-----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, AiPR6pLBT4FuqS/+lwYoUPR0GUtbYtjX7dhO7WFgi7xcL61cGGCJ8am4jGpUtPgY 0JgGpoehi1kHTTDrtaMkHA== 0000071023-96-000006.txt : 19960705 0000071023-96-000006.hdr.sgml : 19960705 ACCESSION NUMBER: 0000071023-96-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960703 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NELSON THOMAS INC CENTRAL INDEX KEY: 0000071023 STANDARD INDUSTRIAL CLASSIFICATION: BOOKS: PUBLISHING OR PUBLISHING AND PRINTING [2731] IRS NUMBER: 620679364 STATE OF INCORPORATION: TN FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13788 FILM NUMBER: 96590638 BUSINESS ADDRESS: STREET 1: P O BOX 141000 CITY: NASHVILLE STATE: TN ZIP: 37214-1000 BUSINESS PHONE: 6158899000 MAIL ADDRESS: STREET 1: P O BOX 141000 CITY: NASHVILLE STATE: TN ZIP: 37214-1000 FORMER COMPANY: FORMER CONFORMED NAME: ROYAL PUBLISHERS INC DATE OF NAME CHANGE: 19721019 10-K 1 "THIS DOCUMENT IS A COPY OF THE ANNUAL REPORT ON FORM 10-K FILED ON JULY 2, 1996, PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION." ================================================================= 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 Commission file number March 31, 1996 0-4095 -------------------- THOMAS NELSON, INC. (Exact name of Registrant as specified in its charter) Tennessee 62-0679364 (State or other jurisdiction of (I.R.S. employer incorporation organization identification number) Nelson Place at Elm Hill Pike, Nashville, Tennessee 37214-1000 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (615)889-9000 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 New York Stock Exchange per share Securities registered pursuant to Section 12(g) of the Act: None (Title of Class) 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 26, 1996, the Registrant had outstanding 16,006,183 shares of common stock and 1,112,075 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 $181.1 million. The market value calculation was determined using the closing sales price of the Registrant's common stock and Class B common stock on June 26, 1996, as reported on The New York Stock Exchange, and assumes that all shares beneficially held by executive officers and the Board of Directors of the Registrant are shares owned by "affiliates", a status which each of such officers and directors individually disclaims. =================================================================
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 Page 41 of the Annual Report to Common Equity and Shareholders for year ended Related Shareholder March 31, 1996 (market price Matters and dividend information only) Item 6 - Selected Financial Page 16 of Annual Report to Data Shareholders for year ended March 31, 1996 Item 7 - Management's Page 17 to 21 of Annual Report to Discussion and Shareholders for year ended Analysis of Financial March 31, 1996 Condition and Results of Operations Item 8 - Financial Statements Page 22 to 40 of Annual Report to and Supplementary Data Shareholders for year ended March 31, 1996 PART III Item 10 - Directors and Executive To be included in Company's Proxy Officers of the Company Statement for the Annual Meeting of Shareholders to be held August 22, 1996, 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, 1996, 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 To be included in Company's Proxy Certain Beneficial Owners Statement for the Annual Meeting and Management of Shareholders to be held August 22, 1996, 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 Proxy Related Transactions Statement for the Annual Meeting of Shareholders to be held August 22, 1996, 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 and recorded music emphasizing Christian, inspirational and family value themes, and believes it is the largest commercial publisher of the Bible in English language translations. The Company also designs, manufactures and markets a broad line of gift and stationery products. The Company believes it is the largest publisher of Christian and inspirational books and the largest producer of recorded Christian music in the United States and the fourth largest manufacturer of gift and stationery items in the world. The Company, incorporated under the laws of the State of Tennessee in 1961, has grown significantly over the last five years through a combination of internal product development, expanded product distribution and acquisitions. In November 1992, the Company acquired Word, Incorporated ("Word"), a leading producer and publisher of Christian music with complementary operations in Christian and inspirational book publishing. The Company also has enhanced its position in the gifts products market and related distribution channels through its March 1994 combination with PPC, Inc. ("Pretty Paper"), a designer and manufacturer of gift products and collections, and through the acquisition of The C.R. Gibson Company ("C.R. Gibson"), effective October 31, 1995. C.R. Gibson, based in Norwalk, Connecticut, is a leading designer, manufacturer and distributor of paper gift products, including baby and wedding memory books, stationery, gift wrap, greeting cards and other products. During the fourth quarter of fiscal 1996, the Company determined to discontinue its Royal Media division operations as part of its business strategy to refocus its efforts and resources on the growth of the Company's core businesses. The Royal Media division was formed in fiscal 1995 to evaluate and implement new initiatives in the use of alternative forms of media and new distribution technologies to further capitalize on the commercial potential of the Company's intellectual properties. As a result of the termination of the Royal Media operations, the Company incurred a net loss of approximately $4.7 million from discontinued operations for the fiscal year ended March 31, 1996. The following table sets forth the net revenues (in thousands) and the percentage of total net revenues for each of the Company's principal product lines for the periods indicated:
Year Ended March 31, -------------------------------------------- 1996 1995 1994 -------------------------------------------- Amount % Amount % Amount % --------------- ------------ ------------- Publishing: Book $ 88,334 28.6 $ 85,652 32.5 $ 76,988 34.2 Bible 73,555 23.9 60,214 22.8 53,212 23.6 --------------- -------------- ------------ Total Publishing 161,889 52.51 45,866 55.31 30,200 57.8 Music 88,572 28.7 89,102 33.8 72,912 32.4 Gifts 54,790 17.8 25,337 9.6 19,926 8.8 Other 3,159 1.0 3,406 1.3 2,291 1.0 --------------- ------------ ----------- $308,410 100.0 $263,711 100.0 $225,329 100.0 ================ ============= =============
PUBLISHING Books 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 the "Nelson" and "Word" imprints and consist generally of inspirational and personal experience books, and educational, trade and reference books emphasizing Christian, inspirational and family value themes. The Company distributes books primarily through Christian bookstores, general bookstores, mass merchandisers and directly to consumers. The Company also distributes books published by other companies to complement their marketing and distribution capabilities. In fiscal 1996, approximately 13% of the book division's net revenues related to the distribution of books published by other companies. In fiscal 1996, the Company published over 200 new titles and, in each of the previous two fiscal years, published over 300 new titles. The Company publishes some of the most well-known communicators in the Christian and inspirational field, including Charles Colson, James Dobson, Billy Graham, Benny Hinn, Barbara Johnson, Max Lucado, Frank Peretti, Pat Robertson, Robert Schuller, Gary Smalley, Charles Stanley, Charles Swindoll, and Bodie and Brock Thoene. The Company also publishes books emphasizing positive and inspirational themes by famous athletes and celebrities, such as Bobby Bowden, Hugh Downs, Joe Gibbs, Evander Holyfield, Bill McCartney, Tom Osborn, Nolan Ryan and Zig Ziglar. In each of the last three fiscal years, the Company published over 50% of the top ten bestselling Christian and inspirational books based on the monthly Bookstore Journal Christian Hardcover Bestsellers' Lists. In addition, the Company maintains a backlist of approximately 1,400 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 55% of the book division's net revenues in fiscal 1996. Authors and titles are supported through the use of radio, television, cooperative advertising, author appearances, in-store promotions, direct mail catalogs, book clubs and other means. The Company's book publishing business is enhanced by the breadth and development 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." Bibles The Company believes it is the largest commercial publisher 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 ten major translations. Of these ten translations, nine 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 nine of the ten major translations, of which four are exclusive to the Company as a result of copyright ownership or licensing arrangements. See "-Copyrights and Royalty Agreements." Approximately 70% of the Company's net revenues from Bible publishing in fiscal 1996 were generated through sales of its proprietary Bible products. The following table sets forth the nine major Bible translations 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 The Living Bible (TLB) 1971 No New American Standard Bible (NAS) 1972 No Today's English Version (TEV) 1976 Yes New King James Version (NKJV) 1982 Yes New Century Version (NCV) 1984 Yes New Revised Standard Version (NRSV) 1990 No Contemporary English Version (CEV) 1995 Yes
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 NKJV in 1982. The monthly Bookstore Journal consistently reports that the KJV, NKJV and NCV are the second, third and fourth best selling Bible translations in the United States, respectively. Among the Company's new products is the CEV, translated under the auspices of the American Bible Society, which is designed to be easy to read and understandable at virtually any reading level. The new testament portion of the CEV was first published by the Company in 1991 and the complete CEV Bible was released in June 1995. 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 1,300 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. Different editions of a particular Bible translation are created by incorporating extra 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. MUSIC The Company believes it is the leading producer, distributor and publisher of Christian and inspirational music in the United States. The Company's music division produces a wide variety of traditional and contemporary Christian and inspirational music, such as gospel, praise and worship, and adult contemporary, as well as pop, country, rock, rhythm and blues, rap and metal with an emphasis on positive, inspirational and family value themes. In addition, the music division produces master recordings of classical music, the Bible on cassette, children's music and video, and other products, and is a leading supplier of value priced Christmas music to mass market, convenience and specialty stores. The Company produces recorded music and related products under seven proprietary recording labels and in fiscal 1996 released 79 new titles. Each label is managed and operated by its own staff within the music division. Over 50 recording artists are currently under contract for future releases. Artists produced by the Company include Anointed, Helen Baylor, Shirley Caesar, Bryan Duncan, Amy Grant, Sandi Patty, Petra and Point of Grace. In 1996, the Company's artists received 15 Dove Awards, the Christian music industry's annual awards for outstanding artists and releases sponsored by the Gospel Music Association. As is customary in the recording industry, contractual arrangements with recording artists provide for the artist to receive as a royalty a percentage of the suggested retail price of recorded products sold. Most artists receive advance payments against future royalties earned. The Company enters into exclusive multi-record agreements with its recording artists. During fiscal 1996, the Company renewed recording contracts with all major artists whose contracts expired during the period. The Company also distributes recordings for other companies under their recording labels pursuant to exclusive distribution agreements. Owners of these third party labels contract with the Company for the distribution of products typically on an exclusive basis to Christian markets worldwide. In fiscal 1996, approximately 26% of the music division's net revenues were attributable to products distributed under recording labels owned or controlled by other companies. In addition to producing and distributing recorded music, the Company operates a music publishing business engaged in songwriter development, print music publishing and copyright administration. The Company has approximately 70 songwriters under contract who write for the Company's recording artists and for licensing to independent organizations for print and recording products. Contracts in the music publishing business range from exclusive songwriters' arrangements to co-publishing agreements to copyright administration agreements. The Company prints and distributes church hymnals, choral music, instrumental music, vocal folios and solo tracks for churches and other religious organizations. The copyright administration area oversees the Company's music catalog of approximately 40,000 copyrighted songs which are licensed to independent publishers, record companies, churches and other organizations. GIFTS The Company's gift division more than doubled in size during fiscal 1996 through the acquisition of C.R. Gibson, and believes it now is the fourth largest manufacturer of gift and stationery products in the world. Current product lines offered by the Company include journals and gift books, photo albums, baby and wedding memory books, kitchen accessories, and stationery. Products are marketed under the C.R. Gibson , Markings , Pretty Paper , Creative Papers , Stepping Stones and Inspirations brand names, the latter of which incorporates Christian and inspirational text or themes. Certain product lines are marketed as collections, with each collection including a variety of products featuring a common design or theme. Designs include original art work designed in-house as well as licensed from artists or design groups such as Waverly Fabrics and Colonial Williamsburg. The Company believes the gift division has significant opportunities for growth as a result of the range of complementary gift categories not offered currently and the breadth of the Company's existing and potential distribution channels. In addition to its product lines, the C.R. Gibson acquisition provides the Company access to a dedicated sales force of more than 100 representatives experienced in marketing to the general gift department and specialty stores and C.R. Gibson's manufacturing and distribution facilities. 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 B. Dalton Booksellers and Waldenbooks; mass merchandisers such as Target, K-Mart, WalMart and Sam's Wholesale Club; and directly to consumers through direct mail, telemarketing and book and record clubs. The Company also markets its products through other market channels, such as gift, specialty retail and convenience stores. The Company services these market channels through its sales force, and through wholesalers or jobbers servicing bookstores, gift stores, convenience stores, other retail outlets and libraries. Certain recorded music products are also distributed to the secular markets pursuant to a domestic distribution agreement with a major record distribution company. In addition, the Company sells certain of its products for promotional purposes and sells specially designed or imprinted products to certain customers. The Company's direct marketing operations sell religious and inspirational products directly to consumers through a variety of direct marketing methods, including direct mail, continuity programs (selling a series of products over time) and the Company's book and record clubs. The Company's book and record clubs include the Word Family Record and Tape Club, which has approximately 250,000 members and features contemporary, traditional and gospel music, and its Book Club, Children's Record Club, Children's Book Club and Continuity Programs, which have a combined membership of approximately 150,000 members. The Company also sells products directly to churches and religious organizations by direct mail and telemarketing. The Company markets academic and contemporary books, hymnals, choral music, trade books and recorded music to approximately 200,000 churches, other religious organizations and pastors. Retail sales also are made during the summer months on a door-to-door, cash sales basis through a student sales organization operated by the Company. As of March 31, 1996, the Company employed a sales force of approximately 290 people and maintains 24-hour-a-day telemarketing capability. These employees service over 50,000 retail accounts and 200,000 church accounts. Customer orders are usually shipped through a variety of common carriers, as well as by UPS, RPS and parcel post. No single customer accounted for more than 10% of net revenues during fiscal 1996. The Company contracts with a number of foreign publishers to translate the Company's English titles to foreign languages. The Company typically retains ownership rights to the titles translated. The Company distributes its products internationally in South America, Europe, Australia, New Zealand, South Africa, the Far East, Mexico and Canada. In fiscal 1996, the Company's international and export operations accounted for approximately 8% of the Company's total net revenues. Substantially all of the Company's book, Bible and music 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. The Company manufactures a significant portion of its gift products and purchases its raw materials (e.g. paper, film and boxes) from a wide group of suppliers. COPYRIGHTS AND ROYALTY AGREEMENTS The Company customarily secures copyrights on its books, Bible editions and music in order to protect its publishing rights. Almost all of the Company's books and music products are published under royalty agreements with their respective authors or other copyright proprietors. Many of the Company's gift products incorporate copyrighted art work, which is licensed directlyfrom theartistor theowning entityundera royaltyagreement. COMPETITION The Company believes that it is the largest publisher of Christian and inspirational books, the largest commercial publisher of Bibles in English language translations, the leading producer, distributor and publisher of Christian and inspirational music in the United States and the fourth largest manufacturer of gift and stationery items in the world. The publishing, music and gift divisions each compete with numerous other companies that publish and distribute Christian and inspirational books and/or music or manufacture and distribute gift products, many of which have significantly longer operating histories and larger revenue bases than the Company and 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's publishing and music divisions is the contractual relationships it establishes and maintains with authors and recording artists. The Company competes with other book publishing, record and music publishing companies, both Christian and secular, for signing top authors, artists and songwriters, and for discovering new talent. The Company's ability to sign and re-sign popular authors, recording artists and successful songwriters 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, artists and songwriters, which are based on its reputation in the book publishing, recording and music publishing industries, its marketing experience and its management expertise give it a competitive advantage in signing and maintaining contracts with top Christian and inspirational authors, artists and songwriters. The Company's gift division has many competitors with respect to one or more of its product lines, but the Company believes there are few competitors who manufacture and distribute all of the Company's gift product lines. The gift division also competes with numerous religious publishers and suppliers, including tax-free church-owned organizations, in connection with the sale of its church supply products, and with numerous large and small companies in the production and sale of stationery products, gift wrap and paper tableware. EMPLOYEES As of March 31, 1996, the Company employed approximately 1,680 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. MANAGEMENT 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 65 Chairman of the Board, Chief Executive Officer, President and Director S. Joseph Moore 33 Executive Vice President and Director; President, Thomas Nelson Gift Division Joe L. Powers 50 Executive Vice President and Secretary Charles Z. Moore 62 Senior Vice President, International and Diversified Markets Ray Capp 43 Senior Vice President, Operations Roland Lundy 46 President, Word Records and Music Division Byron D. Williamson 50 President, NelsonWord Publishing Division Vance Lawson 37 Vice President, Finance Stuart A. Heaton 40 Vice President and General Counsel Phyllis E. Williams 48 Treasurer
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. S. Joseph Moore was appointed Executive Vice President and Director of the Company in 1995 and President of the Thomas Nelson Gift Division in 1996, and prior to such appointments, he served as Divisional Vice President of the Company in various capacities since 1991. S. Joseph Moore is the son of Sam Moore. Joe L. Powers was appointed Executive Vice President of the Company in 1995 and has been the Secretary of the Company since 1990. Previously, Mr. Powers served as a Vice President of the Company since 1980. Charles Z. Moore has been a Vice President of the Company since 1983 and was appointed Senior Vice President, International and Diversified Markets in 1986. Charles Moore is the brother of Sam Moore. Ray Capp was appointed Senior Vice President, Operations of the Company in 1995. Prior to joining the Company, Mr. Capp was the President and Chief Operating Officer of Ingram Merchandising Services and Assistant to the Chairman of Ingram Distribution, Inc. since 1992 and Executive Vice President and Chief Operating Officer of Ingram Entertainment from 1987 to 1992. Roland Lundy has been the President of the Company's Word Records and Music Division since 1993. Mr. Lundy was formerly President of Word from 1989 until Word was acquired by the Company in November 1992. Byron D. Williamson has been the President of the Company's NelsonWord Publishing Division since 1995. Mr. Williamson was formerly President of the Company's Word Publishing Division from 1993 to 1995 and Executive Vice President of the Word Publishing Division of Word from 1988 until Word was acquired by the Company in November 1992. Vance Lawson has been the Vice President, Finance of the Company since 1993. Mr. Lawson was formerly Vice President of Finance and Operations at Word since 1988. Stuart A. Heaton has been Vice President and General Counsel of the Company since 1991. Previous to that time, Mr. Heaton served as the Company's corporate counsel since 1989. Phyllis E. Williams has been the Treasurer of the Company since 1992. Mrs. Williams was previously Controller for the Company since 1988. Item 2. Properties The Company's executive, editorial, sales and production offices are primarily located at its corporate headquarters at Nelson Place at Elm Hill Pike 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, 1996 of $2,075,000. 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 subject to a mortgage securing debt with an outstanding balance at March 31, 1996 of $400,000. 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 with an outstanding balance of $3,666,667 at March 31, 1996. The Company maintains other offices and warehouse facilities for its music division in two locations in Waco, Texas (of approximately 30,000 and 100,000 square feet each) which are owned by the Company. The Company also has offices, manufacturing and warehousing facilities for its gift division in Beacon Falls, Guilford and Norwalk, Connecticut (of approximately 112,000, 74,000 and 147,000 square feet, respectively) which are owned by the Company. The Company leases properties as described below:
Square Annual Lease Location Use Feet Rent Expiration Miami, FL Editorial and sales office 1,200 $ 17,500 8/97 Atlanta, GA Editorial office 800 $ 11,100 10/96 Carmel, IN Retail Store 12,500 $ 79,300 09/99 Cherryville, NC Administrative 77,000 $ 78,000 4/98 Cherryville, NC Warehousing 35,000 $ 60,000 12/96 Clifton, NJ Manufacturing 11,000 $ 46,800 10/98 Dallas, TX Editorial and sales office 17,200 $211,400 12/99 King's Mountain, NC Warehousing 15,000 $ 12,000 monthly Nashville, TN Creation and sales office 31,300 $366,500 11/98 Nashville, TN Creation and sales office 34,400 $543,000 6/01 Nashville, TN Warehousing 85,000 $165,600 12/96 Norwalk, CT Warehousing 10,800 $ 72,000 monthly Shelton, CT Warehousing 78,300 $313,200 01/99 Waco, TX Warehousing 168,000 $420,000 12/96 Richmond, British Sales office and Columbia warehousing 17,000 $ 84,200 06/99 (Canada) Scarborough, Warehousing and office 18,500 $ 103,300 08/98 Ontario (Canada) Milton Keyes, Editorial and sales 25,000 $ 154,500 06/11 United Kingdom office
