). The Company believes it is one of the largest commercial publishers of English translations of the Bible. The Bible is based on ancient manuscripts, which are the surviving reproductions of the original writings. These manuscripts, written in Hebrew, Aramaic or Greek, have been translated into English and other modern languages by biblical scholars and theologians, generally under the auspices of a major Bible society or translation organization. Each of the many English translations available differs in some degree from the others, primarily because of different translation guidelines and principles used as the basis for each translation. The distinctiveness of each translation is also, in part, a result of the evolution of the meaning and use of words within the English language. Virtually all Bibles and Bible products currently published in the United States are based on one of 13 major translations. Of these 13 translations, 12 are protected by copyright laws, which grant the copyright owner the exclusive right, for a limited term, to control the publication of such translation. The Company publishes Bibles and Bible products based on eight of the thirteen major translations, of which three are exclusive to the Company as a result of copyright ownership or licensing arrangements (see "Copyrights and Royalty Agreements"). Approximately 55% of the Company's net revenues from Bible publishing in fiscal 2002 were generated through sales of its proprietary Bible products. The following table sets forth the eight major Bible translations, in the English language, currently published by the Company:
Date First Proprietary Translation Published to the Company - ----------- ---------- -------------- King James Version (KJV) 1611 No New American Bible (NAB) 1970 No Revised Standard Version, Catholic Edition (RSVCE) 1965 No New King James VersionTM (NKJV)(R) 1982 Yes International Children's Bible (ICB) 1983 Yes New Century Version (NCV) 1984 Yes New Revised Standard Version (NRSV) 1990 No New Living Translation (NLT) 1996 No
The KJV, currently published in its fourth revision, is the most widely distributed of all English translations of the Bible. In 1975, the Company commissioned the fifth revision of the KJV resulting in the publication of the proprietary NKJV(R) in 1982. Electronic Bibles and biblical reference books are published under the Nelson Electronic PublishingTM imprint. These products include electronic collections centered on Bible study; electronic libraries featuring well-known authors, such as Jack Hayford, John MacArthur, John Maxwell and Charles Stanley; and software for preparing Bible study lessons. The Company has achieved a leadership position in the industry with its electronic publications, and is aggressively pursuing new digital formats of publication and distribution as they develop, such as the Internet, and emerging portable book technologies. The Company continually seeks to expand its Bible product line by developing or aiding in the development of new translations and editions and seeking new publishing opportunities. The Company also continually makes editorial, design and other changes to its existing line of Bibles and other Bible products in an effort to increase their marketability. The Company currently publishes over 1,100 different Bibles and biblical reference products such as commentaries, study guides and other popular Bible help texts. Styles range from inexpensive paperbacks to deluxe leather-bound Bibles to CD-Rom. Different editions of a particular Bible translation are created by incorporating additional material, such as study helps, concordances, indices and Bible outlines, or artwork, into the biblical text. These editions (which are generally proprietary to the Company regardless of whether or not the Company holds proprietary rights to the underlying Bible translation) are targeted to the general market or positioned for sale to specific market segments. MARKETING, DISTRIBUTION AND PRODUCTION The principal market channels through which the Company markets its products domestically are Christian bookstores, which are primarily independently owned; general bookstores, including national chains such as Barnes & Noble(R) and Borders(R); mass merchandisers such as Target(R), Wal-Mart(R) and Sam's(R) Wholesale Club and directly to consumers through direct mail, telemarketing, inspirational seminars and the Internet. The Company services these market channels through its sales force and through wholesalers or jobbers servicing bookstores, gift stores, other retail outlets and libraries. The Company's direct marketing operations sell publishing products directly to approximately 31,500 customers consisting of churches, other religious organizations, pastors and other individuals by direct mail and telemarketing. As of March 31, 2002, the Company employed a sales force of approximately 130 people and maintained 24-hour-a-day telemarketing capability. These employees service over 30,000 retail accounts and 31,000 church related accounts. Customer orders are usually shipped through a variety of common carriers, as well as by UPS(R), FedEx(R) and parcel post. No single customer accounted for more than 10% of net revenues during fiscal 2002. The Company contracts with a number of foreign publishers to translate the Company's English titles into foreign languages. The Company typically retains publishing rights to the titles translated. The Company distributes its products internationally in South America, Europe, Australia, New Zealand, Africa, the Far East, Mexico and Canada. In fiscal 2002, the Company's export operations accounted for less than 10% of the Company's total net revenues. Substantially all of the Company's products are manufactured by domestic and foreign commercial printers, binders and manufacturers, which are selected on the basis of competitive bids. The Company may contract separately for paper and certain other supplies used by its manufacturers. COPYRIGHTS AND ROYALTY AGREEMENTS The Company customarily secures copyright registrations on its books and Bible editions in order to protect its publishing rights. Almost all of the Company's book products are published under royalty agreements with their respective authors or other copyright proprietors. COMPETITION The Company believes that it is the largest publisher of Christian and inspirational books and one of the largest commercial publishers of Bibles in English language translations. The Company competes with numerous other companies that publish and distribute Christian and inspirational books, certain of which are tax-exempt organizations. While the Company's prices are comparable to those of its competitors, the Company believes that its breadth of product line, established market channels, established sales forces and customer service give it a competitive advantage. The most important factor with respect to the competitive position of the Company is the contractual relationships it establishes and maintains with authors. The Company competes with other book publishing companies, both Christian and secular, for signing top authors. The Company's ability to sign and re-sign popular authors depends on a number of factors, including distribution and marketing capabilities, the Company's management team and the royalty and advance arrangements offered. The Company believes its relationships with its authors, which are based on its reputation in the publishing industry, its marketing experience and its management expertise give it a competitive advantage in signing and maintaining contracts with top Christian and inspirational authors. EMPLOYEES As of March 31, 2002, the Company employed approximately 700 persons. The Company has not suffered any work stoppages as a result of labor disputes in recent years and considers relations with its employees to be good. EXECUTIVE OFFICERS Officers of the Company are elected by the Board of Directors and serve at the pleasure of the Board of Directors. Following is certain information regarding the executive officers of the Company:
Name Age Position with the Company - ---- ----- ------------------------------------------- Sam Moore 72 Chairman of the Board, Chief Executive Officer, President and Director Joe L. Powers 56 Executive Vice President and Secretary Lee Gessner 49 Executive Vice President, Thomas Nelson Publishing and Sales Group Vance Lawson 43 Senior Vice President, Finance and Operations Group Eric Heyden 48 Vice President and General Counsel Michael S. Hyatt 47 Executive Vice President and Group Publisher Philip Stoner 42 Executive Vice President and Publisher, Bibles, Reference, Electronic and Spanish Publishing
Except as indicated below, each executive officer has been an employee of the Company as his/her principal occupation for more than the past five years. Sam Moore has been Chairman of the Board, Chief Executive Officer, President and a Director of the Company since its founding in 1961. Joe L. Powers was appointed Executive Vice President of the Company in 1995. Previously, Mr. Powers served as a Vice President of the Company since 1980. Lee Gessner was appointed Executive Vice President of the Company in December, 2000. Previously, Mr. Gessner served as Senior Vice President and Publishing Group Executive with Word Publishing, Publisher and COO of Word Publishing, Senior Vice President of Sales with the Thomas Nelson Publishing Group and Vice President of Sales with Word Publishing since 1989. Vance Lawson was appointed Senior Vice President, Finance and Operations Group in 2000. Previously, Mr. Lawson served as Vice President, Finance of the Company since 1993 and had served as Senior Vice President of Finance and Operations at Word since 1988. Eric Heyden has been the Vice President and General Counsel of the Company since 1998, Vice President and Deputy General Counsel of the Company since 1997 and Assistant General Counsel of the Company since 1995. Mr. Heyden was previously Vice President and General Counsel with Knoedler Publishing, Inc. from 1985 to 1995. Michael S. Hyatt has been with the Company since February 1998. In May 2002, he was appointed Executive Vice President and Group Publisher for Nelson book, Tommy Nelson, Rutledge Hill Press, Cool Springs Press and the Nelson Multi Media divisions. Previously, Mr. Hyatt served as Executive Vice President and Publisher of Nelson Books, Senior Vice President and Publisher of Nelson Books, and Senior Vice President and Associate Publisher of Nelson Books. Mr. Hyatt was previously a partner with Wolgemuth & Hyatt, a literary agency, from 1992 to 1998. Philip Stoner has been with the Company since May 1990. He was appointed Executive Vice President and Publisher for all Bible, Reference, Electronic and Spanish Publishing in June 2001. Previously, Mr. Stoner served as Executive Vice President and Publisher of Reference, Electronic and Spanish Publishing; Senior Vice President and Publisher of Reference Product; Vice President of Reference and Specialty Publishing; Vice President of Reference and Mass Market; Director of Reference Publishing and Director of Reference Books and Nelson's Communication Division. Item 2. Properties The Company's executive, editorial, sales and production offices are primarily located at its corporate headquarters at 501 Nelson Place in Nashville, Tennessee. These facilities are housed in a 74,000 square foot building completed in 1981, which is owned by the Company subject to a mortgage securing a debt with an outstanding balance at March 31, 2002 of approximately $900,000. The Company's major warehouse facilities for its publishing division are located in a building containing approximately 215,000 square feet adjacent to its corporate headquarters in Nashville, Tennessee. This building, which was completed in fiscal 1978, is owned by the Company. An addition to the warehouse and distribution center of approximately 120,000 square feet was completed during fiscal 1993. This addition was financed by a $5,000,000 construction and term loan secured by a mortgage, which, as of March 31, 2002, is paid in full. The Company's significant leased properties are described below:
Square Annual Lease Location Use/Segment Feet Rent Expiration - -------- ----------- ------- -------- ---------- Nashville, TN Sales office/publishing 38,000 $716,000 11/2005 Nashville, TN Sales office/publishing 12,500 $141,000 09/2002 Nashville, TN Warehousing 169,400 $515,000 12/2005 Plano, TX Office/Women of Faith 23,931 $302,220 10/2010
All building improvements on the properties are brick veneer, metal or block construction and are considered adequate and suitable by the Company for the purposes for which they are used. The Company's machinery and equipment are located in Nashville, Tennessee and Plano, Texas and consist primarily of computer equipment, warehousing and shipping racks, conveyors and other material handling equipment located at the various warehousing facilities and office equipment. Such machinery and equipment are in good repair and adequate for the Company's present operations. All such equipment, other than a portion of the computer equipment and office equipment that is leased, is owned by the Company. The Company's properties are operated at or near capacity. Additional personnel are employed as required. Item 3. Legal Proceedings - -------------------------- The Company is subject to various legal proceedings, claims and liabilities that arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the Company. Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ The Company did not submit any matter to a vote of its security holders during the last quarter of its fiscal year ended March 31, 2002. PART II Item 5. Market for the Company's Common Equity and Related Shareholder Matters - ------------------------------------------------------------------------------- Incorporated by reference to the Annual Report to Shareholders for the year ended March 31, 2002 (the "Annual Report"). Item 6. Selected Financial Data - -------------------------------- Incorporated by reference to the Annual Report. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - ------------------------------------------------------------------------ Incorporated by reference to the Annual Report. Item 7A. Quantitative and Qualitative Disclosures about Market Risk - -------------------------------------------------------------------- Incorporated by reference to the Annual Report. Item 8. Financial Statements and Supplementary Data - ---------------------------------------------------- Incorporated by reference to the Annual Report. Includes selected unaudited quarterly financial data for the years ended March 31, 2002 and 2001. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure - ------------------------------------------------------------------------ None. PART III Item 10. Directors and Executive Officers of the Company - --------------------------------------------------------- Information regarding the directors of the Company and compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is incorporated by reference to the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on August 22, 2002 (the "Proxy Statement"), to be filed within 120 days of March 31, 2002 with the Securities and Exchange Commission (the "Commission") pursuant to Regulation 14A under the Exchange Act. Information regarding the Company's executive officers is contained in Part 1, Item 1 herein. Item 11. Executive Compensation - -------------------------------- Incorporated by reference to the Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management - ------------------------------------------------------------------------ Incorporated by reference to the Proxy Statement. The Company has adopted the 1992 Amended and Restated Employee Stock Incentive Plan (the "Stock Incentive Plan"), which is administered by the Company's Compensation Committee. Stock options, stock appreciation rights, restricted stock, deferred stock, stock purchase rights and other stock-based awards may be granted to employees under this plan. In addition, up to 140,000 shares of Common stock have been authorized for issuance under this plan for annual stock option grants to each of the Company's outside directors for the purchase of 2,000 shares of Common stock. Stock options have been granted under this plan as indicated in the table below. The options in the Stock Incentive Plan typically vest over one to three year periods beginning on the first or fourth anniversary date of the option grant, and at March 31, 2002, there were options to purchase 278,667 shares of Common Stock and 330,000 shares of Class B Common stock exercisable. The weighted average life of the options outstanding under the Stock Incentive Plan at March 31, 2002, was four years. The Company does not mainain any equity compensation plans under which stock may be issued except those approved by the Company's shareholders. EQUITY COMPENSATION PLAN INFORMATION
A B C ----------------------------------------------------------------- Number of securities Weighted-average Number of securities to be issued upon exercise price of remaining available Plan category exercise of outstand- outstanding for future issuance ing options, warrants options, warrants under equity compen- and rights and rights sation plans ----------- ----------- (excluding securities Common Class B reflected in Column A) ----------------------------------------------------------------- Equity compensation plans approved 941,500 330,000 $9.52 774,825 by security holders -----------------------------------------------------------------
Item 13. Certain Relationships and Related Transactions - -------------------------------------------------------- Incorporated by reference to the Proxy Statement. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) Documents filed as part of Report 1. Financial Statements The following consolidated financial statements of the Company included in the Annual Report are incorporated herein by reference as set forth in Part II Item 8: Statements of operations -- years ended March 31, 2002, 2001 and 2000 Balance sheets -- March 31, 2002 and 2001 Statements of shareholders' equity -- years ended March 31, 2002, 2001 and 2000 Notes to consolidated financial statements Report of Arthur Andersen LLP, Independent Public Accountants 2. Financial Statement Schedules The following consolidated financial statement schedules are included herein: Page ---- Report of Arthur Andersen LLP, Independent Public Accountants..........15 Schedule II -- Valuation and Qualifying Accounts and Reserves..........16 Schedules not listed above have been omitted because they are not required, are inapplicable or the required information has been given in the consolidated financial statements or notes thereto. 3. Exhibits The following exhibits are included herein or incorporated by reference as indicated. Exhibit numbers refer to Item 601 of Regulation S-K. Exhibit Number - ------- 3.1 -- Thomas Nelson, Inc. Amended and Restated Charter (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-8 (No. 33-80086) and incorporated herein by reference) 3.2 -- Thomas Nelson, Inc. Amended Bylaws (filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended March 31, 1999 and incorporated herein by reference) 4.1 -- Loan Agreement dated as of May 1, 1990, between the Company and The Industrial Development Board of The Metropolitan Government of Nashville and Davidson County (filed as Exhibit 4(e) to the Company's Annual Report on Form 10-K for the year ended March 31, 1990 and incorporated herein by reference) 4.2 -- Promissory Note dated as of May 1, 1990, of the Company payable to The Industrial Development Board of the Metropolitan Government of Nashville and Davidson County (filed as Exhibit 4(f) to the Company's Annual Report on Form 10-K for the year ended March 31, 1990 and incorporated herein by reference) 4.3 -- Deed of Trust and Security Agreement dated as of May 1, 1990, from the Company to A. Stuart Campbell, as Trustee (filed as Exhibit 4.6 to the Company's Annual Report on Form 10-K for the year ended March 31, 1991 and incorporated herein by reference) 4.4 -- Note Purchase Agreement dated January 3, 1996, among the Company, The Purdential Insurance Company of America and Metropolitan Life Insurance Company (filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1995 and incorporated herein by reference) 4.5 -- Letter Amendment No. 1 dated June 28, 1996, to Note Purchase Agreement dated January 3, 1996, among the Company and Metropolitan Life Insurance Company and related waiver, dated as of March 31, 1996 (filed as Exhibit 4.14 to the Company's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference) 4.6 -- Assumption and Amendment Agreement dated as of May 30, 1996, and as amended June 28, 1996, between the Company, The C.R. Gibson Company, The Prudential Insurance Company of America and Metropolitan Life Insurance Company (filed as Exhibit 4.15 to the Company's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference) 4.7 -- Revolving Credit Agreement dated as of June 28, 2002, among the Company, several banks and other financial institutions from time to time party hereto, and SunTrust Bank, Nashville, in its capacity as Administrative Agent. 10.1 -- Thomas Nelson, Inc. Amended and Restated 1990 Deferred Compensation Option Plan for Outside Directors (filed as Exhibit 4.5 to the Company's Registration Statement on Form S-8 (No. 33-80086) dated June 13, 1994 and incorporated herein by reference)* 10.2 -- Thomas Nelson, Inc. Amended and Restated 1992 Employee Stock Incentive Plan (filed as Exhibit 4.6 to the Company's Proxy Statement dated July 26, 1995, for the Annual Meeting of Shareholders held on August 24, 1995 and incorporated herein by reference)* 10.3 -- Severance Agreement dated as of May 17, 1991, between the Company and Sam Moore (filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for the year ended March 31, 1991 and incorporated herein by reference)* 10.4 -- Employment Agreement dated as of May 13, 1996, between the Company and Sam Moore (filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference)* 10.5 -- Employment Agreement dated as of May 10, 1996, between the Company and S. Joseph Moore (filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference)* 10.6 -- Employment Agreement dated as of May 10, 1996, between the Company and Joe L. Powers (filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference)* 10.7 -- Employment Agreement dated as of December 22, 1994, between the Company and Raymond T. Capp (filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended March 31, 1995 and incorporated herein by reference)* 10.8 -- Employment Agreement dated as of June 23, 1993, between the Company and Vance Lawson (filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended March 31, 1994 and incorporated herein by reference)* 10.9 -- Employment Agreement dated as of July 10, 1995, between the Company and Eric Heyden (filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended March 31, 1998 and incorporated herein by reference)* 10.10 -- Addendum to Employment Agreement dated as of May 13, 1996, between the Company and Sam Moore (executed on June 22, 2000) (filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended March 31, 2000 and incorporated herein by reference)* 10.11 -- Addendum to Employment Agreement dated as of May 10, 1996, between the Company and S. Joseph Moore (executed on June 22, 2000) (filed as Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended March 31, 2000 and incorporated herein by reference)* 10.12 -- Addendum to Employment Agreement dated as of May 10, 1996, between the Company and Joe L. Powers (executed on June 22, 2000) (filed as Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year ended March 31, 2000 and incorporated herein by reference)* 10.13 -- Thomas Nelson, Inc. 1997 Deferred Compensation Plan for Non-employee Directors (adopted on May 22, 1997) (filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended March 31, 2000 and incorporated herein by reference)* 10.14 -- Amended and Restated Asset Purchase Agreement, dated October 31, 2001 by and between the Company, The C.R. Gibson Company, and C.R. Gibson Sales Company, Inc. and CRG Acquisition Corp., as Buyer. Schedules to the Amended and Restated Asset Purchase Agreement have been omitted. The Company agrees to furnish supplementally a copy of any Schedule to the Commission upon request. (filed as Exhibit 2.1 to the Company's Form 10-Q for the quarter period ended September 30, 2001 and incorporated herein by reference) 10.15 -- Transition Services Agreement, dated November 7, 2001, effective as of October 31, 2001 by and between the Company and CRG Acquisition Corp. (filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter period ended September 30, 2001 and incorporated herein by reference) 10.16 -- Lease Agreement, dated November 7, 2001, effective as of October 31, 2001 by and between the Company, as Tenant, and CRG Acquisition Corp., as Landlord. (filed as Exhibit 10.2 to the Company's Form 10-Q for the quarter period ended September 30, 2001 and incorporated herein by reference) 10.17 -- Employment Agreement dated as of November 11, 2000, between the Company and Lee Gessner. 10.18 -- Employment Agreement dated as of July 7, 2000, between the Company and Mike Hyatt. 10.19 -- Employment Agreement dated as of July 8, 1998, between the Company and Phil Stoner. 11 -- Statement re Computation of Per Share Earnings 13 -- Thomas Nelson, Inc. Annual Report to Shareholders for the year ended March 31, 2001 (to the extent of portions specifically incorporated by reference) 21 -- Subsidiaries of the Company 23 -- Consent of Independent Public Accountants 99 -- Letter, dated June 28, 2002 to the Securities and Exchange Commission to address its requirements with respect to issuers that include accountants' reports from Arthur Andersen, LLP ("Andersen") issued after March 14, 2002 in filings with the Commission. - -------------------------- *Management contract or compensatory plan or arrangement. (b) Reports on Form 8-K No reports on Dorm 8-K were filed during the fourth quarter of fiscal 2002. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. By: /s/ Sam Moore ------------------------- Sam Moore Chief Executive Officer and President Date: June 29, 2002 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/Sam Moore Chairman of the Board of June 29, 2002 --------------------- Directors, Chief Executive Sam Moore Officer and President Principal Executive Officer) /s/Joe L. Powers Executive Vice President and June 29, 2002 --------------------- Secretary (Principal Financial Joe L. Powers and Accounting Officer) /s/Jesse T. Correll Director June 29, 2002 --------------------- Jesse T. Correll /s/Brownlee O. Currey, Jr. Director June 29, 2002 --------------------- Brownlee O. Currey, Jr. /s/W. Lipscomb Davis, Jr. Director June 29, 2002 --------------------- W. Lipscomb Davis, Jr. /s/S. Joseph Moore Director June 29, 2002 --------------------- S. Joseph Moore /s/Robert J. Niebel Director June 29, 2002 --------------------- Robert J. Niebel /s/Millard V. Oakley Director June 29, 2002 --------------------- Millard V. Oakley /s/Andrew Young Director June 29, 2002 --------------------- Andrew Young
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Thomas Nelson, Inc.: We have audited, in accordance with auditing standards generally accepted in the United States, the consolidated financial statements included in THOMAS NELSON, INC.'s annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated May 10, 2002 (except with respect to the matters discussed in Note J to the consolidated financial statements, as to which the date is June 28, 2002). Our report on the consolidated financial statements includes an explanatory paragraph with respect to the change in the method of accounting for goodwill and intangible assets (as discussed in Note A to the consolidated financial statements). Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The financial statement schedule listed in the index is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and regulations under the Securities and Exchange Act of 1934 and are not otherwise a required part of the basic consolidated financial statements. The financial statement schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. /s/ Arthur Andersen LLP ----------------------- Nashville, Tennessee May 10, 2002 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES - -------------------------------------------------------------------------------
March 31, 2002 March 31, 2001 March 31, 2000 -------------- -------------- -------------- Reserve for Sales Returns: - -------------------------- Balance at beginning of period $ 4,637,000 $ 4,564,000 $ 4,286,000 Additions: 1. Charged to costs and expenses 36,393,000 36,662,000 41,322,000 2. Charged to other accounts - - - Deductions: charge-offs 36,076,000 36,589,000 41,044,000 -------------- -------------- -------------- Balance at end of period $ 4,954,000 $ 4,637,000 $ 4,564,000 ============== ============== ============== Reserve for Doubtful Accounts: - ------------------------------ Balance at beginning of period $ 1,538,000 $ 1,407,000 $ 1,488,000 Additions: 1. Charged to costs and expenses 4,535,000 999,000 1,212,000 2. Charged to other accounts 1,365,000 - - Deductions: charge-offs 6,003,000 868,000 1,293,000 -------------- -------------- -------------- Balance at end of period $ 1,435,000 $ 1,538,000 $ 1,407,000 ============== ============== ============== Discontinued Operations: - ------------------------ Balance at beginning of period $ 2,032,000 $ 2,424,000 $ 2,705,000 Additions: 1. Charged to costs and expenses - - - 2. Charged to other accounts 3,812,000 - - Deductions: 1. Charge-offs 1,265,000 392,000 281,000 2. Charge to other accounts 767,000 - - -------------- -------------- -------------- Balance at end of period $ 3,812,000 $ 2,032,000 $ 2,424,000 ============== ============== ==============
INDEX TO EXHIBITS
Exhibit Page Number Number - ------- ------ 4.7 -- Revolving Credit Agreement dated as of June 28, 2002, among the Company, several banks and other financial institutions from time to time party hereto, and SunTrust Bank, Nashville, in its capacity as Administrative Agent....... 10.17 -- Employment Agreement dated as of November 11, 2000, between the Company and Lee Gessner. 10.18 -- Employment Agreement dated as of July 7, 2000, between the Company and Mike Hyatt. 10.19 -- Employment Agreement dated as of July 8, 1998, between the Company and Phil Stoner. 11 -- Statement re Computation of Per Share Earnings................ 13 -- Thomas Nelson, Inc. Annual Report to Shareholders for the year ended March 31, 2002 (to the extent of portions specifically incorporated by reference)....................... 21 -- Subsidiaries of the Company................................... 23 -- Consent of Independent Public Accountants..................... 99 -- Letter, dated June 28, 2002 to the Securities and Exchange Commission to address its requirements with respect to issuers that include accountants' reports from Arthur Andersen, LLP ("Andersen") issued after March 14, 2002 in filings with the Commission.................