All building improvements on the properties are brick veneer, metal or block construction and are considered adequate and suitable by the Company for the purpose for which they are used. The Company's machinery and equipment consists primarily of computer equipment located in Nashville, Tennessee, Norwalk, Connecticut and Waco, Texas; warehousing and shipping racks, conveyors and other material handling equipment located at the various warehousing and manufacturing 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 which is leased under capital leases, is owned by the Company. The Company's physical properties are operated at approximate capacity. Additional personnel are employed as required. Item 3. Legal Proceedings The Company is subject to various legal proceedings, claims and liabilities which 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 Matter 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, 1996. Item 5. Market for Company's Common Equity and Related Shareholder Matters Incorporated by reference to the Annual Report to Shareholders for the year ended March 31, 1996 (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 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, 1996 and 1995. 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, 1996 (the "Proxy Statement"), to be filed within 120 days of March 31, 1996 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. 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 income -- years ended March 31, 1996, 1995 and 1994 Balance sheets -- March 31, 1996 and 1995 Statements of shareholders' equity -- years ended March 31, 1996, 1995 and 1994 Statements of cash flow -- years ended March 31, 1996, 1995 and 1994 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 . . . . . . . . . . . . . 19 Schedule VIII -- Valuation and Qualifying Accounts and Reserves . . . . . . . . . . . . . . . . 20 Schedules not listed above have been omitted because they are not required, inapplicable or the required information has been given in the 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(b) to the Company's Annual Report on Form 10-K for the year ended March 31, 1990 and incorporated herein by reference) 4.1 -- Loan Agreement dated December 1, 1976, between the Company and The Industrial Development Board of Metropolitan Government of Nashville and Davidson County (filed as Exhibit 3 to the Company's Annual Report on Form 10-K for the year ended March 31, 1977 and incorporated herein by reference) 4.2 -- Promissory Note dated December 1, 1976, of the Company payable to The Industrial Development Board of the Metropolitan Government of Nashville and Davidson County (filed as Exhibit 4 to the Company's Annual Report on Form 10-K for the year ended March 31, 1977 and incorporated herein by reference) 4.3 -- Deed of Trust and Security Agreement dated December 1, 1976, from the Company to SunTrust Bank, Nashville, N.A. (filed as Exhibit 5 to the Company's Annual Report on Form 10-K for the year ended March 31, 1977 and incorporated herein by reference) 4.4 -- Loan Agreement dated May 18, 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) 4.5 -- Promissory Note dated May 18, 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) 4.6 -- Deed of Trust and Security Agreement dated May 18, 1990, from the Company to SunTrust Bank, Nashville, N.A. (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) 4.7 -- Construction and Term Loan Agreement dated March 31, 1992, between the Company and SunTrust Bank, Nashville, N.A. (filed as Exhibit 4.7 to Company's Annual Report on Form 10-K for the year ended March 31, 1992 and incorporated herein by reference) 4.8 -- Promissory Note dated March 31, 1992, of the Company payable to SunTrust Bank, Nashville, N.A. (filed as Exhibit 4.8 to Company's Annual Report on Form 10-K for the year ended March 31, 1992 and incorporated herein by reference) 4.9 -- Deed of Trust and Security Agreement dated March 31, 1992, from the Company to SunTrust Bank, Nashville, N.A. (filed as Exhibit 4.9 to Company's Annual Report on Form 10-K for the year ended March 31, 1992 and incorporated herein by reference) 4.10 -- Indenture dated as of November 30, 1992, by and between Thomas Nelson, Inc. and Boatman's Trust Company (filed as Exhibit 4 to the Company's Form 8-K dated December 11, 1992 and incorporated herein by reference) 4.11 -- Amended and Restated Credit Agreement dated as of December 13, 1995, and as amended January 3, 1996, among the Company, SunTrust Bank, Nashville, N.A., National City Bank of Louisville, First American National Bank in Nashville, Nationsbank of Texas, N.A. in Dallas, and Creditanstalt-Bankverein in New York (filed as Exhibit 4.1 to the Company's Form 10-Q for the quarter ended December 31, 1995 and incorporated herein by reference) 4.12 -- June 1996 Amendment and Waiver with Respect to Amended and Restated Credit Agreement Dated as of December 13, 1995, among the Company, SunTrust Bank, Nashville, N.A., National City Bank of Louisville, First American National Bank in Nashville, Nationsbank of Texas, N.A. in Dallas, and Creditanstalt-Bankverein in New York 4.13 -- Note Purchase Agreement dated January 3, 1996, among the Company, The Prudential Insurance Company of America and Metropolitan Life Insurance Company (filed as Exhibit 4.1 to the Company's Form 10-Q for the quarter ended December 31, 1995 and incorporated herein by reference) 4.14 -- Letter Amendment No. 1 dated June 28, 1996, to Note Purchase Agreement dated January 3, 1996, among the Company, The Prudential Life Insurance Company of America and Metropolitan Life Insurance Company and related waiver, dated as of March 31, 1996. 4.15 -- Assumption and Amendment Agreement dated as of May 30, 1996, and as amended June 28, 1996, between the Company and Metropolitan Life Insurance Company 4.16 -- Loan Agreement dated as of September 21, 1989 between C.R. Gibson and Metropolitan Life Insurance Company (filed by C.R. Gibson as Exhibit 4(c) to The C.R. Gibson Company's Registration Statement on Form S-2 (No. 33-43644) and incorporated herein by reference) 4.17 -- Loan Agreement dated as of June 23, 1994 between C.R. Gibson and Metropolitan Life Insurance Company (filed by C.R. Gibson (Commission File No. 0-4855) as Exhibit 4(b) to C.R. Gibson's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, filed with the commission on March 14, 1995 and incorporated herein by reference) 10.1 -- Tender Offer and Merger Agreement, dated as of September 13, 1995, as amended by Amendment No.1, dated as of October 16, 1995, among the Company, Nelson Acquisition Corp. and Gibson (filed as Exhibits (c)(1) and (c)(14) to the Company's joint Tender Offer Statement on Schedule 14D-1/Schedule 13D filed September 19, 1995, as amended, and is incorporated herein by reference). 10.2 -- Thomas Nelson, Inc. Amended and Restated 1986 Stock Incentive Plan (filed as Exhibit 4.4 to the Company's Registration Statement on Form S-8 (No. 33-80086) and incorporated herein by reference)* 10.3 -- 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) and incorporated herein by reference)* 10.4 -- 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)* 10.5 -- Thomas Nelson, Inc. Sales Managers' Stock Plan for the Varsity Company (filed as Exhibit 4.7 to the Company's Registration Statement on Form S-8 (No. 33-80086) and incorporated herein by reference)* 10.6 -- 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)* 10.7 -- Employment Agreement dated as of May 13, 1996, between the Company and Sam Moore* 10.8 -- Employment Agreement dated as of May 10, 1996, between the Company and S. Joseph Moore* 10.9 -- Employment Agreement dated as of May 10, 1996, between the Company and Joe L. Powers* 10.10-- Employment Agreement dated as of May 13, 1996, between the Company and Charles Z. Moore* 10.11-- Employment Agreement dated as of May 17, 1993, between the Company and Roland Lundy (filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended March 31, 1994 and incorporated herein by reference)* 10.12-- Employment Agreement dated as of December 7, 1993, between the Company and Byron Williamson (filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended March 31, 1994 and incorporated herein by reference)* 10.13-- 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)* 10.14-- Employment Agreement dated as of January 14, 1988, and as amended July 17, 1991, between the Company and Stuart A. Heaton (filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended March 31, 1992 and incorporated herein by reference)* 10.15-- 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)* 11 -- Statement Re Computation of Per Share Earnings 13 -- Thomas Nelson, Inc. Annual Report to Shareholders for the year ended March 31, 1996 (to the extent of portions specifically incorporated by reference) 21 -- Subsidiaries of the Company 23 -- Consent of Independent Public Accountants 27 -- Financial Data Schedule (for SEC use only) - ----------- *Management contract or compensatory plan or arrangement. (b) Reports on Form 8-K A Current Report of Form 8-K dated November 21, 1995 (the "Form 8-K"), was filed by the Company on November 21, 1995. The Form 8-K included information required pursuant to Item 2 thereunder relating to the acquisition by the Company of all of the issued and outstanding capital stock of C.R. Gibson consummated on November 7, 1995, in accordance with the terms of the Tender Offer and Merger Agreement [included as Exhibit 10.1 herein]. Required financial statements and pro forma financial information were not filed with the Form 8-K, in accordance with applicable rules. The following financial statements and pro forma financial information were filed on January 19, 1996, under cover of a Form 8-K/A amending the Form 8-K: 1) The C.R. Gibson Company Consolidated Balance Sheets at December 31, 1994 and 1993 2) The C.R. Gibson Company Consolidated Statements of Operations for the years ended December 31, 1994 and 1993 3) The C.R. Gibson Company Consolidated Statements of Cash Flows for the years ended December 31, 1994 and 1993 4) The C.R. Gibson Company Consolidated Statements of Shareholders' Equity at December 31, 1994 and 1993 5) The C.R. Gibson Company Unaudited Condensed Consolidated Balance Sheet at September 30, 1995 6) The C.R. Gibson Company Unaudited Condensed Consolidated Statement of Income for the nine months ended September 30, 1995 7) The C.R. Gibson Company Unaudited Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 1995 8) Thomas Nelson, Inc. and Subsidiaries Unaudited Pro Forma Consolidated Balance Sheet at September 30, 1995 9) Thomas Nelson, Inc. and Subsidiaries Unaudited Pro Forma Consolidated Statements of Income for the six months ended September 30, 1995 10) Thomas Nelson, Inc. and Subsidiaries Unaudited Pro Forma Consolidated Statements of Income for the six months ended September 30, 1994 11) Thomas Nelson, Inc. and Subsidiaries Unaudited Pro Forma Consolidated Statements of Income for the twelve months ended March 31, 1995 (c) Exhibits - The response to this portion of Item 14 is submitted [above] as a separate section of this report. (d) Financial Statement Schedules - The response to this portion of Item 14 is submitted [above] as a separate section of this report. 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 28, 1996 Pursuant to the requirements of Section 13 or 15(d) 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 June 28, 1996 - ------------------- of Directors, Chief Sam Moore Executive Officer and President (Principal Executive Officer) /s/ S. Joseph Moore Executive Vice President June 28, 1996 S. Joseph Moore and Director /s/ Joe L. Powers Executive Vice President, June 28, 1996 Joe L. Powers Secretary (Principal Financial and Accounting Officer) /s/ Brownlee O. Currey Jr. Director June 28, 1996 Brownlee O. Currey, Jr. /s/ W. Lipscomb Davis, Jr. Director June 28, 1996 W. Lipscomb Davis, Jr. /s/ Robert J. Niebel, Sr. Director June 28, 1996 Robert J. Niebel, Sr. /s/ Millard V. Oakley Director June 28, 1996 Millard V. Oakley /s/ Joe M. Rodgers Director June 28, 1996 Joe M. Rodgers /s/ Cal Turner, Jr. Director June 28, 1996 Cal Turner, Jr. /s/ Andrew Young Director June 28, 1996 Andrew Young REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Thomas Nelson, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Thomas Nelson's annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated May 21, 1996. Our audit was made for the purpose of forming an opinion on those consolidated statements taken as a whole. The schedules listed in the index are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state 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 21, 1996 THOMAS NELSON, INC. SCHEDULE VIII VALUATION AND QUALIFYING ACCOUNTS AND RESERVES =================================================================
Allowances for Trade Accounts Receivable ----------------------------------------------- March 31, 1996 March 31, 1995 March 31, 1994 ----------------------------------------------- Reserve for Sales Returns ----------------------------------------------- Balance at beginning of period $ 5,744,000 $ 5,220,000 $ 6,054,000 Additions: 1. Charged to costs and expenses 819,000 524,000 ( 834,000) 2. Charged to other accounts 375,000 - - Deductions - charge-offs - - - ----------------------------------------------- Balance at end of period $ 6,938,000 $ 5,744,000 $ 5,220,000 =============================================== Reserve for Doubtful Accounts ----------------------------------------------- March 31, 1996 March 31, 1995 March 31, 1994 ----------------------------------------------- Balance at beginning of period $ 3,257,000 $ 3,676,000 $ 4,371,000 Additions: 1. Charged to costs and expenses 5,679,000 4,308,000 1,336,000 2. Charged to other accounts 500,000 - ( 503,804) Deductions - charge-offs 5,415,000 4,727,000 1,527,196 ----------------------------------------------- Balance at end of period $ 4,021,000 $ 3,257,000 $ 3,676,000 =============================================== Discontinued Operations ----------------------------------------------- March 31, 1996 March 31, 1995 March 31, 1994 ----------------------------------------------- Balance at beginning of period $ - $ - $ - Additions: 1. Charged to costs and expenses 4,381,000 - - 2. Charged to other accounts - - - Deductions - charge-offs - - - ----------------------------------------------- Balance at end of period $ 4,381,000 $ - $ - =============================================== Reserves acquired in connection with acquisition - C.R. Gibson in 1996 and Word in 1994. Reserve for loss on discontinued operations, before taxes, in 1996.
INDEX TO EXHIBITS Exhibit Number 4.12 -- June 1996 Amendment and Waiver With Respect to Amended and Restated Credit Agreement Dated as of December 13, 1995, among the Company, SunTrust Bank, Nashville, N.A., National City Bank of Louisville, First American National Bank in Nashville, Nationsbank of Texas, N.A. in Dallas, and Creditanstalt-Bankverein in New York 4.14 -- Letter Amendment No. 1 dated June 28, 1996, to Note Purchase Agreement dated January 3, 1996, among the Company, The Prudential Life Insurance Company of America and Metropolitan Life Insurance Company and related waiver, dated as of March 31, 1996 4.15 -- Assumption and Amendment Agreement dated as of May 30, 1996, and as amended June 28, 1996, between the Company and Metropolitan Life Insurance Company 10.7 -- Employment Agreement dated as of May 13, 1996, between the Company and Sam Moore 10.8 -- Employment Agreement dated as of May 10, 1996, between the Company and S. Joseph Moore 10.9 -- Employment Agreement dated as of May 10, 1996, between the Company and Joe L. Powers 10.10 -- Employment Agreement dated as of May 13, 1996, between the Company and Charles Z. Moore 11 -- Statement Re-Computation of Per Share Earnings 13 -- Thomas Nelson, Inc. Annual Report to Shareholders for the year ended March 31, 1996 (to the extent of portions specifically incorporated by reference) 21 -- Subsidiaries of the Company 23 -- Consent of Independent Public Accountants 27 -- Financial Data Schedule (for SEC purposes only) EX-4 2 EXHIBIT 4.12 JUNE 1996 AMENDMENT AND WAIVER WITH RESPECT TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF DECEMBER 13, 1995 THOMAS NELSON, INC. (the "Company"), SUNTRUST BANK, NASHVILLE, N.A., as agent (the "Agent") and the lenders referred to therein (the "Lenders") entered into that certain Amended and Restated Credit Agreement dated as of December 13, 1995 (the "Credit Agreement"). WHEREAS, the parties hereto wish to waive compliance with and amend, for certain time periods, the financial covenant set forth in Section 9.08(a) of the Credit Agreement; NOW, THEREFORE, the Company, the Agent and the Lenders agree as follows: 1. Waiver. The Agent and the Lenders waive any default resulting from the Company's failure to comply with the covenant set forth in Section 9.08(a) of the Credit Agreement for the fiscal year ending March 31, 1996. The waiver described herein applies only to the fiscal year ending March 31, 1996, and except for such waiver for such time period, the interest coverage ratio set forth in Section 9.08(a) of the Credit Agreement shall continue in full force and effect. 2. Amendment. The Agent and the Lenders agree that the interest coverage ratio set forth in Section 9.08(a) of the Credit Agreement shall be amended, but only for the quarters ending June 30, 1996, September 30, 1996 and December 31, 1996, as follows. Interest Coverage Ratio (a) The Company shall maintain as of the last day of each fiscal quarter a minimum Interest Coverage Ratio, calculated, with respect to the fiscal quarter ending June 30, 1996, only for that quarter, with respect to the fiscal quarter ending September 30, 1996, for the immediately preceding two fiscal quarters, and with respect to the fiscal quarter ending December 31, 1996, for the immediately preceding three fiscal quarters, as shown below for each fiscal quarter indicated: Fiscal Quarter Ending June 30, 1996 no greater than (.35):1.00 September 30, 1996 no less than 1.25:1.00 December 31, 1996 no less than 1.75:1.00 The amendment as set forth above shall be applicable only through the quarter ending December 31, 1996, and thereafter the Company shall maintain compliance with the Interest Coverage Ratio as set forth in Section 9.08(a) of the Credit Agreement. 3. All defined terms used herein which are not otherwise defined shall have the meanings ascribed to such terms in the Credit Agreement. 4. The waiver set forth in paragraph one above, and the amendment set forth in paragraph two above, both shall terminate on January 1, 1997. Any default or event of default which otherwise would occur under Section 9.08(a) of the Credit Agreement after January 1, 1997 shall be a default or event of default under the Credit Agreement and is not waived. 5. The waiver and amendment set forth herein is conditioned on the Company's obtaining waivers or amendments prior to June 30, 1996 for the same or greater time periods set forth above from The Prudential Insurance Company of America ("Prudential") and The Metropolitan Life Insurance Company ("MetLife") of any existing covenant defaults under any documents and notes relating to all indebtedness of the Company owed to Prudential and MetLife. 6. This waiver and amendment is entered into on June 25, 1996, but is to be effective as of March 31, 1996. 7. Except as expressly stated herein, no other waiver or amendment of any term or provision of the Credit Agreement shall be inferred or implied. IN WITNESS WHEREOF, the parties hereto have executed this June 1996 Amendment and Waiver With Respect to Amended and Restated Credit Agreement dated as of December 13, 1995, on June 25, 1996, to be effective as of March 31, 1996. THOMAS NELSON, INC. By: /s/ Joe L. Powers -------------------------------- Title: Executive Vice President SUNTRUST BANK, NASHVILLE, N.A., as Agent By: /s/ J. Fred Turner -------------------------------- Title: First Vice President SUNTRUST BANK, NASHVILLE, N.A. By: /s/ J. Fred Turner -------------------------------- Title: First Vice President NATIONSBANK OF TEXAS, N.A. By: /s/ Jennifer Zydney -------------------------------- Title: Vice President CREDITANSTALT-BANKVEREIN By: /s/ Robert M. Biringer -------------------------------- Title: Senior Vice President By: /s/ Joseph P. Longosz -------------------------------- Title: Vice President NATIONAL CITY BANK By: /s/ Cheryl Mennen -------------------------------- Title: Assistant Vice President FIRST AMERICAN NATIONAL BANK By: /s/ Scott M. Bane -------------------------------- Title: Senior Vice President 5 EX-4 3 EXHIBIT 4.14 June 28, 1996 WAIVER As of March 31, 1996 The Prudential Insurance Company of America C/O Prudential Capital Group 1201 Elm St., Suite 4900 Dallas, TX 75270 Gentlemen: We refer to the Note Purchase Agreement dated as of January 3, 1996 between the undersigned, Thomas nelson, Inc., The Prudential Insurance Company of America and Metropolitan Life Insurance Company (the "Note Purchase Agreement"). Unless otherwise defined herein, the terms defined in the Note Purchase Agreement shall be used herein as therein defined. We have requested that you waive the requirements of section 10.8(c) of the Note Purchase Agreement for each of the four fiscal quarters periods ended March 31, 1996, June 30, 1996, September 30, 1996 and December 31, 1996. If you agree to waive the requirements of section 10.8(c) of the Note Purchase Agreement for the period set forth above, please evidence such agreement by executing and returning at least one counterpart of this letter waive to Thomas Nelson, Inc., Nelson Place at Elm Hill Pike, P.O. Box 141000, Nashville, Tennessee 37214-1000, Attention Joe L. Powers, Vice President. This letter waive shall become effective as of the date first above written when and if (i) counterparts of this waiver or substantially similar waivers shall have been executed by the Required Holders, (ii) the consent attached hereto shall have been executed by each of the Guarantors, (iii) an amendment in the form attached as Exhibit A shall have executed by all of the parties thereto, (iv) an allonge in the form attached as Exhibit B shall have been executed by Thomas Nelson Inc., for each Note outstanding and (v) each holder of a Note shall have received a fee of .30% of the principal amount of such Note. The execution, delivery and effectiveness of this letter waiver shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy under the Note Purchase Agreement nor constitute a waiver of any provision of the Note Purchase Agreement. This waiver is subject to the provisions of section 17 of the Note Purchase Agreement. Very truly yours, THOMAS NELSON, INC. By /s/ Joe L. Powers ------------------- Title: Vice President Agreed to and accepted as of the date first above written: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By /s/ Robert G. Gwin -------------------- Vice President CONSENT The undersigned, as Guarantors under the Guaranty Agreements dated January 3, 1996 (the "Guaranty Agreements") in favor of The Prudential Insurance Company of America and Metropolitan Life Insurance Company each a party to the Note Purchase Agreement referred to in the foregoing letter waiver, hereby consent to said waiver and hereby confirm and agree that, notwithstanding the effectiveness of said waiver, the Guaranty Agreements are, and shall continue to be, in full force and effect and are hereby confirmed and ratified in all respects. WORD INCORPORATED By /s/ Joe L. Powers ------------------ Title: Vice President PPC, INC. By /s/ Joe L. Powers ------------------ Title: Vice President EDITORIAL CARIBE, INC. By /s/ Joe L. Powers ------------------ Title: Vice President MORNINGSTAR RADIO NETWORK, INC. By /s/ Joe L. Powers ------------------ Title: Vice President NELSON WORD LIMITED By /s/ Joe L. Powers ------------------ Title: Vice President WORD COMMUNICATIONS, LTD By /s/ Joe L. Powers ------------------ Title: Vice President WORD DIRECT, INC. By /s/ Joe L. Powers ------------------ Title: Vice President WORD DIRECT PARTNERS, L.P. By Word Direct, Inc., as general partner By /s/ Joe L. Powers ------------------ Title: Vice President THE C.R. GIBSON COMPANY By /s/ Joe L. Powers ------------------ 855763 ONTARIO LIMITED By /s/ Joe L. Powers ------------------ THOMAS NELSON, INC. Nelson Place at Elm Hill Pike P.O. Box 141000 Nashville, Tennessee 37214-1000 as of March 31, 1996 Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010 Attention: Treasurer Gentlemen: We refer to the Note Purchase Agreement, dated as of January 3, 1996, between the undersigned, Thomas Nelson, Inc., The Prudential Insurance Company of America and Metropolitan Life Insurance Company (the "Note Purchase Agreement"). Unless otherwise defined herein, the terms defined in the Note Purchase Agreement shall be used herein as therein defined. We have requested that you waive the requirements of Section 10.8(c) of the Note Purchase Agreement for each of the four fiscal quarter periods ended March 31, 1996, June 30, 1996, September 30, 1996, and December 31, 1996. If you agree to waive the requirements of Section 10.8(c) of the Note Purchase Agreement for such period, please evidence such agreement by executing and returning at least one counterpart of this letter to Thomas Nelson, Inc., Nelson Place at Elm Hill Pike, P.O. Box 141000, Nashville, Tennessee 37214-1000, Attention of Joe L. Powers, Vice President. This letter waiver shall become effective as of the date first above written when and if (i) counterparts of this or substantially similar waivers shall have been executed by the Required Holders, (ii) the consent attached hereto shall have been executed by each of the Guarantors, (iii) an amendment in the form attached as Exhibit A shall have executed by all of the parties thereto, (iv) an allonge in the form attached as Exhibit B shall have been executed by Thomas Nelson, Inc., for each Note outstanding and (v) each holder of a Note shall have received a fee of .30% of the principal amount of such Note. The execution, delivery and effectiveness of this letter shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy under the Note Purchase Agreement nor constitute a waiver of any provision of the Note Purchase Agreement. This waiver is subject to the provisions of Section 17 of the Note Purchase Agreement. Very truly yours, THOMAS NELSON, INC. By /s/ Joe L. Powers ---------------------------- Title: Vice President Agreed to and accepted as of the date first above written: METROPOLITAN LIFE INSURANCE COMPANY By /s/ John R. Endres -------------------------- CONSENT The undersigned, as Guarantors under the Guaranty Agreements dated January 3, 1996 (the "Guaranty Agreements") in favor of The Prudential Insurance Company of America and Metropolitan Life Insurance Company, each a party to the Note Purchase Agreement referred to in the foregoing letter waiver, hereby consent to said waiver and hereby confirm and agree that, notwithstanding the effectiveness of said waiver, the Guaranty Agreements are, and shall continue to be, in full force and effect and are hereby confirmed and ratified in all respects. WORD, INCORPORATED By /s/ Joe L. Powers ---------------------------- Title: Vice President PPC, INC. By /s/ Joe L. Powers ---------------------------- Title: Vice President EDITORIAL CARIBE, INC. By /s/ Joe L. Powers ---------------------------- Title: Vice President MORNINGSTAR RADIO NETWORK, INC. By /s/ Joe L. Powers ---------------------------- Title: Vice President NELSON WORD LIMITED By /s/ Joe L. Powers ---------------------------- Title: Vice President WORD COMMUNICATIONS, LTD. By /s/ Joe L. Powers ---------------------------- Title: Vice President WORD DIRECT, INC. By /s/ Joe L. Powers ----------------------------- Title: Vice President WORD DIRECT PARTNERS, L.P. By: Word Direct, Inc. as general partner By /s/ Joe L. Powers ---------------------------- Title: Vice President THE C.R. GIBSON COMPANY By /s/ Joe L. Powers ----------------------------- 855763 ONTARIO LIMITED By /s/ Joe L. Powers ------------------------------ EXHIBIT A AMENDMENT NO. 1 June 28, 1996 The Prudential Insurance Company of America C/O Prudential Capital Group 1201 Elm St., Suite 4900 Dallas, TX 75270 Ladies and Gentlemen: We refer to the Note Purchase Agreement dated as of January 3, 1996 (the "Agreement" among the undersigned, Thomas Nelson, Inc., The Prudential Insurance Company of America and Metropolitan Life Insurance Company. Unless otherwise defined herein, the terms defined in the Agreement shall be used herein as therein defined. The Agreement is, effective the date first above written, hereby amended as follows: (a) Section 10. Section 10 is amended by adding thereto new subsections to read as follows: 10.9 Covenants Incorporated by Reference. To the extent that covenants set forth in the Amended and Restated Credit Agreement (the "Credit Agreement" dated as of December 13, 1995, among Thomas Nelson, Inc., the lenders listed therein, and SunTrust Bank Nashville, N.A., as Agent, as amended through the date hereof, are more restrictive than the covenants set forth herein, or otherwise require the Company to comply with computable standards, this Agreement is hereby automatically amended so as to provide the benefit of similar covenants for the benefit of the holders of the Notes. Any such covenants shall be deemed to be incorporated herein mutatis mutandis for the benefit of the holders of the Notes unless and until the Required Holder(s) of the Notes shall otherwise consent thereto. 10.10. Conforming Debt Agreement Changes. The Company will not become or be a party to any agreement relating to any Debt entered into after the date of this Agreement, or to any amendment of or supplement to any agreement relating to any Debt (which amendment or supplement is entered into after the date of this Agreement), if, in any such case, the Company is agreeing therein to any financial covenants of a type specified in this Section 10, which are more restrictive than the covenants set forth herein, or to other covenants expressly requiring the Company to comply with computable standards, unless the Company shall offer to amend this Agreement so as to provide the benefit of similar covenants for the benefit of the holders of the Notes for so long as such covenants are in full force under such agreement, amendment or supplement. Any such offer shall be made in writing to the holders of the Notes prior to being effected in any such agreement, amendment or supplement and, absent such offer, shall be deemed to be incorporated herein mutatis mutandis for the benefit of the holders of the Notes for so long as such covenants are in full force under such agreement, amendment or supplement unless and until the Required Holders) of the Notes shall otherwise consent thereto. (b) All references to the "$6.90% Series A Senior Notes due December 31, 2007" and the "6.68% Series B Senior Notes due December 31, 2005" set forth in the Agreement shall be changed to the "7.15% Series A Senior Notes due December 31, 2007" and the "6.93% Series B Senior Notes due December 31, 2005", respectively. On and after the effective date of this letter amendment, each reference in the Agreement to "this Agreement", "hereunder", "hereof", or words of like import referring to the Agreement, and each reference in the Notes to "the Agreement", "thereunder", "thereof", or words of like import referring to the Agreement, shall mean the Agreement as amended by this letter amendment. The Agreement, as amended by this letter amendment, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. The execution, delivery and effectiveness of this letter amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy under the Agreement not constitute a waiver of any provision of the Agreement. This letter amendment may be executed in any number of counterparts and by any combination of the parties hereto in separate counterparts, each of which counterparts shall be an original and all of which taken together shall constitute one and the same letter amendment. If requested by you, the Company will enter into a subsequent amendment of the Agreement to specifically incorporate any covenant contained in the Credit Agreement into the Agreement. Each holder of a Note hereby agrees that if and when the Company complies with Section 10.8(c) of the Agreement (as in effect on January 3, 1996) the interest rate on each Note will be reduced to 6.90% for the Series A Notes and 6.68% for the Series B Notes. Each holder of a Note agrees to enter into such documentation as may be necessary to evidence such reduction. If you agree to the terms and provisions hereof, please evidence your agreement by executing and returning at least a counterpart of this letter amendment to Thomas Nelson, Inc., Nelson Place at Elm Hill Pike, Nashville, Tennessee 37214-1000, Attention of Joe L. Powers. This letter amendment shall become effective as of the date first above written when and if counterparts of this letter amendment shall have been executed by us and you and the consent attached hereto shall have been executed by the Guarantors. Very truly yours, THOMAS NELSON, INC. By /s/ Joe L. Powers --------------------- Title: Vice President Agreed as of the date first above written: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By /s/ Robert G. Gwin --------------------- Vice President CONSENT The undersigned, as Guarantors under the Guaranty Agreements dated January 3, 1996 (the "Guaranty Agreements") in favor of The Prudential Insurance Company of America and Metropolitan Life Insurance Company referred to in the foregoing amendment, hereby consent to said amendment and hereby confirm and agree that the Guaranty Agreements are, and shall continue to be, in full force and effect and is hereby confirmed and ratified in all respects except that, upon the effectiveness of, and on and after the date of, said amendment, all references in the Guaranty Agreements to the Agreement, "thereunder", "thereof", or words of like import referring to the Agreement shall mean the Agreement as amended by said amendment. WORD INCORPORATED By /s/ Joe L. Powers --------------------------- Title: Vice President PPC, INC. By /s/ Joe L. Powers --------------------------- Title: Vice President EDITORIAL CARIBE, INC. By /s/ Joe L. Powers --------------------------- Title: Vice President MORNINGSTAR RADIO NETWORK, INC. By /s/ Joe L. Powers --------------------------- Title: Vice President NELSON WORD LIMITED By /s/ Joe L. Powers --------------------------- Title: Vice President WORD COMMUNICATIONS, LTD By /s/ Joe L. Powers --------------------------- Title: Vice President WORD DIRECT, INC. By /s/ Joe L. Powers --------------------------- Title: Vice President WORD DIRECT PARTNERS, L.P. By Word Direct, Inc., as general partner By /s/ Joe L. Powers --------------------------- Title: Vice President THE C.R. GIBSON COMPANY By /s/ Joe L. Powers --------------------------- 855763 ONTARIO LIMITED By /s/ Joe L. Powers --------------------------- EXHIBIT B ALLONGE June 28, 1996 The Note due December 31, 2007, in the original principal amount of$33,000,000, to which this Allonge is attached is subject to and shall be governed by the terms and conditions of Amendment No. 1 (the "Amendment") to the Note Purchase Agreement (the "Agreement") dated January 3, 1996, among the company, The Prudential Insurance company of America and Metropolitan Life Insurance Company. The Amendment modifies the Agreement pursuant to which and subject to which the attached Note was originally issued. All references in the attached Note to the Agreement shall be construed and interpreted as references to the Agreement as amended or supplemented, including as amended by the Amendment. As of the date of this Allonge, the Company confirms, renews, and restates it obligations pursuant to the terms of the attached Note, provided that the interest rate on the unpaid principal of the Note shall hereafter be (a) 7.15% per annum payable semiannually, on the last day of June and December in each year, commencing June 30, 1996 until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Yield Maintenance Amount (as defined in the Agreement), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 9.15% or (ii) 2.0% over the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time in New York City as its prime rate. Except as expressly provided herein, this Note is not modified or amended in any respect and remains in full force and effect. THOMAS NELSON, INC. By: /s/ Joe L. Powers ----------------------- Title: Vice President EXHIBIT B ALLONGE June 28, 1996 The Note due December 31, 2007, in the original principal amount of$2,000,000, to which this Allonge is attached is subject to and shall be governed by the terms and conditions of Amendment No. 1 (the "Amendment") to the Note Purchase Agreement (the "Agreement") dated January 3, 1996, among the company, The Prudential Insurance company of America and Metropolitan Life Insurance Company. The Amendment modifies the Agreement pursuant to which and subject to which the attached Note was originally issued. All references in the attached Note to the Agreement shall be construed and interpreted as references to the Agreement as amended or supplemented, including as amended by the Amendment. As of the date of this Allonge, the Company confirms, renews, and restates it obligations pursuant to the terms of the attached Note, provided that the interest rate on the unpaid principal of the Note shall hereafter be (a) 7.15% per annum payable semiannually, on the last day of June and December in each year, commencing June 30, 1996 until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Yield Maintenance Amount (as defined in the Agreement), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 9.15% or (ii) 2.0% over the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time in New York City as its prime rate. Except as expressly provided herein, this Note is not modified or amended in any respect and remains in full force and effect. THOMAS NELSON, INC. By: /s/ Joe L. Powers ----------------------- Title: Vice President EXHIBIT B ALLONGE June 28, 1996 The Note due December 31, 2005, in the original principal amount of $15,000,000, to which this Allonge is attached is subject to and shall be governed by the terms and conditions of Amendment No. 1 (the "Amendment") to the Note Purchase Agreement (the "Agreement") dated January 3, 1996, among the company, The Prudential Insurance company of America and Metropolitan Life Insurance Company. The Amendment modifies the Agreement pursuant to which and subject to which the attached Note was originally issued. All references in the attached Note to the Agreement shall be construed and interpreted as references to the Agreement as amended or supplemented, including as amended by the Amendment. As of the date of this Allonge, the Company confirms, renews, and restates it obligations pursuant to the terms of the attached Note, provided that the interest rate on the unpaid principal of the Note shall hereafter be (a) 6.93% per annum payable semiannually, on the last day of June and December in each year, commencing June 30, 1996 until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Yield Maintenance Amount (as defined in the Agreement), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.93% or (ii) 2.0% over the rate of interest publicly announced by Morgan Guaranty Trust Company of New York from time to time in New York City as its prime rate. Except as expressly provided herein, this Note is not modified or amended in any respect and remains in full force and effect. THOMAS NELSON, INC. By: /s/ Joe L. Powers ---------------------- Title: Vice President EX-4 4 EXHIBIT 4.15 ASSUMPTION AND AMENDMENT AGREEMENT ASSUMPTION AND AMENDMENT AGREEMENT, dated as of May 30, 1996 ("this Agreement"), made by THOMAS NELSON, INC., a Tennessee corporation (the "Company"), THE C.R. GIBSON COMPANY, a Delaware corporation and a wholly-owned subsidiary of the Company ("Gibson"), and METROPOLITAN LIFE INSURANCE COMPANY, a New York corporation ("MetLife"). WHEREAS, the Company, MetLife and another institutional investor entered into a Note Purchase Agreement, dated as of January 3, 1996 (the "1996 Agreement"), pursuant to which MetLife acquired the Company's 6.68% Series B Senior Note due December 31, 2005 in the principal amount of $15,000,000 (the "1996 Note"); WHEREAS, MetLife is the holder of Gibson's (i) 9.50% Senior Note due September 22, 1999 (as amended, the "9.50% Note") outstanding in the principal amount of $7,000,000, which was issued pursuant to a Loan Agreement, dated as of September 21, 1989, between Gibson and MetLife (as amended, the "1989 Agreement"), and (ii) 8.31% Senior Note due June 23, 2004 (the "8.31% Note" and, collectively with the 9.50% Note, the "Gibson Notes" and, individually, a "Gibson Note") outstanding in the principal amount of $5,000,000, which was issued pursuant to a Loan Agreement, dated as of June 23, 1994, between Gibson and MetLife (the "1994 Agreement" and, collectively with the 1989 Agreement, the "Gibson Agreements"); and WHEREAS, the Company, in connection with MetLife's acquisition of the 1996 Note and the transactions contemplated by the 1996 Agreement, wishes to assume the obligations of Gibson with respect to the Gibson Notes and the Gibson Agreements and to amend certain provisions of each thereof, and MetLife is agreeable thereto. NOW, THEREFORE, for good and valuable consideration, receipt whereof is hereby acknowledged, the parties hereto agree as follows: 1. Defined Terms. Unless the context otherwise requires, capitalized terms used herein without definition shall have the respective meanings set forth in Exhibits A-1 and A-2 hereto, as applicable. 2. Assumption of Gibson Notes and Gibson Agreements. Effective upon the Effective Date (as hereinafter defined), the Company hereby unconditionally assumes the due and punctual payment and performance of all of Gibson's obligations and duties under the Gibson Notes and the Gibson Agreements in accordance with the terms thereof (as amended hereby), regardless of the enforceability of the Gibson Notes or the Gibson Agreements or any discharge or release, whether by operation of law or otherwise (except for any written release signed by the obligees of the affected obligation), of Gibson or the Company from their respective obligations under the Gibson Notes or the Gibson Agreements. Upon the Effective Date, the Company shall, without further action hereunder, become a party to the Gibson Notes and to the Gibson Agreements, and Gibson shall be discharged and released from all obligations thereunder. On the Effective Date, the Company shall pay to MetLife interest accrued on the Gibson Notes for the period from the regularly scheduled interest payment date for each of the Gibson Notes next preceding the Effective Date through the day preceding the Effective Date. The Company agrees that, on and after the Effective Date, it shall pay and perform all of Gibson's duties and obligations under the Gibson Notes and the Gibson Agreements (as amended hereby). MetLife hereby consents to such assumption by the Company and to the release and discharge of Gibson. Nothing herein shall impair Gibson's obligations with respect to the Gibson Notes and the Gibson Agreements under the Guaranty Agreement, as amended and supplemented by Amendment and Supplement No. 1, dated as of May 30, 1996, in the form of Exhibit B hereto. 3. Amendment of Gibson Notes. Effective upon the Effective Date, the 9.50% Note and the 8.31% Note are hereby amended in their entirety to read as set forth in Exhibits A-1 and A-2 hereto, respectively. 4. Amendment of Gibson Agreements. a. Effective upon the Effective Date, Section 5 of each of the Gibson Agreements is hereby amended to read as follows: "SECTION 5. INFORMATION AS TO COMPANY. 5.1. Financial and Business Information. The Company shall deliver to each holder of Notes that is an Institutional Investor: (a) Quarterly Statements -- within 60 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 5.1(a); (b) Annual Statements -- within 90 days after the end of each fiscal year of the Company, duplicate copies of (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such year, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, provided that the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 5.1(b); (c) SEC and Other Reports -- promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (ii) each regular or periodic report, each registration statement other than any registration statements on Form S-8 or any similar form (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Subsidiary with the Securities and Exchange Commission and of all press releases and other statements made available generally by the Company or any Subsidiary to the public concerning developments that are Material; (d) Notice of Default or Event of Default -- promptly, and in any event within five Business Days after a Responsible Officer becomes aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default under the Notes or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 7.01F of the Notes, a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto; (e) ERISA Matters -- promptly, and in any event within five Business Days after a Responsible Officer becomes aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: (i) with respect to any Plan, any reportable event, as defined in section 4043(c) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on January 3, 1996; or (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; (f) Notices from Governmental Authority -- promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; and (g) Requested Information -- with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes. 5.2. Officer's Certificate. Each set of financial statements delivered to a holder of Notes pursuant to Section 5.1(a) or Section 5.1(b) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth: (a) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Sections 4.03(j), 4.04(e), 4.05, 4.07(b) and 4.08 of the Notes during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and (b) Event of Default -- a statement that such officer has reviewed the relevant terms hereof and of the Notes and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto. 5.3. Inspection. The Company shall permit the representatives of each holder of a Note that is an Institutional Investor: (a) No Default -- if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company's officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and (b) Default -- if a Default or Event of Default then exists, at the expense of the Company, to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested in writing. 5.4. Bank Agreement Amendments. The Company shall provide to each holder of a Note true, correct and complete copies of any and all amendments, waivers and other modifications to each of the Bank Agreements promptly after the execution and delivery thereof by the parties thereto." b. Effective upon the Effective Date, Section 6 of each of the Gibson Agreements is hereby amended to read as follows: "SECTION 6. PREPAYMENT OF NOTES UPON CHANGE OF CONTROL. In the event a Change of Control (as hereinafter defined) shall occur, the Company hereby covenants and agrees to give each holder of the Notes written notice thereof, promptly after the occurrence of such Change of Control but in any event within 10 days thereof. Such notice shall also (a) describe in reasonable detail the facts and circumstances giving rise to such Change of Control and the effect thereof on the Company, (b) offer to prepay, on a date (the "Change of Control Prepayment Date") which shall be not less than 30 days nor more than 60 days after the date of such notice, all of the Notes held by each such holder, (c) request each such holder to notify the Company in writing, not less than 10 days prior to the Change of Control Prepayment Date, of its acceptance or rejection of such offer and (d) inform each such holder that, upon its receipt of such notice by the Company, failure to accept such offer in writing on or before the 10th day prior to the Change of Control Prepayment Date shall be deemed a rejection of such offer. The notice to the Computing Holder shall also set forth the respective names and addresses of, and principal amounts of the Notes held by, the other holders. The Computing Holder shall give written notice to the Company and the other holders on the second Business Day prior to the Change of Control Prepayment Date, of the amount of the Make- Whole Premium, if any, with respect to the Notes held by it and the other holders, which notice shall set forth in reasonable detail the computation thereof. The Make-Whole Premium, if any, set forth in such notice shall be binding on the Company and the other holders absent manifest error, but such notice in itself shall constitute neither an acceptance nor a rejection by the Computing Holder of such prepayment offer. Thereupon, the Company covenants and agrees that it will on the Change of Control Prepayment Date prepay all of the Notes held by each holder who has accepted the prepayment offer in accordance with this Section, by payment of the unpaid principal amount of such Notes, together with interest accrued thereon to the Change of Control Prepayment Date, and the Make-Whole Premium, if any, applicable to such unpaid principal amount. The term "Change of Control" means any Acquisition subsequent to the Effective Date by any Person, or related Persons constituting a "group" for purposes of Section 13(d) of the Exchange Act, of (a) the power to elect, appoint or cause the election or appointment of at least a majority of the members of the Board of Directors of the Company, through beneficial ownership of the Capital Stock of the Company or otherwise, or (b) all or substantially all of the properties and assets of the Company; provided, however, that a Change of Control shall not be deemed to have occurred if (x) the Acquisition of such power or properties and assets is pursuant to a transaction in compliance with the provisions of Section 4.02 of the Notes and (y) no Person, or related Persons constituting a "group" for purposes of Section 13(d) of the Exchange Act, shall have the power to elect, appoint or cause the election or appointment of at least a majority of the members of the board of directors of such successor or transferee. For the purposes of this definition, "Acquisition" of the power or properties and assets stated in the preceding sentence means the earlier of (i) the actual possession thereof and (ii) the consummation of any transaction or series of related transactions which with the passage of time will give such Person or Persons the actual possession thereof." c. Effective upon the Effective Date, Section 7 of the 1989 Agreement is hereby amended to read as follows: "SECTION 7. MISCELLANEOUS. 7.1. Expenses. The Company will pay all costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by you and each other holder of a Note in connection with the transactions contemplated hereby and in connection with any amendments, waivers or consents under or in respect of this Agreement, the Notes, the Pledge Agreements, the Guaranty Agreement or the Intercreditor Agreement (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement, the Notes, the Pledge Agreements, the Guaranty Agreement or the Intercreditor Agreement or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement, the Notes, the Pledge Agreements, the Guaranty Agreement or the Intercreditor Agreement, or by reason of being a holder of a Note, and (b) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby, and by the Notes, the Pledge Agreements, the Guaranty Agreement and the Intercreditor Agreement. The Company will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by you). The obligations of the Company under this Section 7.1 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement, the Notes, the Pledge Agreements, the Guaranty Agreement and the Intercreditor Agreement, and the termination of any thereof. 7.2. Stamp Taxes, etc. The Company will pay, and save you and any subsequent holder of the Notes harmless against, any and all liability (including any interest or penalty for non-payment or delay in payment) with respect to stamp and other taxes (other than income taxes), if any, which may be payable or determined to be payable in connection with the transactions contemplated hereby including, without limitation, any modification, amendment or alteration of this Agreement or the Notes (other than transfer taxes). The obligations of the Company under this Section 7.2 shall survive the payment or prepayment or transfer of the Notes. 7.3. Successors and Assigns. All covenants, agreements, representations and warranties made herein or in certificates delivered in connection herewith by or on behalf of the Company shall bind the successors and assigns of the Company, whether so expressed or not, and all such covenants, agreements, representations and warranties shall inure to the benefit of your successors and assigns, including any subsequent holder of any of the Notes. 7.4. Home Office Payment. Notwithstanding any provision to the contrary in the Notes contained, the Company will promptly and punctually pay to you by wire transfer of immediately available funds, for credit not later than 1:00 p.m., New York City time, on the date payment is due, to Account Number 002-2-410591, Account Name: Metropolitan Life Insurance Company, Private Placement Number 640376A#6, at The Chase Manhattan Bank, N.A., Metropolitan Branch, 33 East 23rd Street, New York, New York 10010 or to such other account or address or by such other method as may be designated in writing by you, all amounts payable in respect of the principal of, Make-Whole Premium, if any, and interest on, any Notes then held by you or your nominee, without any presentment thereof and without any notation of such payment being made thereon. Prior to the delivery of any Note upon sale, you will make or cause to be made a notation thereon of the date to which interest has been paid thereon and, if not theretofore made, a notation of the extent to which payment has been made on account of the principal thereof. The Company will afford the benefits of this Section 7.4 to any holder of a Note that is an Institutional Investor and that has made the same agreement relating to such Note as you have made in this Section 7.4. 7.5. Notices. All communications and notices provided for hereunder or under the Notes shall be in writing, and if to you, mailed (by registered or certified mail, return receipt requested) or delivered by a recognized overnight delivery service or sent by facsimile transmission, followed by a confirmation copy sent on the same day by a recognized overnight delivery service, to Metropolitan Life Insurance Company, One Madison Avenue, New York, N.Y. 10010, Attention: Treasurer (facsimile number (212) 578-3910) with a copy to Metropolitan Life Insurance Company, Suite 800, One Lincoln Centre, Oak Brook Terrace, Illinois 60181, Attention: Assistant Vice-President (facsimile number (708) 916-2575); if to the Company, mailed (by registered or certified mail, return receipt requested) or delivered by a recognized overnight delivery service or sent by facsimile transmission, followed by a confirmation copy sent on the same day by a recognized overnight delivery service, to Thomas Nelson, Inc., Nelson Place at Elm Hill Pike, P. O. Box 141000, Nashville, Tennessee 37214, Attention: Joe L. Powers, Executive Vice President and Chief Financial Officer (facsimile number (615) 889-5940); if to any other holder of a Note, by any of the foregoing methods to such address as such holder shall have specified to the Company in writing; or addressed to either party hereto at any other address in the United States of America that such party may hereafter designate by written notice to the other party. Any such notice or communication sent as provided in this Section 7.5 shall be effective upon receipt, including receipt of any facsimile transmission. 7.6. Payments Due on Non-Business Days. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Premium or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. 7.7. Severability. Any provision of this Agreement or the Notes that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or thereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. 7.8. Construction. Each covenant contained herein or in the Notes shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein or therein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein or therein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. 