EX-4 4 ex47302k.txt EXHIBIT 4.7 TO FORM 10-K FOR PERIOD ENDED 3/31/2002 EXHIBIT 4.7 REVOLVING CREDIT AGREEMENT dated as of June 28, 2002 among THOMAS NELSON, INC. as Borrower THE LENDERS FROM TIME TO TIME PARTY HERETO and SUNTRUST BANK as Administrative Agent ============================================================================ SUNTRUST CAPITAL MARKETS, INC. as Lead Arranger and Book Manager ============================================================================ TABLE OF CONTENTS [Table of contents to be generated prior to closing.] Schedules - --------- Schedule I - Applicable Margin Schedule 4.14(a) - Subsidiaries Schedule 4.14(b) - Inactive Subsidiaries Schedule 7.1 - Outstanding Indebtedness Schedule 7.2 - Existing Liens Schedule 7.4 - Existing Investments Exhibits - -------- Exhibit A - Revolving Credit Note Exhibit B - Swingline Note Exhibit C - Form of Assignment and Acceptance Exhibit D - Form of Subsidiary Guarantee Agreement Exhibit E - Form of Indemnity, Subrogation and Contribution Agreement Exhibit 2.3 - Notice of Revolving Borrowing Exhibit 2.5 - Notice of Swingline Borrowing Exhibit 2.9 - Form of Continuation/Conversion Exhibit 3.1(b)(iv) - Form of Secretary's Certificate REVOLVING CREDIT AGREEMENT THIS REVOLVING CREDIT AGREEMENT (this "Agreement") is made and entered into as of June 28, 2002, by and among THOMAS NELSON, INC., a Tennessee corporation (the "Borrower"), the several banks and other financial institutions from time to time party hereto (the "Lenders"), and SUNTRUST BANK, in its capacity as Administrative Agent for the Lenders (the "Administrative Agent"). W I T N E S S E T H: WHEREAS, the Borrower has requested that the Lenders establish a $65,000,000 revolving credit facility; WHEREAS, subject to the terms and conditions of this Agreement, the Lenders severally, to the extent of their respective Commitments, are willing to establish the requested revolving credit facility. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Borrower, the Lenders and the Administrative Agent agree as follows: ARTICLE I --------- DEFINITIONS; CONSTRUCTION SECTION 1.1 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): "Adjusted LIBO Rate" shall mean, with respect to each Interest Period for a Eurodollar Borrowing, the rate per annum obtained by dividing (i) LIBOR for such Interest Period by (ii) a percentage equal to 1.00 minus the Eurodollar Reserve Percentage. "Administrative Agent" shall have the meaning assigned to such term in the opening paragraph hereof. "Administrative Questionnaire" shall mean, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent duly completed by such Lender. "Affiliate" shall mean, as to any Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person. "Aggregate Revolving Commitments" shall mean the sum of the Revolving Commitments of all Lenders at any time outstanding. On the Closing Date, the Aggregate Revolving Commitments equal $65,000,000. "Applicable Lending Office" shall mean, for each Lender and for each Type of Loan, the "Lending Office" of such Lender (or an Affiliate of such Lender) designated for such Type of Loan in the Administrative Questionnaire submitted by such Lender or such other office of such Lender (or an Affiliate of such Lender) as such Lender may from time to time specify to the Administrative Agent and the Borrower as the office by which its Loans of such Type are to be made and maintained. "Applicable Margin" shall mean the percentage designated on the "Pricing Grid" attached hereto as Schedule I based on the Borrower's ratio of Total Lease Adjusted Funded Debt to Consolidated EBITDAR. The Applicable Margin shall initially be 2.25%; provided, that upon delivery to the Administrative Agent of Borrower's financial statements for the fiscal quarter ending June 30, 2002, the Applicable Margin shall be reset to the percentage designated in Schedule I based on the Borrower's ratio of Total Lease Adjusted Funded Debt to Consolidated EBITDAR for the preceding four fiscal quarter periods then ending, measured quarterly, such Applicable Margin being effective as of the second Business Day following the date that the Administrative Agent receives the Borrower's applicable financial statements. "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.4(b)) and accepted by the Administrative Agent, in the form of Exhibit C attached hereto or any other form approved by the Administrative Agent. "Availability Period" shall mean the period from the Closing Date to the Commitment Termination Date. "Base Rate" shall mean the higher of (i) the per annum rate which the Administrative Agent publicly announces from time to time to be its prime lending rate, as in effect from time to time, and (ii) the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (0.50%). The Administrative Agent's prime lending rate is a reference rate and does not necessarily represent the lowest or best rate charged to customers. The Administrative Agent may make commercial loans or other loans at rates of interest at, above or below the Administrative Agent's prime lending rate. Each change in the Administrative Agent's prime lending rate shall be effective from and including the date such change is publicly announced as being effective. "Borrower" shall have the meaning in the introductory paragraph hereof. "Borrowing" shall mean a borrowing consisting of Loans of the same Class and Type, made, converted or continued on the same date, and in case of Eurodollar Loans, as to which a single Interest Period is in effect. "Business Day" shall mean (i) any day other than a Saturday, Sunday or other day on which commercial banks in Nashville, Tennessee are authorized or required by law to close and (ii) if such day relates to a Borrowing of, a payment or prepayment of principal or interest on, a conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice with respect to any of the foregoing, any day on which dealings in Dollars are carried on in the London interbank market. "Capital Expenditures" shall mean for any period, without duplication, (a) the additions to property, plant and equipment and other capital expenditures of the Borrower and its Subsidiaries that are (or would be) set forth on a consolidated statement of cash flows of the Borrower for such period prepared in accordance with GAAP and (b) Capital Lease Obligations incurred by the Borrower and its Subsidiaries during such period. "Capital Lease Obligations" of any Person shall mean all obligations of such Person to pay rent or other amounts under any lease (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Change in Control" shall mean the occurrence of one or more of the following events: (a) any sale, lease, exchange or other transfer (in a single transaction or a series of related transactions) of all or substantially all of the assets of the Borrower to any Person or "group" (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder in effect on the date hereof), (b) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or "group" (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of 30% or more of the outstanding shares of the voting stock of the Borrower; or (c) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the current board of directors or (ii) appointed by directors so nominated. "Change in Law" shall mean (i) the adoption of any applicable law, rule or regulation after the date of this Agreement, (ii) any change in any applicable law, rule or regulation, or any change in the interpretation or application thereof, by any Governmental Authority after the date of this Agreement, or (iii) compliance by any Lender (or its Applicable Lending Office) or the Issuing Bank (or for purposes of Section 2.17(b), by such Lender's or the Issuing Bank's holding company, if applicable) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans or Swingline Loans and when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment or a Swingline Commitment. "Closing Date" shall mean the date on which the conditions precedent set forth in Section 3.1 and Section 3.2 have been satisfied or waived in accordance with Section 10.2. "Code" shall mean the Internal Revenue Code of 1986, as amended and in effect from time to time. "Commitment" shall mean a Revolving Commitment or a Swingline Commitment or any combination thereof (as the context shall permit or require). "Commitment Termination Date" shall mean the earliest of (i) June 28, 2005, (ii) the date on which the Revolving Commitments are terminated pursuant to Section 2.8, and (iii) the date on which all amounts outstanding under this Agreement have been declared or have automatically become due and payable (whether by acceleration or otherwise). "Consolidated EBITDA" shall mean, for the Borrower and its Subsidiaries for any period, an amount equal to the sum of (a) Consolidated Net Income for such period plus (b) to the extent deducted in determining Consolidated Net Income for such period, (i) Consolidated Interest Expense, (ii) income tax expense, (iii) depreciation and amortization and (iv) all other non-cash charges, determined on a consolidated basis in accordance with GAAP in each case for such period. "Consolidated EBITDAR" shall mean, for the Borrower and its Subsidiaries for any period, an amount equal to the sum of (a) Consolidated EBITDA and (b) Consolidated Lease Expense. "Consolidated Fixed Charges" shall mean, for the Borrower and its Subsidiaries for any period, the sum (without duplication) of (a) Consolidated Interest Expense for such period, (b) scheduled principal payments made on Consolidated Total Debt during such period, (c) Restricted Payments paid during such period and (d) Consolidated Lease Expense for such period. "Consolidated Interest Expense" shall mean, for the Borrower and its Subsidiaries for any period determined on a consolidated basis in accordance with GAAP, the sum of (i) total cash interest expense, including without limitation the interest component of any payments in respect of Capital Leases Obligations capitalized or expensed during such period (whether or not actually paid during such period) plus (ii) the net amount payable (or minus the net amount receivable) under Hedging Agreements during such period (whether or not actually paid or received during such period). "Consolidated Lease Expense" shall mean, for any period, the aggregate amount of fixed and contingent rentals payable by the Borrower and its Subsidiaries with respect to leases of real and personal property (excluding Capital Lease Obligations) determined on a consolidated basis in accordance with GAAP for such period. "Consolidated Net Income" shall mean, for any period, the net income (or loss) of the Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, but excluding therefrom (to the extent otherwise included therein) (i) any extraordinary gains or losses, (ii) any gains attributable to write-ups of assets and (iii) any equity interest of the Borrower or any Subsidiary of the Borrower in the unremitted earnings of any Person that is not a Subsidiary and (iv) any income (or loss) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any Subsidiary on the date that such Person's assets are acquired by the Borrower or any Subsidiary. "Consolidated Net Worth" shall mean, as of any date, (i) the total assets of the Borrower and its Subsidiaries that would be reflected on the Borrower's consolidated balance sheet as of such date prepared in accordance with GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of Subsidiaries, minus the sum of (i) the total liabilities of the Borrower and its Subsidiaries that would be reflected on the Borrower's consolidated balance sheet as of such date prepared in accordance with GAAP and (ii) the amount of any write-up in the book value of any assets resulting from a revaluation thereof or any write-up in excess of the cost of such assets acquired reflected on the consolidated balance sheet of the Borrower as of such date prepared in accordance with GAAP. "Consolidated Tangible Net Worth" shall mean, as of any date, (i) the total assets of the Borrower and its Subsidiaries that would be reflected on the Borrower's consolidated balance sheet as of such date prepared in accordance with GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of Subsidiaries, minus the sum of (i) the total liabilities of the Borrower and its Subsidiaries that would be reflected on the Borrower's consolidated balance sheet as of such date prepared in accordance with GAAP, (ii) the amount of any write-up in the book value of any assets resulting from a revaluation thereof or any write-up in excess of the cost of such assets acquired reflected on the consolidated balance sheet of the Borrower as of such date prepared in accordance with GAAP and (iii) the net book amount of all assets of the Borrower and its Subsidiaries that would be classified as intangible assets on a consolidated balance sheet of the Borrower as of such date prepared in accordance with GAAP. "Consolidated Total Debt" shall mean, as of any date of determination, all Indebtedness of the Borrower and its Subsidiaries that would be reflected on a consolidated balance sheet of the Borrower prepared in accordance with GAAP as of such date. "Control" shall mean the power, directly or indirectly, either to (i) vote 15% or more of securities having ordinary voting power for the election of directors (or persons performing similar functions) of a Person or (ii) direct or cause the direction of the management and policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms "Controlling", "Controlled by", and "under common Control with" have meanings correlative thereto. "C.R. Gibson Asset Sale Agreement" shall mean that certain Amended and Restated Asset Purchase Agreement by and between Borrower and the other parties listed therein dated October 31, 2001. "Default" shall mean any condition or event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "Default Interest" shall have the meaning set forth in Section 2.12(c). "Dollar(s)" and the sign "$" shall mean lawful money of the United States of America. "Environmental Laws" shall mean all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by or with any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, Release or threatened Release of any Hazardous Material. "Environmental Liability" shall mean any liability, contingent or otherwise (including any liability for damages, costs of environmental investigation and remediation, costs of administrative oversight, fines, natural resource damages, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) any actual or alleged violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) any actual or alleged exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute. "ERISA Affiliate" shall mean any trade or business (whether or not incorporated), which, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for the purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator appointed by the PBGC of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Eurodollar" when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, bears interest at a rate determined by reference to the Adjusted LIBO Rate. "Eurodollar Reserve Percentage" shall mean the aggregate of the maximum reserve percentages (including, without limitation, any emergency, supplemental, special or other marginal reserves) expressed as a decimal (rounded upwards to the next 1/100th of 1%) in effect on any day to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate pursuant to regulations issued by the Board of Governors of the Federal Reserve System (or any Governmental Authority succeeding to any of its principal functions) with respect to eurocurrency funding (currently referred to as "eurocurrency liabilities" under Regulation D). Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D. The Eurodollar Reserve Percentage shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Event of Default" shall have the meaning provided in Article VIII. "Excluded Taxes" shall mean with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its gross net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, and (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located. "Federal Funds Rate" shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the next 1/100th of 1%) equal 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 by the Federal Reserve Bank of New York on the next succeeding Business Day or if such rate is not so published for any Business Day, the Federal Funds Rate for such day shall be the average rounded upwards, if necessary, to the next 1/100th of 1% of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent. "Fixed Charge Coverage Ratio" shall mean, for any period of four consecutive fiscal quarters of the Borrower, the ratio of (a) Consolidated EBITDAR for such period less the actual amount paid by the Borrower and its Subsidiaries in cash during such period on account of Capital Expenditures to (b) Consolidated Fixed Charges for such period. For purposes of calculating Borrower's Fixed Charge Coverage Ratio in accordance with the terms hereof, Capital Expenditures shall not include the amount used for the repurchase of specific real estate assets as required by the C.R. Gibson Asset Sale Agreement. "GAAP" shall mean generally accepted accounting principles in the United States applied on a consistent basis and subject to the terms of Section 1.3. "Governmental Authority" shall mean the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" of or by any Person (the "guarantor") shall mean any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly and including any obligation, direct or indirect, of the guarantor (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued in support of such Indebtedness or obligation; provided, that the term "Guarantee" shall not include endorsements for collection or deposits in the ordinary course of business. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which Guarantee 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. The term "Guarantee" used as a verb has a corresponding meaning. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Hedging Agreements" shall mean interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity agreements and other similar agreements or arrangements designed to protect against fluctuations in interest rates, currency values or commodity values. "Indebtedness" of any Person shall mean, without duplication (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person in respect of the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business; provided, that for purposes of Section 8.1(f), trade payables overdue by more than 120 days shall be included in this definition except to the extent that any of such trade payables are being disputed in good faith and by appropriate measures), (iv) all obligations of such Person under any conditional sale or other title retention agreement(s) relating to property acquired by such Person, (v) all Capital Lease Obligations of such Person, (vi) all obligations, contingent or otherwise, of such Person in respect of letters of credit, acceptances or similar extensions of credit, (vii) all Guarantees of such Person of the type of Indebtedness described in clauses (i) through (vi) above, (viii) all Indebtedness of a third party secured by any Lien on property owned by such Person, whether or not such Indebtedness has been assumed by such Person, (ix) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any common stock of such Person, (x) Off-Balance Sheet Liabilities. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor, and (xi) obligations under any Hedging Agreement or foreign exchange agreement. "Inactive Subsidiaries" shall mean those Subsidiaries of Borrower listed on Schedule 4.14(b) attached hereto. "Indemnified Taxes" shall mean Taxes other than Excluded Taxes. "Indemnity and Contribution Agreement" shall mean the Indemnity, Subrogation and Contribution Agreement, substantially in the form of Exhibit E, among the Borrower, the Borrower's Subsidiaries (other than Inactive Subsidiares) and the Administrative Agent. "Interest Period" shall mean (i) with respect to any Eurodollar Borrowing, a period of one, two, three or six months and (ii) with respect to a Swingline Loan, a period of such duration not to exceed 5 days, as the Borrower may request and the Swingline Lender may agree in accordance with Section 2.5; provided, that: (i) the initial Interest Period for such Borrowing shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing 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; (ii) if any Interest Period would otherwise end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless, in the case of a Eurodollar Borrowing, such Business Day falls in another calendar month, in which case such Interest Period would end on the next preceding Business Day; (iii) any Interest Period in respect of a Eurodollar Borrowing which begins on the last Business Day of a calendar month or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall end on the last Business Day of such calendar month; and (iv) no Interest Period may extend beyond the Commitment Termination Date. "Issuing Bank" shall mean SunTrust Bank. "LC Commitment" shall mean that portion of the Aggregate Revolving Commitments that may be used by the Borrower for the issuance of Letters of Credit in an aggregate face amount not to exceed $5,000,000. "LC Disbursement" shall mean a payment made by the Issuing Bank pursuant to a Letter of Credit. "LC Documents" shall mean the Letters of Credit and all applications, agreements and instruments relating to the Letters of Credit. "LC Exposure" shall mean, at any time, the sum of (i) the aggregate undrawn amount of all outstanding Letters of Credit at such time, plus (ii) the aggregate amount of all LC Disbursements that have not been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender shall be its Pro Rata Share of the total LC Exposure at such time. "Lenders" shall have the meaning assigned to such term in the opening paragraph of this Agreement and shall include, where appropriate, the Swingline Lender. "Letter of Credit" shall mean any stand-by letter of credit issued pursuant to Section 2.22 by the Issuing Bank for the account of the Borrower pursuant to the LC Commitment. For purposes of this Agreement, the defined term "Letter of Credit" does not include commercial letters of credit. "LIBOR" shall mean, for any Interest Period, the British Bankers' Association Interest Settlement Rate for deposits in Dollars for a period comparable to the applicable Interest Period appearing on Telerate Screen Page 3750, as of 11:00 a.m. London time, on the day that is two Business Days prior to the applicable Interest Period. "Lien" shall mean any mortgage, pledge, security interest, lien (statutory or otherwise), charge, encumbrance, hypothecation, assignment, deposit arrangement, or other arrangement having the practical effect of the foregoing or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having the same economic effect as any of the foregoing). "Loan Documents" shall mean, collectively, this Agreement, the Notes, the LC Documents, all Notices of Borrowing, the Subsidiary Guarantee Agreement, the Indemnity and Contribution Agreement, and any and all other instruments, agreements, documents and writings executed in connection with any of the foregoing. "Loan Parties" shall mean the Borrower and Borrower's Subsidiaries, other than Inactive Subsidiaries. "Loans" shall mean all Revolving Loans and Swingline Loans in the aggregate or any of them, as the context shall require. "Material Adverse Effect" shall mean, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences whether or not related, a material adverse change in, or a material adverse effect on, (i) the business, results of operations, financial condition, assets, liabilities or prospects of the Borrower and of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Loan Parties to perform any of their respective obligations under the Loan Documents, (iii) the rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders under any of the Loan Documents or (iv) the legality, validity or enforceability of any of the Loan Documents. "Material Indebtedness" shall mean Indebtedness (other than the Loans and Letters of Credit) or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and the Subsidiaries in an aggregate principal amount exceeding $1,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of the Borrower or any Subsidiary in respect to any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time. "Moody's" shall mean Moody's Investors Service, Inc. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of ERISA. "Notes" shall mean, collectively, the Revolving Credit Notes and the Swingline Note. "Notices of Borrowing" shall mean, collectively, the Notices of Revolving Borrowing and the Notices of Swingline Borrowing. "Notice of Conversion/Continuation" shall mean the notice given by the Borrower to the Administrative Agent in respect of the conversion or continuation of an outstanding Borrowing as provided in Section 2.7(b) hereof. "Notice of Revolving Borrowing" shall have the meaning as set forth in Section 2.3. "Notice of Swingline Borrowing" shall have the meaning as set forth in Section 2.5. "Obligations" shall mean all amounts owing by the Borrower to the Administrative Agent, the Issuing Bank or any Lender (including the Swingline Lender) pursuant to or in connection with this Agreement or any other Loan Document, including without limitation, all principal, interest (including any interest accruing after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or like proceeding relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), all reimbursement obligations, fees, expenses, indemnification and reimbursement payments, costs and expenses (including all fees and expenses of counsel to the Administrative Agent and any Lender (including the Swingline Lender) incurred pursuant to this Agreement or any other Loan Document), whether direct or indirect, absolute or contingent, liquidated or unliquidated, now existing or hereafter arising hereunder or thereunder, together with all renewals, extensions, modifications or refinancings thereof. "Off-Balance Sheet Liabilities" of any Person shall mean (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability of such Person under any sale and leaseback transactions which do not create a liability on the balance sheet of such Person, (iii) any liability of such Person under any so-called "synthetic" lease transaction or (iv) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheet of such Person. "Other Taxes" shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document. "Participant" shall have the meaning set forth in Section 10.4(c). "Payment Office" shall mean the office of the Administrative Agent located at 201 Fourth Avenue North, Nashville, TN 37219, or such other location as to which the Administrative Agent shall have given written notice to the Borrower and the other Lenders. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA, and any successor entity performing similar functions. "Permitted Acquisition" shall mean acquisitions by Borrower satisfying each of the following conditions: (i) total annual consideration for acquisitions shall not exceed 15% of Consolidated Tangible Net Worth; (ii) at the time of each acquisition, the business of the acquired entity shall be substantially similar to those engaged in by the Borrower and its Subsidiaries as of the Closing Date; and (iii) at the time of and after giving effect to such acquisition, no Event of Default has occurred and is continuing. "Permitted Encumbrances" shall mean: (i) Liens imposed by law for taxes not yet due (or in the case of real property taxes, not yet delinquent)or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; (ii) 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 which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; (iii) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (iv) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (v) judgment and attachment liens not giving rise to an Event of Default or Liens created by or existing from any litigation or legal proceeding that are currently being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; (vi) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or materially interfere with the ordinary conduct of business of the Borrower and its Subsidiaries taken as a whole; and (vii) liens securing existing industrial revenue bonds relating to the Borrower's principal facility in Nashville, Tennessee. "Permitted Investments" shall mean: (i) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States), in each case maturing within one year from the date of acquisition thereof; (ii) commercial paper having the highest rating, at the time of acquisition thereof, of S&P or Moody's and in either case maturing within six months from the date of acquisition thereof; (iii) certificates of deposit, bankers' acceptances and time deposits maturing within 180 days of the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States or any state thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000; (iv) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (i) above and entered into with a financial institution satisfying the criteria described in clause (iii) above; and (v) mutual funds investing solely in any one or more of the Permitted Investments described in clauses (i) through (iv) above. "Person" shall mean any individual, partnership, firm, corporation, association, joint venture, limited liability company, trust or other entity, or any Governmental Authority. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Pro Rata Share" shall mean, with respect to any Lender at any time, a percentage, the numerator of which shall be such Lender's Revolving Commitment and the denominator of which shall be all Lenders' Revolving Commitments; or if the Revolving Commitments have been terminated or expired or if the Loans have been declared to be due and payable, a percentage, the numerator of which shall be such Lender's Revolving Credit Exposure and the denominator of which shall be the aggregate Revolving Credit Exposure of all Lenders. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time, and any successor regulations. "Related Parties" shall mean, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Release" means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or within any building, structure, facility or fixture of any Hazardous Materials. "Required Lenders" shall mean, at any time, Lenders holding more than 66 2/3% of the aggregate outstanding Revolving Credit Exposures at such time. "Responsible Officer" shall mean any of the president, the chief executive officer, the chief operating officer, the chief financial officer, the treasurer or a vice president of the Borrower or such other representative of the Borrower as may be designated in writing by any one of the foregoing with the consent of the Administrative Agent; and, with respect to the financial covenants only, the chief financial officer or the treasurer of the Borrower. "Restricted Payment" shall have the meaning set forth in Section 7.5. "Revolving Commitment" shall mean, with respect to each Lender, the obligation of such Lender to make Revolving Loans to the Borrower and to participate in Letters of Credit and Swingline Loans in an aggregate principal amount not exceeding the amount set forth with respect to such Lender on the signature pages to this Agreement, or in the case of a Person becoming a Lender after the Closing Date, the amount of the assigned "Revolving Commitment" as provided in the Assignment and Acceptance Agreement executed by such Person as an assignee, as the same may be changed pursuant to terms hereof. "Revolving Credit Exposure" shall mean, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender's Revolving Loans, such Lender's LC Exposure and such Lender's Swingline Exposure. "Revolving Credit Note" shall mean a promissory note of the Borrower payable to the order of a requesting Lender in the principal amount of such Lender's Revolving Commitment, in substantially the form of Exhibit A. "Revolving Loan" shall mean a loan made by a Lender (other than the Swingline Lender) to the Borrower under its Revolving Commitment, which may either be a Base Rate Loan or a Eurodollar Loan. "S&P" shall mean Standard & Poor's. "Senior Unsecured Notes" shall mean, collectively, (a) the 6.93% Series B Senior Note due December 31, 2005 in the original principal amount of $15,000,000 made payable by the Borrower to Metropolitan Life Insurance Company and (b) the 8.31% Senior Note due June 23, 2004 in the original principal amount of $5,000,000 made payable by the Borrower to the Metropolitan Life Insurance Company. "Subsidiary" shall mean, with respect to any Person (the "parent"), any corporation, partnership, joint venture, limited liability company, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, partnership, joint venture, limited liability company, association or other entity (i) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power, or in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, Controlled or held by the parent, or (ii) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Unless otherwise indicated, all references to "Subsidiary" hereunder shall mean a Subsidiary of the Borrower; provided, that such reference shall not include the Inactive Subsidiaries with respect to Sections 3.1(b), 4.1(i) and (ii), 4.2 and 4.3 hereof. "Subsidiary Guarantee Agreement" shall mean the Subsidiary Guarantee Agreement, substantially in the form of Exhibit D, made by Borrower's Subsidiaries (other than Inactive Subsidiaries) in favor of the Administrative Agent for the benefit of the Lenders. "Swingline Commitment" shall mean the commitment of the Swingline Lender to make Swingline Loans in an aggregate principal amount at any time outstanding not to exceed $10,000,000. "Swingline Exposure" shall mean, with respect to each Lender, the principal amount of the Swingline Loans in which such Lender is legally obligated either to make a Base Rate Loan or to purchase a participation in accordance with Section 2.5, which shall equal such Lender's Pro Rata Share of all outstanding Swingline Loans. "Swingline Lender" shall mean SunTrust Bank. "Swingline Loan" shall mean a loan made to the Borrower by the Swingline Lender under the Swingline Commitment. "Swingline Note" shall mean the promissory note of the Borrower payable to the order of the Swingline Lender in the principal amount of the Swingline Commitment, substantially in the form of Exhibit B. "Swingline Rate" shall mean, for any Interest Period, the rate as offered by the Administrative Agent and accepted by Borrower. The Borrower is under no obligation to accept this rate and the Administrative Agent is under no obligation to provide it. "Taxes" shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Total Lease Adjusted Funded Debt" shall mean, at any time, all Indebtedness (other than items (vi) and (vii) under such definition) of Borrower and its Subsidiaries, including without limitation all Loans and Letter of Credit Obligations evidenced by this Agreement and the other Loan Documents and all lease obligations, including without limitation all Capital Lease Obligations and operating lease obligations, as determined in accordance with GAAP, discounted at a rate of 10% per annum for the life of the applicable lease. "Type", when used in reference to a Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Base Rate. "Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.2 Classifications of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g. a "Revolving Loan" or "Swingline Loan") or by Type (e.g. a "Eurodollar Loan" or "Base Rate Loan") or by Class and Type (e.g. "Revolving Eurodollar Loan"). Borrowings also may be classified and referred to by Class (e.g. "Revolving Borrowing") or by Type (e.g. "Eurodollar Borrowing") or by Class and Type (e.g. "Revolving Eurodollar Borrowing"). SECTION 1.3 Accounting Terms and Determination. Unless otherwise defined or specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP as in effect from time to time. SECTION 1.4 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. ARTICLE II AMOUNT AND TERMS OF THE COMMITMENTS SECTION 2.1 General Description of Facilities. Subject to and upon the terms and conditions herein set forth, (i) the Lenders hereby establish in favor of the Borrower a revolving credit facility pursuant to which the Lenders severally agree (to the extent of each Lender's Pro Rata Share up to such Lender's Revolving Commitment) to make Revolving Loans to the Borrower in accordance with Section 2.2, (ii) the Issuing Bank agrees to issue Letters of Credit in accordance with Section 2.22, (iii) the Swingline Lender agrees to make Swingline Loans in accordance with Section 2.4, and (iv) each Lender agrees to purchase a participation interest in the Letters of Credit and the Swingline Loans pursuant to the terms and conditions hereof; provided, that in no event shall the aggregate principal amount of all outstanding Revolving Loans, Swingline Loans and outstanding LC Obligations exceed at any time the Aggregate Revolving Commitments from time to time in effect. SECTION 2.2 Revolving Loans. Subject to the terms and conditions set forth herein, each Lender severally agrees to make Revolving Loans to the Borrower, from time to time during the Availability Period, in an aggregate principal amount outstanding at any time that will not result in (a) such Lender's Revolving Credit Exposure exceeding such Lender's Revolving Commitment or (b) the sum of the aggregate Revolving Credit Exposures of all Lenders exceeding the Aggregate Revolving Commitments. During the Availability Period, the Borrower shall be entitled to borrow, prepay and reborrow Revolving Loans in accordance with the terms and conditions of this Agreement; provided, that the Borrower may not borrow or reborrow should there exist a Default or Event of Default. SECTION 2.3 Procedure for Revolving Borrowings. The Borrower shall give the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of each Revolving Borrowing substantially in the form of Exhibit 2.3 attached hereto (a "Notice of Revolving Borrowing") (x) prior to 11:00 a.m. one (1) Business Day prior to the requested date of each Base Rate Borrowing and (y) prior to 11:00 a.m. three (3) Business Days prior to the requested date of each Eurodollar Borrowing. Each Notice of Revolving Borrowing shall be irrevocable and shall specify: (i) the aggregate principal amount of such Borrowing, (ii) the date of such Borrowing (which shall be a Business Day), (iii) the Type of such Revolving Loan comprising such Borrowing and (iv) in the case of a Eurodollar Borrowing, the duration of the initial Interest Period applicable thereto (subject to the provisions of the definition of Interest Period). Each Revolving Borrowing shall consist entirely of Base Rate Loans or Eurodollar Loans, as the Borrower may request. The aggregate principal amount of each Eurodollar Borrowing shall be not less than $3,000,000 or a larger multiple of $500,000, and the aggregate principal amount of each Base Rate Borrowing shall not be less than $1,000,000 or a larger multiple of $100,000; provided, that Base Rate Loans made pursuant to Section 2.5 or Section 2.22(d) may be made in lesser amounts as provided therein. At no time shall the total number of Eurodollar Borrowings outstanding at any time exceed six. Promptly following the receipt of a Notice of Revolving Borrowing in accordance herewith, the Administrative Agent shall advise each Lender of the details thereof and the amount of such Lender's Revolving Loan to be made as part of the requested Revolving Borrowing. SECTION 2.4 Swingline Commitment. Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to the Borrower, from time to time during the Availability Period, in an aggregate principal amount outstanding at any time not to exceed the lesser of (i) the Swingline Commitment then in effect and (ii) the difference between the Aggregate Revolving Commitments and the aggregate Revolving Credit Exposures of all Lenders; provided, that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. The Borrower shall be entitled to borrow, repay and reborrow Swingline Loans in accordance with the terms and conditions of this Agreement. SECTION 2.5 Procedure for Swingline Borrowing; Etc: (a) The Borrower shall give the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of each Swingline Borrowing ("Notice of Swingline Borrowing") prior to 12:00 Noon eastern standard time on the requested date of each Swingline Borrowing. Each Notice of Swingline Borrowing shall be irrevocable and shall specify: (i) the principal amount of such Swingline Loan, (ii) the date of such Swingline Loan (which shall be a Business Day) and (iii) the account of the Borrower to which the proceeds of such Swingline Loan should be credited. The Administrative Agent will promptly advise the Swingline Lender of each Notice of Swingline Borrowing. Each Swingline Loan shall accrue interest at the Swingline Rate. The aggregate principal amount of each Swingline Loan shall be not less than $100,000 or a larger multiple of $50,000, or such other minimum amounts agreed to by the Swingline Lender and the Borrower. The Swingline Lender will make the proceeds of each Swingline Loan available to the Borrower in Dollars in immediately available funds at the account specified by the Borrower in the applicable Notice of Swingline Borrowing not later than 2:00 p.m. eastern standard time on the requested date of such Swingline Loan. The Administrative Agent will notify the Lenders on a quarterly basis if any Swingline Loans occurred during such quarter. (b) The Swingline Lender, at any time and from time to time in its sole discretion, may, on behalf of the Borrower (which hereby irrevocably authorizes and directs the Swingline Lender to act on its behalf), give a Notice of Revolving Borrowing to the Administrative Agent requesting the Lenders (including the Swingline Lender) to make Base Rate Loans in an amount equal to the unpaid principal amount of any Swingline Loan. Each Lender will make the proceeds of its Base Rate Loan included in such Borrowing available to the Administrative Agent for the account of the Swingline Lender in accordance with Section 2.3, which will be used solely for the repayment of such Swingline Loan. (c) If for any reason a Base Rate Borrowing may not be (as determined in the sole discretion of the Administrative Agent), or is not, made in accordance with the foregoing provisions, then each Lender (other than the Swingline Lender) shall purchase an undivided participating interest in such Swingline Loan in an amount equal to its Pro Rata Share thereof on the date that such Base Rate Borrowing should have occurred. On the date of such required purchase, each Lender shall promptly transfer, in immediately available funds, the amount of its participating interest to the Administrative Agent for the account of the Swingline Lender. If such Swingline Loan bears interest at a rate other than the Base Rate, such Swingline Loan shall automatically become a Base Rate Loan on the effective date of any such participation and interest shall become payable on demand. (d) Each Lender's obligation to make a Base Rate Loan pursuant to Section 2.5(b) or to purchase the participating interests pursuant to Section 2.5(c) shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (i) any setoff, counterclaim, recoupment, defense or other right that such Lender or any other Person may have or claim against the Swingline Lender, the Borrower or any other Person for any reason whatsoever, (ii) the existence of a Default or an Event of Default or the termination of any Lender's Revolving Commitment, (iii) the existence (or alleged existence) of any event or condition which has had or could reasonably be expected to have a Material Adverse Effect, (iv) any breach of this Agreement or any other Loan Document by the Borrower, the Administrative Agent or any Lender or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. If such amount is not in fact made available to the Swingline Lender by any Lender, the Swingline Lender shall be entitled to recover such amount on demand from such Lender, together with accrued interest thereon for each day from the date of demand thereof at the Federal Funds Rate. Until such time as such Lender makes its required payment, the Swingline Lender shall be deemed to continue to have outstanding Swingline Loans in the amount of the unpaid participation for all purposes of the Loan Documents. In addition, such Lender shall be deemed to have assigned any and all payments made of principal and interest on its Loans and any other amounts due to it hereunder, to the Swingline Lender to fund the amount of such Lender's participation interest in such Swingline Loans that such Lender failed to fund pursuant to this Section, until such amount has been purchased in full. SECTION 2.6 Funding of Borrowings (a) Each Lender will make available each Loan to be made by it hereunder on the proposed date thereof by wire transfer in immediately available funds by 11:00 a.m. to the Administrative Agent at the Payment Office; provided, that the Swingline Loans will be made as set forth in Section 2.5. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts that it receives, in like funds by the close of business on such proposed date, to an account maintained by the Borrower with the Administrative Agent or at the Borrower's option, by effecting a wire transfer of such amounts to an account designated by the Borrower to the Administrative Agent. (b) Unless the Administrative Agent shall have been notified by any Lender prior to 5 p.m. one (1) Business Day prior to the date of a Borrowing in which such Lender is participating that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date, and the Administrative Agent, in reliance on such assumption, may make available to the Borrower on such date a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender on the date of such Borrowing, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest at the Federal Funds Rate for up to two (2) days and thereafter at the rate specified for such Borrowing. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Administrative Agent together with interest at the rate specified for such Borrowing. Nothing in this subsection shall be deemed to relieve any Lender from its obligation to fund its Pro Rata Share of any Borrowing hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender hereunder. (c) All Revolving Borrowings shall be made by the Lenders on the basis of their respective Pro Rata Shares. No Lender shall be responsible for any default by any other Lender in its obligations hereunder, and each Lender shall be obligated to make its Loans provided to be made by it hereunder, regardless of the failure of any other Lender to make its Loans hereunder. SECTION 2.7 Interest Elections. (a) Each Borrowing initially shall be of the Type specified in the applicable Notice of Borrowing, and in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Notice of Borrowing. Thereafter, the Borrower may elect to convert such Borrowing into a different Type or to continue such Borrowing, and in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued. (b) To make an election pursuant to this Section, the Borrower shall give the Administrative Agent prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing (a "Notice of Conversion/Continuation") that is to be converted or continued, as the case may be, (x) prior to 10:00 a.m. one (1) Business Day prior to the requested date of a conversion into a Base Rate Borrowing and (y) prior to 11:00 a.m. three (3) Business Days prior to a continuation of or conversion into a Eurodollar Borrowing. Each such Notice of Conversion/Continuation shall be irrevocable and shall specify (i) the Borrowing to which such Notice of Continuation/Conversion applies and if different options are being elected with respect to different portions thereof, the portions thereof that are to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Notice of Continuation/Conversion, which shall be a Business Day, (iii) whether the resulting Borrowing is to be a Base Rate Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is to be a Eurodollar Borrowing, the Interest Period applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of "Interest Period". If any such Notice of Continuation/Conversion requests a Eurodollar Borrowing but does not specify an Interest Period, the Borrower shall be deemed to have selected an Interest Period of one month. The principal amount of any resulting Borrowing shall satisfy the minimum borrowing amount for Eurodollar Borrowings and Base Rate Borrowings set forth in Section 2.3. (c) If, on the expiration of any Interest Period in respect of any Eurodollar Borrowing, the Borrower shall have failed to deliver a Notice of Conversion/ Continuation, then, unless such Borrowing is repaid as provided herein, the Borrower shall be deemed to have elected to convert such Borrowing to a Base Rate Borrowing. No Borrowing may be converted into, or continued as, a Eurodollar Borrowing if a Default or an Event of Default exists, unless the Administrative Agent and each of the Lenders shall have otherwise consented in writing. No conversion of any Eurodollar Loans shall be permitted except on the last day of the Interest Period in respect thereof. (d) Upon receipt of any Notice of Conversion/Continuation, the Administrative Agent shall promptly notify each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. SECTION 2.8 Optional Reduction and Termination of Commitments; Mandatory Prepayments. (a) Unless previously terminated, all Revolving Commitments shall terminate on the Commitment Termination Date. (b) Upon at least three (3) Business Days' prior written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent (which notice shall be irrevocable), the Borrower may reduce the Aggregate Revolving Commitments in part or terminate the Aggregate Revolving Commitments in whole; provided, that (i) any partial reduction shall apply to reduce proportionately and permanently the Revolving Commitment of each Lender, (ii) any partial reduction shall be in an amount of at least $5,000,000 and any larger multiples of $1,000,000, and (iii) no such reduction shall be permitted which would reduce the Aggregate Revolving Commitments to an amount less than the outstanding Revolving Credit Exposures of all Lenders. Any such reduction in the Aggregate Revolving Commitments shall result in a proportionate reduction (rounded to the next lowest multiple of $100,000) in the Swingline Commitment and the LC Commitment. (c) Borrower shall be required to make mandatory principal prepayments from (i) 100% of the net proceeds received by the Borrower and any Subsidiary from any sale or other disposition by the Borrower and any Subsidiary of any assets, with the exception of the sale of inventory in the normal course of business and the sale of other specific real estate assets pertaining to the C.R. Gibson Asset Sale Agreement and (ii) 100% of net proceeds of any equity offering or debt issuance. All such mandatory prepayments shall be ratably applied in accordance with Section 2.20(b) hereof. The Aggregate Revolving Commitments shall be ratably reduced by any amount prepaid in accordance with this Section 2.8(c). SECTION 2.9 Repayment of Loans. (a) The outstanding principal amount of all Revolving Loans shall be due and payable (together with accrued and unpaid interest thereon) on the Commitment Termination Date. (b) The principal amount of each Swingline Borrowing shall be due and payable (together with accrued interest thereon) on the earlier of (i) the last day of the Interest Period applicable to such Borrowing and (ii) the Commitment Termination Date. SECTION 2.10 Evidence of Indebtedness. (a) Each Lender shall maintain in accordance with its usual practice appropriate records evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable thereon and paid to such Lender from time to time under this Agreement. The Administrative Agent shall maintain appropriate records in which shall be recorded (i) the Revolving Commitment of each Lender, (ii) the amount of each Loan made hereunder by each Lender, the Class and Type thereof and the Interest Period applicable thereto, (iii) the date of each continuation thereof pursuant to Section 2.9, (iv) the date of each conversion of all or a portion thereof to another Type pursuant to Section 2.9, (v) the date and amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder in respect of such Loans and (vi) both the date and amount of any sum received by the Administrative Agent hereunder from the Borrower in respect of the Loans and each Lender's Pro Rata Share thereof. The entries made in such records shall be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, that the failure or delay of any Lender or the Administrative Agent in maintaining or making entries into any such record or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans (both principal and unpaid accrued interest) of such Lender in accordance with the terms of this Agreement. (b) At the request of any Lender at any time, the Borrower agrees that it will execute and deliver to such Lender a Revolving Credit Note and, in the case of the Swingline Lender only, a Swingline Note, payable to the order of such Lender. SECTION 2.11 Optional Prepayments. The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, without premium or penalty, by giving irrevocable written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent no later than (i) in the case of prepayment of any Eurodollar Borrowing, 11:00 a.m. not less than three (3) Business Days prior to any such prepayment, (ii) in the case of any prepayment of any Base Rate Borrowing, not less than one Business Day prior to the date of such prepayment, and (iii) in the case of Swingline Borrowings, prior to 11:00 a. m. on the date of such prepayment. Each such notice shall be irrevocable and shall specify the proposed date of such prepayment and the principal amount of each Borrowing or portion thereof to be prepaid. Upon receipt of any such notice, the Administrative Agent shall promptly notify each affected Lender of the contents thereof and of such Lender's Pro Rata Share of any such prepayment. If such notice is given, the aggregate amount specified in such notice shall be due and payable on the date designated in such notice, together with accrued interest to such date on the amount so prepaid in accordance with Section 2.12(e); provided, that if a Eurodollar Borrowing is prepaid on a date other than the last day of an Interest Period applicable thereto, the Borrower shall also pay all amount required pursuant to Section 2.18. Each partial prepayment of any Loan (other than a Swingline Loan) shall be in minimum amounts of $1,000,000 and in integral multiples of $500,000. Each prepayment of a Borrowing shall be applied ratably to the Loans comprising such Borrowing. SECTION 2.12 Interest on Loans. (a) The Borrower shall pay interest on each Base Rate Loan at the Base Rate in effect from time to time and on each Eurodollar Loan at the Adjusted LIBO Rate for the applicable Interest Period in effect for such Loan, plus, in each case, the Applicable Margin in effect from time to time. (b) The Borrower shall pay interest on each Swingline Loan at the Swingline Rate. (c) While an Event of Default exists or after acceleration, at the option of the Required Lenders, the Borrower shall pay interest ("Default Interest") with respect to all Eurodollar Loans at the rate otherwise applicable for the then-current Interest Period plus an additional 2% per annum until the last day of such Interest Period, and thereafter, and with respect to all Base Rate Loans (including all Swingline Loans) and all other Obligations hereunder (other than Loans), at an all-in rate in effect for Base Rate Loans, plus an additional 2% per annum. (d) Interest on the principal amount of all Loans shall accrue from and including the date such Loans are made to but excluding the date of any repayment thereof. Interest on all outstanding Base Rate Loans shall be payable quarterly in arrears on the last day of each March, June, September and December and on the Commitment Termination Date. Interest on all outstanding Eurodollar Loans shall be payable on the last day of each Interest Period applicable thereto, and, in the case of any Eurodollar Loans having an Interest Period in excess of three months or 90 days, respectively, on each day which occurs every three months or 90 days, as the case may be, after the initial date of such Interest Period, and on the Commitment Termination Date. Interest on each Swingline Loan shall be payable on the maturity date of such Loan, which shall be the last day of the Interest Period applicable thereto, and on the Commitment Termination Date. Interest on any Loan which is converted into a Loan of another Type or which is repaid or prepaid shall be payable on the date of such conversion or on the date of any such repayment or prepayment (on the amount repaid or prepaid) thereof. All Default Interest shall be payable on demand. (e) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder and shall promptly notify the Borrower and the Lenders of such rate in writing (or by telephone, promptly confirmed in writing). Any such determination shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.13 Fees. (a) The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times previously agreed upon by the Borrower and the Administrative Agent pursuant to that certain fee letter by and between Borrower and Administrative Agent dated June 14, 2002. (b) Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue initially at .00375% and upon delivery of Borrower's consolidated financial statements for the fiscal quarter ending September 30, 2002 and thereafter at the Applicable Margin (determined daily in accordance with Schedule I) on the daily amount of the unused Revolving Commitment of such Lender during the Availability Period. Accrued commitment fees shall be payable in arrears on the last day of each March, June, September and December of each year and on the Commitment Termination Date, commencing on the first such date after the Closing Date. (c) Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative Agent, for the account of each Lender, a letter of credit fee with respect to its participation in each Letter of Credit, which shall accrue at the Applicable Margin for Eurodollar Loans then in effect on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) attributable to such Letter of Credit during the period from and including the date of issuance of such Letter of Credit to but excluding the date on which such Letter expires or is drawn in full (including without limitation any LC Exposure that remains outstanding after the Commitment Termination Date) and (ii) to the Issuing Bank for its own account a fronting fee, which shall accrue at the rate of 0.125% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to Unreimbursed LC Disbursements) during the Availability Period (or until the date that such Letter of Credit is irrevocably canceled, whichever is later), as well as the Issuing Bank's standard fees with respect to issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Accrued Letter of Credit fees shall be payable in arrears on the last day of each March, June, September and December of each year and on the Commitment Termination Date, commencing on the first such date after the Closing Date. SECTION 2.14 Computation of Interest and Fees. All computations of interest and fees hereunder shall be made on the basis of a year of 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). Each determination by the Administrative Agent of an interest amount or fee hereunder shall be made in good faith and, except for manifest error, shall be final, conclusive and binding for all purposes. SECTION 2.15 Inability to Determine Interest Rates. If prior to the commencement of any Interest Period for any Eurodollar Borrowing, (i) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant interbank market, adequate means do not exist for ascertaining LIBOR for such Interest Period, or (ii) the Administrative Agent shall have received notice from the Required Lenders that the Adjusted LIBO Rate does not adequately and fairly reflect the cost to such Lenders (or Lender, as the case may be) of making, funding or maintaining their (or its, as the case may be) Eurodollar Loans for such Interest Period, the Administrative Agent shall give written notice (or telephonic notice, promptly confirmed in writing) to the Borrower and to the Lenders as soon as practicable thereafter. In the case of Eurodollar Loans, until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) the obligations of the Lenders to make Eurodollar Revolving Loans or to continue or convert outstanding Loans as or into Eurodollar Loans shall be suspended and (ii) all such affected Loans shall be converted into Base Rate Loans on the last day of the then current Interest Period applicable thereto unless the Borrower prepays such Loans in accordance with this Agreement. Unless the Borrower notifies the Administrative Agent at least one Business Day before the date of any Eurodollar Revolving Borrowing for which a Notice of Revolving Borrowing has previously been given that it elects not to borrow on such date, then such Revolving Borrowing shall be made as a Base Rate Borrowing. SECTION 2.16 Illegality. If any Change in Law shall make it unlawful or impossible for any Lender to make, maintain or fund any Eurodollar Loan and such Lender shall so notify the Administrative Agent, the Administrative Agent shall promptly give notice thereof to the Borrower and the other Lenders, whereupon until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make Eurodollar Revolving Loans, or to continue or convert outstanding Loans as or into Eurodollar Loans, shall be suspended. In the case of the making of a Eurodollar Revolving Borrowing, such Lender's Revolving Loan shall be made as a Base Rate Loan as part of the same Revolving Borrowing for the same Interest Period and if the affected Eurodollar Loan is then outstanding, such Loan shall be converted to a Base Rate Loan either (i) on the last day of the then current Interest Period applicable to such Eurodollar Loan if such Lender may lawfully continue to maintain such Loan to such date or (ii) immediately if such Lender shall determine that it may not lawfully continue to maintain such Eurodollar Loan to such date. Notwithstanding the foregoing, the affected Lender shall, prior to giving such notice to the Administrative Agent, designate a different Applicable Lending Office if such designation would avoid the need for giving such notice and if such designation would not otherwise be disadvantageous to such Lender in the good faith exercise of its discretion. SECTION 2.17 Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement that is not otherwise included in the determination of the Adjusted LIBO Rate hereunder against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or (ii) impose on any Lender or on the Issuing Bank or the eurodollar interbank market any other condition affecting this Agreement or any Eurodollar Loans made by such Lender or any Letter of Credit or any participation therein; and the result of the foregoing is to increase the cost to such Lender of making, converting into, continuing or maintaining a Eurodollar Loan or to increase the cost to such Lender or the Issuing Bank of participating in or issuing any Letter of Credit or to reduce the amount received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or any other amount), then the Borrower shall promptly pay, upon written notice from and demand by such Lender on the Borrower (with a copy of such notice and demand to the Administrative Agent), to the Administrative Agent for the account of such Lender, within five Business Days after the date of such notice and demand, additional amount or amounts sufficient to compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered. (b) If any Lender or the Issuing Bank shall have determined that on or after the date of this Agreement any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the Issuing Bank's capital (or on the capital of such Lender's or the Issuing Bank's parent corporation) as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or the Issuing Bank or such Lender's or the Issuing Bank's parent corporation could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Bank's policies or the policies of such Lender's or the Issuing Bank's parent corporation with respect to capital adequacy) then, from time to time, within five (5) Business Days after receipt by the Borrower of written demand by such Lender (with a copy thereof to the Administrative Agent), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's parent corporation for any such reduction suffered. (c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's parent corporation, as the case may be, specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower (with a copy to the Administrative Agent) and shall be conclusive, absent manifest error. The Borrower shall pay any such Lender or the Issuing Bank, as the case may be, such amount or amounts within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation. SECTION 2.18 Funding Indemnity. In the event of (a) the payment of any principal of a Eurodollar Loan other than on the last day of the Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion or continuation of a Eurodollar Loan other than on the last day of the Interest Period applicable thereto, or (c) the failure by the Borrower to borrow, prepay, convert or continue any Eurodollar Loan on the date specified in any applicable notice (regardless of whether such notice is withdrawn or revoked), then, in any such event, the Borrower shall compensate each Lender, within five (5) Business Days after written demand from such Lender, for any loss, cost or expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense shall be deemed to include an amount determined by such Lender to be the excess, if any, of (A) the amount of interest that would have accrued on the principal amount of such Eurodollar Loan if such event had not occurred at the Adjusted LIBO Rate applicable to such Eurodollar Loan for the period from the date of such event to the last day of the then current Interest Period therefor (or in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Eurodollar Loan) over (B) the amount of interest that would accrue on the principal amount of such Eurodollar Loan for the same period if the Adjusted LIBO Rate were set on the date such Eurodollar Loan was prepaid or converted or the date on which the Borrower failed to borrow, convert or continue such Eurodollar Loan. A certificate as to any additional amount payable under this Section 2.20 submitted to the Borrower by any Lender shall be conclusive, absent manifest error. SECTION 2.19 Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided, that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, any Lender or the Issuing Bank (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within five (5) Business Days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Each Lender organized under the laws of a jurisdiction other than the United States or any state thereof shall deliver to the Borrower, with a copy to the Administrative Agent, concurrently with the delivery of the relevant Assignment and Acceptance, as applicable, (i) two United States Internal Revenue Service Forms W-8 BEN or Forms W-8 ECI, as applicable (or successor forms) properly completed and certifying in each case that such Lender is entitled to a complete exemption from withholding or deduction for or on account of any United States federal income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding taxes. Each such Lender further agrees to deliver to the Borrower, with a copy to the Administrative Agent, a Form W-8 ECI or W-8 BEN and Form W-8 or W-9, or successor applicable forms or manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower, certifying in the case of a Form W-8 ECI or W-8 BEN that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes (unless in any such case an event, including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders such forms inapplicable or the exemption to which such forms relate unavailable and such Lender notifies the Borroweer and the Administrative Agent that it is not entitled to receive payments without deduction or withholding of United States federal income taxes) and, in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax. SECTION 2.20 Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.17, 2.18 or 2.19, or otherwise) prior to 12:00 noon, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at the Payment Office, except payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.17, 2.18, 2.19 and 10.3 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be made payable for the period of such extension. All payments hereunder shall be made in Dollars. (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans or participations in LC Disbursements or Swingline Loans that would result in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans and participations in LC Disbursements and Swingline Loans; provided, that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements or Swingline Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount or amounts due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.5(b), 2.22(c) or (d), 2.20(d) or 10.3(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.21 Mitigation of Obligations; Replacement of Lenders. If any Lender requests compensation under Section 2.17, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.19, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the sole good faith judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable under Section 2.17 or Section 2.19, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all costs and expenses incurred by any Lender in connection with such designation or assignment. SECTION 2.22 Letters of Credit. (a) During the Availability Period, the Issuing Bank, in reliance upon the agreements of the other Lenders pursuant to Section 2.22(d), agrees to issue, at the request of the Borrower, Letters of Credit for the account of the Borrower on the terms and conditions hereinafter set forth; provided, that (i) each Letter of Credit shall expire on the earlier of (A) the date one year after the date of issuance of such Letter of Credit (or in the case of any renewal or extension thereof, one year after such renewal or extension) and (B) the date that is five (5) Business Days prior to the Commitment Termination Date; (ii) each Letter of Credit shall be in a stated amount of at least $500,000; and (iii) the Borrower may not request any Letter of Credit, if, after giving effect to such issuance (A) the aggregate LC Exposure would exceed the LC Commitment or (B) the aggregate LC Exposure, plus the aggregate outstanding Revolving Loans of all Lenders would exceed the Aggregate Revolving Commitments. Upon the issuance of each Letter of Credit each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank without recourse a participation in such Letter of Credit equal to such Lender's Pro Rata Share of the aggregate amount available to be drawn under such Letter of Credit. Each issuance of a Letter of Credit shall be deemed to utilize the Revolving Commitment of each Lender by an amount equal to the amount of such participation. (b) To request the issuance of a Letter of Credit (or any amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall give the Issuing Bank and the Administrative Agent irrevocable written notice at least three (3) Business Days prior to the requested date of such issuance specifying the date (which shall be a Business Day) such Letter of Credit is to be issued (or amended, extended or renewed, as the case may be), the expiration date of such Letter of Credit, the amount of such Letter of Credit , the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. In addition to the satisfaction of the conditions in Article III, the issuance of such Letter of Credit (or any amendment which increases the amount of such Letter of Credit) will be subject to the further conditions that such Letter of Credit shall be in such form and contain such terms as the Issuing Bank shall approve and that the Borrower shall have executed and delivered any additional applications, agreements and instruments relating to such Letter of Credit as the Issuing Bank shall reasonably require; provided, that in the event of any conflict between such applications, agreements or instruments and this Agreement, the terms of this Agreement shall control. (c) At least two Business Days prior to the issuance of any Letter of Credit, the Issuing Bank will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received such notice and if not, the Issuing Bank will provide the Administrative Agent with a copy thereof. Unless the Issuing Bank has received notice from the Administrative Agent on or before the Business Day immediately preceding the date the Issuing Bank is to issue the requested Letter of Credit (1) directing the Issuing Bank not to issue the Letter of Credit because such issuance is not then permitted hereunder because of the limitations set forth in Section 2.22(a) or that one or more conditions specified in Article III are not then satisfied, then, subject to the terms and conditions hereof, the Issuing Bank shall, on the requested date, issue such Letter of Credit in accordance with the Issuing Bank's usual and customary business practices. (d) The Issuing Bank shall examine all documents purporting to represent a demand for payment under a Letter of Credit promptly following its receipt thereof. The Issuing Bank shall notify the Borrower and the Administrative Agent of such demand for payment and whether the Issuing Bank has made or will make a LC Disbursement thereunder; provided, that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Lenders with respect to such LC Disbursement. The Borrower shall be irrevocably and unconditionally obligated to reimburse the Issuing Bank for any LC Disbursements paid by the Issuing Bank in respect of such drawing, without presentment, demand or other formalities of any kind. Unless the Borrower shall have notified the Issuing Bank and the Administrative Agent prior to 11:00 a.m. on the Business Day immediately prior to the date on which such drawing is honored that the Borrower intends to reimburse the Issuing Bank for the amount of such drawing in funds other than from the proceeds of Revolving Loans, the Borrower shall be deemed to have timely given a Notice of Revolving Borrowing to the Administrative Agent requesting the Lenders to make a Base Rate Borrowing on the date on which such drawing is honored in an exact amount due to the Issuing Bank; provided, that for purposes solely of such Borrowing, the conditions precedents set forth in Section 3.2 hereof shall not be applicable. The Administrative Agent shall notify the Lenders of such Borrowing in accordance with Section 2.3, and each Lender shall make the proceeds of its Base Rate Loan included in such Borrowing available to the Administrative Agent for the account of the Issuing Bank in accordance with Section 2.8. The proceeds of such Borrowing shall be applied directly by the Administrative Agent to reimburse the Issuing Bank for such LC Disbursement. (e) If for any reason a Base Rate Borrowing may not be (as determined in the sole discretion of the Administrative Agent), or is not, made in accordance with the foregoing provisions, then each Lender (other than the Issuing Bank) shall be obligated to fund the participation that such Lender purchased pursuant to subsection (a) in an amount equal to its Pro Rata Share of such LC Disbursement on and as of the date which such Base Rate Borrowing should have occurred. Each Lender's obligation to fund its participation shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (i) any setoff, counterclaim, recoupment, defense or other right that such Lender or any other Person may have against the Issuing Bank or any other Person for any reason whatsoever, (ii) the existence of a Default or an Event of Default or the termination of the Aggregate Revolving Commitments, (iii) any adverse change in the condition (financial or otherwise) of the Borrower or any of its Subsidiaries, (iv) any breach of this Agreement by the Borrower or any other Lender, (v) any amendment, renewal or extension of any Letter of Credit or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. On the date that such participation is required to be funded, each Lender shall promptly transfer, in immediately available funds, the amount of its participation to the Administrative Agent for the account of the Issuing Bank. Whenever, at any time after the Issuing Bank has received from any such Lender the funds for its participation in a LC Disbursement, the Issuing Bank (or the Administrative Agent on its behalf) receives any payment on account thereof, the Administrative Agent or the Issuing Bank, as the case may be, will distribute to such Lender its Pro Rata Share of such payment; provided, that if such payment is required to be returned for any reason to the Borrower or to a trustee, receiver, liquidator, custodian or similar official in any bankruptcy proceeding, such Lender will return to the Administrative Agent or the Issuing Bank any portion thereof previously distributed by the Administrative Agent or the Issuing Bank to it. (f) To the extent that any Lender shall fail to pay any amount required to be paid pursuant to paragraph (d) of this Section 2.22 on the due date therefor, such Lender shall pay interest to the Issuing Bank (through the Administrative Agent) on such amount from such due date to the date such payment is made at a rate per annum equal to the Federal Funds Rate; provided, that if such Lender shall fail to make such payment to the Issuing Bank within three (3) Business Days of such due date, then, retroactively to the due date, such Lender shall be obligated to pay interest on such amount at the Default Rate. (g) If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided, that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, with demand or notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (g) or (h) of Section 8.1. Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower's risk and expense, such deposits shall not bear interest. Interest and profits, if any, on such investments shall accumulate in such account. Moneys in such account shall applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it had not been reimbursed and to the extent so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, with the consent of the Required Lenders, be applied to satisfy other obligations of the Borrower under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not so applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived. (h) Promptly following the end of each fiscal quarter, the Issuing Bank shall deliver (through the Administrative Agent) to each Lender and the Borrower a report describing the aggregate Letters of Credit outstanding at the end of such fiscal quarter. Upon the request of any Lender from time to time, the Issuing Bank shall deliver to such Lender any other information reasonably requested by such Lender with respect to each Letter of Credit then outstanding. (i) The Borrower's obligation to reimburse LC Disbursements hereunder shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement under all circumstances whatsoever and irrespective of any of the following circumstances: (i) Any lack of validity or enforceability of any Letter of Credit or this Agreement; (ii) The existence of any claim, set-off, defense or other right which the Borrower or any Subsidiary or Affiliate of the Borrower may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons or entities for whom any such beneficiary or transferee may be acting), any Lender (including the Issuing Bank) or any other Person, whether in connection with this Agreement or the Letter of Credit or any document related hereto or thereto or any unrelated transaction; (iii) Any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect; (iv) Payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document to the Issuing Bank that does not comply with the terms of such Letter of Credit; (v) Any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower's obligations hereunder; or (vi) The existence of a Default or an Event of Default. Neither the Administrative Agent, the Issuing Bank, the Lenders nor any Related Party of any of the foregoing shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to above), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided, that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank's failure to exercise care when determining whether drafts or other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree, that in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented that appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit. (j) Each Letter of Credit shall be subject to the Uniform Customs and Practices for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No.500, as the same may be amended from time to time, and, to the extent not inconsistent therewith, the governing law of this Agreement set forth in Section 10.5. ARTICLE III CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT SECTION 3.1 Conditions To Effectiveness. The obligations of the Lenders (including the Swingline Lender) to make Loans and the obligation of the Issuing Bank to issue any Letter of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.2). (a) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Closing Date, including reimbursement or payment of all out-of-pocket expenses (including reasonable fees, charges and disbursements of counsel to the Administrative Agent) required to be reimbursed or paid by the Borrower hereunder, under any other Loan Document and under any agreement with the Administrative Agent or SunTrust Capital Markets, Inc., as Lead Arranger and Book Manager. (b) The Administrative Agent (or its counsel) shall have received the following: (i) a counterpart of this Agreement signed by or on behalf of each party thereto or written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement; (ii) if requested by any Lender, duly executed Notes payable to such Lender; (iii) a duly executed Subsidiary Guarantee Agreement and Indemnity and Contribution Agreement; (iv) a certificate of the Secretary or Assistant Secretary of each Loan Party, attaching and certifying copies of its bylaws and of the resolutions of its boards of directors, authorizing the execution, delivery and performance of the Loan Documents to which it is a party and certifying the name, title and true signature of each officer of such Loan Party executing the Loan Documents to which it is a party; (v) certified copies of the articles of incorporation or other charter documents of each Loan Party, together with certificates of good standing or existence, as may be available from the Secretary of State of the jurisdiction of incorporation of such Loan Party and each other jurisdiction where such Loan Party is required to be qualified to do business as a foreign corporation; (vi) a favorable written opinion of Bass, Berry & Sims, PLC, counsel to the Loan Parties, addressed to the Administrative Agent and each of the Lenders, and covering such matters relating to the Loan Parties, the Loan Documents and the transactions contemplated therein as the Administrative Agent or the Required Lenders shall reasonably request; (vii) certificates of insurance issued on behalf of insurors of Borrower and its Subsidiaries, describing in reasonable detail the types and amounts of insurance (property and liability) maintained by the Borrower and its Subsidiaries, naming Administrative Agent as additional insured and loss payee, as appropriate; (viii) duly executed payoff letters, in form and substance satisfactory to Administrative Agent, executed by each lender holding Indebtedness to be refinanced at Closing; (ix) duly executed Notices of Borrowing, if applicable; and (x) a duly executed funds disbursement agreement. SECTION 3.2 Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit is subject to the satisfaction of the following conditions: (a) at the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default or Event of Default shall exist; (b) all representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects on and as of the date of such Borrowing or the date of issuance, amendment, extension or renewal of such Letter of Credit, in each case before and after giving effect thereto; (c) since the date of the most recent financial statements of the Borrower described in Section 5.1(a), there shall have been no change which has had or could reasonably be expected to have a Material Adverse Effect; and (d) the Administrative Agent shall have received such other documents, certificates, information or legal opinions as the Administrative Agent or the Required Lenders may reasonably request, all in form and substance reasonably satisfactory to the Administrative Agent or the Required Lenders. Each Borrowing and each issuance, amendment, extension or renewal of any Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a), (b) and (c) of this Section 3.2. SECTION 3.3 Delivery of Documents. All of the Loan Documents, certificates, legal opinions and other documents and papers referred to in this Article III, unless otherwise specified, shall be delivered to the Administrative Agent for the account of each of the Lenders and, except for the Notes, in sufficient counterparts or copies for each of the Lenders and shall be in form and substance satisfactory in all respects to the Administrative Agent. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Administrative Agent and each Lender as follows: SECTION 4.1 Existence; Power. The Borrower and each of its Subsidiaries (i) is duly organized, validly existing and in good standing as a corporation under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to carry on its business as now conducted, and (iii) is duly qualified to do business, and is in good standing, in each jurisdiction where such qualification is required, except where a failure to be so qualified could not reasonably be expected to result in a Material Adverse Effect. SECTION 4.2 Organizational Power; Authorization. The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party are within such Loan Party's organizational powers and have been duly authorized by all necessary organizational, and if required, stockholder action. This Agreement has been duly executed and delivered by the Borrower, and constitutes, and each other Loan Document to which any Loan Party is a party, when executed and delivered by such Loan Party, will constitute, valid and binding obligations of the Borrower or such Loan Party (as the case may be), enforceable against it in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity. SECTION 4.3 Governmental Approvals; No Conflicts. The execution, delivery and performance by the Borrower of this Agreement, and by each Loan Party of the other Loan Documents to which it is a party (a) do not require any consent or approval of, registration or filing with, or any action by, any Governmental Authority, except those as have been obtained or made and are in full force and effect or where the failure to do so, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (b) will not violate any applicable material law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, material agreement or other material instrument binding on the Borrower or any of its Subsidiaries or any of its assets or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Subsidiaries and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries, except Liens (if any) created under the Loan Documents. SECTION 4.4 Financial Statements. The Borrower has furnished to each Lender (i) the audited consolidated balance sheet of the Borrower and its Subsidiaries as of the fiscal years ended March 31, 2002, March 31, 2001 and March 31, 2000, and the related consolidated statements of income, shareholders' equity and cash flows for the fiscal year then ended audited by Arthur Andersen LLP and (ii) the company prepared consolidated balance sheet of the Borrower and its Subsidiaries as at the fiscal period ending May 31, 2002, and the related company prepared consolidated statements of income and cash flows for such period and year-to-date period then ending, certified by a Responsible Officer. Such financial statements fairly present the consolidated financial condition of the Borrower and its Subsidiaries as of such dates and the consolidated results of operations for such periods in conformity with GAAP consistently applied, subject to year end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii). Since March 31, 2002, there have been no changes with respect to the Borrower and its Subsidiaries which have had or could reasonably be expected to have, singly or in the aggregate, a Material Adverse Effect. SECTION 4.5 Litigation and Environmental Matters. (a) No litigation, investigation or proceeding of or before any arbitrators or Governmental Authorities is pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination that could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect or (ii) which in any manner draws into question the validity or enforceability of this Agreement or any other Loan Document. (b) Neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability, in each case, which could reasonably be expected to result in a Material Adverse Effect. SECTION 4.6 Compliance with Laws and Agreements. The Borrower and each Subsidiary (a) is in compliance in all material respects with all applicable laws, rules, regulations and orders of any Governmental Authority, and (b) is in compliance with all indentures, agreements or other instruments binding upon it or its properties, except where non-compliance, either singly or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 4.7 Investment Company Act, Etc. Neither the Borrower nor any of its Subsidiaries is (a) an "investment company", as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended, (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935, as amended or (c) otherwise subject to any other regulatory scheme limiting its ability to incur debt. SECTION 4.8 Taxes. The Borrower and its Subsidiaries have timely filed or caused to be filed all Federal income tax returns and all other material tax returns that are required to be filed by them, and have paid all taxes shown to be due and payable on such returns or on any assessments made against it or its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority, except (i) to the extent the failure to do so would not have a Material Adverse Effect or (ii) where the same are currently being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as the case may be, has set aside on its books adequate reserves. SECTION 4.9 Margin Regulations. None of the proceeds of any of the Loans or Letters of Credit will be used for "purchasing" or "carrying" any "margin stock" with the respective meanings of each of such terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the applicable Margin Regulations. SECTION 4.10 ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $0 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $0 the fair market value of the assets of all such underfunded Plans. SECTION 4.11 Ownership of Property. (a) Each of the Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all of its real and personal property material to the operation of its business. (b) Each of the Borrower and its Subsidiaries owns, or is licensed, or otherwise has the right, to use, all patents, trademarks, service marks, tradenames, copyrights and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe on the rights of any other Person, except for any such infringements that, individually or in the aggregate, would not have a Material Adverse Effect. SECTION 4.12 Disclosure. The Borrower has disclosed to the Lenders all agreements, instruments, and corporate or other restrictions to which the Borrower or any of its Subsidiaries is subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports (including without limitation all reports that the Borrower is required to file with the Securities and Exchange Commission), financial statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation or syndication of this Agreement or any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by any other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, taken as a whole, in light of the circumstances under which they were made, not misleading. SECTION 4.13 Labor Relations. There are no strikes, lockouts or other material labor disputes or grievances against the Borrower or any of its Subsidiaries, or, to the Borrower's knowledge, threatened against or affecting the Borrower or any of its Subsidiaries, and no significant unfair labor practice, charges or grievances are pending against the Borrower or any of its Subsidiaries, or to the Borrower's knowledge, threatened against any of them before any Governmental Authority. All payments due from the Borrower or any of its Subsidiaries pursuant to the provisions of any collective bargaining agreement have been paid or accrued as a liability on the books of the Borrower or any such Subsidiary, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. SECTION 4.14 Subsidiaries. Schedule 4.14 sets forth the name of, the ownership interest of the Borrower in, the jurisdiction of incorporation of, and the type of, each Subsidiary, in each case as of the Closing Date, other than the Inactive Subsidiaries which are set forth in Schedule 4.14(b). None of the Inactive Subsidiaries own any assets or have any net worth, other than de minimus amounts which do not, in the aggreagate for all Inactive Subsidiaries, exceed $5,000. ARTICLE V AFFIRMATIVE COVENANTS The Borrower covenants and agrees that so long as any Lender has a Commitment hereunder or the principal of and interest on any Loan or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains outstanding: SECTION 5.1 Financial Statements and Other Information. The Borrower will deliver to the Administrative Agent and each Lender: (a) as soon as available and in any event within 90 days after the end of each fiscal year of Borrower, a copy of the annual audited report for such fiscal year for the Borrower and its Subsidiaries, containing a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, stockholders' equity and cash flows (together with all footnotes thereto) of the Borrower and its Subsidiaries for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and reported on by independent public accountants of nationally recognized standing as approved by Administrative Agent (without a "going concern" or like qualification, exception or explanation and without any qualification or exception as to scope of such audit) to the effect that such financial statements present fairly in all material respects the financial condition and the results of operations of the Borrower and its Subsidiaries for such fiscal year on a consolidated basis 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) as soon as available and in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, an unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal quarter and the related unaudited consolidated statements of income and cash flows of the Borrower and its Subsidiaries for such fiscal quarter and the then elapsed portion of such fiscal year, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of Borrower's previous fiscal year, all certified by the chief financial officer or treasurer of the Borrower as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with the delivery of the financial statements referred to in clauses (a) and (b) above, a certificate of a Responsible Officer, (i) certifying as to whether there exists a Default or Event of Default on the date of such certificate, and if a Default or an Event of Default then exists, specifying the details thereof and the action which the Borrower has taken or proposes to take with respect thereto, (ii) setting forth in reasonable detail calculations demonstrating compliance, or lack thereof, with Article VI and (iii) stating whether any change in GAAP or the application thereof has occurred since the date of the Borrower's audited financial statements referred to in Section 4.4 and, if any change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) promptly following any request therefor, such other information regarding the results of operations, business affairs and financial condition of the Borrower or any Subsidiary as the Administrative Agent or any Lender may reasonably request. SECTION 5.2 Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default or Event of Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or, to the knowledge of the Borrower, affecting the Borrower or any Subsidiary which could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any event or any other development by which the Borrower or any of its Subsidiaries (i) fails to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) becomes subject to any Environmental Liability, (iii) receives notice of any claim with respect to any Environmental Liability, or (iv) becomes aware of any basis for any Environmental Liability and in each of the preceding clauses, which individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect; (d) the occurrence of any ERISA Event that alone, or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $500,000; and (e) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a written statement of a Responsible Officer setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 5.3 Existence; Conduct of Business. The Borrower will, and will cause its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and maintain in full force and effect its/their legal existence and its/their respective rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business and will continue to engage in the same business as presently conducted or such other businesses that are reasonably related thereto. SECTION 5.4 Compliance with Laws, Etc. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and requirements of any Governmental Authority applicable to its properties, except where the failure to do so, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.5 Payment of Obligations. The Borrower will, and will cause each of its Subsidiaries to, pay and discharge at or before maturity, all of its obligations and liabilities (including without limitation all tax liabilities and claims that could result in a statutory Lien) before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate actions, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.6 Books and Records. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities to the extent necessary to prepare the consolidated financial statements of Borrower in conformity with GAAP. SECTION 5.7 Visitation, Inspection, Etc. The Borrower will, and will cause each of its Subsidiaries to, permit any representative of the Administrative Agent or any Lender, to visit and inspect its properties, to examine its books and records and to make copies and take extracts therefrom, and to discuss its affairs, finances and accounts with any of its officers and with its independent certified public accountants, all at such reasonable times and as often as the Administrative Agent or any Lender may reasonably request after reasonable prior notice to the Borrower. SECTION 5.8 Maintenance of Properties; Insurance. The Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear except where the failure to do so, either individually or it the aggregate, could not reasonably be expected to result in a Material Adverse Effect and (b) maintain with financially sound and reputable insurance companies, 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 companies in the same or similar businesses operating in the same or similar locations. SECTION 5.9 Use of Proceeds and Letters of Credit. The Borrower will use the proceeds of all Loans to refinance existing Indebtedness and thereafter for acquisitions permitted hereunder, working capital and general corporate purposes. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that would violate any rule or regulation of the Board of Governors of the Federal Reserve System, including Regulations T, U or X. All Letters of Credit will be used for general corporate purposes. SECTION 5.10 Additional Subsidiaries. If any additional Subsidiary is acquired or formed after the Closing Date, the Borrower will, within ten (10) business days after such Subsidiary is acquired or formed, notify the Administrative Agent and the Lenders thereof and will cause such Subsidiary to execute agreements in the form of Annex I to Exhibit D and Annex I to Exhibit E in form and substance satisfactory to the Administrative Agent and the Required Lenders and will cause such Subsidiary to deliver simultaneously therewith similar documents applicable to such Subsidiary required under Section 3.1 as reasonably requested by the Administrative Agent. ARTICLE VI FINANCIAL COVENANTS The Borrower covenants and agrees that so long as any Lender has a Commitment hereunder or the principal of or interest on or any Loan remains unpaid or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains outstanding: SECTION 6.1 Fixed Charge Coverage Ratio. The Borrower and its Subsidiaries will have, as of the end of each fiscal quarter of the Borrower, a Fixed Charge Coverage Ratio of not less than 1.25 to 1.00. SECTION 6.2 Consolidated Tangible Net Worth. The Borrower and its Subsidiaries will not permit its Consolidated Tangible Net Worth, measured as of the end of each fiscal quarter of the Borrower, to be less than an amount equal to the sum of (a) 95% of the Consolidated Tangible Net Worth of Borrower as of March 31, 2002, plus (b) 50% of cumulative positive Consolidated Net Income accrued since March 31, 2002, commencing with the fiscal quarter ending June 30, 2002, plus (c) 100% of the net proceeds from any equity offering. SECTION 6.3 Total Lease Adjusted Funded Debt to Consolidated EBITDAR. The Borrower and its Subsidiaries will maintain a ratio of Total Lease Adjusted Funded Debt to Consolidated EBITDAR in accordance with the table set forth below. This ratio will be calculated on a rolling four quarter basis and measured as of the end of each fiscal quarter of Borrower.