7.9. Governing Law. THIS AGREEMENT AND THE NOTES SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. THE COMPANY HEREBY SUBMITS TO THE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK LOCATED IN NEW YORK COUNTY, NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO THE SOLE AND ABSOLUTE ELECTION OF THE REQUIRED HOLDERS AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OTHER RELATED DOCUMENT SHALL BE LITIGATED IN SUCH COURTS, AND THE COMPANY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURTS. THE COMPANY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY AT ITS ADDRESS SPECIFIED IN SECTION 7.5, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. SUBJECT TO THE ELECTION OF THE REQUIRED HOLDERS, PROCESS MAY BE SERVED IN ANY OTHER MANNER PERMITTED BY LAW. 7.10. Waiver of Trial by Jury. THE PARTIES HERETO ACKNOWLEDGE THAT ANY DISPUTE ARISING OUT OF THIS AGREEMENT OR THE NOTES WILL BE BASED ON DIFFICULT AND COMPLEX FACTS. ACCORDINGLY, EACH OF THE PARTIES HERETO HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY DISPUTE, CONTROVERSY, SUIT, HEARING OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE NOTES OR THE OBLIGATIONS, DUTIES AND RIGHTS OF THE COMPANY OR OF THE HOLDER OF ANY NOTE AS SET FORTH HEREIN OR IN THE NOTES. 7.11. Defined Terms. The term "Company" shall mean Thomas Nelson, Inc., a Tennessee corporation. The term "Assumption Agreement" shall mean the Assumption and Amendment Agreement, dated as of May 30, 1996, among the Company, The C. R. Gibson Company and you, pursuant to which the Company assumed the obligations of The C. R. Gibson Company under the Notes and this Agreement. The term "Notes" shall mean the Notes as assumed and amended by the Assumption Agreement in the form of Exhibit A-1 thereto. All other terms used herein shall have the meanings assigned thereto in said Exhibit A-1. 7.12. Headings. The headings of the sections and subsections of this Agreement are inserted for convenience only and do not constitute part of this Agreement. 7.13. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart." d. Effective upon the Effective Date, Section 7 of the 1994 Agreement is hereby amended to read identically to Section 7 of the 1989 Agreement, as amended pursuant to subsection c above, except that (i) the Private Placement Number for purposes of Section 7.4 of the 1994 Agreement shall be "640376B*9", and (ii) Section 7.11 of the 1994 Agreement shall read as follows: "7.11. Defined Terms. The term "Company" shall mean Thomas Nelson, Inc., a Tennessee corporation. The term "Assumption Agreement" shall mean the Assumption and Amendment Agreement, dated as of May 30, 1996, among the Company, The C. R. Gibson Company and you, pursuant to which the Company assumed the obligations of The C. R. Gibson Company under the Notes and this Agreement. The term "Notes" shall mean the Notes as assumed and amended by the Assumption Agreement in the form of Exhibit A-2 thereto. All other terms used herein shall have the meanings assigned thereto in said Exhibit A-2." 5. Representations and Warranties of the Company. a. Compliance with Other Instruments. The execution, delivery and performance of this Agreement and Amendment and Supplement No. 1 to the Pledge Agreements referred to in Section 7c hereof, the assumption and performance of the Gibson Notes and the Gibson Agreements (as amended by this Agreement), and the issuance and delivery of the new Gibson Notes referred to in Section 7a hereof will not (a) result in any violation of or be in conflict with or constitute a default under any term of the charter or by-laws of the Company or any Subsidiary, or any agreement or instrument to which it or any Subsidiary is a party or by which it or any Subsidiary or any of their respective assets or properties are bound, or any term of any applicable law, ordinance, rule or regulation of any Governmental Authority or any term of any order, judgment, award or decree issued by any court, arbitrator or other Governmental Authority applicable to the Company or any Subsidiary, or (b) result in the creation of (or impose any obligation on the Company or any Subsidiary to create) any Lien upon any properties or assets of the Company or any Subsidiary. b. Governmental Consents. No consent, approval, authorization or other action of, or registration, declaration or filing with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement and Amendment and Supplement No. 1 to the Pledge Agreements referred to in Section 7c hereof, the assumption and performance of the Gibson Notes and the Gibson Agreements (as amended by this Agreement), and the issuance and delivery of the new Gibson Notes referred to in Section 7a hereof. c. Due Authorization. The execution, delivery and performance of this Agreement and Amendment and Supplement No. 1 to the Pledge Agreements referred to in Section 7c hereof, the assumption and performance of the Gibson Notes and the Gibson Agreements (as amended by this Agreement), and the issuance and delivery of the new Gibson Notes referred to in Section 7a hereof have been duly authorized by all necessary corporate action on the part of the Company and this Agreement has been, and said Amendment and Supplement No. 1 and said new Gibson Notes will on the Effective Date be, duly executed and delivered by the Company. This Agreement constitutes, and the Pledge Agreements as amended by said Amendment and Supplement No. 1, the Gibson Notes and the Gibson Agreements (as amended hereby) and the new Gibson Notes referred to in Section 7a hereof will on the Effective Date constitute, the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms. The Company has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. d. No Registration. The assumption of the Gibson Notes hereunder and the issuance and delivery of the new Gibson Notes referred to in Section 7a hereof does not require registration under the Securities Act. 6. Representations and Warranties of Gibson. Gibson represents and warrants that: a. Due Authorization. This Agreement has been duly authorized by all necessary corporate action on the part of Gibson and has been duly executed and delivered by Gibson. Gibson has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. 7. Conditions to Effectiveness. This Agreement shall become effective on the date (the "Effective Date") that all the following conditions shall have been fulfilled and MetLife shall have delivered written notice of such fact to the Company and Gibson: a. The Company shall have duly executed and delivered to MetLife (i) a new 9.50% Note in the form of Exhibit A-1 hereto payable to MetLife in the principal amount of $7,000,000 and dated the Effective Date in exchange for the outstanding 9.50% Note, and (ii) a new 8.31% Note in the form of Exhibit A-2 hereto payable to MetLife in the principal amount of $5,000,000 and dated the Effective Date in exchange for the outstanding 8.31% Note. b. Gibson and the other Guarantors shall have duly executed and delivered to MetLife Amendment and Supplement No. 1 to the Guaranty Agreement in the form of Exhibit B hereto and dated the Effective Date. c. The Company and the other parties to the Pledge Agreements shall have duly executed and delivered Amendment and Supplement No. 1 to each Pledge Agreement in the form of Exhibits C-1 and C-2 hereto, respectively, and dated the Effective Date. d. The parties to the Intercreditor Agreement shall have duly executed and delivered Amendment and Supplement No. 1 thereto in the form of Exhibit D hereto and dated the Effective Date. e. The representations and warranties of the Company and Gibson contained in this Agreement and otherwise made in writing by or on behalf of the Company and Gibson in connection with the transactions contemplated by this Agreement shall be true and correct at the date hereof and at the Effective Date, except as affected by the consummation of such transactions. f. The Company and Gibson shall have performed and complied with all provisions and conditions contained in this Agreement required to be performed or complied with by each of them prior to or on the Effective Date. Immediately prior to and after giving effect to the transactions contemplated hereby, no event which constitutes or which after notice or lapse of time or both would constitute an event of default under the Gibson Notes, the 1996 Agreement or the Bank Agreements shall have occurred and be continuing. g. Each of the Company and Gibson shall have delivered to MetLife a certificate, signed by an authorized officer of each of them and dated the Effective Date, certifying that the conditions specified in Sections 7(e) and (f) hereof as to itself have been fulfilled. h. The Company and Gibson shall have delivered to MetLife the written consent of each party to the Bank Agreements and of The Prudential Insurance Company of America with respect to this Agreement and the transactions contemplated hereby, including Exhibits A-1, A-2 and B hereto, in form and substance satisfactory to MetLife. i. Bass, Berry & Sims, special counsel for the Company, and Stuart Heaton, Esq., counsel for the Company, shall have delivered to MetLife favorable opinions dated the Effective Date, substantially in the form set forth in Exhibits E and F hereto, respectively, and covering such other matters as MetLife may reasonably request. j. The Company shall have paid to MetLife, by wire transfer to MetLife's account specified in Section 7.4 of the Gibson Agreements (as amended hereby), accrued interest on the Gibson Notes as contemplated by Section 2 hereof. k. The Company and each Guarantor shall have delivered to MetLife a certificate of an authorized officer thereof (or of the general partner thereof, as the case may be), dated the Effective Date and certifying as to the resolutions attached thereto relating to the transactions contemplated hereby. l. All proceedings in connection with the transactions contemplated hereby and all documents and instruments incident to such transactions shall be satisfactory to MetLife, and MetLife shall have received all such documents, certificates and instruments relating to such transactions as MetLife may reasonably request. 8. Ratification. By its execution hereof, the Company agrees that, upon the Effective Date, the Gibson Notes and the Gibson Agreements, amended and assumed as herein set forth, shall be in all respects ratified and confirmed and that the terms, provisions and conditions of the Gibson Notes and the Gibson Agreements, as so amended and assumed, shall be and remain in full force and effect. 9. Expenses. The Company agrees, whether or not the transactions hereby contemplated shall be consummated, to pay, and save MetLife harmless from and against any and all liability for the payment of, all expenses arising in connection with the execution and delivery of this Agreement and the Exhibits hereto and consummation of the transactions contemplated hereby, and in connection with any amendments, modifications or waivers (whether or not any of the same become effective) under or in respect of this Agreement, including, without limitation, all stamp and other taxes (other than Federal or state income taxes, if any) which may be payable in respect of the execution and delivery of this Agreement and consummation of the transactions contemplated hereby (including the issuance of the new Gibson Notes referred to in Section 7a hereof and the assumption of the Gibson Notes hereunder), and the fees and disbursements of special counsel and any other counsel retained by MetLife or by the Company in connection with this Agreement, the Exhibits hereto, and any such amendments, modifications or waivers. 10. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. THE COMPANY AND GIBSON HEREBY SUBMIT TO THE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK LOCATED IN NEW YORK COUNTY, NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND IRREVOCABLY AGREE THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT SHALL BE LITIGATED IN SUCH COURTS, AND THE COMPANY AND GIBSON WAIVE ANY OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURTS. THE COMPANY AND GIBSON HEREBY IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PERSON AT ITS ADDRESS SPECIFIED IN SECTION 13 HEREOF, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF METLIFE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY AND GIBSON IN ANY OTHER JURISDICTION. 11. Waiver of Trial by Jury. THE PARTIES HERETO ACKNOWLEDGE THAT ANY DISPUTE ARISING OUT OF THIS AGREEMENT WILL BE BASED ON DIFFICULT AND COMPLEX FACTS. ACCORDINGLY, EACH OF THE PARTIES HERETO HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY DISPUTE, CONTROVERSY, SUIT, HEARING OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE OBLIGATIONS, DUTIES AND RIGHTS OF SUCH PARTY AS SET FORTH HEREIN. 12. Successors and Assigns. All covenants, agreements, representations and warranties made herein or in certificates delivered in connection herewith by or on behalf of the Company or Gibson shall survive the Effective Date, and shall bind the successors and assigns of the Company and Gibson, whether so expressed or not, and all such covenants, agreements, representations and warranties shall inure to the benefit of MetLife's successors and assigns, including any subsequent holder of any of the Gibson Notes. 13. Notices. All communications and notices hereunder shall be in writing, mailed (by registered or certified mail, return receipt requested) or delivered by a recognized overnight delivery service or sent by facsimile transmission followed by a confirmation copy sent on the same day by a recognized overnight delivery service, if to MetLife, to Metropolitan Life Insurance Company, One Madison Avenue, New York, N.Y. 10010, Attention: Treasurer (facsimile number (212) 578-3910), with a copy to Metropolitan Life Insurance Company, Suite 800, One Lincoln Centre, Oak Brook Terrace, Illinois 60181, Attention: Assistant Vice-President (facsimile number (708) 916-2575), or if to the Company or Gibson, to Thomas Nelson, Inc. (or, if to Gibson, to The C. R. Gibson Company, c/o Thomas Nelson, Inc.), Nelson Place at Elm Hill Pike, P. O. Box 141000, Nashville, Tennessee 37214, Attention: Joe L. Powers, Executive Vice President and Chief Financial Officer (facsimile number (615) 889-5940); or addressed to any party at any other address in the United States of America that such party may hereafter designate by written notice to the other parties. Any notice or communication sent as provided in this Section 13 shall be effective upon receipt, including receipt of a facsimile transmission. 14. Headings. The headings of the sections and subsections of this Agreement are inserted for convenience only and do not constitute part of this Agreement. 15. Counterparts. This Agreement may be executed in two or more counterparts, and by different parties hereto on separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. IN WITNESS WHEREOF, the Company, Gibson and MetLife have caused this Agreement to be duly executed by its respective officer thereunto duly authorized as of the date first above written. THOMAS NELSON, INC. By /s/ Joe L. Powers _______________________ Joe L. Powers Executive Vice President and Chief Financial Officer THE C. R. GIBSON COMPANY By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary METROPOLITAN LIFE INSURANCE COMPANY By /s/ John R. Endres _______________________ Title: Assistant Vice President EXHIBIT A-1 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION SET FORTH IN SECTION 4(2) THEREOF. THIS NOTE MAY NOT BE TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL REGULARLY EMPLOYED BY THE HOLDER OF THIS NOTE) REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED, EXCEPT THAT NO SUCH OPINION SHALL BE REQUIRED IN ORDER TO EFFECTUATE A TRANSFER IN ACCORDANCE WITH THE PROVISIONS OF RULE 144 OR RULE 144A PROMULGATED UNDER THE ACT OR ANY SIMILAR SUCCESSOR RULE OR RULES THERETO. THOMAS NELSON, INC. 9.50% Senior Note Due September 22, 1999 No. New York, New York $7,000,000 May 30, 1996 THOMAS NELSON, INC., a corporation duly organized and existing under the laws of the State of Tennessee (hereinafter called the "Company"), for value received, hereby promises to pay to Metropolitan Life Insurance Company, or registered assigns, on September 22, 1999 the principal amount of Seven Million Dollars (or so much thereof as shall not have been prepaid) in such coin or currency of the United States of America as at the time of payment shall be legal tender for public and private debts, at the Metropolitan Branch of The Chase Manhattan Bank, N.A., in the Borough of Manhattan, The City of New York, State of New York, and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) at said office, in like coin or currency, on the unpaid portion of said principal amount from the date hereof, semi-annually on the twenty-second day of March and September in each year, commencing on the first such day after the date hereof, at the rate of 9.50% per annum until such unpaid portion of such principal amount shall have become due and payable and at the Overdue Interest Rate thereafter and, so far as may be lawful, on any overdue installment of interest at the Overdue Interest Rate. SECTION 1. THE NOTES; TRANSFERS, EXCHANGE, ETC. 1.01. The Notes. This Note is one of an authorized issue of senior promissory notes (hereinafter called the "Notes", as more fully defined in Section 6) made by the Company in an aggregate principal amount of $7,000,000, maturing on September 22, 1999, bearing interest payable at the same rate and on the same dates as the interest on the principal amount of this Note and originally issued pursuant to the Agreement. 1.02. Registration, Transfer or Exchange of Notes. The Notes are issuable only as registered Notes. The Company will keep at its office or agency maintained as provided in Section 3.02 a register in which the Company shall provide for the registration and registration of transfer of the Notes. The holder of this Note may, at its option and either in person or by duly authorized attorney, surrender the same at said office or agency for registration of transfer or exchange, accompanied if surrendered for transfer by a written instrument of transfer duly executed by such holder or attorney. In case such holder shall so request a transfer or exchange of this Note, the Company shall, at the expense of such holder, deliver to or upon such holder's order one or more Notes in the same aggregate unpaid principal amount as this Note, each dated as of the date of, or, if later, the date to which interest has been paid on, this Note, in the principal amount of $1,000,000 or a multiple of $1,000 in excess thereof, as requested by such holder (provided that if such aggregate unpaid principal amount is less than $500,000, the Company will deliver one Note in exchange for this Note), and registered in such name or names as shall be specified by such holder. Every Note so made and delivered upon transfer or in exchange for this Note shall be in the form of Exhibit A-1 to the Assumption Agreement. Prior to due presentation for registration of transfer of this Note, the Company may deem and treat the registered holder hereof as the absolute owner of this Note for the purpose of receiving payment of or on account of the principal of and premium, if any, and interest on this Note, and for the purpose of any notice, waiver or consent hereunder, and payment of this Note shall be made only to or upon the order in writing of such holder. l.03. Loss, Theft, Destruction or Mutilation of Notes. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of any such loss, theft or destruction, upon receipt of a bond of indemnity reasonably satisfactory to the Company or, in the case of any such mutilation, upon surrender and cancellation of this Note, the Company will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Note, a new Note of like tenor and unpaid principal amount and dated the date of, or, if later, the date to which interest has been paid on, the lost, stolen, destroyed or mutilated Note. In the case of a holder of the Notes which is an institutional investor having combined capital, surplus and undivided profits of at least $200,000,000, its own unsecured agreement of indemnity shall be deemed satisfactory to the Company. SECTION 2. PREPAYMENT OF NOTES. 2.0l. Mandatory Prepayments. The Company covenants and agrees that it will prepay $1,000,000 of the then unpaid principal amount of the Notes on September 22, 1996, $2,000,000 of the then unpaid principal amount of the Notes on September 22, 1997 and $2,000,000 of the then unpaid principal amount of the Notes on September 22, 1998. All such prepayments pursuant to this Section 2.01 shall be applied on the respective payment dates thereof toward the prepayment of the principal amount of the Notes so to be prepaid, in each case together with interest accrued thereon to such prepayment date, but without premium, and otherwise as provided in Section 2.05. Upon prepayment pursuant to Section 6 of the Agreement of the Notes held by some but not all holders, the principal amount of each mandatory prepayment of Notes becoming due under this Section 2.01 on or after the date of such prepayment shall be reduced in the same proportion as the aggregate unpaid principal amount of the Notes is reduced as a result of such prepayment. 2.02. Optional Prepayments. Upon notice given as provided in Section 2.04 and otherwise as provided in Section 2.05, the Company may, at its option, prepay the Notes in whole at any time, or in part, but not less than an amount equal to $1,000,000 (provided that in the event the unpaid principal amount of the Notes outstanding shall be less than $1,000,000, then in amount equal to the full amount of such unpaid principal amount) from time to time, together with accrued interest on the principal amount so prepaid to the prepayment date and a premium equal to the Make-Whole Premium. No prepayment of less than all of the outstanding Notes pursuant to this Section 2.02 shall be credited to or relieve the Company to any extent from its obligation to make any prepayment of the Notes required by Section 2.01. 2.03. Prepayment Upon Change of Control. Upon the request of any holder of a Note as provided in Section 6 of the Agreement, the Company shall prepay the Notes then held by such holder in accordance with the provisions of such Section 6. 2.04. Notice of Prepayment and Other Notices. The Company shall give written notice of optional prepayment of this Note or any portion hereof pursuant to Section 2.02 not less than thirty (30) days nor more than sixty (60) days prior to the date fixed for such prepayment in such notice, which notice of prepayment shall specify the amount so to be prepaid, together with the premium, if any, to be paid thereon and the date fixed for such prepayment. Such notice of prepayment and all other notices to be given to any holder of this Note shall be given in the manner specified in Section 8.01 to the Person in whose name this Note is registered at its address designated on the register maintained by the Company on the date such notice of prepayment or other notice is given. Upon notice of prepayment being given as aforesaid, the Company covenants and agrees that the Company will prepay, on the date therein fixed for prepayment, this Note or the portion hereof, as the case may be, so called for prepayment, at the principal amount thereof so called for prepayment together with interest accrued thereon to the date fixed for such prepayment, plus the applicable premium, if any. The notice to the Computing Holder shall also set forth the respective names and addresses of, and principal amounts of the Notes held by, the other holders. The Computing Holder shall give written notice to the Company and the other holders, on the second Business Day prior to the date fixed for prepayment in such notice, of the amount of the Make-Whole Premium calculated hereunder, which Computing Holder's notice shall set forth in reasonable detail the computation thereof. Such Make-Whole Premium set forth in such notice shall be binding on the Company and the other holders absent manifest error. 2.05. Allocation of Prepayments. In the event of any prepayment of less than all of the outstanding Notes (other than any prepayment pursuant to Section 6 of the Agreement) the Company will allocate the principal amount so to be prepaid (but only in units of $1,000) among the registered holders of Notes in proportion, as nearly as may be, to the respective principal amounts of such Notes not theretofore called for prepayment, of which they shall be registered holders. 2.06. Interest After Date Fixed for Prepayment. This Note or any portion hereof to be prepaid shall cease to bear interest on and after the date fixed for such prepayment unless, upon presentation for the purpose, the Company shall fail to pay this Note or such portion, as the case may be, on the date fixed for such prepayment, in which event this Note or such portion, as the case may be, shall bear interest at the Overdue Interest Rate from and after such date until paid and, so far as may be lawful, any overdue installment of interest shall bear interest at said rate. 2.07. Surrender of Notes; Notation Thereon. Upon any prepayment of a portion of the principal amount of this Note, the registered holder hereof, at its option, may require the Company to execute and deliver at the expense of such holder, upon surrender of this Note, a new Note registered in the name of such Person or Persons as may be designated by such holder for the principal amount of this Note then remaining unpaid, dated as of the date to which interest has been paid on the principal amount of this Note then remaining unpaid, or may present this Note to the Company for notation hereon of the payment of the portion of the principal amount of this Note so prepaid. Every new Note made and delivered pursuant to the provisions of this Section 2.07 shall in all other respects be in the same form and have the same terms as this Note. The Company may, as a condition of payment of all or any of the principal of, premium, if any, and interest on, this Note, require the holder to present this Note for notation of such payment and, if this Note be paid in full, require the surrender hereof. SECTION 3. AFFIRMATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: 3.0l. Payment of Notes. The Company will punctually pay or cause to be paid the principal and interest (and premium, if any) to become due in respect of the Notes according to the terms thereof. 3.02. Maintenance of Company Office. The Company will maintain an office or agency at 501 Nelson Place, Nashville, Tennessee 37214 (or such other place in the United States of America as the Company may designate in writing to the holder hereof), where notices, presentations and demands to or upon the Company in respect of the Notes may be given or made. 3.03. Keeping of Books. The Company will, and will cause each of its Subsidiaries to, keep proper books of record and account in accordance with GAAP. 3.04. Payment of Taxes and Claims; Preservation of Corporate Existence, etc.; Maintenance of Properties. The Company will, and will cause each of its Subsidiaries to, A. file all tax returns required to be filed in any jurisdiction and pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments and governmental charges or levies imposed upon it, its income, franchises or profits or its property before the same shall become in default, as well as all lawful claims and liabilities of any kind (including claims and liabilities for labor, materials and supplies) which, if unpaid, might by law become a Lien upon its property; provided, however, that neither the Company nor any Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim if (i) the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings and if the Company or any such Subsidiary shall have set aside on its books adequate reserves therefor in accordance with GAAP, or (ii) the nonpayment thereof in the aggregate could not reasonably be expected to have a Material Adverse Effect; B. subject to Section 4.02, do all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory), permits, licenses and franchises, unless in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence of a Subsidiary or such right, permit, license or franchise could not, individually or in the aggregate, have a Material Adverse Effect; and C. maintain and keep all its properties used or useful in the conduct of its business in good condition, repair and working order (other than ordinary wear and tear) so that the business carried on in connection therewith may be properly conducted at all times; provided, however, that nothing in this Section 3.04C shall prevent the Company or any of its Subsidiaries from discontinuing the operation and maintenance of any of its properties, if such discontinuance is, in the judgment of the Company, desirable in the conduct of the Company's or such Subsidiary's business and the Company has concluded that such discontinuance could not, individually or in the aggregate, have a Material Adverse Effect. 3.05. Insurance. The Company will, and will cause each of its Subsidiaries to, maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, coinsurance and self-insurance, if adequate reserves are maintained with respect thereto) as is consistent with sound business practices customary in the case of entities of similar size engaged in the same or a similar business and similarly situated. 3.06. Compliance with Laws, etc. The Company will, and will cause each of its Subsidiaries to, comply with all present and future applicable laws, rules, regulations, orders and requirements (including, without limitation, all applicable Environmental Laws) of every duly constituted governmental or quasi-governmental authority or agency applicable to the Company and its Subsidiaries or any of their respective properties, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, rules, regulations, orders and requirements or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 3.07. Covenant to Secure Notes Equally. The Company will, if it or any Subsidiary shall create or assume any Lien upon any of its property or assets, whether now owned or hereafter acquired, other than Liens permitted by the provisions of Section 4.03 (unless prior written consent to the creation or assumption thereof shall have been obtained pursuant to Section 5) make or cause to be made effective provision whereby the Notes will be secured by such Lien equally and ratably with any and all other Indebtedness thereby secured so long as any such other Indebtedness shall be so secured. 3.08. Guaranteed Obligations. The Company will if, at any time, any of its Subsidiaries executes a Guaranty of or collateralizes in any other manner any obligation of the Company under the Bank Agreements, simultaneously cause such Subsidiary or Subsidiaries, as the case may be, to execute and deliver to each holder of a Note a similar Guaranty in form and substance reasonably satisfactory to such holder with respect to payment of the principal amount of the Notes and any premium and interest thereon, which bears the same ratio to the total unpaid principal amount of the Notes as the amount of such other obligation which is subject to a Guaranty bears to the total unpaid principal amount of such other obligation, or if such other obligation is collateralized, to collateralize the Notes equally and ratably with the obligations of the Company under the Bank Agreements. 3.09. Parity With Bank Agreements. The Company will, and will cause each of its Subsidiaries to, execute all such documents and take such other actions as the Required Holders may reasonably request in order to assure that at all times the Notes shall rank pari passu in right of payment with the obligations of the Company under the Bank Agreements, including, without limitation, the waiver of set-off rights or the execution of a set-off and collateral sharing agreement in favor of the holders of the Notes. 3.10. Information Required by Rule 144A. The Company will, upon the request of the holder of any Note, provide such holder, and any qualified institutional buyer designated by such holder, such financial and other information as such holder may reasonably determine to be necessary in order to permit compliance with the information requirements of Rule 144A under the Securities Act in connection with the resale of Notes, except at such times as the Company is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act. For the purpose of this Section 3.10, the term "qualified institutional buyer" shall have the meaning specified in Rule 144A under the Securities Act. 3.ll. No Integration. The Company will take all necessary steps so that its assumption of the Notes and issuance of new Notes pursuant to the Assumption Agreement will not require registration under the Securities Act. The Company will not make any future offer and sale of debt securities of the Company of any class if, as a result of the doctrine of "integration", there is a reasonable possibility that such offer and sale would result in the loss of the entitlement of its assumption of the Notes and its issuance of new Notes to an exemption from the registration requirements of the Securities Act. SECTION 4. NEGATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: 4.01. Transactions with Affiliates. The Company will not, and will not permit any of its Subsidiaries to, enter into directly or indirectly any transaction or group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Subsidiary), except in the ordinary course and pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate; provided, however, this Section 4.01 shall not apply to any individual transaction which does not exceed $250,000 or any series of related transactions which in the aggregate do not exceed $250,000. 4.02. Merger, Consolidation, etc. The Company will not, and will not permit any of its Subsidiaries to, consolidate with or merge with any other Person or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to any Person except that: (i) any Subsidiary may merge or consolidate with the Company or a Material Subsidiary that is a Wholly-Owned Subsidiary, provided immediately after such merger or consolidation, no Default or Event of Default shall have occurred or exist and, in the case of any transaction involving the Company, the surviving corporation or the continuing corporation (if not the Company) shall be a solvent corporation organized and existing under the laws of the United States or any State thereof (including the District of Columbia), and such corporation (if not the Company) (A) shall have executed and delivered to each holder of a Note its assumption of the due and punctual performance and observance of each covenant and condition of the Agreement and the Notes, (B) shall have executed and delivered, or caused to be executed and delivered, to each holder of a Note a reaffirmation of the Pledge Agreements and the Guaranty Agreement by each party thereto, and (C) shall have caused to be delivered to each holder of a Note (1) an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the holders of the Notes, to the effect that all agreements or instruments effecting such assumption and reaffirmation are enforceable in accordance with their terms and comply with the terms hereof which opinion shall be reasonably satisfactory to the holders of the Notes in all respects and (2) such other agreements and instruments which any holder of a Note may reasonably request; (ii) the Company may merge or consolidate with any other corporation (including a Material Subsidiary that is a Wholly-Owned Subsidiary) if (A) the continuing or surviving corporation (if not the Company) shall be a solvent corporation existing under the laws of the United States or any State thereof (including the District of Columbia), and such corporation (1) shall have executed and delivered to each holder of a Note its assumption of the due and punctual performance and observance of each covenant and condition of the Agreement and the Notes, (2) shall have executed and delivered, or caused to be executed and delivered, to each holder of a Note a reaffirmation of the Pledge Agreements and the Guaranty Agreement by each party thereto, and (3) shall have caused to be delivered to each holder of a Note a) an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the holders of the Notes, to the effect that all agreements or instruments effecting such assumption and reaffirmation are enforceable in accordance with their terms and comply with the terms hereof which opinion shall be reasonably satisfactory to the holders of the Notes in all respects and b) such other agreements and instruments which any holder of a Note may reasonably request, and (B) immediately after such merger or consolidation, no Default or Event of Default shall have occurred or exist; (iii) any Subsidiary may convey, transfer or lease all or substantially all of its assets to the Company or a Material Subsidiary that is a Wholly-Owned Subsidiary, provided immediately after such transaction, no Default or Event of Default shall have occurred or exist; and (iv) the Company may convey, transfer or lease all or substantially all of its assets to any other corporation (including a Material Subsidiary that is a Wholly-Owned Subsidiary), provided (A) the acquiring corporation shall be a solvent corporation existing under the laws of the United States or any State thereof (including the District of Columbia), and such corporation (1) shall have executed and delivered to each holder of a Note its assumption of the due and punctual performance and observance of each covenant and condition of the Agreement and the Notes, (2) shall have executed and delivered, or caused to be executed and delivered, to each holder of a Note a reaffirmation of the Pledge Agreements and the Guaranty Agreement by each party thereto, and (3) shall have caused to be delivered to each holder of a Note a) an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption and reaffirmation are enforceable in accordance with their terms and comply with the terms hereof which opinion shall be reasonably satisfactory to the holders of the Notes in all respects and b) such other agreements and instruments which any holder of a Note may reasonably request, and (B) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred or exist. 4.03. Liens. The Company will not, and will not permit any of its Subsidiaries to, create, assume, incur or suffer to exist any Lien upon any of its property or assets, whether owned on January 3, 1996 or thereafter acquired (whether or not provision is made for the equal and ratable securing of the Notes pursuant to Section 3.07), except: (a) Liens existing on January 3, 1996 and specified on Schedule 10.3 to the 1996 Agreement, provided in the case of Liens securing the Company's obligations under the Bank Agreements, all Persons party to the Bank Agreements shall have executed and delivered the Intercreditor Agreement and the Intercreditor Agreement shall be in full force and effect so long as such Liens exist; (b) Liens for taxes (including ad valorem and property taxes) and assessments (other than any Liens and assessments imposed under ERISA) or governmental charges or levies which are not yet due (and not then delinquent) or which are being actively contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained; (c) landlord liens and statutory liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law, created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained, and, in any case (i) were not incurred in connection with the borrowing of money, and (ii) do not, individually or in the aggregate, materially detract from the value of the property or assets of the Company or any Material Subsidiary, or the Company and its Subsidiaries taken as a whole; (d) Liens (other than any Lien imposed under ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases (other than Capitalized Leases), government contracts, performance and return of money bonds and similar obligations which (i) were not incurred in connection with the borrowing of money, and (ii) do not, individually or in the aggregate, materially detract from the value of the property or assets of the Company or any Material Subsidiary, or the Company and its Subsidiaries taken as a whole; (e) Liens arising in the ordinary course of business (including easements, rights of way, zoning restrictions of record and similar restrictions and other similar charges or encumbrances) which are not incurred in connection with Debt, and which do not, individually or in the aggregate, (a) materially interfere with the ordinary conduct of the business of the Company, or the Company and its Subsidiaries taken as a whole, or (b) materially detract from the value of the property or assets of the Company or any Material Subsidiary, or the Company and its Subsidiaries taken as a whole; (f) any right of setoff or banker's lien arising (whether by law, contract or otherwise) in connection with ordinary course of business deposit arrangements maintained by the Company or its Subsidiaries with its banks or other financial institutions so long as any such bank or other financial institution (A) shall not at any time make loans or otherwise extend credit to the Company or any Subsidiary, (B) does not maintain accounts (for the deposit of cash or otherwise) for the benefit of the Company or any Subsidiary, (C) shall have waived in writing for the benefit of each holder of a Note such right of setoff or banker's lien or (D) holds no more than $1,000,000 of obligations owed to the Company or any Subsidiary and the total of all such obligations permitted solely by this clause (D) shall not exceed $3,000,000; (g) any Lien renewing, extending or refunding any outstanding obligations secured by a Lien described in clause (a), (b), (c), (d), (f), (h) and (i) of this Section 4.03, provided (A) with respect to Debt described in clause (a), such renewal, extension or refunding shall relate solely to Debt under the Bank Agreements, so long as all Persons then party to the Bank Agreements shall have executed and delivered the Intercreditor Agreement and the Intercreditor Agreement shall be in full force and effect so long as such Lien exists, (B) after giving effect to such renewal extension or refunding of the obligations described in clauses (b), (c), (d), (f), (h) and (i), such obligations shall remain subject to the conditions and provisions set forth in clauses (b), (c), (d), (f), (h) and (i), respectively, and (C) except for Debt under the Bank Agreements, the principal amount secured is not increased and such Lien is not extended to any other property of the Company or its Subsidiaries; (h) Liens securing judgments rendered against the Company or any of its Subsidiaries or arising in connection with any court proceedings, provided (i) such Liens are being contested in good faith by appropriate proceedings and (ii) no action has been taken by any Person to execute or otherwise collect on such Lien; (i) Liens securing Debt held by the Company in any Subsidiary or Debt held by any Subsidiary in any other Subsidiary; and (j) Liens securing Debt permitted by clause (ii) of the definition of Priority Debt, provided that after giving effect to such Liens, Consolidated Priority Debt shall not exceed 25% of Shareholders' Equity at any time. 4.04. Loans, Advances and Investments. The Company will not, and will not permit any of its Subsidiaries to, make or permit to remain outstanding any Investments, except that the Company or any Subsidiary may: (a) make or own Investments in any Subsidiary or any Person which immediately after giving effect to such Investment will be a Subsidiary; (b) own, purchase or otherwise acquire notes or accounts receivable arising from transactions with customers, suppliers and employees in the ordinary course of business; (c) execute Guaranties of Debt of Subsidiaries, provided that after giving effect to any such Guaranty the Company will be in compliance with Sections 4.08(a), (b) and (e); (d) own, purchase or acquire (A) prime commercial paper of an issuer rated A-1 or P1 or better by Moody's or S&P or certificates of deposit in U.S. commercial banks (having capital and surplus in excess of $500,000,000), in each case due within one year from the date of purchase, or (B) obligations of the United States Government or any agency thereof for which the full faith and credit of the United States Government is pledged due within one year from the date of purchase, or (C) obligations guaranteed by the United States Government due within one year from the date of purchase; and (e) make or permit to remain outstanding any other Investments which in the aggregate do not exceed at any time 15% of Shareholders' Equity. 4.05. Restricted Payments. The Company will not, and will not permit any of its Subsidiaries to: (a) pay or declare any dividend on any class of its Capital Stock or make any other distribution on account of any class of its Capital Stock; or (b) redeem, purchase or otherwise acquire, directly or indirectly (through a Subsidiary or otherwise), any shares of its Capital Stock (all of the foregoing events set forth in subsections (a) and (b), whether made in cash or property, being herein called "Restricted Payments"); unless (A) the aggregate amount of all Restricted Payments made since September 30, 1995 would not exceed the sum of (1) $20,000,000, plus (2) 50% of cumulative Consolidated Net Income since September 30, 1995 (or minus 100% of cumulative Consolidated Net Income since September 30, 1995 if such cumulative Consolidated Net Income for such period is a loss), plus (3) the aggregate net proceeds of the issuance or sale of the Company's Capital Stock after September 30, 1995 and (B) no Default or Event of Default shall have occurred and be continuing, and no Default or Event of Default would occur as a result of such Restricted Payment; provided, however, any Subsidiary may make Restricted Payments to the Company or any Material Subsidiary. For purposes of this Section 4.05, the conversion of the Company's Convertible Subordinated Notes due 1999 shall not constitute an issuance of the Company's Capital Stock. 4.06. Nature of Business. The Company will not, and will not permit any of its Subsidiaries to, engage in any business, if as a result, when taken as a whole, the general nature of the business then engaged in by the Company and its Subsidiaries would be substantially changed from the nature of the business of the Company and its Subsidiaries on January 3, 1996. 4.07. Sale of Property. The Company will not, and will not permit any of its Subsidiaries to, Dispose of any property or assets (including, without limitation, Subsidiary Stock), except, so long as no Default or Event of Default shall exist: (a) the Company or any Subsidiary may Dispose of inventory in the ordinary course of business at Fair Market Value; provided, however, the Company and its Subsidiaries may Dispose of inventory at less than Fair Market Value, provided such Disposition is in the ordinary course of business of the Company and its Subsidiaries which shall be consistent with the practice of the industry of the Company and the Subsidiaries at the time of such Disposition; and (b) the Company or any Subsidiary may Dispose of any of its assets so long as, immediately after giving effect to such proposed Disposition: (i) the cumulative net book value of all assets so Disposed of by the Company and its Subsidiaries during any fiscal year does not exceed 15% of the net book value of the Consolidated Assets of the Company and its Subsidiaries determined after giving effect to any such Disposition; (ii) the consideration for such assets represents the Fair Market Value of such assets at the time of such Disposition; and (iii) in the case of the Disposition of Subsidiary Stock, the following additional conditions shall apply: (A) in connection with such Disposition of Subsidiary Stock, the entire Investment (whether represented by stock, Debt, claims or otherwise) of the Company and its other Subsidiaries in such Subsidiary is Disposed of to a Person other than (1) the Company, (2) another Subsidiary not being simultaneously Disposed of, or (3) an Affiliate, and (B) the Subsidiary being Disposed of has no continuing Investment in any other Subsidiary of the Company not being simultaneously Disposed of or in the Company. For purposes of this Section 4.07, "Disposition" means the sale, lease, transfer or other disposition of property, and "Disposed of" has a corresponding meaning to Disposition. The term "Disposition" shall not include an exchange of assets, provided that the assets involved in such exchange are similar in function in that after giving effect to such exchange there has not been (A) a Material Adverse Effect, (B) any Material deterioration of cash flow generation, or (C) any deterioration in the overall quality of plant, property and equipment of the Company and its Subsidiaries taken as a whole. An "exchange" shall be deemed to have occurred if each of the transactions involved shall have been consummated within a six month period. 4.08. Certain Financial Limits. The Company will not permit: (a) Consolidated Senior Funded Debt to exceed 60% of Total Capitalization at any time; (b) Total Funded Debt to exceed 65% of Total Capitalization at any time; (c) the ratio of Consolidated Income Available for Fixed Charges for the four fiscal quarters most recently ended to Consolidated Fixed Charges for such four fiscal quarter period to be less than 1.75 to 1.0 on the last day of any fiscal quarter; (d) Shareholders' Equity to be less than $100,000,000 at any time; and (e) Consolidated Priority Debt to exceed 25% of Shareholders' Equity at any time. SECTION 5. CONSENTS, WAIVERS AND AMENDMENTS. Any term, covenant, agreement or condition of the Agreement or the Notes may, with the consent of the Company, be amended or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), by one or more written instruments signed by the Required Holders; provided, however, that A. no such amendment or waiver shall 1. change the maturity of the principal of, or any installment of interest on, any of the Notes, or reduce the principal amount thereof or the interest or premium thereon, or subordinate or otherwise modify the terms of, or rights to, payment of the principal thereof or interest or premium thereon including, without limitation, change the time for any such payment, without the consent of the holder of each Note so affected, or 2. change the percentage of holders of Notes required to approve any such amendment or effectuate any such waiver or give to any Note any preference over any other Note, without the consent of the holders of all Notes then outstanding; B. no such amendment or waiver shall modify or alter the provisions of Section 2.03 of the Notes or Section 6 of the Agreement without the consent of all holders of the Notes then outstanding; and C. no such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. Any amendment or waiver pursuant to this Section 5 shall apply equally to all the holders of the Notes and shall be binding upon them, upon each future holder of any Note and upon the Company, whether or not a notation of such amendment or waiver shall have been made on such Notes. In the case of an amendment or waiver of the character described in Section 5A, the holder of this Note agrees to make a notation on this Note to indicate that such amendment or waiver has been effected. In the case of any other amendment or waiver, no notation need be made on the Notes at the time outstanding, but any Note executed and delivered thereafter may, at the option of the Company, bear a notation referring to any such amendment or waiver then in effect. For purposes of determining whether the holders of outstanding Notes of the requisite aggregate principal amount at any time have agreed or consented to any amendment or waiver pursuant to the provisions of this Section 5, any Notes owned by the Company, any Subsidiary or any Affiliate shall be disregarded and deemed not to be outstanding. The Company will not increase the rate of interest on any Note or grant any holder of any Note any benefit or payment for or in connection with any amendment or waiver in respect to the Agreement or the Notes, whether pursuant to this Section 5 or otherwise, unless such increase in interest or other benefit or payment is extended on the same terms ratably to all other holders of Notes at the time outstanding. SECTION 6. DEFINITIONS. For all purposes of this Note and the Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Affiliate" means, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of the Company or any Subsidiary or any corporation of which the Company and its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests. As used in this definition, "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an "Affiliate" is a reference to an Affiliate of the Company. "Agreement" means the Loan Agreement dated as of September 21, 1989 between The C. R. Gibson Company ("Gibson") and Metropolitan Life Insurance Company ("MetLife") pursuant to which the Notes were originally issued, as amended from time to time, including by the Assumption Agreement, and as assumed by the Company pursuant to the Assumption Agreement. "Assets" means, at any time, assets of any Person as determined in accordance with GAAP. "Assumption Agreement" means the Assumption and Amendment Agreement, dated as of May 30, 1996, among Gibson, the Company and MetLife, pursuant to which the Agreement, the Notes, the 1994 Agreement and the 8.31% Notes were amended and Gibson's obligations thereunder were assumed by the Company. "Bank Agreements" means (i) the Amended and Restated Credit Agreement, dated December 13, 1995, among the Company, the Lenders listed therein, and SunTrust Bank, Nashville, N.A., as agent, and any refinancing thereof or substitution therefor, as it may be amended, modified or supplemented from time to time in accordance with its terms, (ii) the Amended and Restated Revolving Credit Promissory Note dated as of December 13, 1995 (effective as of July 25, 1995) given by the Company to SunTrust Bank, Nashville, N.A. in the original principal amount of $10,000,000, and any refinancing thereof or substitution therefor, as it may be amended, modified or supplemented from time to time in accordance with its terms, and the Amended and Restated Letter Agreement dated as of December 13, 1995 from SunTrust Bank, Nashville, N.A., to the Company delivered in connection therewith, as it may be amended, modified or supplemented from time to time in accordance with its terms, (iii) the SunTrust LOC Facility (as defined in the Intercreditor Agreement) and (iv) the NCB LOC Facility (as defined in the Intercreditor Agreement). "Business Day" means any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed. "Capital Stock" means, with respect to any Person, the outstanding capital stock (or any options or warrants to purchase capital stock or other securities exchangeable for or convertible into capital stock) of such Person. "Capitalized Lease" means, at any time, and with respect to any Person, a lease which the lessee is required to capitalize on the balance sheet of such lessee in accordance with GAAP. "Capitalized Lease Obligations" means the amount at which the aggregate rentals due and to become due under all Capitalized Leases under which the Company or any Subsidiary is the lessee, would be required to be reflected as a liability on its consolidated balance sheet. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "Company" means Thomas Nelson, Inc., a Tennessee corporation, and, subject to Section 4.02, its successors and assigns. "Computing Holder" means, as of the date of prepayment pursuant to Section 6 of the Agreement or Section 2.02 hereof or the date of acceleration pursuant to Section 7.02 hereof, as the case may be, the holder of Notes with an aggregate principal amount outstanding higher than that of Notes held by any other holder of the Notes. "Consolidated" means the consolidation of accounts of the Company and its Subsidiaries determined in accordance with GAAP giving effect to the elimination of any intercompany items and any minority interests in Subsidiaries. "Consolidated Net Income" means, for any period, the consolidated net income (or loss) of the Company and its Subsidiaries for such period (taken as a single accounting period) determined in accordance with GAAP, but excluding therefrom (to the extent otherwise included therein) (i) any gains or losses, together with any related provision for taxes, realized upon any sale of assets other than in the ordinary course of business, and (ii) any income or loss of any Person accrued prior to the date such Person becomes a Subsidiary of the Company or is merged into or consolidated with the Company or any Subsidiary or all or substantially all of such Person's assets are acquired by the Company or any Subsidiary. "Current Debt" means, with respect to any Person, all Debt of such Person which by its terms matures on demand or within one year from the date of the creation thereof and is not directly or indirectly renewable or extendible at the option of the obligor in respect thereto to a date one year or more from the date of creation thereof, provided that (i) Debt outstanding under an agreement which obligates the lender or lenders to extend credit over a period of one year or more and (ii) Current Maturities of Funded Debt shall constitute Funded Debt and not Current Debt. "Current Maturities of Funded Debt" means the portion of Funded Debt outstanding which by its terms is due on demand or within one year from the date of determination and is not directly or indirectly renewable, extendible or refundable at the option of the obligor to a date one year or more from such time. "Debt" with respect to any Person means, at any time, without duplication, (a) its liabilities for borrowed money; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including, without limitation, all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) its Capitalized Lease Obligations; (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); and (e) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (d) hereof. Debt of any Person shall include all obligations of such Person of the character described in clauses (a) through (e) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "Default" means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "Disposition" is defined in Section 4.07. "Environmental Laws" means any and all Federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. "ERISA Affiliate" means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code. "Event of Default" is defined in Section 7.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" means, at any time, the sale value of property that would be realized in an arm's-length sale at such time between an informed and willing buyer, and an informed and willing seller, under no compulsion to buy or sell, respectively. "Fixed Charges" means, for any period, the sum of (i) Interest Expense and (ii) Operating Rents for such period. "Funded Debt" means, with respect to any Person, all Debt of such Person which by its terms matures, or which is otherwise payable or unpaid, one year or more from the date of creation thereof, or is directly or indirectly renewable or extendible at the option of the obligor in respect thereof to a date one year or more from the date of creation thereof, provided that Funded Debt shall also include, as at any time of determination, Current Maturities of Funded Debt and the minimum daily average level of Current Debt outstanding for any sixty day period during the twelve month period immediately preceding such time of determination. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States of America, consistently applied. "Gibson" means The C. R. Gibson Company, a Delaware corporation and a Wholly-Owned Subsidiary. "Governmental Authority" means (a) the government of (i) the United States of America or any State or other political subdivision thereof, or (ii) any jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. "Guarantor" means each Subsidiary which is a party to the Guaranty Agreement, and any other Subsidiary which executes a Guaranty pursuant to Section 3.08 or Section 3.09. "Guarantee" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person: (i) to purchase such indebtedness or obligation or any property constituting security therefor; (ii) to advance or supply funds (a) for the purchase or payment of such indebtedness or obligation, or to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation; (iii) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or (iv) otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof. In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor. "Guaranty Agreement" means the Guaranty Agreement, dated as of January 3, 1996, made by the Guarantors in favor of MetLife with respect to the Company's obligations under the 1996 Notes and the 1996 Agreement, as such Guaranty Agreement may be amended or supplemented from time to time including by Amendment and Supplement No. 1 thereto, dated as of May 30, 1996, in the form of Exhibit B to the Assumption Agreement, to include as Obligations (as defined in the Guaranty Agreement) thereunder the Company's obligations under the Agreement, the Notes, the 1994 Agreement and the 8.31% Notes. The term "Guaranty Agreement" shall also include any other Guaranty executed by a Subsidiary from time to time pursuant to Section 3.08 or Section 3.09. "Hazardous Material" means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls). "Income Available For Fixed Charges" means, for any period, the sum of (i) Consolidated Net Income, (ii) taxes, (iii) Interest Expense, (iv) Operating Rents, and (v) amortization charges, of the Company and its Subsidiaries for such period, all as determined in accordance with GAAP. "Indebtedness" with respect to any Person means, at any time, without duplication, (a) its liabilities for borrowed money; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including, without limitation, all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) its Capitalized Lease Obligations; (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); (e) all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); (f) Swaps of such Person; and (g) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof. Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (g) to the extent such person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "Institutional Investor" means (a) MetLife, as the original purchaser of all of the Notes and the holder thereof on May 30, 1996, (b) any holder of a Note holding more than 10% of the aggregate principal amount of the Notes then outstanding, and (c) any other holder of a Note which is a bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. "Intercreditor Agreement" means the Intercreditor Agreement, dated as of January 3, 1996, among The Prudential Insurance Company of America, MetLife, SunTrust Bank, Nashville, N.A., First American National Bank, National City Bank, Kentucky, Nationsbank of Texas, N.A. and Creditanstalt-Bankverein, as it may be amended, restated, modified or supplemented from time to time in accordance with its terms, including by Amendment and Supplement No. 1 thereto, dated as of May 30, 1996, in the form of Exhibit D to the Assumption Agreement, to more fully include therein the Company's obligations under the Agreement, the Notes, the 1994 Agreement and the 8.31% Notes and MetLife as the holder of all of said Notes and a party to each of said Agreements. "Interest Expense" means, for any period, all interest expense in respect of Debt (including imputed interest in respect of Capitalized Lease Obligations) of the Company and its Subsidiaries for such period as determined in accordance with GAAP. "Investment" shall mean, when used with respect to any Person, any direct or indirect advance, loan or other extension of credit or capital contribution by such Person (by means of transfers of property to others or payments for property or services for the account or use of others, or otherwise) to any other Person, or any direct or indirect purchase or other acquisition or beneficial ownership by such Person of, or of a beneficial interest in, Capital Stock, partnership interests, bonds, notes, debentures or other securities issued by any other Person. "Lien" means any mortgage, pledge, security interest, encumbrance, lien (statutory or otherwise), or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any Capitalized Lease, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction) or any other type of preferential arrangement for the purpose, or having the effect, of protecting a creditor against loss or securing the payment or performance of an obligation, including any rights of setoff (whether by statute, common law, contract or otherwise). "Make-Whole Premium" means the excess, if any, of (i) the sum of the respective Payment Values of each prospective interest payment, prospective mandatory prepayment and the principal payment at maturity in respect of the principal amount of the Notes to be prepaid pursuant to Section 2.02 or Section 6 of the Agreement or to be accelerated pursuant to Section 7.02, as the case may be (the amount of each such payment being herein referred to as a "Payment") over (ii) the principal amount of the Notes to be so prepaid or accelerated. The Payment Value of each Payment shall be determined by discounting such Payment at the Reinvestment Rate, for the period from the scheduled date of such Payment to the applicable date of prepayment or acceleration, as the case may be. The Reinvestment Rate is (i) 50 basis points plus (ii) the yield to maturity implied by (A) the yields reported, at the Calculation Time, by the Telerate Access Service on Page 678 (or such other display as may replace Page 678 on Telerate Access Service) for United States Treasury securities having a maturity equal to the Weighted Average Life to Final Maturity (rounded to the nearest month) of the Notes so to be prepaid or accelerated, or (B) if such yields are not reported at the Calculation Time or the yields reported at the Calculation Time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been reported at the Calculation Time, in Federal Reserve Statistical Release H.15(519) (or any comparable successor publication) for actively traded United States Treasury securities having a constant maturity equal to such Weighted Average Life to Final Maturity. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the duration closest to and greater than such rounded Weighted Average Life to Final Maturity and (2) the actively traded U.S. Treasury security with the duration closest to and less than such rounded Weighted Average Life to Final Maturity. The "Calculation Time" for determining the yields of such United States Treasury securities shall be 10 a.m. (New York City time) on the second Business Day prior to the prepayment date pursuant to Section 2.02 or Section 6 of the Agreement or prior to the date of acceleration pursuant to Section 7.02, as the case may be. "Material" means material in relation to the business, operations, affairs, financial condition, assets, properties, or prospects of the Company and its Subsidiaries taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Company and its Subsidiaries taken as a whole, or (b) the ability of the Company to perform its obligations under the Agreement and the Notes, or (c) the validity or enforceability against the Company of the Agreement, or the Notes, or (d) the ability of the Company and its Subsidiaries (taken as a whole) to perform their respective obligations under the Pledge Agreements or the Guaranty Agreement. "Material Subsidiary" means a Subsidiary having (i) Assets with an aggregate book value in excess of $5,000,000 at the time of determination or (ii) Revenues in excess of 5% of Consolidated Revenues for the fiscal year most recently ended prior to the time of determination. "MetLife" means Metropolitan Life Insurance Company, a New York corporation, the original purchaser of all of the Notes, the 8.31% Notes and the 1996 Notes and which holds the entire principal amount of each thereof on May 30, 1996. "Moody's" means Moody's Investors Service, Inc. or any successor thereto. "Multiemployer Plan" means any Plan that is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). "1994 Agreement" means the Loan Agreement dated as of June 23, 1994 between Gibson and MetLife entered into in connection with the original issuance of the 8.31% Notes, as amended from time to time, including by the Assumption Agreement, and as assumed by the Company pursuant to the Assumption Agreement. "8.31% Notes" means the 8.31% Senior Notes due June 23, 2004 originally issued by Gibson pursuant to the 1994 Agreement, as amended from time to time, including by the Assumption Agreement, and as assumed by the Company pursuant to the Assumption Agreement. "1996 Agreement" means the Note Purchase Agreement, dated as of January 3, 1996, among the Company, MetLife and another institutional investor, pursuant to or in connection with which, inter alia, (i) MetLife acquired the 1996 Notes, (ii) the Pledge Agreements, the Guaranty Agreement and the Intercreditor Agreement were entered into, and (iii) the assumption of the Notes and the 8.31% Notes by the Company and the amendment thereof pursuant to the Assumption Agreement was contemplated. "1996 Notes" means the Company's 6.68% Series B Senior Notes due December 31, 2005 issued to MetLife in the aggregate principal amount of $15,000,000 pursuant to the 1996 Agreement. "Notes" means the Notes as amended from time to time, including by the Assumption Agreement, and as assumed by the Company pursuant to the Assumption Agreement. "Officer's Certificate" means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate. "Operating Rents" means, for any period, noncapitalized lease obligations of the Company and its Subsidiaries for such period but shall exclude all leases related to vehicles, computer and office equipment. "Overdue Interest Rate" means the greater (determined on a daily basis) of 10.50% per annum or the rate per annum which The Chase Manhattan Bank, N.A. announces publicly from time to time as its corporate base rate of interest. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. "Person" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. "Plan" means an "employee benefit plan" (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability. "Pledge Agreements" means (i) the Amended and Restated Pledge Agreement, dated as January 3, 1996, among the Company, as pledgor, SunTrust Bank, Nashville, N.A., National City Bank, Kentucky, First American National Bank, Nationsbank of Texas, N.A., Creditanstalt - Bankverein, MetLife and The Prudential Insurance Company of America, as pledgees, and SunTrust Bank, Nashville, N.A., as agent, pursuant to which the Company has, among other things, pledged to the pledgees a security interest in the outstanding common stock of Word, Incorporated owned by the Company, (ii) the Amended and Restated Pledge Agreement, dated as of January 3, 1996, among the Company, as pledgor, SunTrust Bank, Nashville, N.A., National City Bank, Kentucky, First American National Bank, Nationsbank of Texas, N.A., Creditanstalt - Bankverein, MetLife and The Prudential Insurance Company of America, as pledgees, and SunTrust Bank, Nashville, N.A., as agent, pursuant to which the Company has, among other things, pledged to the pledgees a security interest in the outstanding common stock of Gibson owned by the Company and (iii) any other pledge agreement or other similar security agreement executed by the Company or any Subsidiary pursuant to Sections 3.07, 3.08 or 3.09, as any such agreement may be amended, restated, modified, or supplemented from time to time in accordance with its terms, including by Amendment and Supplement No. 1 thereto, dated as of May 30, 1996, in the form of Exhibits C-1 and C-2, respectively, to the Assumption Agreement, to include as Secured Obligations (as defined in the Pledge Agreements) thereunder the Company's obligations under the Notes, the 8.31% Notes, the Agreement and the 1994 Agreement and MetLife as obligee of such obligations as pledgee thereunder. "Preferred Stock" means any class of Capital Stock of a corporation that is preferred over any other class of Capital Stock of such corporation as to the payment of dividends or the payment of any amount upon liquidation or dissolution of such corporation. "Priority Debt" means with respect any Person, at any time, without duplication, the sum of (i) Debt of each Subsidiary (other than Debt held by the Company or another Subsidiary); (ii) Debt secured by any Lien other than a Lien described in clauses (a) through (i) of Section 4.03; (iii) all Preferred Stock of Subsidiaries owned by a Person other than the Company or a Subsidiary; and (iv) any obligation or liability arising in connection with a Receivables Financing. "Receivables Financing" means a transaction pursuant to which funds are advanced to the Company and/or any of its Subsidiaries in exchange for which the Company and/or any of its Subsidiaries shall pledge, sell or otherwise transfer any or all of its notes or accounts receivable to secure, in whole or in part, the repayment of such funds. "Required Holders" means, at any time, the holders of at least 66 2/3% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates). "Responsible Officer" means the chief executive officer, any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of the Agreement or the Notes. "Restricted Payment" is defined in Section 4.05. "Revenues" means, at any time, and with respect to any Person, revenues as determined in accordance with GAAP. "S&P" means Standard & Poor's Rating Group or any successor thereto. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Senior Financial Officer" means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company. "Senior Funded Debt" means (i) all Funded Debt of the Company other than Subordinated Funded Debt, and (ii) all Funded Debt of the Subsidiaries. "Shareholders' Equity" means shareholders' equity of the Company and its Subsidiaries on a consolidated basis as set forth in the Company's consolidated balance sheet prepared in accordance with GAAP. "Subordinated Funded Debt" means all Funded Debt of the Company which is expressly subordinate to other Funded Debt of the Company on terms and conditions approved by the Required Holders, which approval (or disapproval) shall be given within ten (10) Business Days of receipt by the holders of the Notes of the subordination terms of such Funded Debt. The Company's Convertible Subordinated Notes due 1999 shall constitute Subordinated Funded Debt. "Subsidiary" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. "Subsidiary Stock" means the outstanding Capital Stock of any Subsidiary. For purposes of Section 4.07, the book value of Subsidiary Stock that is sold or otherwise disposed of shall be equal to that percentage of book value of the assets of the Subsidiary that issued such stock as is equal to the percentage that the book value of such Subsidiary Stock represents of the book value of all of the outstanding Capital Stock of such Subsidiary (assuming, in making such calculations, that all securities convertible into such Capital Stock are so converted and giving full effect to all transactions that would occur or be required in connection with such conversion). "Swaps" means, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For the purposes of this Agreement, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined. "Total Capitalization" means the sum of (i) Total Funded Debt and (ii) Shareholders' Equity. "Total Funded Debt" means the sum of (i) Consolidated Senior Funded Debt and (ii) Consolidated Subordinated Funded Debt. "Weighted Average Life to Final Maturity" of the Notes as of the time of determination thereof means the number of years (rounded to the nearest one-twelfth) obtained by dividing the then Remaining Dollar-Years of the Notes by the then outstanding principal amount of the Notes. For the purposes of this definition, "Remaining Dollar-Years" means the sum of the amounts obtained by multiplying the amount of each then remaining mandatory prepayment, and repayment at final maturity, by the number of years (calculated to the nearest one-twelfth) which will elapse between the time of such determination and the date of such prepayment or repayment. "Wholly-Owned Subsidiary" means, at any time, any Subsidiary one hundred percent (100%) of all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company's other Wholly-Owned Subsidiaries at such time. All accounting terms used herein or in the Agreement and not expressly defined in this Note shall have the meanings respectively given to them in accordance with GAAP from time to time in effect. SECTION 7. DEFAULTS AND REMEDIES. 7.0l. Events of Default. An "Event of Default" shall exist if one or more of the following events shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): A. default in the payment of any interest upon any Note when such interest becomes due and payable and continuance of such default for a period of 5 Business Days; or B. default in the payment of principal of (or premium, if any, on) any Note for more than three Business Days after the same becomes due and payable, whether at maturity or at a date fixed for prepayment (including, without limitation, a prepayment as provided in Section 2.01, Section 2.02 or Section 2.03), or by acceleration or otherwise; or C. default in the performance or observance of any covenant, agreement or condition contained in Sections 4.01, 4.02, 4.03, 4.05, 4.06, 4.07 or 4.08; or D. default in the performance or observance of any other covenant, agreement or condition contained in this Note or in the Agreement and continuance of any such other default for a period of 45 days after the earlier of (i) written notice thereof, specifying such other default and requiring it to be remedied, shall have been given to the Company by the holder of any Note (any such notice to be identified as a "notice of default" and to refer specifically to this paragraph D of this Section 7.01), and (ii) a Responsible Officer obtaining actual knowledge of any such default; or E. any representation or warranty made in writing by or on behalf of the Company or Gibson or by any officer of the Company or Gibson in the Assumption Agreement or in any writing furnished in connection with the transactions contemplated thereby proves to have been false or incorrect in any material respect on the date as of which made; or F. (i) the Company or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal or premium or make-whole amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $5,000,000 beyond any period of grace provided with respect thereto, or (ii) the Company or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal amount of at least $5,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared (or one or more Persons are entitled to declare such Indebtedness to be), due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests), (x) the Company or any Subsidiary has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $5,000,000, or (y) one or more Persons have the right to require the Company or any Subsidiary so to purchase or repay such Indebtedness; or G. the Company or any Material Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or H. a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any of its Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any of its Subsidiaries, or any such petition shall be filed against the Company or any of its Subsidiaries and such petition shall not be stayed or dismissed within 60 days; or I. a final judgment or judgments for the payment of money aggregating in excess of $5,000,000 (exclusive of any insurance coverage for which the insurance company issuing such coverage shall have acknowledged in writing liability with respect thereto) shall be rendered against one or more of the Company and its Subsidiaries and (A) action shall be taken by a Person within 90 days after entry thereof to collect on such judgment or to secure such judgment with any property or assets of the Company or its Subsidiaries or (B) such judgments shall not, within 90 days after entry thereof, be bonded, discharged or stayed pending appeal, or shall not be discharged within 9O days after the expiration of such stay; or J. if (i) any Plan shall fail to satisfy the minimum funding standards of ERlSA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed $5,000,000, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary shall establish or amend any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect; or K. any Guarantor shall disavow the validity or enforceability of or attempt to terminate the Guaranty Agreement; or the Guaranty Agreement shall cease to be in full force and effect in whole or in part for any reason whatsoever (other than pursuant to Section 8(a) of the Intercreditor Agreement); or L. the security interests granted pursuant to any Pledge Agreement shall fail at any time to constitute a first priority security interest in or assignment of the collateral described in such Pledge Agreement (other than pursuant to Section 8(a) of the Intercreditor Agreement); or any Pledge Agreement shall cease to be in full force and effect in whole or in part for any reason whatsoever (other than pursuant to Section 8(a) of the Intercreditor Agreement); or the Company shall disavow the validity or enforceability of or attempt to terminate any or all of the Pledge Agreements. As used in Section 7.01J, the terms "employee benefit plan" and "employee welfare benefit plan" shall have the respective meanings assigned to such terms in Section 3 of ERlSA. 7.02. Remedies, Etc. A. Acceleration. (i) If an Event of Default with respect to the Company or any Material Subsidiary described in paragraph G or H of Section 7.01 (other than an Event of Default described in clause (i) of paragraph G) or described in clause (vi) of paragraph G by virtue of the fact that such clause encompasses clause (i) of paragraph G) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (ii) If any other Event of Default has occurred and is continuing (including, without limitation, an Event of Default described in paragraph H respect to a Subsidiary which is not a Material Subsidiary), any holder or holders of 51% or more in principal amount of the Notes at the time outstanding may at any time, at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable. (iii) If any Event of Default described in paragraph A or B of Section 7.01 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. Upon any Notes becoming due and payable under this Section 7.02, whether automatically or by declaration, such Notes will forthwith mature and the unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole Premium determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Premium by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. The Computing Holder shall give prompt written notice to the Company and all other holders of the Notes, whose names and addresses shall have been supplied to the Computing Holder by the Company, of the amount of the Make-Whole Premium, if any, with respect to any Notes accelerated, computed as of the second Business Day prior to the date of acceleration, which notice shall set forth in reasonable detail the computation thereof. The Make-Whole Premium, if any, set forth in such notice shall be binding on the Company and the other holders of the Notes absent manifest error. B. Other Remedies. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 7.02A, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether to enforce the payment of such Note, or for the specific performance of any agreement contained in the Agreement or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. The Company agrees that its obligations under Section 6 of the Agreement are of the essence of the Agreement, and upon application to any court of equity having jurisdiction in the premises, any holder of the Notes shall be entitled to a decree against the Company requiring specific performance of such obligations. If any holder of a Note shall demand payment thereof or take any other action in respect of an Event of Default, the Company will forthwith give written notice, as provided in Section 8.01, to the other holders of Notes specifying such action and the nature and status of the Event of Default. C. Rescission. At any time after any Notes have been declared due and payable pursuant to clause (ii) or (iii) of Section 7.02A, the holders of not less than 66 2/3% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Premium, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Premium, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Overdue Interest Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 5, and (c) no judgment or decree has been entered for the payment of any monies due pursuant to the Notes or the Agreement. No rescission and annulment under this Section 7.02C will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. D. No Waivers or Election of Remedies; Expenses, etc. No course of dealing and no delay on the part of any holder of a Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by any Note or by the Agreement upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 7.1 of the Agreement, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 7.02, including, without limitation, reasonable attorneys' fees, expenses and disbursements. SECTION 8. MISCELLANEOUS. 8.01. Notices. All notices to be given to any holder of this Note shall be in writing and delivered by a recognized overnight delivery service, or mailed (by registered or certified mail, return receipt requested) or sent by facsimile transmission followed by a confirmation copy sent on the same day by a recognized overnight delivery service, to such holder at its address designated on the date of such notice on the register or other record maintained by the Company. Any such notice so given shall be effective upon receipt, including receipt of a facsimile transmission. 8.02. Covenants Bind Successors and Assigns. All covenants and agreements in this Note by the Company shall bind its successors and assigns, whether so expressed or not. 8.03. Governing Law. This Note shall be construed in accordance with and governed by the internal laws of the State of New York. 8.04. Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. IN WITNESS WHEREOF, THOMAS NELSON, INC. has caused this Note to be signed in its corporate name by one of its officers thereunto duly authorized, and to be dated as of the day and year first above written. THOMAS NELSON, INC. By /s/ Joe L. Powers _______________________ Joe L. Powers Executive Vice President and Chief Financial Officer EXHIBIT A-2 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION SET FORTH IN SECTION 4(2) THEREOF. THIS NOTE MAY NOT BE TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL REGULARLY EMPLOYED BY THE HOLDER OF THIS NOTE) REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED, EXCEPT THAT NO SUCH OPINION SHALL BE REQUIRED IN ORDER TO EFFECTUATE A TRANSFER IN ACCORDANCE WITH THE PROVISIONS OF RULE 144 OR RULE 144A PROMULGATED UNDER THE ACT OR ANY SIMILAR SUCCESSOR RULE OR RULES THERETO. THOMAS NELSON, INC. 8.31% Senior Note Due June 23, 2004 No. R-1 New York, New York $5,000,000 May 30, 1996 THOMAS NELSON, INC., a corporation duly organized and existing under the laws of the State of Tennessee (hereinafter called the "Company"), for value received, hereby promises to pay to Metropolitan Life Insurance Company, or registered assigns, on June 23, 2004 the principal amount of Five Million Dollars (or so much thereof as shall not have been prepaid) in such coin or currency of the United States of America as at the time of payment shall be legal tender for public and private debts, at the Metropolitan Branch of The Chase Manhattan Bank, N.A., in the Borough of Manhattan, The City of New York, State of New York, and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) at said office, in like coin or currency, on the unpaid portion of said principal amount from the date hereof, semi-annually on the twenty-third day of June and December in each year, commencing on the first such day after the date hereof, at the rate of 8.31% per annum until such unpaid portion of such principal amount shall have become due and payable and at the Overdue Interest Rate thereafter and, so far as may be lawful, on any overdue installment of interest at the Overdue Interest Rate. SECTION 1. THE NOTES; TRANSFERS, EXCHANGE, ETC. 1.01. The Notes. This Note is one of an authorized issue of senior promissory notes (hereinafter called the "Notes", as more fully defined in Section 6) made by the Company in an aggregate principal amount of $5,000,000, maturing on June 23, 2004, bearing interest payable at the same rate and on the same dates as the interest on the principal amount of this Note and originally issued pursuant to the Agreement. 1.02. Registration, Transfer or Exchange of Notes. The Notes are issuable only as registered Notes. The Company will keep at its office or agency maintained as provided in Section 3.02 a register in which the Company shall provide for the registration and registration of transfer of the Notes. The holder of this Note may, at its option and either in person or by duly authorized attorney, surrender the same at said office or agency for registration of transfer or exchange, accompanied if surrendered for transfer by a written instrument of transfer duly executed by such holder or attorney. In case such holder shall so request a transfer or exchange of this Note, the Company shall, at the expense of such holder, deliver to or upon such holder's order one or more Notes in the same aggregate unpaid principal amount as this Note, each dated as of the date of, or, if later, the date to which interest has been paid on, this Note, in the principal amount of $1,000,000 or a multiple of $1,000 in excess thereof, as requested by such holder (provided that if such aggregate unpaid principal amount is less than $500,000, the Company will deliver one Note in exchange for this Note), and registered in such name or names as shall be specified by such holder. Every Note so made and delivered upon transfer or in exchange for this Note shall be in the form of Exhibit A-2 to the Assumption Agreement. Prior to due presentation for registration of transfer of this Note, the Company may deem and treat the registered holder hereof as the absolute owner of this Note for the purpose of receiving payment of or on account of the principal of and premium, if any, and interest on this Note, and for the purpose of any notice, waiver or consent hereunder, and payment of this Note shall be made only to or upon the order in writing of such holder. l.03. Loss, Theft, Destruction or Mutilation of Notes. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of any such loss, theft or destruction, upon receipt of a bond of indemnity reasonably satisfactory to the Company or, in the case of any such mutilation, upon surrender and cancellation of this Note, the Company will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Note, a new Note of like tenor and unpaid principal amount and dated the date of, or, if later, the date to which interest has been paid on, the lost, stolen, destroyed or mutilated Note. In the case of a holder of the Notes which is an institutional investor having combined capital, surplus and undivided profits of at least $200,000,000, its own unsecured agreement of indemnity shall be deemed satisfactory to the Company. SECTION 2. PREPAYMENT OF NOTES. 2.0l. Mandatory Prepayments. The Company covenants and agrees that it will prepay $714,285.71 of the then unpaid principal amount of the Notes on June 23 in each of the years 1998 through 2003, inclusive. All such prepayments pursuant to this Section 2.01 shall be applied on the respective payment dates thereof toward the prepayment of the principal amount of the Notes so to be prepaid, in each case together with interest accrued thereon to such prepayment date, but without premium, and otherwise as provided in Section 2.05. Upon prepayment pursuant to Section 6 of the Agreement of the Notes held by some but not all holders, the principal amount of each mandatory prepayment of Notes becoming due under this Section 2.01 on or after the date of such prepayment shall be reduced in the same proportion as the aggregate unpaid principal amount of the Notes is reduced as a result of such prepayment. 2.02. Optional Prepayments. Upon notice given as provided in Section 2.04 and otherwise as provided in Section 2.05, the Company may, at its option, prepay the Notes in whole at any time, or in part, but not less than an amount equal to $1,000,000 (provided that in the event the unpaid principal amount of the Notes outstanding shall be less than $1,000,000, then in amount equal to the full amount of such unpaid principal amount) from time to time, together with accrued interest on the principal amount so prepaid to the prepayment date and a premium equal to the Make-Whole Premium. No prepayment of less than all of the outstanding Notes pursuant to this Section 2.02 shall be credited to or relieve the Company to any extent from its obligation to make any prepayment of the Notes required by Section 2.01. 2.03. Prepayment Upon Change of Control. Upon the request of any holder of a Note as provided in Section 6 of the Agreement, the Company shall prepay the Notes then held by such holder in accordance with the provisions of such Section 6. 2.04. Notice of Prepayment and Other Notices. The Company shall give written notice of optional prepayment of this Note or any portion hereof pursuant to Section 2.02 not less than thirty (30) days nor more than sixty (60) days prior to the date fixed for such prepayment in such notice, which notice of prepayment shall specify the amount so to be prepaid, together with the premium, if any, to be paid thereon and the date fixed for such prepayment. Such notice of prepayment and all other notices to be given to any holder of this Note shall be given in the manner specified in Section 8.01 to the Person in whose name this Note is registered at its address designated on the register maintained by the Company on the date such notice of prepayment or other notice is given. Upon notice of prepayment being given as aforesaid, the Company covenants and agrees that the Company will prepay, on the date therein fixed for prepayment, this Note or the portion hereof, as the case may be, so called for prepayment, at the principal amount thereof so called for prepayment together with interest accrued thereon to the date fixed for such prepayment, plus the applicable premium, if any. The notice to the Computing Holder shall also set forth the respective names and addresses of, and principal amounts of the Notes held by, the other holders. The Computing Holder shall give written notice to the Company and the other holders, on the second Business Day prior to the date fixed for prepayment in such notice, of the amount of the Make-Whole Premium calculated hereunder, which Computing Holder's notice shall set forth in reasonable detail the computation thereof. Such Make-Whole Premium set forth in such notice shall be binding on the Company and the other holders absent manifest error. 2.05. Allocation of Prepayments. In the event of any prepayment of less than all of the outstanding Notes (other than any prepayment pursuant to Section 6 of the Agreement) the Company will allocate the principal amount so to be prepaid (but only in units of $1,000) among the registered holders of Notes in proportion, as nearly as may be, to the respective principal amounts of such Notes not theretofore called for prepayment, of which they shall be registered holders. 2.06. Interest After Date Fixed for Prepayment. This Note or any portion hereof to be prepaid shall cease to bear interest on and after the date fixed for such prepayment unless, upon presentation for the purpose, the Company shall fail to pay this Note or such portion, as the case may be, on the date fixed for such prepayment, in which event this Note or such portion, as the case may be, shall bear interest at the Overdue Interest Rate from and after such date until paid and, so far as may be lawful, any overdue installment of interest shall bear interest at said rate. 2.07. Surrender of Notes; Notation Thereon. Upon any prepayment of a portion of the principal amount of this Note, the registered holder hereof, at its option, may require the Company to execute and deliver at the expense of such holder, upon surrender of this Note, a new Note registered in the name of such Person or Persons as may be designated by such holder for the principal amount of this Note then remaining unpaid, dated as of the date to which interest has been paid on the principal amount of this Note then remaining unpaid, or may present this Note to the Company for notation hereon of the payment of the portion of the principal amount of this Note so prepaid. Every new Note made and delivered pursuant to the provisions of this Section 2.07 shall in all other respects be in the same form and have the same terms as this Note. The Company may, as a condition of payment of all or any of the principal of, premium, if any, and interest on, this Note, require the holder to present this Note for notation of such payment and, if this Note be paid in full, require the surrender hereof. SECTION 3. AFFIRMATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: 3.0l. Payment of Notes. The Company will punctually pay or cause to be paid the principal and interest (and premium, if any) to become due in respect of the Notes according to the terms thereof. 3.02. Maintenance of Company Office. The Company will maintain an office or agency at 501 Nelson Place, Nashville, Tennessee 37214 (or such other place in the United States of America as the Company may designate in writing to the holder hereof), where notices, presentations and demands to or upon the Company in respect of the Notes may be given or made. 3.03. Keeping of Books. The Company will, and will cause each of its Subsidiaries to, keep proper books of record and account in accordance with GAAP. 3.04. Payment of Taxes and Claims; Preservation of Corporate Existence, etc.; Maintenance of Properties. The Company will, and will cause each of its Subsidiaries to, A. file all tax returns required to be filed in any jurisdiction and pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments and governmental charges or levies imposed upon it, its income, franchises or profits or its property before the same shall become in default, as well as all lawful claims and liabilities of any kind (including claims and liabilities for labor, materials and supplies) which, if unpaid, might by law become a Lien upon its property; provided, however, that neither the Company nor any Subsidiary shall be required to pay any such tax, assessment, charge, levy or claim if (i) the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings and if the Company or any such Subsidiary shall have set aside on its books adequate reserves therefor in accordance with GAAP, or (ii) the nonpayment thereof in the aggregate could not reasonably be expected to have a Material Adverse Effect; B. subject to Section 4.02, do all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory), permits, licenses and franchises, unless in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence of a Subsidiary or such right, permit, license or franchise could not, individually or in the aggregate, have a Material Adverse Effect; and C. maintain and keep all its properties used or useful in the conduct of its business in good condition, repair and working order (other than ordinary wear and tear) so that the business carried on in connection therewith may be properly conducted at all times; provided, however, that nothing in this Section 3.04C shall prevent the Company or any of its Subsidiaries from discontinuing the operation and maintenance of any of its properties, if such discontinuance is, in the judgment of the Company, desirable in the conduct of the Company's or such Subsidiary's business and the Company has concluded that such discontinuance could not, individually or in the aggregate, have a Material Adverse Effect. 3.05. Insurance. The Company will, and will cause each of its Subsidiaries to, maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, coinsurance and self-insurance, if adequate reserves are maintained with respect thereto) as is consistent with sound business practices customary in the case of entities of similar size engaged in the same or a similar business and similarly situated. 3.06. Compliance with Laws, etc. The Company will, and will cause each of its Subsidiaries to, comply with all present and future applicable laws, rules, regulations, orders and requirements (including, without limitation, all applicable Environmental Laws) of every duly constituted governmental or quasi-governmental authority or agency applicable to the Company and its Subsidiaries or any of their respective properties, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, rules, regulations, orders and requirements or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 3.07. Covenant to Secure Notes Equally. The Company will, if it or any Subsidiary shall create or assume any Lien upon any of its property or assets, whether now owned or hereafter acquired, other than Liens permitted by the provisions of Section 4.03 (unless prior written consent to the creation or assumption thereof shall have been obtained pursuant to Section 5) make or cause to be made effective provision whereby the Notes will be secured by such Lien equally and ratably with any and all other Indebtedness thereby secured so long as any such other Indebtedness shall be so secured. 3.08. Guaranteed Obligations. The Company will if, at any time, any of its Subsidiaries executes a Guaranty of or collateralizes in any other manner any obligation of the Company under the Bank Agreements, simultaneously cause such Subsidiary or Subsidiaries, as the case may be, to execute and deliver to each holder of a Note a similar Guaranty in form and substance reasonably satisfactory to such holder with respect to payment of the principal amount of the Notes and any premium and interest thereon, which bears the same ratio to the total unpaid principal amount of the Notes as the amount of such other obligation which is subject to a Guaranty bears to the total unpaid principal amount of such other obligation, or if such other obligation is collateralized, to collateralize the Notes equally and ratably with the obligations of the Company under the Bank Agreements. 3.09. Parity With Bank Agreements. The Company will, and will cause each of its Subsidiaries to, execute all such documents and take such other actions as the Required Holders may reasonably request in order to assure that at all times the Notes shall rank pari passu in right of payment with the obligations of the Company under the Bank Agreements, including, without limitation, the waiver of set-off rights or the execution of a set-off and collateral sharing agreement in favor of the holders of the Notes. 3.10. Information Required by Rule 144A. The Company will, upon the request of the holder of any Note, provide such holder, and any qualified institutional buyer designated by such holder, such financial and other information as such holder may reasonably determine to be necessary in order to permit compliance with the information requirements of Rule 144A under the Securities Act in connection with the resale of Notes, except at such times as the Company is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act. For the purpose of this Section 3.10, the term "qualified institutional buyer" shall have the meaning specified in Rule 144A under the Securities Act. 3.ll. No Integration. The Company will take all necessary steps so that its assumption of the Notes and issuance of new Notes pursuant to the Assumption Agreement will not require registration under the Securities Act. The Company will not make any future offer and sale of debt securities of the Company of any class if, as a result of the doctrine of "integration", there is a reasonable possibility that such offer and sale would result in the loss of the entitlement of its assumption of the Notes and its issuance of new Notes to an exemption from the registration requirements of the Securities Act. SECTION 4. NEGATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: 4.01. Transactions with Affiliates. The Company will not, and will not permit any of its Subsidiaries to, enter into directly or indirectly any transaction or group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Subsidiary), except in the ordinary course and pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate; provided, however, this Section 4.01 shall not apply to any individual transaction which does not exceed $250,000 or any series of related transactions which in the aggregate do not exceed $250,000. 4.02. Merger, Consolidation, etc. The Company will not, and will not permit any of its Subsidiaries to, consolidate with or merge with any other Person or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to any Person except that: (i) any Subsidiary may merge or consolidate with the Company or a Material Subsidiary that is a Wholly-Owned Subsidiary, provided immediately after such merger or consolidation, no Default or Event of Default shall have occurred or exist and, in the case of any transaction involving the Company, the surviving corporation or the continuing corporation (if not the Company) shall be a solvent corporation organized and existing under the laws of the United States or any State thereof (including the District of Columbia), and such corporation (if not the Company) (A) shall have executed and delivered to each holder of a Note its assumption of the due and punctual performance and observance of each covenant and condition of the Agreement and the Notes, (B) shall have executed and delivered, or caused to be executed and delivered, to each holder of a Note a reaffirmation of the Pledge Agreements and the Guaranty Agreement by each party thereto, and (C) shall have caused to be delivered to each holder of a Note (1) an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the holders of the Notes, to the effect that all agreements or instruments effecting such assumption and reaffirmation are enforceable in accordance with their terms and comply with the terms hereof which opinion shall be reasonably satisfactory to the holders of the Notes in all respects and (2) such other agreements and instruments which any holder of a Note may reasonably request; (ii) the Company may merge or consolidate with any other corporation (including a Material Subsidiary that is a Wholly-Owned Subsidiary) if (A) the continuing or surviving corporation (if not the Company) shall be a solvent corporation existing under the laws of the United States or any State thereof (including the District of Columbia), and such corporation (1) shall have executed and delivered to each holder of a Note its assumption of the due and punctual performance and observance of each covenant and condition of the Agreement and the Notes, (2) shall have executed and delivered, or caused to be executed and delivered, to each holder of a Note a reaffirmation of the Pledge Agreements and the Guaranty Agreement by each party thereto, and (3) shall have caused to be delivered to each holder of a Note a) an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the holders of the Notes, to the effect that all agreements or instruments effecting such assumption and reaffirmation are enforceable in accordance with their terms and comply with the terms hereof which opinion shall be reasonably satisfactory to the holders of the Notes in all respects and b) such other agreements and instruments which any holder of a Note may reasonably request, and (B) immediately after such merger or consolidation, no Default or Event of Default shall have occurred or exist; (iii) any Subsidiary may convey, transfer or lease all or substantially all of its assets to the Company or a Material Subsidiary that is a Wholly-Owned Subsidiary, provided immediately after such transaction, no Default or Event of Default shall have occurred or exist; and (iv) the Company may convey, transfer or lease all or substantially all of its assets to any other corporation (including a Material Subsidiary that is a Wholly-Owned Subsidiary), provided (A) the acquiring corporation shall be a solvent corporation existing under the laws of the United States or any State thereof (including the District of Columbia), and such corporation (1) shall have executed and delivered to each holder of a Note its assumption of the due and punctual performance and observance of each covenant and condition of the Agreement and the Notes, (2) shall have executed and delivered, or caused to be executed and delivered, to each holder of a Note a reaffirmation of the Pledge Agreements and the Guaranty Agreement by each party thereto, and (3) shall have caused to be delivered to each holder of a Note a) an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption and reaffirmation are enforceable in accordance with their terms and comply with the terms hereof which opinion shall be reasonably satisfactory to the holders of the Notes in all respects and b) such other agreements and instruments which any holder of a Note may reasonably request, and (B) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred or exist. 