DATES: REQIORED RATIO: ---------------------------------------------------------------------- From the Closing Date to December 31, 2002 3.50 to 1.00 From January 1, 2003 to March 31, 2003 3.25 to 1.00 From April 1, 2003 to March 31, 2004 3.00 to 1.00 From April 1, 2004 to the Commitment Termination Date 2.75 to 1.00
ARTICLE VII NEGATIVE COVENANTS The Borrower covenants and agrees that so long as any Lender has a Commitment hereunder or the principal of or interest on any Loan remains unpaid or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains outstanding: SECTION 7.1 Indebtedness. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness created pursuant to the Loan Documents; (b) Indebtedness existing on the date hereof and set forth on Schedule 7.1 and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof; (c) Purchase money Indebtedness acceptable to Administrative Agent 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 instrument) 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; and (e) other unsecured Indebtedness in an aggregate principal amount not to exceed $1,000,000 at any time outstanding. SECTION 7.2 Negative Pledge. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien on any of its assets or property now owned or hereafter acquired or, except: (a) Permitted Encumbrances; (b) any Liens on any property or asset of the Borrower or any Subsidiary existing on the Closing Date set forth on Schedule 7.2; provided, that such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary; (c) any Liens securing purchase money Indebtedness described in Section 7.1(c); (d) Liens, other than those described above, encumbering assets having a book value, as determined in accordance with GAAP, of not greater than $1,000,000. SECTION 7.3 Fundamental Changes. (a) The Borrower will not, and will not permit any Subsidiary to, merge into or consolidate into any other Person, or permit any other Person to merge into or consolidate with it, or sell, lease, transfer or otherwise dispose of (in a single transaction or a series of transactions) all or substantially all of its assets (in each case, whether now owned or hereafter acquired) or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired) or liquidate or dissolve; provided, that if at the time thereof and immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing (i) the Borrower or any Subsidiary may merge with a Person if the Borrower (or such Subsidiary if the Borrower is not a party to such merger) is the surviving Person, (ii) any Subsidiary may merge into another Subsidiary, and (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of all or substantially all of its assets to the Borrower or to another Subsidiary. (b) The Borrower will not, and will not permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Borrower and its Subsidiaries on the date hereof and businesses reasonably related thereto. (c) The Borrower will not purchase, lease or otherwise acquire all or any substantial portion of the property or assets (including capital stock) of any Person (an "Acquisition") unless such Acquisition meets the requirements of a Permitted Acquisition. SECTION 7.4 Investments, Loans, Etc. The Borrower will not, and will not permit any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly-owned Subsidiary prior to such merger), any common stock, evidence of indebtedness or other securities (including any option, warrant, or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person (all of the foregoing being collectively called "Investments"), or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person that constitute a business unit, except: (a) Investments (other than Permitted Investments) existing on the date hereof and set forth on Schedule 7.4 (including Investments in Subsidiaries); (b) Permitted Investments; (c) Investments made by the Borrower in or to any Subsidiary and by any Subsidiary to the Borrower or in or to another Subsidiary; (d) Loans or advances to employees, officers or directors of the Borrower or any Subsidiary in the ordinary course of business for travel, relocation and related expenses; and (e) Other Investments which in the aggregate do not exceed $10,000,000. SECTION 7.5 Restricted Payments. The Borrower will not, and will not permit its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any dividend on any class of its stock, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, retirement, defeasance or other acquisition of, any shares of common stock or any options, warrants, or other rights to purchase such common stock or such Indebtedness, whether now or hereafter outstanding (each, a "Restricted Payment"), except for (a) dividends payable by the Borrower solely in shares of any class of its common stock, (b) Restricted Payments made by any Subsidiary to the Borrower or to another Subsidiary and (c) cash dividends paid on, and cash redemptions of, the common stock of the Borrower; provided, that (x) no Default or Event of Default has occurred and is continuing at the time such dividend is paid or redemption is made, and (y) the aggregate amount of all such Restricted Payments made by the Borrower in any fiscal year does not exceed the sum of (i) 20% of Consolidated Net Income (if greater than $0) earned during the immediately preceding fiscal year, plus (ii) any Restricted Payments that the Borrower was eligible to pay but did not pay during the immediately preceding fiscal year. SECTION 7.6 Sale of Assets. The Borrower will not, and will not permit any of its Subsidiaries to, convey, sell, lease, assign, transfer or otherwise dispose of, any of its assets, business or property, whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's common stock to any Person other than the Borrower, except: (a) the sale or other disposition for fair market value of obsolete or worn out property or other property not necessary for operations disposed of in the ordinary course of business; (b) the sale of inventory and Permitted Investments in the ordinary course of business; (c) the sale or other disposition of such assets in an aggregate amount not to exceed $500,000 in any fiscal year of the Borrower; and (d) the sale of specific real estate assets by the Borrower following the purchase of such real estate assets in connection with the C.R. Gibson Asset Sale Agreement; provided, if net proceeds from any such sale exceed $3,000,000, Borrower shall reduce the Aggregate Revolving Commitments by such amount in excess of $3,000,000. SECTION 7.7 Transactions with Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, (b) transactions between or among the Borrower and its wholly- owned Subsidiaries not involving any other Affiliates and (c) any Restricted Payment permitted by Section 7.5, and (d) the provision of transitional services to CRG Acquisiton Corp. or its successor pursuant to the C.R.Gibson Asset Sale Agreement. SECTION 7.8 Restrictive Agreements. The Borrower will not, and will not permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Subsidiary to create, incur or permit any Lien upon any of its assets or properties, whether now owned or hereafter acquired, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to its common stock, to make or repay loans or advances to the Borrower or any other Subsidiary, to Guarantee Indebtedness of the Borrower or any other Subsidiary or to transfer any of its property or assets to the Borrower or any Subsidiary of the Borrower; provided, that (i) the foregoing shall not apply to restrictions or conditions imposed by law or by this Agreement or any other Loan Document, (ii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is sold and such sale is permitted hereunder, (iii) clause (a) shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions and conditions apply only to the property or assets securing such Indebtedness and (iv) clause (a) shall not apply to customary provisions in leases restricting the assignment thereof. SECTION 7.9 Sale and Leaseback Transactions. The Borrower will not, and will not permit any of the Subsidiaries to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred. SECTION 7.10 Hedging Agreements. The Borrower will not, and will not permit any of the Subsidiaries to, enter into any Hedging Agreement, other than Hedging Agreements entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower or any Subsidiary is exposed in the conduct of its business or the management of its liabilities. SECTION 7.11 Amendment to Material Documents. The Borrower will not, and will not permit any Subsidiary to, amend, modify or waive any of its rights in a manner materially adverse to the Lenders under (a) its certificate of incorporation, bylaws or other organizational documents or (b) any material contract, including without limitation the Senior Unsecured Notes. SECTION 7.12 Accounting Changes. The Borrower will not, and will not permit any Subsidiary to, make any significant change in accounting treatment or reporting practices, except as required or permitted by GAAP, or change the fiscal year of the Borrower or of any Subsidiary, except to change the fiscal year of a Subsidiary to conform its fiscal year to that of the Borrower. SECTION 7.13 Inactive Subsidiaries (a) Borrower will not transfer any assets to an Inactive Subsidiary. (b) Borrower will not permit the proceeds of any Advance to be used by or for the benefit of any Inactive Subsidiary. ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1 Events of Default. If any of the following events (each an "Event of Default") shall occur: (a) the Borrower shall fail to pay any principal of any Loan or of any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment or otherwise; or (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount payable under clause (a) of this Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three (3) Business Days; or (c) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with this Agreement or any other Loan Document (including the Schedules attached thereto) and any amendments or modifications hereof or waivers hereunder, or in any certificate, report, financial statement or other document submitted to the Administrative Agent or the Lenders by any Loan Party or any representative of any Loan Party pursuant to or in connection with this Agreement or any other Loan Document shall prove to be incorrect in any maerial respect when made or deemed made or submitted; or (d) the Borrower shall fail to observe or perform any covenant or agreement contained in Sections 5.2, 5.3 (with respect to the Borrower's existence) or Articles VI or VII; or (e) any Loan Party shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those referred to in clauses (a), (b) and (d) above), and such failure shall remain unremedied for 30 days after the earlier of (i) any officer of the Borrower becomes aware of such failure, or (ii) notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender; or (f) the Borrower or any Subsidiary (whether as primary obligor or as guarantor or other surety) shall fail to pay any principal of or premium or interest on any Material Indebtedness that is outstanding, when and as the same shall become due and payable (whether at scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument evidencing such Indebtedness; or any other event shall occur or condition shall exist under any agreement or instrument relating to such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to be due and payable; or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or any offer to prepay, redeem, purchase or defease such Indebtedness shall be required to be made, in each case prior to the stated maturity thereof; or (g) the Borrower or any Subsidiary shall (i) commence a voluntary case or other proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a custodian, trustee, receiver, liquidator or other similar official of it or any substantial part of its property, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (i) of this Section, (iii) apply for or consent to the appointment of a custodian, trustee, receiver, liquidator or other similar official for the Borrower or any such [Material] Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, or (vi) take any action for the purpose of effecting any of the foregoing; or (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Subsidiary or its debts, or any substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or (ii) the appointment of a custodian, trustee, receiver, liquidator or other similar official for the Borrower or any Subsidiary or for a substantial part of its assets, and in any such case, such proceeding or petition shall remain undismissed or unstayed for a period of 60 days or an order or decree approving or ordering any of the foregoing shall be entered; or (i) the Borrower or any Subsidiary shall become unable to pay, shall admit in writing its inability to pay, or shall fail to pay, its debts as they become due; or (j) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with other ERISA Events that have occurred, could reasonably be expected to result in liability to the Borrower and the Subsidiaries in an aggregate amount exceeding $1,000,000; or (k) any judgment or order for the payment of money in excess of $1,000,000 in the aggregate shall be rendered against the Borrower or any Subsidiary, and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (l) any non-monetary judgment or order shall be rendered against the Borrower or any Subsidiary that could reasonably be expected to have a Material Adverse Effect, and there shall be a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (m) a Change in Control shall occur or exist; or (n) any provision of any Subsidiary Guarantee Agreement shall for any reason cease to be valid and binding on, or enforceable against, any Subsidiary, or any Subsidiary shall so state in writing, or any Subsidiary shall seek to terminate its Subsidiary Guarantee Agreement; then, and in every such event (other than an event with respect to the Borrower described in clause (g) or (h) of this Section) and at any time thereafter during the continuance of such event, the Administrative Agent may, and upon the written request of the Required Lenders shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate the Commitments, whereupon the Commitment of each Lender shall terminate immediately; (ii) declare the principal of and any accrued interest on the Loans, and all other Obligations owing hereunder, to be, whereupon the same shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower and (iii) exercise all remedies contained in any other Loan Document; and that, if an Event of Default specified in either clause (g) or (h) shall occur, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon, and all fees, and all other Obligations shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. ARTICLE IX THE ADMINISTRATIVE AGENT SECTION 9.1 Appointment of Administrative Agent. (a) Each Lender irrevocably appoints SunTrust Bank as the Administrative Agent and authorizes it to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent under this Agreement and the other Loan Documents, together with all such actions and powers that are reasonably incidental thereto. The Administrative Agent may perform any of its duties hereunder by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub- agent may perform any and all of its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions set forth in this Article shall apply to any such sub-agent and the Related Parties of the Administrative Agent and any such sub- agent and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. (b) The Issuing Bank shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith until such time and except for so long as the Administrative Agent may agree at the request of the Required Lenders to act for the Issuing Bank with respect thereto; provided, that the Issuing Bank shall have all the benefits and immunities (i) provided to the Administrative Agent in this Article IX with respect to any acts taken or omissions suffered by the Issuing Bank in connection with Letters of Credit issued by it or proposed to be issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as the term "Administrative Agent" as used in this Article IX included the Issuing Bank with respect to such acts or omissions and (ii) as additionally provided in this Agreement with respect to the Issuing Bank. SECTION 9.2 Nature of Duties of Administrative Agent. The Administrative Agent shall not have any duties or obligations except those expressly set forth in this Agreement and the other Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or an Event of Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except those discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall not be deemed to have knowledge of any Default or Event of Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or any Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements, or other terms and conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article III or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. SECTION 9.3 Lack of Reliance on the Administrative Agent. Each of the Lenders, the Swingline Lender and the Issuing Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each of the Lenders, the Swingline Lender and the Issuing Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, continue to make its own decisions in taking or not taking of any action under or based on this Agreement, any related agreement or any document furnished hereunder or thereunder. SECTION 9.4 Certain Rights of the Administrative Agent. If the Administrative 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 Administrative Agent shall be entitled to refrain from such act or taking such act, unless and until it shall have received instructions from such Lenders; and the Administrative 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 Administrative Agent as a result of the Administrative Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders where required by the terms of this Agreement. SECTION 9.5 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed, sent or made by the proper Person. The Administrative Agent may also rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or not taken by it in accordance with the advice of such counsel, accountants or experts. SECTION 9.6 The Administrative Agent in its Individual Capacity. The bank serving as the Administrative Agent shall have the same rights and powers under this Agreement and any other Loan Document in its capacity as a Lender as any other Lender and may exercise or refrain from exercising the same as though it were not the Administrative Agent; and the terms "Lenders", "Required Lenders", "holders of Notes", or any similar terms shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity. The bank acting as the Administrative Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if it were not the Administrative Agent hereunder. SECTION 9.7 Successor Administrative Agent. (a) The Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent, subject to the approval by the Borrower provided that no Default or Event of Default shall exist at such time. If no successor Administrative Agent shall have been so appointed, and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States of America or any state thereof or a bank which maintains an office in the United States, having a combined capital and surplus of at least $500,000,000. (b) Upon the acceptance of its appointment as the Administrative Agent hereunder by a successor, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. If within 45 days after written notice is given of the retiring Administrative Agent's resignation under this Section 9.7 no successor Administrative Agent shall have been appointed and shall have accepted such appointment, then on such 45th day (i) the retiring Administrative Agent's resignation shall become effective, (ii) the retiring Administrative Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (iii) the Required Lenders shall thereafter perform all duties of the retiring Administrative Agent under the Loan Documents until such time as the Required Lenders appoint a successor Administrative Agent as provided above. After any retiring Administrative Agent's resignation hereunder, the provisions of this Article IX shall continue in effect for the benefit of such retiring Administrative Agent and its representatives and agents in respect of any actions taken or not taken by any of them while it was serving as the Administrative Agent. ARTICLE X MISCELLANEOUS SECTION 10.1 Notices. (a) Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications to any party herein to be effective shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: To the Borrower: Thomas Nelson, Inc. 501 Nelson Place Nashville, TN 37214 Attention: Joe Powers Telecopy Number: 615-883-6353 With a copy to: Bass, Berry & Sims, PLC 315 Deaderick Street, Suite 2700 Nashville, TN 37238 Attention: Michael S. Peek, Esq. Telecopy Number: 615-742-2731 To the Administrative Agent: SunTrust Bank 201 Fourth Avenue North, Third Floor Nashville, TN 37219 Attention: Jim Sloan Telecopy Number: 615-748-5269 With a copy to: SunTrust Capital Markets, Inc. 303 Peachtree Street, N. E./24th Floor Atlanta, Georgia 30308 Attention: Jay White Telecopy Number: (404) 827-6514 To the Issuing Bank: SunTrust Bank 25 Park Place, N. E./Mail Code 3706 Atlanta, Georgia 30303 Attention: Michael E. Sullivan Telecopy Number: (404) 588-8129 To the Swingline Lender: SunTrust Bank 201 Fourth Avenue North, Third Floor Nashville, TN 37219 Attention: Jim Sloan Telecopy Number: 615-748-5269 To any other Lender: the address set forth in the Administrative Questionnaire Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All such notices and other communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the mails or if delivered, upon delivery; provided, that notices delivered to the Administrative Agent, the Issuing Bank or the Swingline Bank shall not be effective until actually received by such Person at its address specified in this SECTION 10.1. (b) Any agreement of the Administrative Agent and the Lenders herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Borrower. The Administrative Agent and the Lenders shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Borrower to give such notice and the Administrative Agent and Lenders shall not have any liability to the Borrower or other Person on account of any action taken or not taken by the Administrative Agent or the Lenders in reliance upon such telephonic or facsimile notice. The obligation of the Borrower to repay the Loans and all other Obligations hereunder shall not be affected in any way or to any extent by any failure of the Administrative Agent and the Lenders to receive written confirmation of any telephonic or facsimile notice or the receipt by the Administrative Agent and the Lenders of a confirmation which is at variance with the terms understood by the Administrative Agent and the Lenders to be contained in any such telephonic or facsimile notice. SECTION 10.2 Waiver; Amendments. (a) No failure or delay by the Administrative Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or any other Loan Document, and no course of dealing between the Borrower and the Administrative Agent or any Lender, shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power or any abandonment or discontinuance of steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power hereunder or thereunder. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies provided by law. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or the issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default or Event of Default at the time. (b) No amendment or waiver of any provision of this Agreement or the other Loan Documents, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Borrower and the Required Lenders or the Borrower and the Administrative Agent with the consent of 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 or waiver shall: (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the date fixed for any payment of any principal of, or interest on, any Loan or LC Disbursement or interest thereon or any fees hereunder or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date for the termination or reduction of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.19(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders which are required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the consent of each Lender; (vi) release any guarantor or limit the liability of any such guarantor under any guaranty agreement; (vii) release all or substantially all collateral (if any) securing any of the Obligations; provided further, that no such agreement shall amend, modify or otherwise affect the rights, duties or obligations of the Administrative Agent, the Swingline Bank or the Issuing Bank without the prior written consent of such Person. SECTION 10.3 Expenses; Indemnification. (a) The Borrower shall pay (i) all reasonable, out-of-pocket costs and expenses of the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent and its Affiliates, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents and any amendments, modifications or waivers thereof (whether or not the transactions contemplated in this Agreement or any other Loan Document shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket costs and expenses (including, without limitation, the reasonable fees, charges and disbursements of outside counsel and the allocated cost of inside counsel) incurred by the Administrative Agent, the Issuing Bank or any Lender in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made or any Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit. (b) The Borrower shall indemnify the Administrative Agent, the Issuing Bank and each Lender, and each Related Party of any of the foregoing (each, an "Indemnitee") against, and hold each of them harmless from, any and all costs, losses, liabilities, claims, damages and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, which may be incurred by or asserted against any Indemnitee arising out of, in connection with or as a result of (i) the execution or delivery of this Agreement or any other agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of any of the transactions contemplated hereby, (ii) any Loan or Letter of Credit or any actual or proposed use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned by the Borrower or any Subsidiary or any Environmental Liability related in any way to the Borrower or any Subsidiary or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided, that the Borrower shall not be obligated to indemnify any Indemnitee for any of the foregoing arising out of such Indemnitee's gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final and nonappealable judgment. (c) The Borrower shall pay, and hold the Administrative Agent and 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 and any other Loan Documents, any collateral described therein, or any payments due thereunder, and save the Administrative Agent and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes. (d) To the extent that the Borrower fails to pay any amount required to be paid to the Administrative Agent, the Issuing Bank or the Swingline Lender under clauses (a), (b) or (c) hereof, each Lender severally agrees to pay to the Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may be, such Lender's Pro Rata Share (determined as of the time that the unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided, that the unreimbursed expense or indemnified payment, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Issuing Bank or the Swingline Lender in its capacity as such. (e) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to actual or direct damages) arising out of, in connection with or as a result of, this Agreement or any agreement or instrument contemplated hereby, the transactions contemplated therein, any Loan or any Letter of Credit or the use of proceeds thereof. (f) All amounts due under this Section shall be payable promptly after written demand therefor. SECTION 10.4 Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). (b) Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Commitment and the Loans and LC Exposure at the time owing to it); provided, that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of the Borrower and the Administrative Agent (and, in the case of an assignment of all or a portion of a Commitment or any Lender's obligations in respect of its LC Exposure or Swingline Exposure, the Issuing Bank and the Swingline Lender) must give their prior written consent (which consent shall not be unreasonably withheld or delayed), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire amount of the assigning Lender's Commitment hereunder or an assignment while an Event of Default has occurred and is continuing, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $1,000,000 (unless the Borrower and the Administrative Agent shall otherwise consent), (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement and the other Loan Documents, (iv) the assigning Lender and the assignee shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee payable by the assigning Lender or the assignee (as determined between such Persons) in an amount equal to $1,000 and (v) such assignee, if it is not a Lender, shall deliver a duly completed Administrative Questionnaire to the Administrative Agent; provided, that any consent of the Borrower otherwise required hereunder shall not be required if an Event of Default has occurred and is continuing. Upon the execution and delivery of the Assignment and Acceptance and payment by such assignee to the assigning Lender of an amount equal to the purchase price agreed between such Persons, such assignee shall become a party to this Agreement and any other Loan Documents to which such assigning Lender is a party and, to the extent of such interest assigned by such Assignment and Acceptance, shall have the rights and obligations of a Lender under this Agreement, and the assigning Lender shall be released from its obligations hereunder to a corresponding extent (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.18, 2.19 and 2.20 and 10.3. Upon the consummation of any such assignment hereunder, the assigning Lender, the Administrative Agent and the Borrower shall make appropriate arrangements to have new Notes issued if so requested by either or both the assigning Lender or the assignee. Any assignment or other transfer by a Lender that does not fully comply with the terms of this clause (b) shall be treated for purposes of this Agreement as a sale of a participation pursuant to clause (c) below. (c) Any Lender may at any time, without the consent of the Borrower, the Administrative Agent, the Issuing Bank or the Swingline Lender, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment, the Loans owing to it and its LC Exposure); provided, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of its obligations hereunder, and (iii) the Borrower, the Administrative Agent, the Swingline Bank, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. Any agreement between such Lender and the Participant with respect to such participation shall provide that such Lender shall retain the sole right and responsibility to enforce this Agreement and the other Loan Documents and the right to approve any amendment, modification or waiver of this Agreement and the other Loan Documents; provided, that such participation agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver of this Agreement described in the first proviso of Section 10.2(b) that affects the Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.16, 2.17 and 2.18 to the same extent as if it were a Lender hereunder and had acquired its interest by assignment pursuant to paragraph (b); provided, that no Participant shall be entitled to receive any greater payment under Section 2.16 or 2.18 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant unless the sale of such participation is made with the Borrower's prior written consent. To the extent permitted by law, the Borrower agrees that each Participant shall be entitled to the benefits of Section 2.19 as though it were a Lender, provided, that such Participant agrees to share with the Lenders the proceeds thereof in accordance with Section 2.19 as fully as if it were a Lender hereunder. (d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement and its Notes (if any) to secure its obligations to a Federal Reserve Bank without complying with this Section; provided, that no such pledge or assignment shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. (e) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an "SPV"), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided, that (i) nothing herein shall constitute a commitment by any SPV to make any Loan and (ii) if an SPV elects not to exercise such option or otherwise fails to provide all or any part of any Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPV hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPV shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPV, it will not institute against, or join any other person in instituting against, such SPV any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State contrary in this Section 10.4. Any SPV may (i) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrower and the Administrative Agent) providing liquidity and/or credit support to or for the account of such SPV to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPV. As this Section 10.4(g) applies to any particular SPV, this Section may not be amended without the written consent of such SPV. SECTION 10.5 Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement and the other Loan Documents 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) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the non-exclusive jurisdiction of the United States District Court of the Middle District of Tennessee, and of any state court of the State of Tennessee and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document or the transactions contemplated hereby or thereby, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Tennessee state court or, to the extent permitted by applicable law, such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or its properties in the courts of any jurisdiction. (c) The Borrower irrevocably and unconditionally waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding described in paragraph (b) of this Section and brought in any court referred to in paragraph (b) of this Section. Each of the parties hereto irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to the service of process in the manner provided for notices in Section 10.1. Nothing in this Agreement or in any other Loan Document will affect the right of any party hereto to serve process in any other manner permitted by law. SECTION 10.6 WAIVER OF JURY TRIAL. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 10.7 Right of Setoff. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, each Lender and the Issuing Bank shall have the right, at any time or from time to time upon the occurrence and during the continuance of an Event of Default, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, to set off and apply against all deposits (general or special, time or demand, provisional or final) of the Borrower at any time held or other obligations at any time owing by such Lender and the Issuing Bank to or for the credit or the account of the Borrower against any and all Obligations held by such Lender or the Issuing Bank, as the case may be, irrespective of whether such Lender or the Issuing Bank shall have made demand hereunder and although such Obligations may be unmatured. Each Lender and the Issuing Bank agree promptly to notify the Administrative Agent and the Borrower after any such set-off and any application made by such Lender and the Issuing Bank, as the case may be; provided, that the failure to give such notice shall not affect the validity of such set-off and application. SECTION 10.8 Counterparts; Integration. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Agreement, the other Loan Documents, and any separate letter agreement(s) relating to any fees payable to the Administrative Agent constitute the entire agreement among the parties hereto and thereto regarding the subject matters hereof and thereof and supersede all prior agreements and understandings, oral or written, regarding such subject matters. SECTION 10.9 Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.17, 2.18, 2.19, and 10.3 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. 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 and the other Loan Documents, and the making of the Loans and the issuance of the Letters of Credit. SECTION 10.10 Severability. Any provision of this Agreement or any other Loan Document held to be illegal, invalid or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability without affecting the legality, validity or enforceability of the remaining provisions hereof or thereof; and the illegality, invalidity or unenforceability of a particular provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 10.11 Confidentiality. Each of the Administrative Agent, the Issuing Bank and each Lender agrees to take normal and reasonable precautions to maintain the confidentiality of any information designated in writing as confidential and provided to it by the Borrower or any Subsidiary, except that such information may be disclosed (i) to any Related Party of the Administrative Agent, the Issuing Bank or any such Lender, including without limitation accountants, legal counsel and other advisors, (ii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iii) to the extent requested by any regulatory agency or authority, (iv) to the extent that such information becomes publicly available other than as a result of a breach of this Section, or which becomes available to the Administrative Agent, the Issuing Bank, any Lender or any Related Party of any of the foregoing on a nonconfidential basis from a source other than the Borrower, (v) in connection with the exercise of any remedy hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, and (ix) subject to provisions substantially similar to this Section 10.11, to any actual or prospective assignee or Participant, or (vi) with the consent of the Borrower. Any Person required to maintain the confidentiality of any information as provided for in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such information as such Person would accord its own confidential information. SECTION 10.12 Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which may be treated as interest on such Loan under applicable law (collectively, the "Charges"), shall exceed the maximum lawful rate of interest (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by a Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Rate to the date of repayment, shall have been received by such Lender. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. BORROWER: --------- THOMAS NELSON, INC. By: /s/ Joe L. Powers ---------------------------- Joe L. Powers Executive Vice President and Secretary ADMINISTRATIVE AGENT: --------------------- SUNTRUST BANK as Administrative Agent, as Issuing Bank, as Swingline Lender and as a Lender By: /s/ James M. Sloan, Jr. ---------------------------- Title: Director ---------------------------- Revolving Commitment: $40,000,000 LC Commitment: $5,000,000 Swingline Commitment: $10,000,000 NATIONAL CITY BANK OF KENTUCKY, as Lender By: /s/ Kevin L. Anderson ---------------------------- Title: Vice President ---------------------------- Schedule I ---------- (CAPTION> Total Lease Adjusted Funded Debt to Applicable Margin Consolidated EBITDAR (basis points per annum) - ---------------------------------------------------------------------------- Base LIBOR Commitment Fee ---- ----- -------------- Less than 1.50 to 1.00 0.00 125.0 25.0 Greater than or equal to 1.50 to 1.00 and less than 2.00 to 1.00 0.00 175.0 37.5 Greater than or equal to 2.00 to 1.00 and less than 2.50 to 1.00 0.25 200.0 37.5 Greater than or equal to 2.50 to 1.00 and less than 3.00 to 1.00 0.50 225.0 50.0 Greater then or equal to 3.00 to 1.00 0.75 250.0 50.0
Schedule 4.14(a) ---------------- Subsidiaries
Borrower's Percentage Ownership Incorporation Name Interest Jurisdiction Type ---- --------- ------------- -------- 1. Thomas Nelson Sales Co., Inc. 100% Delaware Corporation 2. The Norwalk Company 100% Delaware Corporation 3. Editorial Caribe, Inc. 100% Florida Corporation 4. Elm Hill Press, Inc. 100% Tennessee Corporation 5. Nelson Direct Marketing Services, Inc. 100% Delaware Corporation 6. New Life Treatment Centers, Inc. 99.2% Delaware Corporation 7. The Wickenburg Company 99.2% Delaware Corporation 8. Women of Faith, Inc. 99.2% Delaware Corporation 9. Worthy, Inc. 100% Delaware Corporation 10. They Hayward California Company 100% Delaware Corporation
Schedule 4.14(b) ---------------- Inactive Subsidiaries
Approximate Market Value Name of Assets Owned ---- ------------------------ 1. 855763 Ontario Ltd. $ - 0 - 2. Right Things, Inc. $ - 0 - 3. Thomas Nelson Acquistion Co., Inc. $ - 0 - 4. Nelson Communications, Inc. $ - 0 - 5. Nelson Media, Inc. $ - 0 - 6. Royal Publishers, Inc. $ - 0 - 7. Thomas Nelson Export, Inc. $ - 0 - 8. Nelson Acquistion Co., Inc. $ - 0 - 9. Parclete, Inc. $ - 0 - 10. Miss Patty Cake $ - 0 -
Schedule 7.1 ------------ Outstanding Indebtedness 1. Indebtedness of Borrower with approximate outstanding principal balance of $900,000 incurred 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, between the Board and Borrower; and (b) Reimbursement Agreement dated as of May 1, 1990, between Borrower and SunTrust Bank. 2. Indebtedness of Borrower with an approximate outstanding principal balance of $9,230,750 issued in connection with the $15,000,000 Loan from Metropolitan Life Insurance Company ("MetLife") to Borrower evidenced by: (a) Note Purchase Agreement dated January 3, 1996, among Borrower, The Prudential Life Insurance Company of America and MetLife; and (b) 6.93% Series B Senior Note Due December 31, 2005, made payable by Borrower to MetLife, with an outstanding principal balance of $9,230,750. 3. Indebtedness of Borrower with an approximate outstanding principal balance of $1,428,570 issued in connection with the $5,000,000 loan from MetLife to Borrower evidenced by: (a) Assumption and Amendment Agreement dated May 30, 1996, by and among Borrower, the C.R. Gibson Company and MetLife; and (b) 8.31% Senior Note Due June 23, 2004, made payable by Borrower to MetLife, with an outstanding principal balance of $1,428,570. Schedule 7.2 ------------ Existing Liens 1. Liens securing the indebtedness described in Item 1 of Schedule 7.1, 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 of 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. 2. Liens securing, pari passu, the Senior Unsecured Notes described in Items 2 and 3 of Schedule 7.1 and the Loans, including: a. Amended and Restated Pledge Agreement dated January 3, 1996, by and among Borrower and the banks named therein, Metropolitan Life Insurance Company, The Prudential Insurance Company and SunTrust Bank, as Agent, with respect to pledge of 100% of the outstanding common stock of The Norwalk Company (formerly known as C. R. Gibson Company), as amended by Amendment and Supplement No. 1 with respect thereto by and among the aforesaid parties, dated as of May 30, 1996. b. Amended and Restated Pledge Agreement dated January 3, 1996, by and among Borrower and the banks named therein, Metropolitan Life nsurance Company, The Prudential Insurance Company and SunTrust Bank, as Agent, with respect to pledge of 100% of the outstanding common stock of Worthy, Inc. (formerly known as Word Incorporated), as amended by Amendment and Supplement No. 1 with respect thereto by and among the aforesaid parties, dated as of May 30, 1996. [FOLLOWING SUBJECT TO CHANGE BASED ON PENDING UCC-11 SEARCHES] 3. UCC-1 Financing Statement showing Borrower as the Debtor and Comdisco, Inc. (Hitachi Credit as assignee) as Secured Party, filed with the Tennessee Secretary of State as #857974. 4. UCC-1 Financing Statement showing Borrower as Debtor and Capitol Systems, Inc. (Contel Credit Corporation as assignee) as Secured Party, filed with the Tennessee Secretary of State as #688961. 5. UCC-1 Financing Statement showing Editorial Caribe, Inc. as Debtor and Latin America Mission Publications, Incorporated as the Secured Party, filed with the Florida Secretary of State as #91 0000186292. 6. UCC-1 Financing Statement showing Editorial Caribe, Inc. as Debtor and Garborg's Heart'n Home, Inc. as the Secured Party, filed with the Florida Secretary of State as #92 0000164003. Schedule 7.4 ------------ Existing Investments 1. Subordinated Promissory Note of Remuda Ranch Company payable to Thomas Nelson, Inc. in the amount of $2,000,000 dated July 18, 2001 with principal due on the fith anniversary bearhing interest at 8% per annum. 2. Promissory Note of Ceres (USA) Inc. payable to The Haywood California Company in the amount of $150,000 dated August 31, 2001 due and payble in eight equal quartelry installments bearing interest at 7% per annum. EXHIBIT A REVOLVING CREDIT NOTE $------------- Nashville, Tennessee June 28, 2002 FOR VALUE RECEIVED, the undersigned, THOMAS NELSON, INC., a Tennessee corporation (the "Borrower"), hereby promises to pay to --------------------- - -----------------------------(the "Lender") or its registered assigns, at the office of SunTrust Bank ("SunTrust") at 201 Fourth Avenue North, Nashville, Tennessee 37219, on the Commitment Termination Date, as defined in that certain Revolving Credit Agreement dated as of June 28, 2002 (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the lenders from time to time party thereto and SunTrust, as administrative agent for the lenders, the lesser of the principal sum of $----------------, and the aggregate unpaid principal amount of all Revolving Loans made by the Lender to the Borrower pursuant to the Credit Agreement, in lawful money of the United States of America in immediately available funds, and to pay interest from the date hereof on the principal amount thereof from time to time outstanding, in like funds, at said office, at the rate or rates per annum and payable on such dates as provided in the Credit Agreement. In addition, should legal action or an attorney-at-law be utilized to collect any amount due hereunder, the Borrower further promises to pay all costs of collection, including the reasonable attorneys' fees of the Lender. Capitalized terms not otherwise defined herein shall have such meaning as set forth in the Credit Agreement. The Borrower promises to pay interest, on demand, on any overdue principal and, to the extent permitted by law, overdue interest from their due dates at a rate or rates provided in the Credit Agreement. All borrowings evidenced by this Revolving Credit Note and all payments and prepayments of the principal hereof and the date thereof shall be endorsed by the holder hereof on the schedule attached hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof, or otherwise recorded by such holder in its internal records; provided, that the failure of the holder hereof to make such a notation or any error in such notation shall not affect the obligations of the Borrower to make the payments of principal and interest in accordance with the terms of this Revolving Credit Note and the Credit Agreement. This Revolving Credit Note is issued in connection with, and is entitled to the benefits of, the Credit Agreement which, among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events, for prepayment of the principal hereof prior to the maturity hereof and for the amendment or waiver of certain provisions of the Credit Agreement, all upon the terms and conditions therein specified. THIS REVOLVING CREDIT NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TENNESSEE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWER: --------- THOMAS NELSON, INC. By: ---------------------------- Joe L. Powers Executive Vice President and Secretary LOANS AND PAYMENTS
Date Amount and Payments of Unpaid Principal Name of Person Type of Loan Principal Balance of Note Making Notation - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- ---------------
Exhibit B --------- SWINGLINE NOTE $10,000,000 Nashville, Tennessee June 28, 2002 FOR VALUE RECEIVED, the undersigned, THOMAS NELSON, INC., a Tennessee corporation (the "Borrower"), hereby promises to pay to SUNTRUST BANK (the "Swingline Lender") or its registered assigns, at the office of SunTrust Bank ("SunTrust") at 201 Fourth Avenue North, Nashville, Tennessee 37219, on the Commitment Termination Date, as defined in the Revolving Credit Agreement dated as of June 28, 2002 (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the lenders from time to time party thereto and SunTrust, as administrative agent for the lenders, the lesser of the principal sum of TEN MILLION and no/100 Dollars ($10,000,000.00) and the aggregate unpaid principal amount of all Swingline Loans made by the Swingline Lender to the Borrower pursuant to the Credit Agreement, in lawful money of the United States of America in immediately available funds, and to pay interest from the date hereof on the principal amount thereof from time to time outstanding, in like funds, at said office, at the rate or rates per annum and payable on such dates as provided in the Credit Agreement. In addition, should legal action or an attorney-at-law be utilized to collect any amount due hereunder, the Borrower further promises to pay all costs of collection, including the reasonable attorneys' fees of the Swingline Lender. Capitalized terms not otherwise defined herein shall have such meaning as set forth in the Credit Agreement. The Borrower promises to pay interest, on demand, on any overdue principal and, to the extent permitted by law, overdue interest from their due dates at a rate or rates provided in the Credit Agreement. All borrowings evidenced by this Swingline Note and all payments and prepayments of the principal hereof and the date thereof shall be endorsed by the holder hereof on the schedule attached hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof, or otherwise recorded by such holder in its internal records; provided, that the failure of the holder hereof to make such a notation or any error in such notation shall not affect the obligations of the Borrower to make the payments of principal and interest in accordance with the terms of this Swingline Note and the Credit Agreement. This Swingline Note is issued in connection with, and is entitled to the benefits of, the Credit Agreement which, among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events, for optional and mandatory prepayment of the principal hereof prior to the maturity hereof and for the amendment or waiver of certain provisions of the Credit Agreement, all upon the terms and conditions therein specified. THIS SWINGLINE NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TENNESSEE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWER: --------- THOMAS NELSON, INC. By: ---------------------------- Joe L. Powers Executive Vice President and Secretary LOANS AND PAYMENTS
Date Amount and Payments of Unpaid Principal Name of Person Type of Loan Principal Balance of Note Making Notation - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- --------------- - ---- ------------ ----------- ----------------- ---------------
Exhibit C --------- ASSIGNMENT AND ACCEPTANCE Date: ----------------- Reference is made to the Revolving Credit Agreement dated as of June 28, 2002 (as amended and in effect on the date hereof, the "Credit Agreement"), among THOMAS NELSON, INC., a Tennessee corporation, the Lenders from time to time party hereto and SunTrust Bank, as Administrative Agent for the Lenders. Terms defined in the Credit Agreement are used herein with the same meanings. Capitalized terms not otherwise defined herein shall have such meaning as set forth in the Credit Agreement. The Assignor hereby sells and assigns, without recourse, to the Assignee designated below, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Assignment Date set forth below, the interests set forth below (the "Assigned Interest") in the Assigno's rights and obligations under the Credit Agreement, including, without limitation, the interests set forth below in the Revolving Commitment of the Assignor on the Assignment Date and Revolving Loans owing to the Assignor which are outstanding on the Assignment Date, together with the participations in the LC Exposure and the Swingline Exposure of the Assignor on the Assignment Date, but excluding accrued interest and fees to and excluding the Assignment Date. The Assignee hereby acknowledges receipt of a copy of the Credit Agreement. From and after the Assignment Date (i) the 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 (ii) the Assignor shall, to the extent of the Assigned Interest, relinquish its rights and be released from its obligations under the Credit Agreement. This Assignment and Acceptance is being delivered to the Administrative Agent together with, if the Assignee is not already a Lender under the Credit Agreement, an Administrative Questionnaire in the form supplied by the Administrative Agent, duly completed by the Assignee. The Assignee shall pay the fee payable to the Administrative Agent pursuant to Section 10.4(b) of the Credit Agreement. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of Tennessee. Date of Assignment: -------------------------------- Legal Name of Assignor: --------------------------- Legal Name of Assignee: --------------------------- Assignee's Address for Notices: ------------------------------------------- - -------------------------------------------------------------------------- Effective Date of Assignment: --------------------- ("Assignment Date"):------------------------------
Percentage Assigned of Facility Principal Amount Assigned Revolving Commitment - --------------------- ------------------------- ----------------------- Revolving Loans - --------------------- ------------------------- -----------------------
The terms set forth above are hereby agreed to: ASSIGNOR: --------- By: ---------------------------- Title: ---------------------------- ASSIGNEE: --------- By: ---------------------------- Title: ---------------------------- The undersigned hereby consents to the within assignment: THOMAS NELSON, INC, as Borrower SUNTRUST BANK, as Administrative Agent and Issuing Bank: By: By: ---------------------------- --------------------------------- Title: Title: ------------------------- ------------------------------ Exhibit D --------- SUBSIDIARY GUARANTEE AGREEMENT THIS SUBSIDIARY GUARANTEE AGREEMENT dated as of June 28, 2002, among each of the Subsidiaries listed on Schedule I hereto (each such subsidiary individually, a "Guarantor" and collectively, the "Guarantors") of THOMAS NELSON, INC., a Tennessee corporation (the "Borrower"), and SUNTRUST BANK, a Georgia banking corporation as administrative agent (the "Administrative Agent") for the Lenders (as defined in the Credit Agreement referred to below). Reference is made to the Revolving Credit Agreement dated as of June 28, 2002 (as amended, supplemented or otherwise modified from time time, the "Credit Agreement"), among the Borrower, the Lenders from time to time party thereto and Administrative Agent as a Lender, Swingline Lender and Issuing Bank. Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Lenders have agreed to make Loans to the Borrower, and the Issuing Bank has agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. Each of the Guarantors is a direct or indirect wholly- owned Subsidiary of the Borrower and acknowledges that it will derive substantial benefit from the making of the Loans by the Lenders, and the issuance of the Letters of Credit by the Issuing Bank. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are conditioned on, among other things, the execution and delivery by the Guarantors of a Subsidiary Guarantee Agreement in the form hereof. As consideration therefor and in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit, the Guarantors are willing to execute this Subsidiary Guarantee Agreement. Accordingly, the parties hereto agree as follows: SECTION 1. Guarantee. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, (a) the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under the Credit Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement or disbursements, interest thereon and obligations to provide cash collateral, and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Loan Parties to the Administrative Agent and the Lenders under the Credit Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Loan Parties under or pursuant to the Credit Agreement and the other Loan Documents; and (c) the due and punctual payment and performance of all obligations of the Borrower, monetary or otherwise, under each Hedging Agreement entered into with a counterparty that was a Lender or an Affiliate of a Lender at the time such Hedging Agreement was entered into (all the monetary and other obligations referred to in the preceding clauses (a) through (c) being collectively called the "Obligations"). Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its guarantee notwithstanding any extension or renewal of any Obligation. SECTION 2. Obligations Not Waived. To the fullest extent permitted by applicable law, each Guarantor waives presentment to, demand of payment from and protest to the Borrower of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. To the fullest extent permitted by applicable law, the obligations of each Guarantor hereunder shall not be affected by (a) the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce or exercise any right or remedy against the Borrower or any other Guarantor under the provisions of the Credit Agreement, any other Loan Document or otherwise, (b) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Agreement, any other Loan Document, any Guarantee or any other agreement, including with respect to any other Guarantor under this Agreement, or (c) the failure to perfect any security interest in, or the release of, any of the security held by or on behalf of the Administrative Agent or any Lender. SECTION 3. Guarantee of Payment. Each Guarantor further agrees that its guarantee constitutes a guarantee of payment when due and not of collection, and waives any right to require that any resort be had by the Administrative Agent or any Lender to any of the security held for payment of the Obligations or to any balance of any deposit account or credit on the books of the Administrative Agent or any Lender in favor of the Borrower or any other person. SECTION 4. No Discharge or Diminishment of Guarantee. The obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce any remedy under the Credit Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or omission that may or might in any manner or to the extent vary the risk of any Guarantor or that would otherwise operate as a discharge of each Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations). SECTION 5. Defenses of Borrower Waived. To the fullest extent permitted by applicable law, each Guarantor waives any defense based on or arising out of any defense of the Borrower or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower, other than the final and indefeasible payment in full in cash of the Obligations. The Administrative Agent and the Lenders may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other guarantor, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Obligations have been fully, finally and indefeasibly paid in cash. Pursuant to applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other Guarantor or guarantor, as the case may be, or any security. SECTION 6. Agreement to Pay; Subordination. In furtherance of the foregoing and not in limitation of any other right that the Administrative Agent or any Lender has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Borrower or any other Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Administrative Agent for the benefit of the Lenders in cash the amount of such unpaid Obligations. Upon payment by any Guarantor of any sums to the Administrative Agent, all rights of such Guarantor against the Borrower arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of payment to the prior indefeasible payment in full in cash of all the Obligations. In addition, any indebtedness of the Borrower now or hereafter held by any Guarantor is hereby subordinated in right of payment to the prior payment in full in cash of the Obligations. If any amount shall erroneously be paid to any Guarantor on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of the Borrower, such amount shall be held in trust for the benefit of the Administrative Agent and the Lenders and shall forthwith be paid to the Administrative Agent to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of the Loan Documents. SECTION 7. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Administrative Agent or the Lenders will have any duty to advise any of the Guarantors of information known to it or any of them regarding such circumstances or risks. SECTION 8. Representations and Warranties. Each Guarantor represents and warrants as to itself that all representations and warranties relating to it (as a Subsidiary of the Borrower) contained in the Credit Agreement are true and correct. SECTION 9. Termination. The guarantees made hereunder (a) shall terminate when all the Obligations have been paid in full in cash and the Lenders have no further commitment to lend under the Credit Agreement, the LC Exposure has been reduced to zero and the Issuing Bank has no further obligation to issue Letters of Credit under the Credit Agreement and (b) shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Lender or any Guarantor upon the bankruptcy or reorganization of the Borrower, any Guarantor or otherwise. In connection with the foregoing, the Administrative Agent shall execute and deliver to such Guarantor or Guarantor's designee, at such Guarantor's expense, any documents or instruments which such Guarantor shall reasonably request from time to time to evidence such termination and release. SECTION 10. Binding Effect; Several Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Guarantors that are contained in this Agreement shall bind and inure to the benefit of each party hereto and their respective successors and assigns. This Agreement shall become effective as to any Guarantor when a counterpart hereof executed on behalf of such Guarantor shall have been delivered to the Administrative Agent, and a counterpart hereof shall have been executed on behalf of the Administrative Agent, and thereafter shall be binding upon such Guarantor and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of such Guarantor, the Administrative Agent and the Lenders, and their respective successors and assigns, except that no Guarantor shall have the right to assign its rights or obligations hereunder or any interest herein (and any such attempted assignment shall be void). If all of the capital stock of a Guarantor is sold, transferred or otherwise disposed of pursuant to a transaction permitted by the Credit Agreement, such Guarantor shall be released from its obligations under this Agreement without further action. This Agreement shall be construed as a separate agreement with respect to each Guarantor and may be amended, modified, supplemented, waived or released with respect to any Guarantor without the approval of any other Guarantor and without affecting the obligations of any other Guarantor hereunder. SECTION 11. Waivers; Amendment. (a) No failure or delay of the Administrative Agent of any in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and of the Administrative Agent hereunder and of the Lenders under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver and consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on any Guarantor in any case shall entitle such Guarantor to any other or further notice in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Guarantors with respect to which such waiver, amendment or modification relates and the Administrative Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). SECTION 12. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TENNESSEE. SECTION 13. Notices. All communications and notices hereunder shall be in writing and given as provided in Section 10.1 of the Credit Agreement. All communications and notices hereunder to each Guarantor shall be given to it at its address set forth on Schedule I attached hereto. SECTION 14. Survival of Agreement; Severability. (a) All covenants, agreements representations and warranties made by the Guarantors herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or the other Loan Document shall be considered to have been relied upon by the Administrative Agent and the Lenders and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Issuing Bank regardless of any investigation made by any of them or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any other fee or amount payable under this Agreement or any other Loan Document is outstanding and unpaid or the LC Exposure does not equal zero and as long as the Commitments have not been terminated. (b) In the event one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 15. Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract (subject to Section 10), and shall become effective as provided in Section 10. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. SECTION 16. Jurisdiction; Consent to Service of Process. (a) Each Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any Tennessee State court or Federal court of the United States of America sitting in Tennessee, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Tennessee State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against any Guarantor or its properties in the courts of any jurisdiction. (b) Each Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any Tennessee State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 14. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 17. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19. SECTION 18. Additional Guarantors. Pursuant to Section 5.10 of the Credit Agreement, each Subsidiary that was not in existence on the date of the Credit Agreement is required to enter into this Agreement as a Guarantor upon becoming Subsidiary. Upon execution and delivery after the date hereof by the Administrative Agent and such Subsidiary of an instrument in the form of Annex 1, such Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any other Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement. SECTION 19. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and the Issuing Bank are hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by such Lender or the Issuing Bank to or for the credit or the account of any Guarantor against any or all the obligations of such Guarantor now or hereafter existing under this Agreement and the other Loan Documents held by such Lender or the Issuing Bank, irrespective of whether or not such Person shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each Lender and the Issuing Bank under this Section 19 are in addition to other rights and remedies (including other rights of setoff) which such Lender or the Issuing Bank, as the case may be, may have. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. GUARANTORS: ----------- [list each subsidiary set forth on Schedule I] By: ---------------------------- Title: ---------------------------- ADMINISTRATIVE AGENT: --------------------- SUNTRUST BANK By: ---------------------------- Title: ---------------------------- SCHEDULE I ---------- Guarantor(s) Address ------------ ------- Annex 1 ------- SUPPLEMENT NO. ------ dated as of ------------------, ---------, to the Subsidiary Guarantee Agreement (the "Guarantee Agreement") dated as of June 28, 2002 among each of the subsidiaries listed on Schedule I thereto (each such Subsidiary individually, a "Guarantor" and collectively, the "Guarantors") of THOMAS NELSON, INC., a Tennessee corporation (the "Borrower"), and SUNTRUST BANK, a Georgia banking corporation, as Administrative Agent (the "Administrative Agent") for the Lenders (as defined in the Credit Agreement referred to below). A. Reference is made to the Revolving Credit Agreement dated as of June 28, 2002 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lenders from time to time party thereto and Administrative Agent, as a Lender, Swingline Lender and Issuing Bank. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. B. The Guarantors have entered into the Guarantee Agreement in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit. Pursuant to Section 5.10 of the Credit Agreement, each Subsidiary that was not in existence on the date of the Credit Agreement is required to enter into the Guarantee Agreement as a Guarantor upon becoming a Subsidiary. Section 18 of the Guarantee Agreement provides that additional Subsidiaries of the Borrower may become Guarantors under the Guarantee Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary of the Borrower (the "New Guarantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor under the Guarantee Agreement in order to induce the Lenders to make additional Loans and the Issuing Bank to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. ACCORDINGLY, the Administrative Agent and the New Guarantor agree as follows: SECTION 1. In accordance with Section 18 of the Guarantee Agreement, the New Guarantor by its signature below becomes a Guarantor under the Guarantee Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby (a) agrees to all the terms and provisions of the Guarantee Agreement applicable to it as Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor thereunder are true and correct on and as of the date hereof. Each reference to a Guarantor in the Guarantee Agreement shall be deemed to include the New Guarantor. The Guarantee Agreement is hereby incorporated herein by reference. SECTION 2. The New Guarantor represents and warrants to the Administrative Agent and the Lenders that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Administrative Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Guarantor and the Administrative Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. Except as expressly supplemented hereby, the Guarantee Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TENNESSEE. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantee Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision hereof in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 13 of the Guarantee Agreement. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature below, with a copy to the Borrower. SECTION 8. The New Guarantor agrees to reimburse the Administrative Agent for its out-of-pocket expenses in connection with this Supplement, including the fees, disbursements and other charges of counsel for the Administrative Agent. IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent have duly executed this Supplement to the Guarantee Agreement as of the day and year first above written. NEW GUARANTOR: -------------- ---------------------------- By: ---------------------------- Title: ---------------------------- ADMINISTRATIVE AGENT: --------------------- SUNTRUST BANK By: ---------------------------- Title: ---------------------------- Exhibit E --------- INDEMNITY, SUBROGATION AND CONTRIBUTION AGREEMENT INDEMNITY, SUBROGATION and CONTRIBUTION AGREEMENT dated as of June 28, 2002, among THOMAS NELSON, INC., a Tennessee corporation (the "Borrower"), each Subsidiary listed on Schedule I hereto (the "Guarantors"), SUNTRUST BANK, a Georgia banking corporation, as administrative agent (in such capacity, the "Administrative Agent") for the Lenders (as defined in the Credit Agreement referred to below). Reference is made to (a) that certain Revolving Credit Agreement dated as of June 28, 2002 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lenders from time to time party thereto, and Administrative Agent, as a Lender, Swingline Lender and Issuing Bank, and (b) that certain Subsidiary Guarantee Agreement dated as June 28, 2002, among the Guarantors and the Administrative Agent (as amended, supplemented or otherwise modified from time to time, the "Guarantee Agreement"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Lenders have agreed to make Loans to the Borrower, and the Issuing Bank has agreed to issue Letters of Credit for the account of the Borrower, pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement. The Guarantors have guaranteed such Loans and the other Obligations (as defined in the Guarantee Agreement) of the Borrower under the Credit Agreement pursuant to the Guarantee Agreement. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are conditioned on, among other things, the execution and delivery by the Borrower and the Guarantors of an agreement in the form hereof. Accordingly, the Borrower, each Guarantor and the Administrative Agent agree as follows: SECTION 1. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 3), the Borrower agrees that in the event a payment shall be made by any Guarantor under the Guarantee Agreement, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment. SECTION 2. Contribution and Subrogation. Each Guarantor (a "Contributing Guarantor") agrees (subject to Section 3) that, in the event a payment shall be made by any other Guarantor under the Guarantee Agreement and such other Guarantor (the "Claiming Guarantor") shall not have been fully indemnified by the Borrower as provided in Section 1, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment, in each case multiplied by a fraction of which the numerator shall be the net worth of the Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 11, the date of the Supplement hereto executed and delivered by such Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 2 shall be subrogated to the rights of such Claiming Guarantor under Section 1 to the extent of such payment. SECTION 3. Subordination. Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under Sections 1 and 2 and all other rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Obligations. No failure on the part of the Borrower or any Guarantor to make the payments required under applicable law or otherwise shall in any respect limit the obligations and liabilities of any Guarantor with respect to its obligations hereunder, and each Guarantor shall remain liable for the full amount of the obligations of such Guarantor hereunder. SECTION 4. Termination. This Agreement shall survive and be in full force and effect so long as any Obligation is outstanding and has not been indefeasibly paid in full in cash, and so long as the LC Exposure has not been reduced to zero or any of the Commitments under the Credit Agreement have not been terminated, and shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Lender or any Guarantor upon the bankruptcy or reorganization of the Borrower, any Guarantor or otherwise. SECTION 5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TENNESSEE. SECTION 6. No Waiver; Amendment. (a) No failure on the part of the Administrative Agent or any Guarantor to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by the Administrative Agent or any Guarantor preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. None of the Administrative Agent and the Guarantors shall be deemed to have waived any rights hereunder unless such waiver shall be in writing and signed by such parties. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Borrower, the Guarantors and the Administrative Agent, with the prior written consent of the Required Lenders (except as otherwise provided in the Credit Agreement). SECTION 7. Notices. All communications and notices hereunder shall be in writing and given as provided in the Guarantee Agreement and addressed as specified therein. SECTION 8. Binding Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the parties that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns. Neither the Borrower nor any Guarantor may assign or transfer any of its rights or obligations hereunder (and any such attempted assignment or transfer shall be void) without the prior written consent of the Required Lenders. Notwithstanding the foregoing, at the time any Guarantor is released from its obligations under the Guarantee Agreement in accordance with such Guarantee Agreement and the Credit Agreement, such Guarantor will cease to have any rights or obligations under this Agreement. SECTION 9. Survival of Agreement; Severability. (a) All covenants and agreements made by the Borrower and each Guarantor herein and in the certificates or other instruments prepared or delivered in connection with this Agreement or the other Loan Documents shall be considered to have been relied upon by the Administrative Agent, the Lenders and each Guarantor and shall survive the making by the Lenders of the Loans and the issuance of the Letters of Credit by the Issuing Bank, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loans or any other fee or amount payable under the Credit Agreement or this Agreement or under any of the other Loan Documents is outstanding and unpaid or the LC Exposure does not equal zero and as long as the Commitments have not been terminated. (b) In case one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 10. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts) each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement shall be effective with respect to any Guarantor when a counterpart bearing the signature of such Guarantor shall have been delivered to the Administrative Agent. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement. SECTION 11. Additional Guarantors. Pursuant to Section 5.10 of the Credit Agreement, each Subsidiary of the Borrower that was not in existence on the date of the Credit Agreement is required to enter into the Guarantee Agreement as Guarantor upon becoming a Subsidiary. Upon the execution and delivery, after the date hereof, by the Administrative Agent and such Subsidiary of an instrument in the form of Annex I hereto, such Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor hereunder. The execution and delivery of any instrument adding an additional Guarantor as a party to this Agreement shall not require the consent of any Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the date first appearing above. BORROWER: --------- THOMAS NELSON, INC. By: /s/ Joe L. Powers ---------------------------- Joe L. Powers Executive Vice President and Secretary GUARANTORS: -------------- Thomas Nelson Sales Co., Inc. By: /s/ Joe L. Powers ---------------------------- Joe L. Powers Executive Vice President and Secretary The Norwalk Company By: /s/ Joe L. Powers ---------------------------- Joe L. Powers Executive Vice President and Secretary Editorial Caribe, Inc. By: /s/ Joe L. Powers ---------------------------- Joe L. Powers Executive Vice President and Secretary Elm Hill Press, Inc. By: /s/ Joe L. Powers ---------------------------- Joe L. Powers Executive Vice President and Secretary Nelson Direct Marketing Services, Inc. By: /s/ Joe L. Powers ---------------------------- Joe L. Powers Executive Vice President and Secretary New Life Treatment Centers, Inc. By: /s/ Joe L. Powers ---------------------------- Joe L. Powers Executive Vice President and Secretary The Wickenburg Company By: /s/ Joe L. Powers ---------------------------- Joe L. Powers Executive Vice President and Secretary Women of Faith, Inc. By: /s/ Joe L. Powers ---------------------------- Joe L. Powers Executive Vice President and Secretary Worthy, Inc. By: /s/ Joe L. Powers ---------------------------- Joe L. Powers Executive Vice President and Secretary The Hayward California Company By: /s/ Joe L. Powers ---------------------------- Joe L. Powers Executive Vice President and ADMINISTRATIVE AGENT: --------------------- SUNTRUST BANK By: ---------------------------- Title: ---------------------------- SCHEDULE I ---------- Guarantor(s) ------------
Name Address ---- ------- Thomas Nelson Sales Co., Inc. 501 Nelson Place, Nashville, TN 37214 The Norwalk Company 501 Nelson Place, Nashville, TN 37214 Editorial Caribe, Inc. 501 Nelson Place, Nashville, TN 37214 Elm Hill Press, Inc. 501 Nelson Place, Nashville, TN 37214 Nelson Direct Marketing Services, Inc. 501 Nelson Place, Nashville, TN 37214 New Life Treatment Centers, Inc. 820 West Spring Creek Parkway, Suite 400, Plano, TX 75023 The Wickenburg Company 501 Nelson Place, Nashville, TN 37214 Women of Faith, Inc. 820 West Spring Creek Parkway, Suite 400, Plano, TX 75023 Worthy, Inc. 501 Nelson Place, Nashville, TN 37214 The Hayward California Company 501 Nelson Place, Nashville, TN 37214
Annex I ------- SUPPLEMENT NO. ------ dated as of ----------------, --------, to the Indemnity, Subrogation and Contribution Agreement dated as of June 28, 2002 (as the same may be amended, supplemented or otherwise modified from time to time, the "Indemnity, Subrogation and Contribution Agreement") among THOMAS NELSON, INC., a Tennessee corporation (the "Borrower"), each Subsidiary listed on Schedule I thereto (the "Guarantors") and SUNTRUST BANK, a Georgia banking corporation, as administrative agent (the "Administrative Agent") for the Lenders (as defined in the Credit Agreement referred to below). A. Reference is made to (a) that certain Revolving Credit Agreement dated as of June 28, 2002 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lenders from time to time party thereto, and Administrative Agent, as a Lender, Swingline Lender and Issuing Bank, and (b) that certain Subsidiary Guarantee Agreement dated as June 28, 2002, among the Guarantors and the Administrative Agent (as amended, supplemented or otherwise modified from time to time, the "Guarantee Agreement"). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Indemnity, Subrogation and Contribution Agreement and the Credit Agreement. B. The Borrower and the Guarantors have entered into the Indemnity, Subrogation and Contribution Agreement in order to induce the Lenders to make Loans and the Issuing Bank to issue Letters of Credit. Pursuant to Section 5.10 of the Credit Agreement, each Subsidiary that was not in existence on the date of the Credit Agreement is required to enter into the Guarantee Agreement as a Guarantor upon becoming a Subsidiary. Section 11 of the Indemnity, Subrogation and Contribution Agreement provides that additional Subsidiaries may become Guarantors under the Indemnity, Subrogation and Contribution Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary (the "New Guarantor") is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor under the Indemnity, Subrogation and Contribution Agreement in order to induce the Lenders to make additional Loans and the Issuing Bank to issue additional Letters of Credit and as consideration for Loans previously made and Letters of Credit previously issued. ACCORDINGLY, the Administrative Agent and the New Guarantor agree as follows: SECTION 1. In accordance with Section 11 of the Indemnity, Subrogation and Contribution Agreement, the New Guarantor by its signature below becomes a Guarantor under the Indemnity, Subrogation and Contribution Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby agrees to all the terms and provisions of the Indemnity, Subrogation and Contribution Agreement applicable to it as Guarantor thereunder. Each reference to a Guarantor in the Indemnity, Subrogation and Contribution Agreement shall be deemed to include the New Guarantor. The Indemnity, Subrogation and Contribution Agreement is hereby incorporated herein by reference. SECTION 2. The New Guarantor represents and warrants to the Administrative Agent and the Lenders that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. SECTION 3. This Supplement may be executed in counterparts (and by different parties hereto on different counterparts) each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Administrative Agent shall have received counterparts of this Supplement that, when taken together, bear the signature of the New Guarantor and the Administrative Agent. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Supplement. SECTION 4. Except as expressly supplemented hereby, the Indemnity, Subrogation and Contribution Agreement shall remain in full force and effect. SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TENNESSEE. SECTION 6. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Indemnity, Subrogation and Contribution Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. SECTION 7. All communications and notices hereunder shall be in writing and given as provided in Section 7 of the Indemnity, Subrogation and Contribution Agreement. All communications and notices hereunder to the New Guarantor shall be given to it at the address set forth under its signature. SECTION 8. The New Guarantor agrees to reimburse the Administrative Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Administrative Agent. IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent have duly executed this Supplement to the Indemnity, Subrogation and Contribution Agreement as of the day and year first above written. NEW GUARANTOR: -------------- ---------------------------- By: ---------------------------- Title: ---------------------------- ADMINISTRATIVE AGENT: --------------------- SUNTRUST BANK By: ---------------------------- Title: ---------------------------- Exhibit 2.3 ----------- NOTICE OF REVOLVING BORROWING --------------------,----------- SunTrust Bank, as Administrative Agent for the Lenders referred to below 201 Fourth Avenue North Nashville, TN 37219 Attention: Jim Sloan Dear Sirs: Reference is made to the Revolving Credit Agreement dated as of June 28, 2002 (as amended and in effect on the date hereof, the "Credit Agreement"), among the undersigned, as Borrower, the Lenders named therein, and SunTrust Bank, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. This notice constitutes a Notice of Revolving Borrowing, and the Borrower hereby requests a Revolving Borrowing under the Credit Agreement, and in that connection the Borrower specifies the following information with respect to the Revolving Borrowing requested hereby: (A) Aggregate principal amount of Revolving Borrowing: $ ----------------- (B) Date of Revolving Borrowing (which is a Business Day): --------------- (C) Interest Rate basis: ------------------------------------------------- (D) Interest Period (if applicable): ------------------------------------- (E) Location and number of Borrower's account to which proceeds of Revolving Borrowing are to be disbursed: ---------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- The Borrower hereby represents and warrants that the conditions specified in paragraphs (a), (b) and (c) of Section 3.2 of the Credit Agreement are satisfied. Very truly yours, THOMAS NELSON, INC. By: /s/ Joe L. Powers ---------------------------- Joe L. Powers Executive Vice President and Secretary Exhibit 2.5 ----------- NOTICE OF SWINGLINE BORROWING ---------------------,-------- SunTrust Bank, as Administrative Agent for the Lenders referred to below 201 Fourth Avenue North Nashville, TN 37219 Attention: Jim Sloan Dear Sirs: Reference is made to the Revolving Credit Agreement dated as of June 28, 2002 (as amended and in effect on the date hereof, the "Credit Agreement"), among the undersigned, as Borrower, the Lenders named therein, and SunTrust Bank, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. This notice constitutes a Notice of Swingline Borrowing, and the Borrower hereby requests a Swingline Borrowing under the Credit Agreement, and in that connection the Borrower specifies the following information with respect to the Revolving Borrowing requested hereby: (A) Principal amount of Swingline Loan: $ ------------------------------- (B) Date of Swingline Loan (which is a Business Day): -------------------- (C) Location and number of Borrower's account to which proceeds of Swingline Loan are to be disbursed: ---------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- The Borrower hereby represents and warrants that the conditions specified in paragraphs (a), (b) and (c) of Section 3.2 of the Credit Agreement are satisfied. Very truly yours, THOMAS NELSON, INC. By: /s/ Joe L. Powers ---------------------------- Joe L. Powers Executive Vice President and Secretary Exhibit 2.9 ----------- FORM OF CONTINUATION/CONVERSION ----------------------,--------- SunTrust Bank, as Administrative Agent for the Lenders referred to below 201 Fourth Avenue North Nashville, TN 37219 Attention: Jim Sloan Dear Sirs: Reference is made to the Revolving Credit Agreement dated as of June 28, 2002 (as amended and in effect on the date hereof, the "Credit Agreement"), among the undersigned, as Borrower, the Lenders named therein, and SunTrust Bank, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. This notice constitutes a Continuation/Conversion and the Borrower hereby requests the conversion or continuation of a Revolving Borrowing under the Credit Agreement, and in that connection the Borrower specifies the following information with respect to the Revolving Borrowing to be converted or continued as requested hereby: (A) Revolving Borrowing to which this request applies: -------------------- ----------------------------------------------------------------------- (B) Principal amount of Revolving Borrowing to be converted/continued: $ ------------------------------------------------ (C) Effective date of election (which is a Business Day): ------------------- (D) Interest rate basis: -------------------------------------------------- (E) Interest Period (if applicable): --------------------------------------- Very truly yours, THOMAS NELSON, INC. By: /s/ Joe L. Powers ---------------------------- Joe L. Powers Executive Vice President and Secretary Exhibit 3.1(b)(iv) ------------------ Form of Secretary's Certificate of Thomas Nelson, Inc. Reference is made to the Revolving Credit Agreement dated as of June 28, 2002 (the "Credit Agreement"), among THOMAS NELSON, INC. (the "Borrower"), the lenders named therein, and SUNTRUST BANK, as Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meanings. This certificate is being delivered pursuant to Section 3.1 of the Credit Agreement. I, Joe L. Powers, Secretary of the Borrower, DO HEREBY CERTIFY that: (a) there have been no amendments or supplements to, or restatements of, the articles of incorporation of the Borrower delivered pursuant to Section 3.1 of the Credit Agreement; (b) no proceedings have been instituted or are pending or contemplated by the Borrower with respect to the dissolution, liquidation or sale of all or substantially all the assets of the Borrower or threatening its existence or the forfeiture of any of its corporate rights under state law; (c) annexed hereto as Exhibit A is a true and correct copy of the Bylaws of the Borrower as in effect on -----------------,-------- and at all times thereafter through the date hereof; (d) annexed hereto as Exhibit B is a true and correct copy of certain resolutions duly adopted by the Board of Directors of the Borrower at a meeting of said Board of Directors duly called and held on --------------, ------, which resolutions are the only resolutions adopted by the Board of Directors of the Borrower or any committee thereof relating to the Credit Agreement and the other Loan Documents to which the Borrower is a party and the transactions contemplated therein and have not been revoked, amended, supplemented or modified and are in full force and effect on the date hereof; and (e) each of the persons named below is and has been at all times since ------------------, -------- a duly elected and qualified officer of the Borrower holding the respective office set forth opposite his or her name and the signature set forth opposite of each such person is his or her genuine signature: Name Title Specimen Signature ---- ----- ------------------ Joe L. Powers Executive Vice President /s/ Joe L. Powers And Secretary ------------------ Vance Lawson Senior Vice President, /s/ Vance Lawson Finance and Operations ------------------- IN WITNESS WHEREOF, I have hereunto signed my name as of this 28th day of June, 2002. /s/ Joe L. Powers --------------------------------- Secretary EX-17 5 x101702k.txt EXHIBIT 10.17 TO FORM 10-K FOR PERIOD ENDED 3/31/2002 EXHIBIT 10.17 EMPLOYMENT AGREEMENT This contract of Employment is made and entered into by and between Thomas Nelson, Inc., a Tennessee corporation, hereinafter referred to as "Employer", and Lee Gessner, hereinafter referred to as "Employee". Employer desires to employ Employee in the capacity of Executive Vice President of Thomas Nelson Publishing Division, with all principal powers, duties and responsibilities attendant thereto, and such other duties as shall be requested of Employee by Employer, and Employee desires to be so employed by Employer. In consideration therefore, the parties mutually agree as follows: A. TERM OF AGREEMENT ----------------- The term of this contract shall be for a period of one (1) year commencing on November 9, 2000 and thereafter shall automatically renew for additional sixty (60) day periods unless 1) cancelled upon sixty (60) days written notice by either party or 2) superseded by a new employment agreement. B. EMPLOYEE COMPENSATION --------------------- Employee's remuneration shall be as set forth in Schedule A attached to this Agreement and incorporated herein. C. EMPLOYEE CONDUCT ---------------- As Executive Vice President of Thomas Nelson Publishing Division, Employee recognizes and understands his fiduciary relationship with and responsibilities to Employer. Employee therefore promises to act always in good faith and in the best interests of Employer in the discharge of his duties and obligations. Further, Employee agrees to devote his full time and efforts to his employment with Employer. Should Employee during the term of this Agreement fail to so devote his full working time and efforts to the benefit of Employer for any reason other than illness or disability, or should he engage in any activity or business enterprise competing or conflicting with the business or activities of Employer, its subsidiaries, partners, or agents, or should he engage in any illegal or criminal conduct or acts of insubordination or moral turpitude (such as fornication, adultery, theft, embezzlement and/or fraud), or should he violate any of the terms and provisions of Subparagraph D(1) hereunder, then Employer, at its sole discretion, may terminate the employment of Employee immediately. All Employee's rights hereunder shall end upon such termination by Employer and Employee's only rights in such event shall be to receive all salary accrued through the date of termination. D. CONFIDENTIAL CLAUSES AND NON-COMPETITION AGREEMENT -------------------------------------------------- Employee further agrees as follows: (1) During Employment by Employer: Confidential Information Employee recognizes and acknowledges that there are certain trade secrets related to Employer's Bible, book, gift, and related businesses including, but not limited to, the names, royalties, account information and/or business relationships pertaining to Employer's artists, authors, writers, customers, and manufacturers, as well as certain information related to manufacturing schedules and procedures, new products, future plans, marketing practices, sales volumes of various products, and other items of Employer's businesses not specifically mentioned herein. Employee recognizes and understands that he holds a position of fiduciary privilege, and except as authorized in writing by Employer, he agrees during the term of this Agreement and thereafter to refrain from disclosing to any person, firm, corporation, partnership, association or other business entity, or to use for his own benefit, any trade secrets, unique business information, plans, products, manufacturing data, customer lists, author or artist lists, or any other confidential information relating to any and all ongoing business activities of Employer, or its parent company, or its subsidiaries the disclosure of which he knows, or in the exercise of reasonable care should have reason to know, may, can, or will be damaging or harmful to Employer's business activities or those of its parent company, affiliates, or subsidiaries, or which disclosure shall serve to direct or divert corporate opportunities, product sales, and/or profits away from Employer, its parent company, its affiliates, its subsidiaries, partners, or agents, to the person, firm, corporation, partnership, association, or the given entity to whom or to which such disclosure is made. Employer has all right to possession of, and all title in and to, all ideas, methods, plans, developments or improvements ("Proprietary Material") known by Employee which relate directly or indirectly to the business of Employer, whether acquired by Employee before or during his employment by Employer. Nothing in this Section D shall be construed as requiring any communication or transfer to Employer where the Proprietary material is lawfully protected from disclosure as a trade secret of a third party or by any other lawful prohibition against such communication or transfer. Employee hereby assigns to Employer all his right, title and interest in and to all Proprietary Material, and any patents thereon or copyrights therein. Employee will, on request of Employer, at any time during or following his employment, execute specific assignments (prepared by Employer) reflecting the assignment to the Employer or its nominee of the Properietary mateiral, as well as execute all patent and copyright applications and papers relating therto, and take all other lawful acts, which Employer deems necessary or advisable in connection therewith, including the giving of testimony. Employee will, on request of Employer, at any time during or following his employment, return to Employer any and all Employer property that he or any of his affiliates, relatives or persons under his control then has, or at any time has had, in his control. Employee agrees that in the event he or any of his affiliates, relatives or persons under his control from time to time comes into possession of any Employer property at any time following his employement, he will or will cause such person, as the case may be, to immediately deliver to Employer any and all originals and copies of the same. (2) Subsequent to Termination of Employment: Non-Competition (i) Employee agrees that he will not attempt to publish, produce, or sell any trade obok of religious or inspirational nature or Bible product or book project related to the Christian book industry, or any project of any author or artist under contract with, or published by Employer during the preceding three (3) years prior to termination, that in his knowledge was under consideraiton, in negotiation, or in the process of publication, or distribution by Employer at the time of the Employee's departure. Employee agrees that for a period extending two (2) years from the date of Employee's termination with Employer for any reason: (ii) Whether for Employee's own account or for the account of any other person or company, he will not negotiate or enter into any contract with any artist, author, writer, editor, designer, packager or other person who, at the time of termination, is under contract to Employer, or its parent, affiliates or subsidiaries, or with whom Employer or its parent, affiliates or subsidiaries is negotiating at such time, or with whom Employer its parent, affiliates or subsidiaries enters into any contract or agreement during the non-compete period hereunder. Employee further agrees not to negotiate or enter into contract with any of the above persons for a period of two (2) years following the expiration of any such person's contract with Employer or its parent, affiliates or subsidiaries. (iii) Whether for Employee's own account or for the account of any other person or company, he will not solicit or hire, nor encourage others to solicit or hire, whether as an employee, consultant, independent contractor or otherwise, any employees or consultants of Employer or its parent, affiliates or subsidiaries who are employed at the time of execution hereof, or such employees as may become employed by Employer or any of its subsidiaries during the non-compete period hereunder or in any manner induce or attempt to induce any employee or consultant of Employer to terminate his employment or engagement with Employer. (iv) Whether for Employee's own account or for the account of any other person or company, he will not engage in publishing, producing or distributing Bibles, religious or inspirational books, or audio/video product, or religious or secular gift or stationery products, nor divert to other companies any artists, authors, writers, editors, designers, packagers, or any other person under contract with Employer or its parent, affiliates or subsidiaries or with whom Employer is negotiating at the time of termination, in any geographical region in which Employer or its parent, affiliates or subsidiaries conduct such business or sell such products both as of the time of execution hereof and throughout the non-compete period hereunder. (v) He agrees never to make, utter, write, nor otherwise publish derogatory or defamatory statements which can, may, or do cause harm, whether intended or not, to the relationship between Employer or its parent, affiliates, or subsidiaries and any of their customers, personnel, producers, artists, authors, or writers. E. REMEDIES -------- Employee acknowledges that he will receive privileged information from Employer during his employment and that he will have substantial access to Employer's trade secrets, business information and personnel data. In consideration of his employment and the privilege of access to Employer's trade secrets, information, business methods and procedures, and personnel data, Employee acknowledges that the restrictions contained within paragraph D are reasonable and necessary in order to preserve Employer's legitimate interests and that any violation thereof would result in irreparable injury to Employer for which monetary damages would be an inadequate remedy. Therefore, Employee acknowledges and agrees that in the event of any violations thereof, Employer may seek from any court of competent jurisdiction preliminary and permanent injunctive relief as well as an equitable accounting of all Employee's profits or benefits arising out of such violation, which rights shall be cumulative and in addition to any other action or remedies to which Employer may be entitled. In the event that any Non-Competition provision of this Agreement shall be held by a court of competent jurisdiction to be, in any respect, an unreasonable restriction of Employee, then the court so holding may reduce the territory to which it pertains and/or the period of time to which it operates or effect any other change to the extent necessary to render the Non-Competition provisions and the Non-Disclosure of Information provisions of this Contract enforceable by the said court. F. WAIVERABILITY OF PROVISIONS --------------------------- In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected nor impaired thereby and such provisions shall be enforced to the fullest extent possible in accordance with the mutual intent of the parties hereto. G. NON-WAIVER AGREEMENT -------------------- No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and is signed by the Employee and an officer of Employer. No waiver by either party hereto of the other party's compliance with, or breach of, any condition or provision herein to be performed by said party shall constitute a simultaneous waiver of any other terms, provisions or conditions herein nor shall such waiver by either party constitute a continuing waiver of said pertinent term, provision, or condition subsequent thereto unless such continuation of waiver is agreed to in writing by the parties pursuant to the terms of this paragraph. H. WARRANTIES AND REPRESENTATION ----------------------------- This Agreement, including attachments, contains the entire agreement between the parties hereto and no agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. I. APPLICABLE LAW -------------- The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Tennessee and the parties hereto submit to the exclusive jurisdiction of the courts of Davidson County, Tennessee which shall be the venue for resolution of any dispute arising herefrom. The cost of any such litigation to enforce all or part of this Agreement, including without limitation, court costs and attorneys' fees, shall be paid by the party found to be in default hereunder or who is otherwise found to be acting or to have acted contrary to the terms hereof. Agreement is made and entered into this 11th day of November, 2000. ACCEPTED BY: THOMAS NELSON, INC. /s/ Lee Gessner By: /s/ Sam Moore - -------------------- -------------------- Lee Gessner Name: Sam Moore Title: CEO -------------------- EX-18 6 x101802k.txt EXHIBIT 10.18 TO FORM 10-K FOR PERIOD ENDED 3/31/2002 EXHIBIT 10.18 EMPLOYMENT AGREEMENT This contract of Employment is made and entered into by and between Thomas Nelson, Inc., a Tennessee corporation, hereinafter referred to as "Employer", and Mike Hyatt, hereinafter referred to as "Employee". Employer desires to employ Employee in the capacity of Senior Vice President, Publisher of Thomas Nelson Books, a division of Employer, with all principal powers, duties and responsibilities attendant thereto, and such other duties as shall be requested of Employee by Employer, and Employee desires to be so employed by Employer. In consideration therefore, the parties mutually agree as follows: A. TERM OF AGREEMENT. ----------------- The term of this contract shall be for a period of one (1) year commencing on July 7, 2000 and thereafter shall automatically renew for additional thirty (30) day periods unless 1) cancelled upon thirty (30) days written notice by either party or 2) superseded by a new employment agreement. B. EMPLOYEE COMPENSATION. --------------------- Employee's remuneration shall be as set forth in Schedule A attached to this Agreement and incorporated herein. C. EMPLOYEE CONDUCT. ---------------- As Senior Vice President, Publisher, Employee recognizes and understands his fiduciary relationship with and responsibilities to Employer. Employee therefore promises to act always in good faith and in the best interests of Employer in the discharge of his duties and obligations. Further, Employee agrees to devote his full time and efforts to his employment with Employer. Should Employee during the term of this Agreement fail to so devote his full working time and efforts to the benefit of Employer for any reason other than illness or disability, or should he engage in any activity or business enterprise competing or conflicting with the business or activities of Employer, its subsidiaries, partners, or agents, or should he engage in any illegal or criminal conduct or acts of insubordination or moral turpitude (such as fornication, adultery, theft, embezzlement and/or fraud), or should he violate any of the terms and provisions of Subparagraph D(1) hereunder, then Employer, at its sole discretion, may terminate the employment of Employee immediately. All Employee's rights hereunder shall end upon such termination by Employer and Employee's only rights in such event shall be to receive all salary accrued through the date of termination. D. CONFIDENTIAL CLAUSES AND NON-COMPETITION AGREEMENT. -------------------------------------------------- Employee further agrees as follows: (1) During Employment by Employer: Confidential Information - Employee recognizes and acknowledges that there are certain trade secrets related to Employer's Bible, book, gift, and related businesses including, but not limited to, the names, royalties, account information and/or business relationships pertaining to Employer's artists, authors, writers, customers, and manufacturers, as well as certain information related to manufacturing schedules and procedures, new products, future plans, marketing practices, sales volumes of various products, and other items of Employer's businesses not specifically mentioned herein. Employee recognizes and understands that he holds a position of fiduciary privilege, and except as authorized in writing by Employer, he agrees during the term of this Agreement and thereafter to refrain from disclosing to any person, firm, corporation, partnership, association or other business entity, or to use for his own benefit, any trade secrets, unique business information, plans, products, manufacturing data, customer lists, author or artist lists, or any other confidential information relating to any and all ongoing business activities of Employer, or its parent company, or its subsidiaries the disclosure of which he knows, or in the exercise of reasonable care should have reason to know, may, can, or will be damaging or harmful to Employer's business activities or those of its parent company, affiliates, or subsidiaries, or which disclosure shall serve to direct or divert corporate opportunities, product sales, and/or profits away from Employer, its parent company, its affiliates, its subsidiaries, partners, or agents, to the person, firm, corporation, partnership, association, or the given entity to whom or to which such disclosure is made. (2) Subsequent to Termination of Employment: Non-Competition - Employee agrees that for a period extending two (2) years from the date of Employee's termination with Employer for any reason: (i) He will not negotiate or enter into any contract with any artist, author, writer, editor, designer, packager or other person who, at the time of termination, is under contract to Employer, or its parent, affiliates or subsidiaries, or with whom Employer or its parent, affiliates or subsidiaries is negotiating at such time, or with whom Employer its parent, affiliates or subsidiaries enters into any contract or agreement during the non-compete period hereunder. Employee further agrees not to negotiate or enter into contract with any of the above persons for a period of two (2) years following the expiration of any such person's contract with Employer or its parent, affiliates or subsidiaries. (ii) He will not attempt to procure, nor encourage others to procure, the employment of any employees of Employer or its parent, affiliates or subsidiaries who are employed at the time of execution hereof, or such employees as may become employed by Employer or any of its subsidiaries during the non-compete period hereunder. (iii) He will not engage in publishing, producing or distributing Bibles, religious, Christian, or inspirational books, or audio/video product, or religious gift or stationery products, nor divert to other companies any artists, authors, writers, editors, designers, packagers, or any other person under contract with Employer or its parent, affiliates or subsidiaries or with whom Employer is negotiating at the time of termination, in any geographical region in which Employer or its parent, affiliates or subsidiaries conduct such business or sell such products both as of the time of execution hereof and throughout the non-compete period hereunder. (iv) He agrees that he will not attempt to publish, produce, or distribute any religious, Christian or inspirational trade book or Bible product or book project related to the trade book industry, or any project of any author or artist under contract with, or published by Employer during the preceding three (3) years prior to termination, that in his knowledge was under consideration, in negotitation, or in the process of publication, or distribution by Employer at the time of the Employee's departure. (v) He agrees never to make, utter, write, nor otherwise publish derogatory or defamatory statements which can, may, or do cause harm, whether intended or not, to the relationship between Employer or its parent, affiliates, or subsidiaries and any of their customers, personnel, producers, artists, authors, or writers. E. REMEDIES. --------- Employee acknowledges that he will receive privileged information from Employer during his employment and that he will have substantial access to Employer's trade secrets, business information and personnel data. In consideration of his employment and the privilege of access to Employer's trade secrets, information, business methods and procedures, and personnel data, Employee acknowledges that the restrictions contained within paragraph D are reasonable and necessary in order to preserve Employer's legitimate interests and that any violation thereof would result in irreparable injury to Employer for which monetary damages would be an inadequate remedy. Therefore, Employee acknowledges and agrees that in the event of any violations thereof, Employer may seek from any court of competent jurisdiction preliminary and permanent injunctive relief as well as an equitable accounting of all Employee's profits or benefits arising out of such violation, which rights shall be cumulative and in addition to any other action or remedies to which Employer may be entitled. In the event that any Non-Competition provision of this Agreement shall be held by a court of competent jurisdiction to be, in any respect, an unreasonable restriction of Employee, then the court so holding may reduce the territory to which it pertains and/or the period of time to which it operates or effect any other change to the extent necessary to render the Non-Competition provisions and the Non-Disclosure of Information provisions of this Contract enforceable by the said court. F. WAIVERABILITY OF PROVISIONS. ---------------------------- In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected nor impaired thereby and such provisions shall be enforced to the fullest extent possible in accordance with the mutual intent of the parties hereto. G. NON-WAIVER AGREEMENT. --------------------- No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and is signed by the Employee and an officer of Employer. No waiver by either party hereto of the other party's compliance with, or breach of, any condition or provision herein to be performed by said party shall constitute a simultaneous waiver of any other terms, provisions or conditions herein nor shall such waiver by either party constitute a continuing waiver of said pertinent term, provision, or condition subsequent thereto unless such continuation of waiver is agreed to in writing by the parties pursuant to the terms of this paragraph. H. WARRANTIES AND REPRESENTATION. ------------------------------ This Agreement, including attachments, contains the entire agreement between the parties hereto and no agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. I. APPLICABLE LAW. --------------- The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Tennessee and the parties hereto submit to the exclusive jurisdiction of the courts of Davidson County, Tennessee which shall be the venue for resolution of any dispute arising herefrom. The cost of any such litigation to enforce all or part of this Agreement, including without limitation, court costs and attorneys' fees, shall be paid by the party found to be in default hereunder or who is otherwise found to be acting or to have acted contrary to the terms hereof. Agreement is made and entered into this 7th day of July, 2000. ACCEPTED BY: THOMAS NELSON, INC. /s/ Mike Hyatt By: /s/Charles Moore - -------------------- -------------------- Mike Hyatt Name: Charles Moore -------------------- Title: Vice President -------------------- EX-19 7 x101902k.txt EXHIBIT 10.19 TO FORM 10-K FOR PERIOD ENDED 3/31/2002 EXHIBIT 10.19 EMPLOYMENT AGREEMENT This contract of Employment is made and entered into by and between Thomas Nelson, Inc., a Tennessee corporation, hereinafter referred to as "Employer", and Phil Stoner, hereinafter referred to as "Employee". Employer desires to employ Employee in the capacity of Sr. Vice President and Publisher of Reference Product, with all principal powers, duties and responsibilities attendant thereto, and such other duties as shall be requested of Employee by the Company, and Employee desires to be so employed by Employer. In consideration therefore, the parties mutually agree as follows: A. TERM OF AGREEMENT ----------------- The term of this contract shall be for a period of one (1) year commencing on June 30, 1998 and thereafter shall automatically renew for additional thirty (30) day periods unless 1) cancelled upon thirty (30) days written notice by either party or 2) superseded by a new employment agreement. B. EMPLOYEE COMPENSATION --------------------- Employee's remuneration shall be as set forth in Schedule A attached to this Agreement and incorporated herein. C. EMPLOYEE CONDUCT ---------------- (1) As Sr. Vice President and Publisher of Reference Product, Employee recognizes and understands his fiduciary relationship with and responsibilities to Employer. Employee therefore promises to act always in good faith and in the best interests of Employer in the discharge of his duties and obligations. Further, Employee agrees to devote his full working time and efforts to his employment with Employer. Should Employee during the term of this Agreement fail to so devote his full working time and efforts to the benefit of Employer for any reason other than illness or disability, or should he fail in Employer's resonable estimation to accomplish the business goals and responsibilities with which he has been charged, providing that failure is a result of factors within his control, or engage in any activity or business enterprise competing or conflicting with the business or activities of Employer, its subsidiaries, partners, or agents, or should he engage in any illegal or criminal conduct or acts of insubordination or moral turpitude (such as fornication, adultery, theft, embezzlement and/or fraud), or should he violate any of the terms and provisions of Subparagraph D(1) hereunder, then Employer, at its sole discretion, may terminate the employment of Employee immediately and without payment of the salary continuation described in C.(2) below. On the last day of employment or promptly thereafter, Employer shall pay Employee as final compensation all salary earned and unpaid as of that date, accrued vacation and sick pay, vested and non-forfeited bonuses and stock grants, if any, and any other vested funds earned in accordance with the provisions of Employer's benefit plans. (2) If Employer terminates the employment of Employee for any reason other than those listed in C.(1) above, Employer shall continue to pay to Employee his base salary and provide health insurance coverage for not more than one (1) year, provided, however, that Employee shall notify Employer immediately upon accepting an offer of employment of its commencement date. Employer's obligation to continue to pay Employee's salary shall cease of said commencement date. D. CONFIDENTIAL CLAUSES AND NON-COMPETITION AGREEMENT -------------------------------------------------- Employee further agrees as follows: (1) During Employment by Employer: Confidential Information Employee recognizes and acknowledges that there are certain trade secrets related to Employer's Bible, reference and electronic, book, gift, and related businesses including, but not limited to, the names, royalties, account information and/or business relationships pertaining to Employer's artists, authors, writers, customers, and manufacturers, as well as certain information related to manufacturing schedules and procedures, new products, future plans, marketing practices, sales volumes of various products, and other items of Employer's businesses not specifically mentioned herein. Employee recognizes and understands that he holds a position of fiduciary privilege, and except as authorized in writing by Employer, he agrees during the term of this Agreement and the non-compete period to refrain from disclosing to any person, firm, corporation, partnership, association or other business entity, or to use for his own benefit, any trade secrets, unique business information, plans, products, manufacturing data, customer lists, author or artist lists, or any other confidential information relating to any and all ongoing business activities of Employer, or its parent company, or its subsidiaries the disclosure of which he knows, or in the exercise of reasonable care should have reason to know, may, can, or will be damaging or harmful to Employer's business activities or those of its parent company, affiliates, or subsidiaries, or which disclosure shall serve to direct or divert corporate opportunities, product sales, and/or profits away from Employer, its parent company, its affiliates, its subsidiaries, partners, or agents, to the person, firm, corporation, partnership, association, or the given entity to whom or to which such disclosure is made. (2) Subsequent to Termination of Employment: Non-Competition Employee agrees that for a period extending one (1) year from the date of Employee's termination with Employer for any reason: (i) He will not negotiate or enter into any contract with any artist, author, writer, editor, designer, packager or other person who, at the time of termination, is under contract to Employer, or its parent, affiliates or subsidiaries, or with whom Employer or its parent, affiliates or subsidiaries is negotiating at such time, or with whom Employer its parent, affiliates or subsidiaries enters into any contract or agreement during the non-compete period hereunder. Employee further agrees not to negotiate or enter into contract with any of the above persons for a period of two (2) years following the expiration of any such person's contract with Employer or its parent, affiliates or subsidiaries. (ii) He will not attempt to procure, nor encourage others to procure, the employment of any employees of Employer or its parent, affiliates or subsidiaries who are employed at the time of execution hereof, or such employees as may become employed by Employer or any of its subsidiaries during the non-compete period hereunder. (iii) He will not engage in publishing, producing or distributing Bibles, or publishing biblical reference or biblical electronic products, or religious audio/video product, nor divert to other companies any artists, authors, writers, editors, designers, packagers, or any other person under contract with Employer or its parent, affiliates or subsidiaries or with whom Employer is negotiating at the time of termination, in any geographical region in which Employer or its parent, affiliates or subsidiaries conduct such business or sell such products both as of the time of execution hereof and throughout the non-compete period hereunder. (iv) He agrees never to make, utter, write, nor otherwise publish derogatory or defamatory statements which can, may, or do cause harm, whether intended or not, to the relationship between Employer or its parent, affiliates, or subsidiaries and any of their customers, personnel, producers, artists, authors, or writers. E. REMEDIES -------- Employee acknowledges that he will receive privileged information from Employer during his employment and that he will have substantial access to Employer's trade secrets, business information and personnel data. In consideration of his employment and the privilege of access to Employer's trade secrets, information, business methods and procedures, and personnel data, Employee acknowledges that the restrictions contained within paragraph D are reasonable and necessary in order to preserve Employer's legitimate interests and that any violation thereof would result in irreparable injury to Employer for which monetary damages would be an inadequate remedy. Therefore, Employee acknowledges and agrees that in the event of any violations thereof, Employer may seek from any court of competent jurisdiction preliminary and permanent injunctive relief as well as an equitable accounting of all Employee's profits or benefits arising out of such violation, which rights shall be cumulative and in addition to any other action or remedies to which Employer may be entitled. In the event that any Non-Competition provision of this Agreement shall be held by a court of competent jurisdiction to be, in any respect, an unreasonable restriction of Employee, then the court so holding may reduce the territory to which it pertains and/or the period of time to which it operates or effect any other change to the extent necessary to render the Non-Competition provisions and the Non-Disclosure of Information provisions of this Contract enforceable by the said court. F. WAIVERABILITY OF PROVISIONS --------------------------- In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected nor impaired thereby and such provisions shall be enforced to the fullest extent possible in accordance with the mutual intent of the parties hereto. G. NON-WAIVER AGREEMENT -------------------- No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and is signed by the Employee and an officer of Employer. No waiver by either party hereto of the other party's compliance with, or breach of, any condition or provision herein to be performed by said party shall constitute a simultaneous waiver of any other terms, provisions or conditions herein nor shall such waiver by either party constitute a continuing waiver of said pertinent term, provision, or condition subsequent thereto unless such continuation of waiver is agreed to in writing by the parties pursuant to the terms of this paragraph. H. WARRANTIES AND REPRESENTATION ----------------------------- This Agreement, including attachments, contains the entire agreement between the parties hereto and no agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. I. APPLICABLE LAW -------------- The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Tennessee. Any dispute regarding this Agreement and any amendment or addendum hereto shall be resolved through an arbitration hearing held in accordance with the procedures of the American Arbitration Association. Such arbitration hearing shall be held in Davidson County, Tennessee and the arbitrators' decision shall be final, binding and nonappealable by the parties hereto. Agreement is made and entered into this 8th day of July, 1998. ACCEPTED BY THOMAS NELSON, INC. /s/ Phil Stoner By: /s/ Sam Moore - -------------------- -------------------- Phil Stoner Name: Sam Moore -------------------- Title: CEO -------------------- EX-11 8 ex11302k.txt EXHJIBIT 11 TO FORM 10-K FOR PERIOD ENDED 3/31/2002 EXHIBIT 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (in thousands, except per share data)
March 31, 2002 March 31, 2001 March 31, 2000 -------------- -------------- -------------- BASIC EARNINGS PER SHARE: - ------------------------- Weighted average shares outstanding 14,348 14,299 14,242 ============== ============== ============== Income from continuing operations $ 7,821 $ 8,977 $10,657 Loss from discontinued operations (16,862) (11,811) (716) Cumulate effect of a change in accounting principle (40,433) - - -------------- -------------- -------------- Net income $(49,474) $ (2,834) $ 9,941 ============== ============== ============== Income per share from continuing operations $ 0.55 $ 0.63 $ 0.75 Income per share from discontinued operations (1.18) (0.83) (0.05) Cumulative effect of a change in accounting principle (2.82) - - -------------- -------------- -------------- Net income (loss) per share $ (3.45) $ (0.20) $ 0.70 ============== ============== ============== DILUTED EARNINGS PER SHARE: - --------------------------- Basic weighted average shares outstanding 14,348 14,299 14,242 Convertible notes - - - Dilutive stock options - based on treasury stock method using the average market price 140 236 2 -------------- -------------- -------------- Total shares 14,488 14,535 14,244 ============== ============== ============== Income from continuing operations $ 7,821 $ 8,977 $10,657 Income from discontinued operations (16,862) (11,811) (716) Cumulative effect of a change in accounting principle (40,433) - - -------------- -------------- -------------- Net income (loss) $(49,474) $ (2,834) $ 9,941 ============== ============== ============== Income per share from continuing operations $ 0.54 $ 0.62 $ 0.75 Income per share from discontinued operations (1.16) (0.82) (0.05) Cumulative effect of a change in accounting principle (2.79) - - -------------- -------------- -------------- Net income per share $ (3.41) $ (0.20) $ 0.70 ============== ============== ==============
EX-13 9 ex13302k.txt EXHIBIT 13 TO FORM 10-K FOR PERIOD ENDED 3/31/2002 EXHIBIT 13 SELECTED FINANCIAL DATA
YEARS ENDED March 31, (in thousands, except per share data) 2002 2001 2000 1999 1998 - -------------------------------------------------------------------------------- OPERATING RESULTS (a): Net revenues (b) $215,552 $214,147 $182,001 $173,903 $168,815 ================================================ Operating income $ 16,188 $ 17,627 $ 18,358 $ 17,234 $ 19,592 ================================================ Income from continuing operations $ 7,821 $ 8,977 $ 10,657 $ 8,615 $ 11,070 Income (loss) from discontinued operations (c) (16,862) (11,811) (716) 240 1,603 Cumulative effect of a change in accounting principle (d) (40,433) - - - - ------------------------------------------------ Net income (loss) $(49,474) $ (2,834) $ 9,941 $ 8,855 $ 12,673 ================================================ Cash flow: Net cash provided by continuing operating activities $ 24,374 $ 508 $ 8,781 $ 1,485 $ 4,992 Net cash provided by (used in) discontinued operating activities $ (3,092) $ 57 $(12,692) $ (1,215) $ (791) Net cash provided by (used in) investing activities $ 33,662 $ (666) $(15,299) $ 1,093 $ (2,708) Net cash provided by (used in) financing activities $(56,543) $ 1,414 $ 19,757 $(39,734) $ (6,101) EBITDA from continuing operations (e) $ 19,213 $ 20,626 $ 21,035 $ 22,705 $ 25,313 ================================================ - -------------------------------------------------------------------------------- FINANCIAL POSITION: Total assets $183,476 $285,266 $284,349 $242,499 $277,857 Working capital 83,683 140,466 145,897 117,841 140,911 Total debt 56,374 111,800 107,941 84,307 83,209 Shareholders' equity 77,576 127,437 131,732 125,649 156,396 Long-term debt to total capitalization 42.1% 46.7% 45.0% 40.2% 34.7% - -------------------------------------------------------------------------------- PER SHARE DATA (a): Income per share from continuing operations $ 0.55 $ 0.63 $ 0.75 $ 0.56 $ 0.65 Income (loss) per share from discontinued operations (c) (1.18) (0.83) (0.05) 0.02 0.09 Cumulative effect of a change in accounting principle (d) (2.82) - - - - ------------------------------------------------ Net income (loss) per share $ (3.45) $ (0.20) $ 0.70 $ 0.58 $ 0.74 ================================================ Dividends declared per share $ 0.04 $ 0.16 $ 0.16 $ 0.16 $ 0.16 EBITDA per share (e) 1.34 1.44 1.48 1.49 1.48 Book value per share 5.41 8.91 9.25 8.22 9.14 Weighted average number of shares outstanding (in thousands) (f) 14,348 14,299 14,242 15,279 17,113 - -------------------------------------------------------------------------------- (a) For all periods presented, operating results and per share data have been restated for discontinued operations. (b) The increase in net revenues during fiscal 2001 was primarily attributable to the full year of operations of fiscal 2000 acquisitions. (c) Discontinued operations include Ceres Candles and Gifts, Remuda Ranch Center for Anorexia and Bulimia, Inc. and The C.R. Gibson Company. (d) The Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets", as of April 1, 2001. The adoption of SFAS No. 142 resulted in a $40.4 million cumulative effect of a change in accounting principle charge to write-off goodwill associated with the Company's gift division, which was discontinued and sold during fiscal 2002. (e) EBITDA, earnings from continuing operations before interest expense, income taxes and depreciation and amortization expense, is a common measure not based in accounting principles generally accepted in the United States. (f) Represents basic weighted average number of shares outstanding in accordance with SFAS No. 128.
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company disposed of its non-publishing businesses this year and is now poised to focus all of its efforts on its strength, publishing. On October 11, 2001, the Company announced that it had entered into a definitive agreement by which the Company would sell and CRG Acquisition Corp. ("CRG") would purchase the Company's gift business, including substantially all of the assets of the Company's wholly-owned subsidiary, The C.R. Gibson Company ("Gibson"). The purchase was consummated on November 7, 2001, with an effective date of October 31, 2001, at a purchase price of $30.5 million, plus the assumption by CRG of certain liabilities. This sale resulted in a loss on disposal of $15.3 million. The Company also recognized a $40.4 million cumulative effect of a change in accounting principle charge to write-off goodwill associated with Gibson. Gibson generated an operating income (loss) from discontinued operations of $(0.8) million, $(3.2) million and $0.3 million in fiscal years 2002, 2001 and 2000, respectively. The Company utilized net proceeds from the sale to pay down existing debt. The financial statements reflect the gift business segment as discontinued operations for all periods presented. During December 2000, the Company determined it would dispose of its Ceres candles operation, formerly a division of its gift segment. This sale was completed in August 2001 for approximately $1.5 million. This sale resulted in a loss on disposal of $(0.5) million in fiscal 2002 and $(7.3) million in fiscal 2001. Ceres generated an operating loss from discontinued operations of $(1.3) million and $(1.0) million in fiscal years 2001 and 2000, respectively. Effective April 1, 2001, Remuda Ranch Center for Anorexia and Bulimia, Inc. ("Remuda Ranch"), which operates therapeutic centers in Arizona for women with eating disorders, was reflected as discontinued operations. For periods prior to April 1, 2001, Remuda Ranch net assets are reflected as assets held for sale in accordance with Emerging Issues Task Force Issue No. 87-11, "Allocation of Purchase Price to Assets to be Sold." Remuda Ranch was part of the New Life Treatment Center, Inc. ("NLTC") acquisition during fiscal 2000 and was considered as assets held for sale from the acquisition date through March 31, 2001. The Company closed the sale of the Remuda Ranch net assets in July 2001 for approximately $7.2 million in cash and a $2 million note receivable. This sale resulted in a loss on disposal of $(0.3) million during fiscal 2002. The operations of Remuda Ranch have been accounted for as discontinued operations and accordingly, their assets, liabilities and results of operations are segregated in the accompanying consolidated statements of operations, balance sheets and statements of cash flows and have been reclassified for all periods presented, except Remuda Ranch net assets for periods prior to April 1, 2001, which were classified as assets held for sale. During fiscal 2000, the Company completed three business acquisitions. On June 24, 1999, the Company acquired substantially all of the assets of Ceres for approximately $6.2 million, which included the assumption of certain liabilities. On December 30, 1999, the Company acquired substantially all of the assets of Rutledge Hill Press, Inc. for approximately $4.5 million including the assumption of certain liabilities. Rutledge Hill Press is a Nashville, Tennessee-based publisher that specializes in cooking, quilting, regional interest and Civil War titles. On January 28, 2000, the Company acquired approximately 70% of the outstanding shares of NLTC from a group of investors for approximately $15.4 million in cash. NLTC, headquartered in Plano, Texas, operated two primary businesses. One, Women of Faith, hosts inspirational conferences for women at venues throughout the United States, and the other, Remuda Ranch operation described above. As discussed above, at the NLTC acquisition date, Remuda Ranch was identified as an asset held for sale. During fiscal 2001, the Company paid approximately $0.8 million in cash and issued approximately 108,000 shares of the Company's common stock to acquire an additional 10% of the outstanding shares of NLTC, and has accepted additional shares of NLTC in lieu of debt payments from a third party. At March 31, 2002, the Company owned approximately 99% of the outstanding shares of NLTC. CRITICAL ACCOUNTING POLICIES - ---------------------------- The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. These policies are common with industry practice and are applied consistently from period to period. REVENUE RECOGNITION: The Company has four primary revenue sources: sales of publishing product, attendance fees and product sales from its Women of Faith seminars, royalty income from licensing copyrighted material to third parties and billed freight. Revenue from the sale of publishing product is recognized upon shipment to the customer. A reserve for sales returns is recorded where return privileges exist. The returns reserve is determined by using a 12-month rolling average return rate, multiplied by gross sales occurring over the previous four-month period by market sales channel. Historical experience reflects that product is generally returned from and credited to customers' accounts within the first 120 days of the original sale. The Company's current analysis indicates that its experience changed during fiscal 2002 from 90 days to 120 days, which resulted in an increase in the returns reserve for the period. This change in accounting estimate effectively reduced reported sales by $1.9 million for the fourth quarter and the fiscal year. The full amount of the returns reserve, net of inventory and royalty costs (based on current gross margin rates), is shown as a reduction of accounts receivable in the accompanying consolidated financial statements. Returns of publishing products from customers are accepted in accordance with standard industry practice. Generally, products that are designated as out-of-print are not returnable 90 days after notice of out-of-print status is given to the customer. Also, certain high discount sales are not returnable. Revenue from seminars is recognized as the seminars take place. Cash received in advance of seminars is included in the accompanying financial statements as deferred revenue. Royalty income from licensing the Company's publishing rights is recorded as revenue when earned under the terms of the applicable license, net of amounts due to authors. Billed freight consists of shipping charges billed to customers and is recorded as revenue upon shipment of product. ALLOWANCE FOR DOUBTFUL ACCOUNTS: The Company records an estimated reserve for bad debts as a reduction to accounts receivable in the accompanying consolidated financial statements. The reserve for bad debts has two components: a general reserve and a specific reserve. The general reserve is calculated using a 10-year rolling bad debt history applied to the accounts receivable balance, less specific reserves. Our credit department identifies specific reserves for each customer which is deemed to be a collection risk or may have filed for bankruptcy protection. INVENTORIES: Inventories are stated at the lower of cost or market using the first-in, first-out (FIFO) valuation method. The FIFO method of accounting for inventory was selected to value our inventory at the lower of market or current cost because the Company continuously introduces new products, eliminates existing products and redesigns products. Therefore, inflation does not have a material effect on the valuation of inventory. Costs of producing publishing products are included in inventory and charged to operations when product is sold or otherwise disposed. These costs include paper, printing, binding, outside editorial, international freight and duty costs, when applicable. The Company policy is to expense all internal editorial, typesetting, production, warehousing and domestic freight-in costs as incurred, except for certain indexing, stickering and assembly costs, which are capitalized into inventory. Costs of abandoned publishing projects are charged to operations when identified. The Company also maintains a reserve for excess and obsolete inventory as a reduction to inventory in the accompanying consolidated financial statements. This reserve is based on historical liquidation recovery rates applied to inventory quantities identified in excess of a twenty-four month supply on hand for each category of product. ROYALTY ADVANCES/PRE-PRODUCTION COSTS: Royalty advances are typically paid to authors at contract execution, as is standard in the publishing industry. These advances are either recorded as prepaid assets or other (long-term) assets in the accompanying consolidated financial statements, depending on the expected publication date (availability for shipment) of the product. Author advances for trade books are generally amortized over five months beginning when the product is first sold into the market. The Company's historical experience is that typically 80% of book product sales occur within the first five months after release into the market. Reference and video royalty advances are generally amortized over a twelve-month period beginning with the first sale date of the product, as these products typically have a longer sales cycle than books. Royalty advances for significant new Bible products are amortized on a straight-line basis for a period not to exceed five years (as determined by management). When royalty advances are earned through product sales at a faster pace than the amortization period, the amortization expense is accelerated to match the royalty earnings. Outstanding advances are reviewed monthly for abandoned projects or titles that appear to have unrecoverable advances. All abandoned projects and advances that management does not expect to fully recover are charged to operations when identified. For authors with multiple book/product contracts, the advance is amortized over a period that encompasses the publication of all products, generally not to exceed 24 months or the actual recovery period, whichever is shorter. Advances to our most important authors are typically expensed as they are recovered through sales. These authors generally have multiple year and multiple book contracts, as well as strong sales history of backlist titles (products published during preceding fiscal years and prior) that can be used to recover advances over long periods of time. Many Bible, reference and video products require significant development costs prior to the actual printing or production of the saleable product. These products also typically have a longer life cycle. All video pre- production costs are amortized over 12 months on a straight-line basis. Bible and reference products typically have the longest life cycle. Pre-production costs for significant Bible and reference products are recorded as other assets in the accompanying consolidated financial statements and are amortized on a straight-line basis, for a period not to exceed five years (as determined by management). GOODWILL AND INTANGIBLE ASSETS: In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets". SFAS No. 142 requires that goodwill no longer be amortized, but tested for impairment by comparing net book carrying values to fair market values upon adoption and periodically thereafter. The Company has adopted the provisions of SFAS No. 142 as of April 1, 2001. The election of SFAS No. 142 resulted in a $40.4 million cumulative effect of a change in accounting principle charge to write-off goodwill associated with the Company's gift division, which was discontinued and sold during fiscal 2002. The election of this new pronouncement had a favorable impact on continuing operations by eliminating amortization of remaining goodwill attributable to continuing operations, which amounted to a pre-tax impact of $1 million. In accordance with SFAS No. 142, goodwill was tested for impairment by the Company's reporting units: Core Publishing, Women of Faith and Gift. The fair value for the assets of the Core Publishing and Women of Faith reporting units was evaluated using discounted expected cash flows and current market multiples, and it was determined that no impairment existed during fiscal 2002. The fair value of the Gift assets was determined by the actual sales price for that division. RESULTS OF OPERATIONS - --------------------- The following table sets forth, for the periods indicated, certain selected statement of operations data of the Company expressed as a percentage of net revenues and the percentage change in dollars of such data from the prior fiscal year.
Fiscal Year-to-Year Years Ended March 31, Increase (Decrease) ----------------------------------------------------- 2002 2001 2000 2001 to 2002 2000 to 2001 ----------------------------------------------------- Net revenues 100.0 100.0 100.0 0.7 17.7 Costs and expenses: Cost of goods sold 60.2 60.3 58.5 0.5 21.3 Selling, general and administrative 30.9 30.1 29.9 3.4 18.2 Depreciation and amortization 1.4 1.4 1.5 0.9 12.0 ----------------------------------------------------- Total costs and expenses 92.5 91.8 89.9 1.4 20.1 ----------------------------------------------------- Operating income 7.5 8.2 10.1 ( 8.2) ( 4.0) ----------------------------------------------------- Interest expense 1.7 1.6 1.8 7.2 6.0 ----------------------------------------------------- Income from continuing operations 3.6 4.2 5.9 (12.9) (15.8) ----------------------------------------------------- Loss from discontinued operations ( 7.8) (5.5) (0.4) -------------------------- Cumulative effect of change in accounting principle (18.8) - - -------------------------- Net income (loss) (23.0) (1.3) 5.5 ==========================
The Company's net revenues fluctuate seasonally, with revenues in the first fiscal quarter historically being less than the remaining quarters of the year. Seasonality is the result of increased consumer purchases of the Company's products during the traditional calendar year-end holidays. Due to this seasonality, the Company has historically incurred a loss or recognized only a small profit during the first quarter of each fiscal year. In addition, the Company's quarterly operating results may fluctuate significantly due to new product introductions, the timing of selling and marketing expenses and changes in sales and product mixes. The following discussion includes certain forward-looking statements. Actual results could differ materially from those in the forward-looking statements, and a number of factors may affect future results, liquidity and capital resources. These factors include, but are not limited to, softness in the general retail environment, the timing of products being introduced to the market, the level of product returns experienced, the level of margins achievable in the marketplace, the collectibility of accounts receivable, recoupment of royalty advances, effects of acquisitions or dispositions, financial condition of our customers and suppliers, realization of inventory values at carrying amounts, access to capital and realization of income tax and intangible assets. Future revenue and margin trends cannot be reliably predicted and may cause the Company to adjust its business strategy during the 2003 fiscal year. The Company disclaims any intent or obligation to update forward-looking statements. Fiscal 2002 Compared to Fiscal 2001 - ----------------------------------- Net revenues from continuing operations in fiscal 2002 increased $1.4 million, or 0.7%, over fiscal 2001. The increase in net revenues related primarily to an increase in Women of Faith seminar revenue due to an increase in the number of events, somewhat offset by declines in product sales through our ministry and direct mail sales channels and increases in reserves for returns, as previously discussed. The decline in sales through these channels is due to an adverse impact from the events of September 11th. Our ministry customers received fewer donations this year due to a significant shift in charitable giving to disaster relief funds. Although we increased prices on several of our product lines this year, price increases did not have a material effect on net revenues. The Company's cost of goods sold from continuing operations for fiscal 2002 increased by $0.6 million, or 0.5%, and, as a percentage of net revenues, remained essentially the same. Selling, general and administrative expenses from continuing operations for fiscal 2002 increased by $2.2 million, or 3.4%, over the comparable period in fiscal 2001, and, as a percentage of net revenues, increased from 30.1% to 30.9%. This increase is primarily attributable to the net impact of $3 million from the Kmart bankruptcy. Depreciation and amortization from continuing operations was essentially the same as the prior year in dollars and as a percentage of net sales. The Company ceased amortizing goodwill during the current year in conjunction with adopting SFAS No. 142. This was offset by increased amortization of deferred loan costs and a change in the estimated useful life of certain computer equipment and software. Interest expense attributable to continuing operations remained materially consistent with fiscal 2001. Fiscal 2001 Compared to Fiscal 2000 - ----------------------------------- Net revenues in fiscal 2001 increased $32.1 million, or 17.7%, over fiscal 2000. This was primarily due to the full year of operations of fiscal 2000 acquisitions, Women of Faith and Rutledge Hill Press, which accounted for approximately $25 million of the increase, as well as modest growth in core book and Bible product lines. Price increases did not have a material effect on net revenues. The Company's cost of goods sold for fiscal 2001 increased $22.6 million, or 21.3%, and, as a percentage of net revenues, increased from 58.5% to 60.3%. The increase in cost of goods sold as a percentage of net revenues resulted primarily from issues related to royalty advance recovery from certain publishing products. Selling, general and administrative expenses for fiscal 2001 increased $9.9 million, or 18.2%, over the comparable period in fiscal 2000, primarily due to payroll and conference related expenses from a full year's operations of fiscal 2000 acquisitions. These expenses, expressed as a percentage of net revenues, were comparable from fiscal 2000 to fiscal 2001. Depreciation and amortization for fiscal 2001 increased $0.3 million, or 12.0%, from fiscal 2000. This increase is directly attributable to amortization of goodwill and other intangible assets that resulted from fiscal 2000 acquisitions. Interest expense increased $0.2 million, or 6.0%, for fiscal 2001. The increase in interest expense is related to incremental debt incurred as a result of fiscal 2000 acquisitions, partially offset by the effect of reductions in interest rates. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- At March 31, 2002, the Company had $0.5 million in cash and cash equivalents. The primary sources of liquidity to meet the Company's future obligations and working capital needs are cash generated from operations, an expected tax refund and borrowings available under bank credit facilities. At March 31, 2002, the Company had working capital of $83.7 million. Under its two bank credit facilities, at March 31, 2002, the Company had $44.1 million in borrowings outstanding, and $34.1 million available for borrowing, compared to $93.1 million in borrowings outstanding and $16.9 million available for borrowing at March 31, 2001. Net cash provided by (used in) operating activities was $21.3 million, $0.6 million and ($3.9) million in fiscal 2002, 2001 and 2000, respectively. The cash generated by operations during fiscal 2002 was principally attributable to reductions in inventories and income from continuing operations. The cash provided by operations during fiscal 2001 was principally attributable to income from continuing operations, partially offset by an increase in core Bible inventory. The cash used in operations during fiscal 2000 was principally attributable to cash used in funding the losses of discontinued operations. The Company received net proceeds from the sale of discontinued operations during fiscal 2002 in the amount of $37.8 million. All of these proceeds were used to pay down the Company's debt under its Credit Agreements. During fiscal 2002, capital expenditures totaled approximately $1.1 million. The capital expenditures were primarily for computer and warehousing equipment. In fiscal 2003, the Company anticipates capital expenditures of approximately $5.0 million, consisting primarily of office renovations, warehouse expansion, computer equipment, computer software and warehousing equipment. The Company is also obligated to pay $2.5 million under the terms of a "put option" from the Asset Purchase Agreement between CRG Acquisition and Thomas Nelson for the sale of Gibson. This option gives CRG the right to require Thomas Nelson to repurchase the Beacon Falls Distribution Center. CRG has given notice that in October 2002, the Company must repurchase the land and building at Beacon Falls for $2.5 million. The Company has engaged the services of a commercial real estate broker to list the property for sale. During fiscal 2001, the Company paid approximately $0.8 million in cash and issued approximately 108,000 shares of Common stock to acquire additional minority shares of NLTC. The Company's bank credit facilities are unsecured and consist of a revolving credit facility and a $10 million credit facility (collectively, the "Credit Agreements"). The revolving credit facility bears interest at either the prime rate or, at the Company's option, LIBOR plus a percentage, subject to adjustment based on certain financial ratios. The average interest rate for the revolving credit facility was approximately 4.92% at March 31, 2002. On June 29, 2001, the revolving credit facility was amended and included provisions to approve certain asset sales, to amend certain financial covenants, to adjust the interest rate structure, to recommend the cessation of the cash dividend and to change the maturity date to April 1, 2003. The $10 million credit facility bears interest at LIBOR plus a percentage, subject to adjustment based on certain financial ratios, and matures on July 31, 2002. The $10 million credit facility is used for temporary cash needs on a daily basis and is classified as long-term debt, as long as the revolving credit facility has the capacity to fund the outstanding balance. Effective July 25, 2001, the revolving credit facility was reduced from $100 million to $92.8 million with the sale of Remuda Ranch. Effective November 7, 2001, the revolving credit facility was further reduced to $68.2 million due to the sale of Gibson. At March 31, 2002, the Company had $44.1 million outstanding under the Credit Agreements, and $34.1 million available for borrowing. Due to the seasonality of the Company's business, borrowings under the Credit Agreements typically peak during the third quarter of the fiscal year. On June 28, 2002, the Credit Agreements were replaced by a new $65 million Senior Unsecured Revolving Credit Facility (the "Credit Facility"). The Credit Facility bears interest at either the lenders' base rate or, at the Company's option, the LIBOR plus a percentage, based on certain financial ratios. The Company has agreed to maintain certain financial ratios and tangible net worth, as well as, to limit the payment of cash dividends. The Company expects to be in compliance with such covenants during fiscal 2003. The Credit Facility has a term of three years and matures on June 28, 2005. At March 31, 2002, the Company had outstanding approximately $11.4 million of unsecured senior notes ("Senior Notes"). The Senior Notes bear interest at rates from 6.68% to 8.31% and are due through fiscal 2006. Under the terms of the Credit Agreements and the Senior Notes, the Company has agreed to maintain certain interest coverage and debt-to-total-capital ratios, which are similarly calculated for each debt agreement. The Company is currently in compliance with all covenants of these debt agreements. Management believes cash generated by operations, an expected tax refund and borrowings available under the Credit Agreements, as replaced by the Credit Facility, will be sufficient to fund anticipated working capital and capital expenditure requirements for existing operations in fiscal 2003. The Company's current cash commitments include current maturities of debt and operating lease obligations that are disclosed in the Company's Annual Report on Form 10-K for the year ended March 31, 2002. The Company also has current inventory purchase and royalty advance commitments in the ordinary course of business that require cash payments as vendors and authors fulfill their requirements to the Company in the form of delivering satisfactory product orders and manuscripts, respectively. The Company has no off-balance sheet commitments or transactions with any special purpose entities (SPE's). Management also is not aware of any undisclosed material related party transactions or relationships with management, officers or directors. The Company has declared and paid a dividend of four cents per share every quarter during fiscal 2001 and 2000, and during the first quarter of fiscal 2002. The Board of Directors, at its quarterly meetings, approves and declares the amount and timing of the dividends, if any. On August 23, 2001, the Company's Board of Directors adopted management's recommendation to suspend the payment of dividends on the Company's Common and Class B Common stock. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - ---------------------------------------------------------- The Company is subject to market risk from exposure to changes in interest rates based on its financing, investing and cash management activities. The exposure relates primarily to the Credit Agreements. In the event that interest rates associated with these Credit Agreements were to increase 100 basis points, the impact would be to reduce future cash flows by approximately $0.4 million, assuming current debt levels are maintained. THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
Years Ended March 31, -------------------------------------- 2002 2001 2000 -------------------------------------- NET REVENUES $215,552 $214,147 $182,001 COSTS AND EXPENSES: Cost of goods sold 129,691 129,095 106,457 Selling, general and administrative 66,648 64,426 54,509 Depreciation and amortization 3,025 2,999 2,677 -------------------------------------- Total costs and expenses 199,364 196,520 163,643 -------------------------------------- OPERATING INCOME 16,188 17,627 18,358 Other expense 132 - - Interest expense 3,740 3,490 3,294 -------------------------------------- Income from continuing operations before income taxes 12,316 14,137 15,064 Provision for income taxes 4,495 5,160 4,407 -------------------------------------- Income from continuing operations 7,821 8,977 10,657 Discontinued operations: Operating loss, net of applicable tax benefit of $395 and $2,719 and tax provision of $378, respectively (766) (4,547) (716) Loss on disposal, net of applicable tax benefit of $8,359 and $4,175, respectively (16,096) (7,264) - -------------------------------------- Total loss from discontinued operations (16,862) (11,811) (716) -------------------------------------- Income (loss) before cumulative effect of a change in accounting principle (9,041) (2,834) 9,941 -------------------------------------- Cumulative effect of change in accounting principle (40,433) - - -------------------------------------- Net income (loss) $ (49,474) $ (2,834) $ 9,941 Weighted average number of shares outstanding: Basic 14,348 14,299 14,242 ====================================== Diluted 14,488 14,535 14,244 ====================================== NET INCOME (LOSS) PER SHARE: Basic: Income from continuing operations $ 0.55 $ 0.63 $ 0.75 Loss from discontinued operations (1.18) (0.83) (0.05) Cumulative effect of a change in accounting principle (2.82) - - -------------------------------------- Net income (loss) per share $ (3.45) $ (0.20) $ 0.70 ====================================== Diluted: Income from continuing operations $ 0.54 $ 0.62 $ 0.75 Loss from discontinued operations (1.16) (0.82) (0.05) Cumulative effect of a change in accounting principle (2.79) - - -------------------------------------- Net income (loss) per share $ (3.41) $ (0.20) $ 0.70 ====================================== See Notes to Consolidated Financial Statements
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
March 31, ---------------------- 2002 2001 ---------------------- ASSETS Current assets: Cash and cash equivalents $ 535 $ 2,134 Accounts receivable, less allowances of $6,389 and $6,175, respectively 61,600 57,849 Inventories 39,195 51,408 Prepaid expenses 15,079 14,691 Assets held for sale 2,500 10,000 Refundable income taxes 7,800 - Deferred tax assets 7,966 13,510 Net assets of discontinued operations - 38,925 ---------------------- Total current assets 134,675 188,517 Property, plant and equipment, net 9,242 12,780 Other assets 8,120 4,999 Deferred charges 2,135 973 Goodwill, less accumulated amortization of $4,131 at 2002 and 2001 29,304 28,945 Net assets of discontinued operations - 49,052 ---------------------- TOTAL ASSETS $183,476 $285,266 ====================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 22,258 $ 19,969 Accrued expenses 15,603 12,218 Deferred revenue 9,309 9,084 Dividends payable - 574 Income taxes currently payable 500 1,004 Current portion of long-term debt 3,322 5,202 ---------------------- Total current liabilities 50,992 48,051 Long-term debt 53,052 106,598 Deferred tax liabilities 792 1,866 Other liabilities 1,064 1,314 Commitments and contingencies - - 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 13,329,759 and 13,282,327 shares, respectively 13,330 13,282 Class B common stock, $1.00 par value, authorized 5,000,000 shares; issued 1,036,801 and 1,060,901 shares, respectively 1,037 1,061 Additional paid-in capital 44,008 43,845 Retained earnings 19,201 69,249 ---------------------- Total shareholders' equity 77,576 127,437 ---------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $183,476 $285,266 ====================== See Notes to Consolidated Financial Statements
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands, except per share data)
Class B Additional Common Common Paid-In Retained Stock Stock Capital Earnings Total ------------------------------------------------ Balance at April 1, 1999 $13,287 $1,104 $44,537 $66,721 $125,649 Net income 9,941 9,94 Class B stock converted to common 18 (18) - Common stock issued: Option plans -- 3,132 common shares 3 57 60 Common stock repurchased -- 165,400 common shares (165) (1,483) (1,648) Dividends declared - $0.16 per share (2,287) (2,287) Incentive plan stock awards -- 1,635 common shares 2 15 17 ------------------------------------------------ Balance at March 31, 2000 $13,145 $1,086 $43,126 $74,375 $131,732 ================================================ Net loss (2,834) (2,834) Class B stock converted to common 25 (25) - Common stock issued: Acquisition of additional minority interest of consolidated subsidiary 108 652 760 Option plans -- 2,424 common shares 2 58 60 Dividends declared - $0.16 per share (2,292) (2,292) Incentive plan stock awards -- 1,635 common shares 2 9 11 ------------------------------------------------ Balance at March 31, 2001 $13,282 $1,061 $43,845 $69,249 $127,437 ================================================ Net loss (49,474) (49,474) Class B stock converted to common 24 (24) - Common stock issued: Option plans -- 23,999 common shares 24 163 187 Dividends declared - $0.04 per share (574) (574) ------------------------------------------------ Balance at March 31, 2002 $13,330 $1,037 $44,008 $19,201 $77,576 ================================================ See Notes to Consolidated Financial Statements
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Years ended March 31, -------------------------------- 2002 2001 2000 -------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Income from continuing operations $ 7,821 $ 8,977 $10,657 Adjustments to reconcile income to net cash provided by continuing operations: Depreciation and amortization 3,025 2,999 2,677 Deferred income taxes 4,470 (4,571) (1,803) Gain on sale of fixed assets and assets held for sale (41) (9) - Changes in assets and liabilities, net of acquisitions and disposals: Accounts receivable, net (3,751) (1,279) (408) Inventories 12,213 (6,408) (850) Prepaid expenses (388) (2,090) (1,119) Accounts payable and accrued expenses 1,304 2,465 (1,431) Deferred revenue 225 2,531 - Income taxes currently payable (504) (2,107) 1,058 -------------------------------- Net cash provided by continuing operations 24,374 508 8,781 -------------------------------- Discontinued operations Loss from discontinued operations (766) (4,547) (716) Loss on disposal (16,096) (7,264) - Changes in discontinued net assets 13,770 11,868 (11,976) -------------------------------- Net cash provided by (used in) discontinued operations (3,092) 57 (12,692) -------------------------------- Net cash provided by (used in) operating activities 21,282 565 (3,911) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1,139) (2,796) (876) Net proceeds from sales of property, plant and equipment and assets held for sale 37,844 8,876 1,857 Purchase of net assets of acquired companies - net of cash received - (760) (18,215) Changes in other assets and deferred charges (3,043) (5,986) 1,935 -------------------------------- Net cash provided by (used in) investing activities 33,662 (666) (15,299) -------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings (payments) under credit agreements (51,550) 8,560 33,084 Payments under capital lease obligations - - (80) Payments on long-term debt (3,876) (4,701) (9,440) Dividends paid (1,148) (2,287) (2,279) Changes in other liabilities (132) (160) 43 Proceeds from issuance of Common stock 163 2 77 Common stock purchased and retired - - (1,648) -------------------------------- Net cash provided by (used in) financing activities (56,543) 1,414 19,757 -------------------------------- Net increase (decrease) in cash and cash equivalents (1,599) 1,313 547 Cash and cash equivalents at beginning of year 2,134 821 274 -------------------------------- Cash and cash equivalents at end of year $ 535 $ 2,134 $ 821 ================================ Supplemental disclosures of noncash investing and financing activities: Dividends accrued and unpaid $ - $ 574 $ 569 Acquisition of additional minority interest of consolidated subsidiary $ - $ 760 $ - Note receivable received in connection with sale of Remuda Ranch $ 2,000 $ - $ - See Notes to Consolidated Financial Statements
Thomas Nelson, Inc. and Subsidiaries Notes to Consolidated Financial Statements NOTE A - DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF THE BUSINESS: Thomas Nelson, Inc. (a Tennessee corporation) and subsidiaries (the "Company"), is a publisher, producer and distributor of Bibles, books, videos and CD-ROM products emphasizing Christian, inspirational and family value themes, as well as a host of inspirational seminars for women. The principal markets for the Company's products are Christian bookstores, general bookstores, mass merchandisers and direct marketing to consumers in English-speaking countries. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements consist of the accounts of the Company including its subsidiaries, Worthy, Incorporated, The C.R. Gibson Company ("Gibson") and New Life Treatment Centers, Inc. ("NLTC"). All intercompany transactions and balances have been eliminated. NLTC has minority shareholders that own approximately 0.8% of the outstanding equity shares of NLTC at March 31, 2002. Minority interest, where material, will be presented as a reduction of net income (loss) on the consolidated statements of operations and as a separate caption between liabilities and shareholders' equity on the consolidated balance sheets. At the time of acquisition, NLTC had a net deficit in shareholders' equity, and post-acquisition operations, excluding Remuda Ranch (see Notes B, C and F), were approximately breakeven for fiscal 2002, 2001 and 2000. REVENUE RECOGNITION: The Company has four primary revenue sources: sales of publishing product, attendance fees and product sales from its Women of Faith seminars, royalty income from licensing copyrighted material to third parties and billed freight. Revenue from the sale of publishing product is recognized upon shipment to the customer. A reserve for sales returns is recorded where return privileges exist. The returns reserve is determined by using a 12-month rolling average return rate, multiplied by gross sales occurring over the previous four-month period by market sales channel. Historical experience reflects that product is generally returned from and credited to customers' accounts within the first 120 days of the original sale. The Company's current analysis indicates that its experience changed during fiscal 2002 from 90 days to 120 days, which resulted in an increase in the returns reserve for the period. This change in accounting estimate effectively reduced reported sales by $1.9 million for the fourth quarter and the fiscal year. The full amount of the returns reserve, net of inventory and royalty costs (based on current gross margin rates), is shown as a reduction of accounts receivable in the accompanying consolidated financial statements. Returns of publishing products from customers are accepted in accordance with standard industry practice. Generally, products that are designated as out-of-print are not returnable 90 days after notice of out-of-print status is given to the customer. Also, certain high discount sales are not returnable. Revenue from seminars is recognized as the seminars take place. Cash received in advance of seminars is included in the accompanying financial statements as deferred revenue. Royalty income from licensing the Company's publishing rights is recorded as revenue when earned under the terms of the applicable license, net of amounts due to authors. Billed freight consists of shipping charges billed to customers and is recorded as revenue upon shipment of product. INVENTORIES: Inventories are stated at the lower of cost or market using the first-in, first-out (FIFO) valuation method. The FIFO method of accounting for inventory was selected to value our inventory at the lower of market or current cost because the Company continuously introduces new products, eliminates existing products and redesigns products. Therefore, inflation does not have a material effect on the valuation of inventory. Costs of producing publishing products are included in inventory and charged to operations when product is sold or otherwise disposed. These costs include paper, printing, binding, outside editorial, international freight and duty costs. The Company policy is to expense all internal editorial, production, warehousing and domestic freight-in costs as incurred, except for certain indexing, stickering and assembly costs, which are capitalized into inventory. Costs of abandoned publishing projects are charged to operations when identified. The Company also maintains a reserve for excess and obsolete inventory as a reduction to inventory in the accompanying consolidated financial statements. This reserve is based on historical liquidation recovery rates applied to inventory quantities identified in excess of a twenty-four month supply on hand for each category of product. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at cost. Depreciation and amortization are provided for, principally on the straight-line method over the estimated useful lives of the individual assets: 40 years for buildings and 3 to 10 years for furniture, fixtures and equipment. GOODWILL: In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets". SFAS No. 142 requires that goodwill no longer be amortized, but tested for impairment by comparing net book carrying values to fair market values upon adoption and periodically thereafter. The Company has adopted the provisions of SFAS No. 142 as of April 1, 2001. The adoption of SFAS No. 142 resulted in a $40.4 million cumulative effect of a change in accounting principle charge to write-off goodwill associated with the Company's gift division, which was discontinued and sold during fiscal 2002. The election of this new pronouncement had a favorable impact on continuing operations by eliminating amortization of remaining goodwill attributable to continuing operations, which amounted to a pre-tax impact of $1 million. In accordance with SFAS No. 142, goodwill was tested for impairment by the Company's reporting units: Core Publishing, Women of Faith and Gift. The fair value for the assets of the Core Publishing and Women of Faith reporting units was evaluated using discounted expected cash flows and current market multiples, and it was determined that no impairment exists during fiscal 2002. The fair value of the Gift assets was determined by the actual sales price for that division. Goodwill amortization was $749,000 and $367,000 for fiscal 2001 and fiscal 2000, respectively. There was no goodwill amortization during fiscal 2002. PREPAID EXPENSES: Prepaid expenses consist primarily of royalty advances. These costs are expensed over the expected benefit periods. DEFERRED CHARGES: Deferred charges consist primarily of loan issuance costs which are being amortized over the average life of the related debt and publication costs that are expected to be of significant benefit to future periods and other deferred charges, all of which are amortized over periods not greater than 60 months. Amortization for deferred charges was $376,000, $158,000 and $202,000 for fiscal 2002, 2001 and 2000, respectively. OTHER ASSETS: Other assets consist primarily of prepaid royalty costs for works and projects which are not expected to be released within the next fiscal year. STOCK-BASED COMPENSATION: SFAS No. 123, "Accounting for Stock-Based Compensation", encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for employee stock- based compensation using the intrinsic value method as prescribed in Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB Opinion No. 25"), and related Interpretations. Under APB Opinion No. 25, no compensation cost related to employee stock options has been recognized because all options are issued with exercise prices equal to or greater than the fair market value at the date of grant. See Note L for further discussion. INCOME TAXES: Income taxes are accounted for in accordance with SFAS No. 109, "Accounting for Income Taxes". Deferred income taxes are provided for temporary differences between the financial statement and income tax bases of assets and liabilities. COMPUTATION OF NET INCOME (LOSS) PER SHARE: Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of Common and Class B Common shares outstanding during the year. Diluted earnings per share reflects the dilutive effect of stock options outstanding during the period. STATEMENT OF CASH FLOWS: For purposes of the consolidated statement of cash flows, the Company considers all highly liquid debt instruments with an original maturity of three months or less as cash equivalents. ACCOUNTING ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ACCOUNTING PRONOUNCEMENTS: In June 2001, the FASB issued SFAS No. 141, "Business Combinations." SFAS No. 141 supersedes APB Opinion No. 16, "Business Combinations", and requires all business combinations to be accounted for using the purchase method of accounting. In addition, SFAS No. 141 requires that identifiable, intangible assets be recognized apart from goodwill, based on meeting certain criteria. Implementation of SFAS No. 141did not have a material impact on the Company's consolidated financial statements. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". Implementation of SFAS No. 144 is not expected to have a material impact on the Company's consolidated financial statements. RECLASSIFICATIONS: Certain reclassifications of prior period amounts have been made to conform to the current year's presentation. NOTE B - ACQUISITIONS On June 24, 1999, the Company acquired substantially all of the assets of Ceres LLC ("Ceres") for approximately $6.2 million, which included the assumption of certain liabilities. Ceres manufactured and marketed candles, primarily under private labels for the specialty and department store markets, and was headquartered in Hayward, California. The purchase price was allocated to the net assets acquired based on their estimated fair values, including identified intangible assets related to trademarks and customer lists in the amount of approximately $1 million. After final purchase price allocations during fiscal 2001, the excess of the purchase price over the fair value of the net assets acquired (goodwill) was approximately $7.2 million. In December 2000, the Company discontinued Ceres. The accompanying consolidated financial statements reflect the results of Ceres as a discontinued operation (see Note C). On December 30, 1999, the Company acquired substantially all of the assets of Rutledge Hill Press, Inc. for approximately $4.5 million including the assumption of certain liabilities. Rutledge Hill Press is a Nashville, Tennessee-based publisher that specializes in cooking, quilting, regional interest and Civil War titles. The purchase price was allocated to the net assets acquired based on their estimated fair values, including identified intangible assets related to trademarks and customer lists in the amount of approximately $0.1 million. After final purchase price allocations during fiscal 2001, the excess of the purchase price over the fair value of the net assets acquired (goodwill) was approximately $0.9 million. On January 28, 2000, the Company acquired approximately 70% of the outstanding shares of NLTC from a group of investors for approximately $15.4 million in cash. NLTC, headquartered in Plano, Texas, operates two primary businesses. One, Women of Faith, hosts inspirational conferences for women at venues throughout the United States, and the other, Remuda Ranch Center for Anorexia and Bulimia, Inc. ("Remuda Ranch"), operates therapeutic centers in Arizona for women with eating disorders. During fiscal 2001, the Company paid approximately $0.8 million in cash and issued approximately 108,000 shares of the Company's Common Stock to acquire an additional 10% of the outstanding minority shares of NLTC, and, as of March 31, 2001, accepted additional minority shares of NLTC, representing 15% of the outstanding minority shares of NLTC, in lieu of notes receivable from a third party. The 2001 acquisition of the additional minority interest representing 25% of the outstanding shares of NLTC resulted in additional goodwill of approximately $3.7 million. At March 31, 2002, the Company owns approximately 99% of the outstanding shares of NLTC. At the date of acquisition, the Company declared its intent to sell Remuda Ranch. Accordingly, the accompanying consolidated financial statements reflect Remuda Ranch as an asset held for sale, and the Remuda Ranch operations have been excluded from the accompanying consolidated statements of operations (see Notes C and F) in accordance with Emerging Issue Task Force Issue No. 87-11, "Allocation of Purchase Price to Assets to Be Sold," ("EITF 87-11"), until April 1, 2001 (see Note C). The purchase price for NLTC was allocated to the net assets acquired based on their estimated fair values, including identified intangible assets related to trademarks and customer lists in the amount of $1 million. After final purchase price allocations during fiscal 2001, the excess of the purchase price over the fair value of the net assets acquired (goodwill) was approximately $16.3 million. The fiscal 2000 acquisitions described above were accounted for by the purchase method of accounting for business combinations. Accordingly, the accompanying consolidated statements of operations do not include any revenues or expenses related to these acquisitions prior to the respective closing dates. The cash portions of these acquisitions were financed through borrowings from the Company's Credit Agreements (see Note J). Following are the Company's unaudited pro forma results for fiscal year 2000, assuming the acquisitions, other than Ceres and Remuda Ranch (see Note C), occurred on April 1, 1999 (in thousands):
2000 --------- Net Revenues $293,199 Net Income 10,045 Earnings Per Share 0.71
These unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations, which would have actually resulted had the combinations been in effect on April 1, 1999, or of future results of operations. NOTE C - DISCONTINUED OPERATIONS On October 11, 2001, the Company announced that it had entered into a definitive agreement by which the Company would sell and CRG Acquisition Corp. would purchase the Company's gift business, including substantially all of the assets and certain liabilities of the Company's wholly-owned subsidiary, The C.R. Gibson Company ("Gibson"). Gibson is a designer, marketer and distributor of premium stationery and memory albums, (i.e. the Company's gift product segment). The purchase was consummated on November 7, 2001, with an effective date of October 31, 2001, at a purchase price of $30.5 million, subject to certain purchase price adjustments, if any (see Note R). This sale resulted in a loss on disposal of $15.3 million. The Company also recognized a $40.4 million cumulative effect of a change in accounting principle charge to write-off goodwill associated with Gibson in accordance with SFAS No. 142. Gibson generated an operating income (loss) from discontinued operations of $(0.8) million, $(3.2) million and $0.3 million and net revenues of $45.7 million, $83.8 million and $83.5 million in fiscal years 2002, 2001 and 2000, respectively. Interest expense allocations to the gift discontinued operations were based on percentage of net assets employed and totaled $1.4 million, $2.3 million and $2.2 million for fiscal years ended 2002, 2001 and 2000, respectively. The Company utilized net proceeds from the sale to pay down existing debt. The accompanying consolidated financial statements reflect the gift business segment as discontinued operations for all periods presented. During December 2000, the Company determined it would dispose of its Ceres candles operation, a former division of its gift segment. Ceres manufactured and marketed candles, primarily under private labels for the specialty and department store markets. This sale was completed in August 2001 for approximately $1.5 million. This sale resulted in a loss on disposal of $(0.5) million in fiscal 2002 and $(7.3) million in fiscal 2001. Ceres generated an operating loss from discontinued operations of $(1.3) million and $(1.0) million in fiscal years 2001 and 2000, respectively. Through the date of sale, Ceres generated net revenues of $2.5 million, $7.1 million and $7.4 million during fiscal years 2002, 2001 and 2000, respectively. Interest expense allocations to Ceres totaled $0.4 million, $0.9 million and $0.5 million for fiscal years 2002, 2001 and 2000, respectively. Effective April 1, 2001, Remuda Ranch was reclassified as a discontinued operation. For periods prior to April 1, 2001, Remuda Ranch net assets are reflected as assets held for sale in accordance with Emerging Issues Task Force Issue No. 87-11, "Allocation of Purchase Price to Assets to be Sold." Remuda Ranch was part of the NLTC acquisition during fiscal 2000 and was considered as assets held for sale from the acquisition date through March 31, 2001. The Company closed the sale of the Remuda Ranch net assets in July 2001 for approximately $7.2 million in cash and a $2 million note receivable. This sale resulted in a loss on disposal of $(0.3) million during fiscal 2002. Interest expense allocations to Remuda Ranch totaled $0.2 million in fiscal 2002. The fiscal 2002 operations of Remuda Ranch have been accounted for as discontinued operations and accordingly, their assets, liabilities and results of operations are segregated in the accompanying consolidated statements of operations and cash flows. Remuda Ranch net assets for periods prior to April 1, 2001 are classified as assets held for sale, and the results of operations and cash flows for periods up to April 1, 2001, are not included in the accompanying consolidated financial statements. All discontinued operations have been sold as of March 31, 2002. Assets and liabilities of discontinued operations as of March 31, 2001 are summarized below:
2001 ----------- Receivables $23,846 Inventories 29,090 Other current assets 609 Less: Accounts payable and accrued expenses, including estimated disposal costs (14,620) ----------- Net current assets of discontinued operations 38,925 Net property, plant and equipment 6,626 Goodwill 40,435 Other assets 1,991 ----------- Net non-current assets of discontinued operations 49,052 Net assets of discontinued operations $87,977 ===========
NOTE D - INVENTORIES Inventories consisted of the following at March 31 (in thousands):
2002 2001 --------- --------- Finished goods $36,736 $46,941 Work in process and raw materials 2,459 4,467 --------- --------- $39,195 $51,408 ========= =========
NOTE E - PREPAID EXPENSES Prepaid expenses consisted of the following at March 31 (in thousands):
2002 2001 --------- --------- Royalties $12,089 $11,979 Prepaid production costs 2,135 919 Other 855 1,793 --------- --------- $15,079 $14,691 ========= =========
NOTE F - ASSETS HELD FOR SALE Assets held for sale at March 31, 2001 include Remuda Ranch (see Notes B and C), which was sold in July, 2001 for approximately $7.2 million in cash and a $2 million note receivable. In accordance with EITF No. 87-11, during 2001 (the "holding period"), cash flows from operations, interest on incremental debt and the estimated proceeds from the sale were considered in the allocation of the purchase price to the net assets of Remuda Ranch. Accordingly, during 2001, the Company reallocated approximately $3.0 million to goodwill from Remuda Ranch's original purchase price allocation, based on the current estimated sales proceeds. During 2001, Remuda Ranch had pre-tax income of $0.6 million, including interest allocations of $1.3 million, which have been excluded from the accompanying consolidated statements of operations. At April 1, 2001, the Company determined the holding period had expired, in accordance with EITF No. 87-11. As a result, the Company applied the provisions of EITF No. 90-06, "Accounting for Certain Events not Addressed in Issue No. 87-11 Related to an Acquired Operating Unit to be Sold" and reflected Remuda Ranch as a discontinued operation in the Company's consolidated financial statements until it was sold in July 2001 (see Note C). NOTE G - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following at March 31 (in thousands):
2002 2001 --------- --------- Land $ 291 $ 748 Buildings 8,870 9,504 Machinery and equipment 12,504 14,568 Furniture and fixtures 4,020 6,729 Other 1,825 1,912 --------- --------- 27,510 33,461 Less allowance for depreciation and amortization (18,268) (20,681) --------- --------- $ 9,242 $12,780 ========= =========
Depreciation expense was $2.6 million, $1.8 million and $2.1 million for fiscal years 2002, 2001 and 2000, respectively. NOTE H - OTHER ASSETS Other assets consisted of the following at March 31 (in thousands):
2002 2001 --------- --------- Prepaid royalties $3,061 $2,473 Note receivable 2,000 - Cash surrender value of life insurance policies 1,729 1,539 Intangible assets, net 51 34 Other 1,279 953 --------- --------- $8,120 $4,999 ========= =========
Amortization expense for other assets was $25, 000, $281,000 and $23,000 for fiscal years 2002, 2001 and 2000, respectively. NOTE I - ACCRUED EXPENSES Accrued expenses consisted of the following at March 31 (in thousands):
2002 2001 --------- --------- Accrued royalties $ 4,862 $ 4,868 Accrued payroll 473 455 Accrued commissions 295 388 Accrued interest 346 1,118 Accrued sales and property tax 343 17 Net liability of discontinued operations 6,312 2,032 Accrued group insurance 565 625 Other 2,407 2,715 --------- --------- $15,603 $12,218 ========= =========
Cash payments for interest were $6.6 million in 2002, $7.9 million in 2001 and $6.2 million in 2000. NOTE J - LONG-TERM DEBT Long-term debt consisted of the following at March 31 (in thousands):
2002 2001 --------- --------- Credit Agreements $44,100 $ 93,050 Senior Notes 11,374 14,396 Industrial Revenue Bonds 900 1,126 Loan Agreement - 333 Other - 2,895 --------- --------- 56,374 111,800 Less current portion (3,322) (5,202) --------- --------- $53,052 $106,598 ========= =========
As of March 31, 2002, the Company's bank credit facilities consisted of a revolving credit facility and a $10 million credit facility (collectively, the "Credit Agreements"). The revolving credit facility bears interest at either the base rate or, at the Company's option, LIBOR plus a percentage, subject to adjustment based on certain financial ratios. The average interest rate for the revolving credit facility was approximately 4.92% at March 31, 2002. On June 29, 2001, the revolving credit facility was amended and included provisions to approve certain asset sales, to amend certain financial covenants, to adjust the interest rate structure, to recommend the cessation of the cash dividend and to change the maturity date to April 1, 2003. The $10 million credit facility bears interest at LIBOR plus a percentage, subject to adjustment based on certain financial ratios, and matures on July 31, 2002. The $10 million credit facility is used for temporary cash needs on a daily basis and is classified as long-term debt, as long as the revolving credit facility has the capacity to fund the outstanding balance. Effective July 25, 2001, the revolving credit facility was reduced from $100 million to $92.8 million with the sale of Remuda Ranch. Effective November 7, 2001, the revolving credit facility was further reduced to $68.2 million due to the sale of Gibson. At March 31, 2002, the Company had $44.1 million outstanding under the Credit Agreements, and $34.1 million available for borrowing. Due to the seasonality of the Company's business, borrowings under the Credit Agreements typically peak during the third quarter of the fiscal year. On June 28, 2002, the Credit Agreements were replaced by a new $65 million Senior Unsecured Revolving Credit Facility (the "Credit Facility"). The Credit Facility bears interest at either the lenders' base rate or, at the Company's option, the LIBOR plus a percentage, based on certain financial ratios. The Company has agreed to maintain certain financial ratios and tangible net worth, as well as, to limit the payment of cash dividends. The Company expects to be in compliance with such covenants during fiscal 2003. The Credit Facility is for three years and matures on June 28, 2005. The Company has outstanding Industrial Revenue Bonds, which bear interest at rates from 7.35% to 8.1% and are due through 2005. At March 31, 2002, the Industrial Revenue Bonds were secured by property, plant and equipment with a net book value of approximately $1.3 million. The Company has outstanding $11.4 million in Senior Notes, which bear interest at rates from 6.68% to 8.31% and are due through fiscal 2006. Under the terms of the Senior Notes, the Company has agreed, among other things, to limit the payment of cash dividends and to maintain certain interest coverage and debt-to-total-capital ratios. At March 31, 2002, the Company was in compliance with all covenants of the Senior Notes. Maturities of long-term debt for the years ending March 31, reflecting the Credit Facility dated June 28, 2002, are as follows (in thousands):
2003 $ 3,322 2004 3,322 2005 3,322 2006 46,408 2007 and thereafter - -------- $56,374 ========
NOTE K - LEASES Total rental expense for operating leases associated with continuing operations, including short-term leases of less than a year, amounted to approximately $3.2 million in 2002, $3.0 million in 2001 and $2.5 million in 2000. Generally, the leases provide that, among other things, the Company shall pay for utilities, insurance, maintenance and property taxes in excess of base year amounts. Minimum rental commitments under non-cancelable operating leases for the years ending March 31 are as follows (in thousands):
Operating Leases --------- 2003 $2,074 2004 1,637 2005 1,507 2006 1,035 2007 319 2008 and thereafter 1,237 --------- Total minimum lease payments $7,809 =========
NOTE L - STOCK PLANS 1992 EMPLOYEE STOCK INCENTIVE PLAN: The Company has adopted the 1992 Amended and Restated Employee Stock Incentive Plan (the "Stock Incentive Plan"), which is administered by the Company's Compensation Committee. Stock options, stock appreciation rights, restricted stock, deferred stock, stock purchase rights and other stock-based awards may be granted to employees under this plan. In addition, 140,000 shares of Common stock have been authorized for issuance under this plan for annual stock option grants to each of the Company's outside directors for the purchase of 2,000 shares of Common stock. Stock options have been granted under this plan as indicated in the table below. The options in the Stock Incentive Plan vest at a rate of 33 1/3% on the first through third anniversaries of the date of grant, subject to certain performance goals, and vest in full if the executive is employed on the third anniversary of the date of grant, regardless of whether such goals are met. At March 31, 2002, there were options to purchase 278,667 shares of Common Stock and 330,000 shares of Class B Common stock exercisable. The weighted average life of the options outstanding in the Stock Incentive Plan at March 31, 2002, was four years.
Weighted Remaining Outstanding Options Average Weighted Shares ------------------- Exercise Average Reserved Common Class B /Grant Fair For Grant Stock Stock Price Value -------------------------------------------------------- April 1, 1999 138,261 507,000 1,405,000 15.86 Options canceled 90,500 (85,500) (5,000) 12.16 Options granted (12,000) 12,000 - 10.00 $4.82 Stock awards (1,635) - - 9.94 -------------------------------------------------------- March 31, 2000 215,126 433,500 1,400,000 15.89 ======================================================== Options canceled 1,088,500 (108,500) (980,000) 17.76 Options granted (367,000) 367,000 - 6.91 $3.10 Stock awards (1,635) - - 6.50 -------------------------------------------------------- March 31, 2001 934,991 692,000 420,000 11.16 ======================================================== Options canceled 413,334 (324,000) (90,000) 10.86 Options granted (573,500) 573,500 - 7.10 $4.05 Stock awards - - - - -------------------------------------------------------- March 31, 2002 774,825 941,500 330,000 9.52 ========================================================
1989 NLTC STOCK INCENTIVE PLAN: NLTC has a stock option plan that provides for granting to officers and key employees non-qualified options to purchase its Common Stock. Options shall not be priced at less than 85% of the fair value at the date of grant or be granted for terms of greater than ten years. Options outstanding generally vest after four years of employment, or at 25% per year. No options have been granted under this plan since the Company's acquisition of NLTC. At March 31, 2002 and 2001, there were options to purchase approximately 0.6 million and 1.2 million shares outstanding under this plan, of which approximately 0.5 million and 1.0 million were exercisable, respectively. At March 31, 2002, the weighted average exercise price on outstanding options and exercisable options was approximately $0.85 per share and the weighted average life was four years. At March 31, 2001, the weighted average exercise price on outstanding options and exercisable options was approximately $0.96, and the weighted average life was five years. STOCK-BASED COMPENSATION PLANS: The Company accounts for options issued to employees and directors under APB Opinion No. 25 and related interpretations. All options are granted with exercise prices equal to or greater than market value of the Company's Common stock on the date of grant. As a result, no compensation cost has been recognized. SFAS No. 123 established new financial accounting and reporting standards for stock-based compensation plans. The Company has adopted the disclosure-only provision of SFAS No. 123. As a result, no compensation cost has been recognized for the Company's employee stock option plans. Had compensation cost for the employee stock option plans been determined based on the fair value at the grant date for awards in fiscal 2002, 2001 and 2000 consistent with the provisions of SFAS No. 123, the Company's net income (loss) and net income (loss) per share would have been reduced (increased) to the following pro forma amounts for the 2002, 2001 and 2000 fiscal years:
2002 2001 2000 --------------------------- Net income (loss): As reported $(49,474) $(2,834) $9,941 =========================== Pro forma $(49,667) $(2,987) $9,750 =========================== Net income (loss) per share: Basic - As reported $ (3.45) $ (0.20) $ 0.70 =========================== Pro forma $ (3.46) $ (0.21) $ 0.68 =========================== Diluted - As reported $ (3.41) $ (0.20) $ 0.70 =========================== Pro forma $ (3.43) $ (0.21) $ 0.68 ===========================
Because the SFAS No. 123 method of accounting has not been applied to options granted prior to April 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. The fair value of each option on its date of grant has been estimated for pro forma purposes using the Black-Scholes option pricing model using the following weighted average assumptions:
2002 2001 2000 --------- --------- --------- Expected dividend payment $ - $ 0.16 $ 0.16 Expected stock price volatility 35.40% 34.45% 11.83% Risk free interest rate 5.38% 6.27% 5.45% Expected life of options 9 years 9 years 9 years
1997 DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS: The Company adopted the 1997 Deferred Compensation Plan for Non-Employee Directors (the "Deferred Compensation Plan"), which is administered by the Compensation Committee. The Deferred Compensation Plan is a non-qualified plan that allows eligible non-employee members of the Company's Board of Directors to elect to defer receipt of all or any portion of annual base fees payable to them for services rendered to the Company as Directors. The participating Directors are awarded performance units of the Company's Common Stock at fair market value on the deferral dates and dividend payment dates. Distributions at age 65 or 70 are paid in cash, based on the value of the performance units at the time of distribution, payable in a lump sum or in installments. Compensation expense is recognized on deferral dates, dividend payment dates, and based on changes in the quoted price of the Company's Common Stock. During fiscal years 2002, 2001 and 2000, compensation expense in relation to the Deferred Compensation Plan, was recorded in the amounts of approximately $0.3 million, $0.1 million and $0.1 million, respectively. NOTE M - RETIREMENT PLANS The Company administers the Thomas Nelson, Inc. Savings and Investment Plan ("Company Plan"), which includes an ESOP and a 401(k) salary deferral feature. In addition, Gibson maintains The C.R. Gibson Company Employee Stock Ownership Plan ("Gibson ESOP") and The C.R. Gibson Company Savings and Investment Plan ("Gibson 401(k) Plan"). The Company Plan covers all eligible officers and employees other than those employed by Gibson. The Company, at its discretion, matches each employee's 401(k) contribution annually and, in addition, may make retirement contributions to the ESOP at its discretion. The Gibson ESOP and Gibson 401(k) Plan benefit all eligible Gibson employees. Gibson matches, at its discretion, each Gibson employee's 401(k) contributions annually and contributes 4% of the first $6,600 of each participant's compensation in the Gibson 401(k) Plan. The Company's contributions to these retirement plans, including matching contributions, totaled $2.4 million in 2000. In fiscal 2001, the Gibson ESOP and Gibson 401(k) plans were merged into the Company Plan. The surviving plan continued to allow employer discretionary contributions to a stock bonus feature and continued to have a 401(k) feature. The surviving plan allows all eligible employees to elect deferral contributions of between 1% and 15% of their eligible compensation. The Company will match 100% of each participant's salary deferral contributions up to 3% of eligible compensation and 50% of the next 2% of eligible compensation. The new 401(k) matching schedule was retroactive to January 1, 2000, in order for the surviving plan to qualify as a "safe harbor" 401(k) plan under applicable Internal Revenue Code Sections. The Company's contributions under this plan, including matching contributions, totaled $0.7 million and $2.5 million during fiscal 2002 and 2001, respectively. NLTC has adopted a profit sharing plan, which is qualified under section 401 of the Internal Revenue Code. Eligible employees over 21 years of age may participate in the plan after one year of credited service with NLTC. NLTC's contribution to the plan for any year is discretionary. During fiscal 2002 and 2001, NLTC matched 20% of all employee contributions, up to 15% of eligible compensation. The Company's matching contributions under this plan totaled $24,000 during fiscal 2002 and $176,000 during fiscal 2001. NOTE N - COMMON STOCK The Company has declared and paid a dividend of four cents per share every quarter during fiscal 2001 and 2000 and for the first quarter of fiscal 2002. The Board of Directors, at its quarterly meetings, approves and declares the amount and timing of the dividends, if any. On August 23, 2001, the Company's Board of Directors adopted management's recommendation to suspend the payment of dividends on the Company's Common and Class B Common Stock. Class B Common Stock carries ten votes per share and is convertible to Common Stock on a one-to-one ratio at the election of the holder. NOTE O - INCOME TAXES The income tax provision (benefit) is comprised of the following for the fiscal years ended March 31, (in thousands):
2002 2001 2000 --------- --------- --------- Current: U.S. federal $(7,800) $ 1,670 $ 5,369 State (929) 1,167 1,069 Foreign - - 150 --------- --------- --------- Total current (8,729) 2,837 6,588 Deferred 4,470 (4,571) (1,803) --------- --------- --------- Total tax provision (benefit) $(4,259) $(1,734) $ 4,785 ========= ========= ========= Provision for income taxes from continuing operations $ 4,495 $ 5,160 $ 4,407 Provision (benefit) for income taxes from discontinued operations (8,754) (6,894) 378 --------- --------- --------- Total tax provision (benefit) $(4,259) $(1,734) $4,785 ========= ========= =========
SFAS No. 109 permits the recognition of a deferred tax asset if it is more likely than not that the future tax benefit will be realized. The Company believes that, based on its history of profitable operations, the net deferred tax asset will be realized on future tax returns, primarily from the generation of future taxable income. The Company maintains a valuation allowance against net deferred tax assets. The valuation allowance consists primarily of contribution carryforwards for which utilization is uncertain due to limited carryforward periods and cumulative tax losses in recent years. The net deferred tax asset is comprised of the following at March 31 (in thousands):
2002 2001 --------- --------- Deferred tax assets: Contributions $ 2,909 $ 2,786 Inventory obsolescence reserve 1,765 2,650 Bad debt and returns reserves 2,053 3,463 Inventory-unicap tax adjustment 1,017 1,217 Advances and prepaid expenses 123 (6) Accrued liabilities 1,896 5,430 Deferred charges (84) - Valuation allowance (1,713) (2,030) --------- --------- 7,966 13,510 Deferred tax liabilities: Accelerated depreciation (792) (874) Deferred charges - (992) --------- --------- (792) (1,866) Net deferred taxes $ 7,174 $11,644 ========= =========
Reconciliation of income taxes from continuing operations computed at the U.S. federal statutory tax rate to the Company's effective tax rate is as follows for the fiscal years ended March 31:
2002 2001 2000 --------- --------- --------- U.S. federal statutory tax rate provision 34.0% 34.0% 34.0% State taxes on income, net of federal tax effect 2.5% 2.5% 2.5% Tax benefit of foreign translation adjustment charge-off - - (7.2)% Effective tax rate 36.5% 36.5% 29.3%
During the fourth quarter of fiscal year 2000, the Company closed a foreign subsidiary in the United Kingdom. This subsidiary distributed products throughout Europe. The Company continues to sell products in Europe through third-party distributor arrangements. This closure did not have a material impact on the Company's consolidated financial statements. While this foreign subsidiary produced only nominal revenues and operating income over the last several years, it did generate a substantial cumulative foreign currency translation loss over the course of its existence. Upon the closure of this foreign subsidiary, the Company realized a permanent tax benefit of approximately $0.6 million, related to the cumulative foreign currency translation loss. Cash payments for income taxes were $2.3 million, $5.2 million and $6.7 million in 2002, 2001 and 2000, respectively. NOTE P - QUARTERLY RESULTS (UNAUDITED) Summarized results for each quarter in the fiscal years ended March 31, 2002 and 2001 are as follows (dollars in thousands, except per share data):
1st 2nd 3rd 4th Quarter Quarter Quarter Quarter ------------------------------------------ 2002 - ---- Net revenue $ 45,414 $ 58,710 $ 61,167 $ 50,261 Operating income 1,569 6,471 4,035 4,113 Income from continuing operations 540 3,294 1,875 2,112 Loss from discontinued operations (234) (15,239) - (1,389) Cumulative effect of a change in accounting principle (40,433) - - - Net income (loss) (40,127) (11,945) 1,875 723 Income per share from continuing operations 0.04 0.23 0.13 0.15 Loss per share from discontinued operations (0.02) (1.06) - (0.10) Loss per share from change in accounting principle (2.82) - - - Net income (loss) per share (2.80) (0.83) 0.13 0.05 2001 - ---- Net revenue $ 49,202 $ 55,703 $ 54,372 $ 54,870 Operating income 4,016 5,885 4,202 3,524 Income from continuing operations 1,971 3,011 2,150 1,845 Income (loss) from discontinued operations (1,158) 3 (7,306) (3,350) Net income (loss) 813 3,014 (5,156) (1,505) Income per share from continuing operations 0.14 0.21 0.15 0.13 Loss per share from discontinued operations (0.08) - (0.51) (0.24) Net income (loss) per share 0.06 0.21 (0.36) (0.11)
The quarterly results for fiscal 2002 have been adjusted to reflect the cumulative effect of a change in accounting principle, associated with the adoption of SFAS No. 142. The Company originally recorded the goodwill impairment of $40.4 million as a loss from discontinued operations in the second quarter. In accordance with SFAS No. 142, the Company has restated its results of operations to reflect the $40.4 million as a cumulative effect of a change in accounting principle in the first quarter. NOTE Q - COMMITMENTS AND CONTINGENCIES The Company has commitments to provide advances to certain authors in connection with products being developed for the Company. These commitments totaled approximately $9.4 million at March 31, 2002. The timing of payments will be dependent upon the performance by the authors of conditions provided in the applicable contracts. It is anticipated that a substantial portion of the commitments will be completed within the next four years. The Company is subject to various other legal proceedings, claims and liabilities, which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the Company. NOTE R - RELATED PARTY TRANSACTIONS Effective October 31, 2001, the Company sold the assets of its gift division to CRG Acquisition Corp., now known as C.R. Gibson, Inc., for consideration of $30.5 million, subject to adjustment. At the date of sale, S. Joseph Moore became President of C.R. Gibson, Inc. Mr. Moore's employment with the Company terminated at the date of sale; however, he remains a member of the Company's board of directors. The Company and C.R. Gibson, Inc. are engaged in discussions concering the amount of the final purchase price adjustment related to minimum working capital and accounts receivable under the Amended and Restated Asset Purchase Agreement dated as of October 31, 2001. The Company believes it has adequately reserved for such purchase price adjustment, if any. In connection with the sale transaction, the parties also entered into a Transaction Services Agreement whereby the Company provides warehousing, accounting and other administrative services to C.R. Gibson, Inc. The Company received fees under this agreement totaling approximately $3.0 million in fiscal 2002 and expects to continue to provide transition services during the first half of fiscal 2003. The Company is obligated to pay $2.5 million under the terms of a "put option" from the Asset Purchase Agreement. This option gives C. R. Gibson, Inc. the right to require the Company to repurchase the Beacon Falls Distribution Center. At March 31, 2002 the liability for the option is recorded in Accrued Expenses, and the distribution center is recorded as an Asset Held for Sale. The Company believes that the value of the option approximates the fair value of the property. NOTE S - FINANCIAL INSTRUMENTS The following disclosure of estimated fair value of financial instruments as of March 31, 2002 is made in accordance with SFAS No. 107, "Disclosures about Fair Value of Financial Instruments". The estimated fair value amounts have been determined by the Company using available market information as of March 31, 2002 and 2001, respectively. The estimates presented are not necessarily indicative of amounts the Company could realize in a current market transaction (in thousands):
2002 2001 ---------------------- ---------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value ---------------------- ---------------------- CASH AND CASH EQUIVALENTS $ 535 $ 535 $ 2,134 $ 2,134 LONG-TERM DEBT: Credit Agreements $44,100 $44,100 $93,050 $93,050 Senior Notes 11,374 11,491 14,396 14,539 Industrial Revenue Bonds 900 900 1,126 1,126 Loan Agreement - - 333 333 Other - - 2,895 2,895
The carrying values of the cash and cash equivalents approximate the fair value based on the short-term nature of the investment instruments. The fair values of the Senior Notes are based on the quoted prices from financial institutions. The carrying value of the Company's Credit Agreements and Loan Agreement approximate the fair value. Due to the variable rate nature of the instruments, the interest rate paid by the Company approximates the current market rate demanded by investors; therefore, the instruments are valued at par. The carrying value of the Industrial Revenue Bonds approximates the fai value. Outstanding letters of credit totaled $0.8 million as of March 31, 2002 and 2001. The letters of credit guarantee performance to third parties of various trade activities. Fair value estimated on the basis of fees paid to obtain the obligations is not material at March 31, 2002 and 2001. Financial instruments that potentially subject the Company to credit risk consist primarily of trade receivables. Credit risk on trade receivables is minimized as a result of the large and diverse nature of the Company's customer base. NOTE T - OPERATING SEGMENTS The Company is organized and managed based upon its products. After discontinuing the gift business segment in fiscal 2002, the Company has one reportable business segment, identified as publishing. The publishing segment primarily creates and markets Bibles, inspirational books and videos and hosts inspirational seminars for women. No single customer accounted for as much as 10% of consolidated revenues in fiscal 2002, 2001 or 2000. Foreign revenues accounted for less than 10% of consolidated revenues in fiscal 2002, 2001 and 2000. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Thomas Nelson, Inc. and Subsidiaries: We have audited the accompanying consolidated balance sheets of Thomas Nelson, Inc. (a Tennessee corporation) and Subsidiaries as of March 31, 2002 and 2001, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended March 31, 2002. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Thomas Nelson, Inc. and Subsidiaries as of March 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2002, in conformity with accounting principles generally accepted in the United States. As explained in Note A to the consolidated financial statements, upon doption of a new accounting pronouncement, effective April 1, 2001, the Company changed its method of accounting for goodwill and other intangible assets. /s/ Arthur Andersen LLP Nashville, Tennessee May 10, 2002 (except for Note J, as to which the date is June 28, 2002) OTHER FINANCIAL INFORMATION (Unaudited) The Common stock and the Class B Common stock are traded on the NYSE under the symbols "TNM" and "TNMB," respectively. The following table sets forth, for the periods indicated, the high and low closing sales prices as reported on the NYSE composite tape:
Common Class B Stock Common Stock ----------------------------------------- Dividends Paid High Low High Low Per Share -------------------------------------------------------- Fiscal 2002 - ----------- First Quarter $ 7.4500 $ 6.3500 $ 7.5000 $ 6.6000 $0.04 Second Quarter 8.5000 6.8000 8.5000 6.7500 0.04 Third Quarter 11.1300 8.0900 11.0000 8.6000 - Fourth Quarter 12.1500 9.9800 12.0000 10.6500 - ------- $0.08 ======= Fiscal 2001 - ----------- First Quarter $ 9.6250 $ 6.2500 $11.2500 $ 7.5000 $0.04 Second Quarter 9.1875 7.6250 10.5000 9.5000 0.04 Third Quarter 8.3750 5.2500 9.0000 6.1250 0.04 Fourth Quarter 7.7500 6.0000 7.6250 6.3125 0.04 ------- $0.16 =======
As of June 24, 2002, there were 855 record holders of the Common stock and 562 record holders of the Class B Common stock. Declaration of dividends is within the discretion of the Board of Directors of the Company. The Board considers the payment of dividends on a quarterly basis, taking into account the Company's earnings and capital requirements, as well as financial and other conditions existing at the time. Certain covenants of the Company's Credit Agreements and Senior Notes limit the amount of cash dividends payable based on the Company's cumulative consolidated net income. On August 23, 2001, the Company's Board of Directors adopted management's recommendation to suspend the payment of dividends on the Company's Common and Class B Common stock. EX-21 10 ex21302k.txt EXHIBIT 21 TO FORM 10-K FOR PERIOD ENDED 3/31/2002 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY
Percentage Jurisdiction of Ownership of Subsidiary Incorporation Capital Stock - ------------------------------------------------------------------------------- Worthy, Incorporated Delaware 100% New Life Treatment Centers, Inc. Delaware 99% Nelson Direct Marketing Services, Inc. Delaware 100% Editorial Caribe, Inc. Florida 100% Elm Hill Press, Inc. (dba Rutledge Hill Press, Inc.) Tennessee 100%
EX-23 11 ex23302k.txt EXHIBIT 23 TO FORM 10-K FOR PERIOD ENDED 3/31/2002 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Form 10-K of our reports included in Thomas Nelson, Inc.'s annual report to its shareholders. In addition, we hereby consent to the incorporation of our reports incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statements on Form S-8 (File No. 33-80086 and File No. 333-4503). /s/ Arthur Andersen LLP ----------------------- Nashville, Tennessee June 28, 2002 EX-99 12 ex99302k.txt EXHIBIT 99 TO FORM 10-K FOR PERIOD ENDED 3/31/2002 EXHIBIT 99 June 28, 2002 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549-0408 RE: Arthur Andersen, LLP The purpose of this letter is to address the requirements of the Securities and Exchange Commission (the "Commission") with respect to issuers that include accountants' reports from Arthur Andersen, LLP ("Andersen") issued after March 14, 2002 in filings with the Commission. In connection with the audit of the consolidated financial statements of Thomas Nelson, Inc. and subsidiaries (the "Company") as of March 31, 2002 and for the year then ended, Andersen has issued a report to the Company dated May 10, 2002 (except for Note J, as to which the date is June 28, 2002). The report is included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2002. In accordance with the requirements of the Commission, the Company has received the following written representation from Andersen: We represent that this audit was subject to our quality control system for the U.S. Accounting and Auditing Practice to provide reasonable assurance that the engagement was conducted in compliance with professional standards, that there was appropriate continuity of Arthur Andersen personnel working on the audit and availability of national office consultation. Thomas Nelson, Inc. /s/ Joe L. Powers Joe L. Powers Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----