4.03. Liens. The Company will not, and will not permit any of its Subsidiaries to, create, assume, incur or suffer to exist any Lien upon any of its property or assets, whether owned on January 3, 1996 or thereafter acquired (whether or not provision is made for the equal and ratable securing of the Notes pursuant to Section 3.07), except: (a) Liens existing on January 3, 1996 and specified on Schedule 10.3 to the 1996 Agreement, provided in the case of Liens securing the Company's obligations under the Bank Agreements, all Persons party to the Bank Agreements shall have executed and delivered the Intercreditor Agreement and the Intercreditor Agreement shall be in full force and effect so long as such Liens exist; (b) Liens for taxes (including ad valorem and property taxes) and assessments (other than any Liens and assessments imposed under ERISA) or governmental charges or levies which are not yet due (and not then delinquent) or which are being actively contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained; (c) landlord liens and statutory liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law, created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained, and, in any case (i) were not incurred in connection with the borrowing of money, and (ii) do not, individually or in the aggregate, materially detract from the value of the property or assets of the Company or any Material Subsidiary, or the Company and its Subsidiaries taken as a whole; (d) Liens (other than any Lien imposed under ERISA) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases (other than Capitalized Leases), government contracts, performance and return of money bonds and similar obligations which (i) were not incurred in connection with the borrowing of money, and (ii) do not, individually or in the aggregate, materially detract from the value of the property or assets of the Company or any Material Subsidiary, or the Company and its Subsidiaries taken as a whole; (e) Liens arising in the ordinary course of business (including easements, rights of way, zoning restrictions of record and similar restrictions and other similar charges or encumbrances) which are not incurred in connection with Debt, and which do not, individually or in the aggregate, (a) materially interfere with the ordinary conduct of the business of the Company, or the Company and its Subsidiaries taken as a whole, or (b) materially detract from the value of the property or assets of the Company or any Material Subsidiary, or the Company and its Subsidiaries taken as a whole; (f) any right of setoff or banker's lien arising (whether by law, contract or otherwise) in connection with ordinary course of business deposit arrangements maintained by the Company or its Subsidiaries with its banks or other financial institutions so long as any such bank or other financial institution (A) shall not at any time make loans or otherwise extend credit to the Company or any Subsidiary, (B) does not maintain accounts (for the deposit of cash or otherwise) for the benefit of the Company or any Subsidiary, (C) shall have waived in writing for the benefit of each holder of a Note such right of setoff or banker's lien or (D) holds no more than $1,000,000 of obligations owed to the Company or any Subsidiary and the total of all such obligations permitted solely by this clause (D) shall not exceed $3,000,000; (g) any Lien renewing, extending or refunding any outstanding obligations secured by a Lien described in clause (a), (b), (c), (d), (f), (h) and (i) of this Section 4.03, provided (A) with respect to Debt described in clause (a), such renewal, extension or refunding shall relate solely to Debt under the Bank Agreements, so long as all Persons then party to the Bank Agreements shall have executed and delivered the Intercreditor Agreement and the Intercreditor Agreement shall be in full force and effect so long as such Lien exists, (B) after giving effect to such renewal, extension or refunding of the obligations described in clauses (b), (c), (d), (f), (h) and (i), such obligations shall remain subject to the conditions and provisions set forth in clauses (b), (c), (d), (f), (h) and (i), respectively, and (C) except for Debt under the Bank Agreements, the principal amount secured is not increased and such Lien is not extended to any other property of the Company or its Subsidiaries; (h) Liens securing judgments rendered against the Company or any of its Subsidiaries or arising in connection with any court proceedings, provided (i) such Liens are being contested in good faith by appropriate proceedings and (ii) no action has been taken by any Person to execute or otherwise collect on such Lien; (i) Liens securing Debt held by the Company in any Subsidiary or Debt held by any Subsidiary in any other Subsidiary; and (j) Liens securing Debt permitted by clause (ii) of the definition of Priority Debt, provided that after giving effect to such Liens, Consolidated Priority Debt shall not exceed 25% of Shareholders' Equity at any time. 4.04. Loans, Advances and Investments. The Company will not, and will not permit any of its Subsidiaries to, make or permit to remain outstanding any Investments, except that the Company or any Subsidiary may: (a) make or own Investments in any Subsidiary or any Person which immediately after giving effect to such Investment will be a Subsidiary; (b) own, purchase or otherwise acquire notes or accounts receivable arising from transactions with customers, suppliers and employees in the ordinary course of business; (c) execute Guaranties of Debt of Subsidiaries, provided that after giving effect to any such Guaranty the Company will be in compliance with Sections 4.08(a), (b) and (e); (d) own, purchase or acquire (A) prime commercial paper of an issuer rated A-1 or P1 or better by Moody's or S&P or certificates of deposit in U.S. commercial banks (having capital and surplus in excess of $500,000,000), in each case due within one year from the date of purchase, or (B) obligations of the United States Government or any agency thereof for which the full faith and credit of the United States Government is pledged due within one year from the date of purchase, or (C) obligations guaranteed by the United States Government due within one year from the date of purchase; and (e) make or permit to remain outstanding any other Investments which in the aggregate do not exceed at any time 15% of Shareholders' Equity. 4.05. Restricted Payments. The Company will not, and will not permit any of its Subsidiaries to: (a) pay or declare any dividend on any class of its Capital Stock or make any other distribution on account of any class of its Capital Stock; or (b) redeem, purchase or otherwise acquire, directly or indirectly (through a Subsidiary or otherwise), any shares of its Capital Stock (all of the foregoing events set forth in subsections (a) and (b), whether made in cash or property, being herein called "Restricted Payments"); unless (A) the aggregate amount of all Restricted Payments made since September 30, 1995 would not exceed the sum of (1) $20,000,000, plus (2) 50% of cumulative Consolidated Net Income since September 30, 1995 (or minus 100% of cumulative Consolidated Net Income since September 30, 1995 if such cumulative Consolidated Net Income for such period is a loss), plus (3) the aggregate net proceeds of the issuance or sale of the Company's Capital Stock after September 30, 1995 and (B) no Default or Event of Default shall have occurred and be continuing, and no Default or Event of Default would occur as a result of such Restricted Payment; provided, however, any Subsidiary may make Restricted Payments to the Company or any Material Subsidiary. For purposes of this Section 4.05, the conversion of the Company's Convertible Subordinated Notes due 1999 shall not constitute an issuance of the Company's Capital Stock. 4.06. Nature of Business. The Company will not, and will not permit any of its Subsidiaries to, engage in any business, if as a result, when taken as a whole, the general nature of the business then engaged in by the Company and its Subsidiaries would be substantially changed from the nature of the business of the Company and its Subsidiaries on January 3, 1996. 4.07. Sale of Property. The Company will not, and will not permit any of its Subsidiaries to, Dispose of any property or assets (including, without limitation, Subsidiary Stock), except, so long as no Default or Event of Default shall exist: (a) the Company or any Subsidiary may Dispose of inventory in the ordinary course of business at Fair Market Value; provided, however, the Company and its Subsidiaries may Dispose of inventory at less than Fair Market Value, provided such Disposition is in the ordinary course of business of the Company and its Subsidiaries which shall be consistent with the practice of the industry of the Company and the Subsidiaries at the time of such Disposition; and (b) the Company or any Subsidiary may Dispose of any of its assets so long as, immediately after giving effect to such proposed Disposition: (i) the cumulative net book value of all assets so Disposed of by the Company and its Subsidiaries during any fiscal year does not exceed 15% of the net book value of the Consolidated Assets of the Company and its Subsidiaries determined after giving effect to any such Disposition; (ii) the consideration for such assets represents the Fair Market Value of such assets at the time of such Disposition; and (iii) in the case of the Disposition of Subsidiary Stock, the following additional conditions shall apply: (A) in connection with such Disposition of Subsidiary Stock, the entire Investment (whether represented by stock, Debt, claims or otherwise) of the Company and its other Subsidiaries in such Subsidiary is Disposed of to a Person other than (1) the Company, (2) another Subsidiary not being simultaneously Disposed of, or (3) an Affiliate, and (B) the Subsidiary being Disposed of has no continuing Investment in any other Subsidiary of the Company not being simultaneously Disposed of or in the Company. For purposes of this Section 4.07, "Disposition" means the sale, lease, transfer or other disposition of property, and "Disposed of" has a corresponding meaning to Disposition. The term "Disposition" shall not include an exchange of assets, provided that the assets involved in such exchange are similar in function in that after giving effect to such exchange there has not been (A) a Material Adverse Effect, (B) any Material deterioration of cash flow generation, or (C) any deterioration in the overall quality of plant, property and equipment of the Company and its Subsidiaries taken as a whole. An "exchange" shall be deemed to have occurred if each of the transactions involved shall have been consummated within a six month period. 4.08. Certain Financial Limits. The Company will not permit: (a) Consolidated Senior Funded Debt to exceed 60% of Total Capitalization at any time; (b) Total Funded Debt to exceed 65% of Total Capitalization at any time; (c) the ratio of Consolidated Income Available for Fixed Charges for the four fiscal quarters most recently ended to Consolidated Fixed Charges for such four fiscal quarter period to be less than 1.75 to 1.0 on the last day of any fiscal quarter; (d) Shareholders' Equity to be less than $100,000,000 at any time; and (e) Consolidated Priority Debt to exceed 25% of Shareholders' Equity at any time. SECTION 5. CONSENTS, WAIVERS AND AMENDMENTS. Any term, covenant, agreement or condition of the Agreement or the Notes may, with the consent of the Company, be amended or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), by one or more written instruments signed by the Required Holders; provided, however, that A. no such amendment or waiver shall 1. change the maturity of the principal of, or any installment of interest on, any of the Notes, or reduce the principal amount thereof or the interest or premium thereon, or subordinate or otherwise modify the terms of, or rights to, payment of the principal thereof or interest or premium thereon including, without limitation, change the time for any such payment, without the consent of the holder of each Note so affected, or 2. change the percentage of holders of Notes required to approve any such amendment or effectuate any such waiver or give to any Note any preference over any other Note, without the consent of the holders of all Notes then outstanding; B. no such amendment or waiver shall modify or alter the provisions of Section 2.03 of the Notes or Section 6 of the Agreement without the consent of all holders of the Notes then outstanding; and C. no such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. Any amendment or waiver pursuant to this Section 5 shall apply equally to all the holders of the Notes and shall be binding upon them, upon each future holder of any Note and upon the Company, whether or not a notation of such amendment or waiver shall have been made on such Notes. In the case of an amendment or waiver of the character described in Section 5A, the holder of this Note agrees to make a notation on this Note to indicate that such amendment or waiver has been effected. In the case of any other amendment or waiver, no notation need be made on the Notes at the time outstanding, but any Note executed and delivered thereafter may, at the option of the Company, bear a notation referring to any such amendment or waiver then in effect. For purposes of determining whether the holders of outstanding Notes of the requisite aggregate principal amount at any time have agreed or consented to any amendment or waiver pursuant to the provisions of this Section 5, any Notes owned by the Company, any Subsidiary or any Affiliate shall be disregarded and deemed not to be outstanding. The Company will not increase the rate of interest on any Note or grant any holder of any Note any benefit or payment for or in connection with any amendment or waiver in respect to the Agreement or the Notes, whether pursuant to this Section 5 or otherwise, unless such increase in interest or other benefit or payment is extended on the same terms ratably to all other holders of Notes at the time outstanding. SECTION 6. DEFINITIONS. For all purposes of this Note and the Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Affiliate" means, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of the Company or any Subsidiary or any corporation of which the Company and its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests. As used in this definition, "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an "Affiliate" is a reference to an Affiliate of the Company. "Agreement" means the Loan Agreement dated as of June 23, 1994 between The C. R. Gibson Company ("Gibson") and Metropolitan Life Insurance Company ("MetLife") pursuant to which the Notes were originally issued, as amended from time to time, including by the Assumption Agreement, and as assumed by the Company pursuant to the Assumption Agreement. "Assets" means, at any time, assets of any Person as determined in accordance with GAAP. "Assumption Agreement" means the Assumption and Amendment Agreement, dated as of May 30, 1996, among Gibson, the Company and MetLife, pursuant to which the Agreement, the Notes, the 1989 Agreement and the 9.50% Notes were amended and Gibson's obligations thereunder were assumed by the Company. "Bank Agreements" means (i) the Amended and Restated Credit Agreement, dated December 13, 1995, among the Company, the Lenders listed therein, and SunTrust Bank, Nashville, N.A., as agent, and any refinancing thereof or substitution therefor, as it may be amended, modified or supplemented from time to time in accordance with its terms, (ii) the Amended and Restated Revolving Credit Promissory Note dated as of December 13, 1995 (effective as of July 25, 1995) given by the Company to SunTrust Bank, Nashville, N.A. in the original principal amount of $10,000,000, and any refinancing thereof or substitution therefor, as it may be amended, modified or supplemented from time to time in accordance with its terms, and the Amended and Restated Letter Agreement dated as of December 13, 1995 from SunTrust Bank, Nashville, N.A., to the Company delivered in connection therewith, as it may be amended, modified or supplemented from time to time in accordance with its terms, (iii) the SunTrust LOC Facility (as defined in the Intercreditor Agreement) and (iv) the NCB LOC Facility (as defined in the Intercreditor Agreement). "Business Day" means any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed. "Capital Stock" means, with respect to any Person, the outstanding capital stock (or any options or warrants to purchase capital stock or other securities exchangeable for or convertible into capital stock) of such Person. "Capitalized Lease" means, at any time, and with respect to any Person, a lease which the lessee is required to capitalize on the balance sheet of such lessee in accordance with GAAP. "Capitalized Lease Obligations" means the amount at which the aggregate rentals due and to become due under all Capitalized Leases under which the Company or any Subsidiary is the lessee, would be required to be reflected as a liability on its consolidated balance sheet. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "Company" means Thomas Nelson, Inc., a Tennessee corporation, and, subject to Section 4.02, its successors and assigns. "Computing Holder" means, as of the date of prepayment pursuant to Section 6 of the Agreement or Section 2.02 hereof or the date of acceleration pursuant to Section 7.02 hereof, as the case may be, the holder of Notes with an aggregate principal amount outstanding higher than that of Notes held by any other holder of the Notes. "Consolidated" means the consolidation of accounts of the Company and its Subsidiaries determined in accordance with GAAP giving effect to the elimination of any intercompany items and any minority interests in Subsidiaries. "Consolidated Net Income" means, for any period, the consolidated net income (or loss) of the Company and its Subsidiaries for such period (taken as a single accounting period) determined in accordance with GAAP, but excluding therefrom (to the extent otherwise included therein) (i) any gains or losses, together with any related provision for taxes, realized upon any sale of assets other than in the ordinary course of business, and (ii) any income or loss of any Person accrued prior to the date such Person becomes a Subsidiary of the Company or is merged into or consolidated with the Company or any Subsidiary or all or substantially all of such Person's assets are acquired by the Company or any Subsidiary. "Current Debt" means, with respect to any Person, all Debt of such Person which by its terms matures on demand or within one year from the date of the creation thereof and is not directly or indirectly renewable or extendible at the option of the obligor in respect thereto to a date one year or more from the date of creation thereof, provided that (i) Debt outstanding under an agreement which obligates the lender or lenders to extend credit over a period of one year or more and (ii) Current Maturities of Funded Debt shall constitute Funded Debt and not Current Debt. "Current Maturities of Funded Debt" means the portion of Funded Debt outstanding which by its terms is due on demand or within one year from the date of determination and is not directly or indirectly renewable, extendible or refundable at the option of the obligor to a date one year or more from such time. "Debt" with respect to any Person means, at any time, without duplication, (a) its liabilities for borrowed money; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including, without limitation, all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) its Capitalized Lease Obligations; (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); and (e) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (d) hereof. Debt of any Person shall include all obligations of such Person of the character described in clauses (a) through (e) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "Default" means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "Disposition" is defined in Section 4.07. "Environmental Laws" means any and all Federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. "ERISA Affiliate" means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code. "Event of Default" is defined in Section 7.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" means, at any time, the sale value of property that would be realized in an arm's-length sale at such time between an informed and willing buyer, and an informed and willing seller, under no compulsion to buy or sell, respectively. "Fixed Charges" means, for any period, the sum of (i) Interest Expense and (ii) Operating Rents for such period. "Funded Debt" means, with respect to any Person, all Debt of such Person which by its terms matures, or which is otherwise payable or unpaid, one year or more from the date of creation thereof, or is directly or indirectly renewable or extendible at the option of the obligor in respect thereof to a date one year or more from the date of creation thereof, provided that Funded Debt shall also include, as at any time of determination, Current Maturities of Funded Debt and the minimum daily average level of Current Debt outstanding for any sixty day period during the twelve month period immediately preceding such time of determination. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States of America, consistently applied. "Gibson" means The C. R. Gibson Company, a Delaware corporation and a Wholly-Owned Subsidiary. "Governmental Authority" means (a) the government of (i) the United States of America or any State or other political subdivision thereof, or (ii) any jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. "Guarantor" means each Subsidiary which is a party to the Guaranty Agreement, and any other Subsidiary which executes a Guaranty pursuant to Section 3.08 or Section 3.09. "Guarantee" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person: (i) to purchase such indebtedness or obligation or any property constituting security therefor; (ii) to advance or supply funds (a) for the purchase or payment of such indebtedness or obligation, or to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation; (iii) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or (iv) otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof. In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor. "Guaranty Agreement" means the Guaranty Agreement, dated as of January 3, 1996, made by the Guarantors in favor of MetLife with respect to the Company's obligations under the 1996 Notes and the 1996 Agreement, as such Guaranty Agreement may be amended or supplemented from time to time including by Amendment and Supplement No. 1 thereto, dated as of May 30, 1996, in the form of Exhibit B to the Assumption Agreement, to include as Obligations (as defined in the Guaranty Agreement) thereunder the Company's obligations under the Agreement, the Notes, the 1989 Agreement and the 9.50% Notes. The term "Guaranty Agreement" shall also include any other Guaranty executed by a Subsidiary from time to time pursuant to Section 3.08 or Section 3.09. "Hazardous Material" means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls). "Income Available For Fixed Charges" means, for any period, the sum of (i) Consolidated Net Income, (ii) taxes, (iii) Interest Expense, (iv) Operating Rents, and (v) amortization charges, of the Company and its Subsidiaries for such period, all as determined in accordance with GAAP. "Indebtedness" with respect to any Person means, at any time, without duplication, (a) its liabilities for borrowed money; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including, without limitation, all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) its Capitalized Lease Obligations; (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); (e) all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); (f) Swaps of such Person; and (g) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof. Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (g) to the extent such person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "Institutional Investor" means (a) MetLife, as the original purchaser of all of the Notes and the holder thereof on May 30, 1996, (b) any holder of a Note holding more than 10% of the aggregate principal amount of the Notes then outstanding, and (c) any other holder of a Note which is a bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. "Intercreditor Agreement" means the Intercreditor Agreement, dated as of January 3, 1996, among The Prudential Insurance Company of America, MetLife, SunTrust Bank, Nashville, N.A., First American National Bank, National City Bank, Kentucky, Nationsbank of Texas, N.A. and Creditanstalt-Bankverein, as it may be amended, restated, modified or supplemented from time to time in accordance with its terms, including by Amendment and Supplement No. 1 thereto, dated as of May 30, 1996, in the form of Exhibit D to the Assumption Agreement, to more fully include therein the Company's obligations under the Agreement, the Notes, the 1989 Agreement and the 9.50% Notes and MetLife as the holder of all of said Notes and a party to each of said Agreements. "Interest Expense" means, for any period, all interest expense in respect of Debt (including imputed interest in respect of Capitalized Lease Obligations) of the Company and its Subsidiaries for such period as determined in accordance with GAAP. "Investment" shall mean, when used with respect to any Person, any direct or indirect advance, loan or other extension of credit or capital contribution by such Person (by means of transfers of property to others or payments for property or services for the account or use of others, or otherwise) to any other Person, or any direct or indirect purchase or other acquisition or beneficial ownership by such Person of, or of a beneficial interest in, Capital Stock, partnership interests, bonds, notes, debentures or other securities issued by any other Person. "Lien" means any mortgage, pledge, security interest, encumbrance, lien (statutory or otherwise), or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any Capitalized Lease, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction) or any other type of preferential arrangement for the purpose, or having the effect, of protecting a creditor against loss or securing the payment or performance of an obligation, including any rights of setoff (whether by statute, common law, contract or otherwise). "Make-Whole Premium" means the excess, if any, of (i) the sum of the respective Payment Values of each prospective interest payment, prospective mandatory prepayment and the principal payment at maturity in respect of the principal amount of the Notes to be prepaid pursuant to Section 2.02 or Section 6 of the Agreement or to be accelerated pursuant to Section 7.02, as the case may be (the amount of each such payment being herein referred to as a "Payment") over (ii) the principal amount of the Notes to be so prepaid or accelerated. The Payment Value of each Payment shall be determined by discounting such Payment at the Reinvestment Rate, for the period from the scheduled date of such Payment to the applicable date of prepayment or acceleration, as the case may be. The Reinvestment Rate is (i) 50 basis points plus (ii) the yield to maturity implied by (A) the yields reported, at the Calculation Time, by the Telerate Access Service on Page 678 (or such other display as may replace Page 678 on Telerate Access Service) for United States Treasury securities having a maturity equal to the Weighted Average Life to Final Maturity (rounded to the nearest month) of the Notes so to be prepaid or accelerated, or (B) if such yields are not reported at the Calculation Time or the yields reported at the Calculation Time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been reported at the Calculation Time, in Federal Reserve Statistical Release H.15(519) (or any comparable successor publication) for actively traded United States Treasury securities having a constant maturity equal to such Weighted Average Life to Final Maturity. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the duration closest to and greater than such rounded Weighted Average Life to Final Maturity and (2) the actively traded U.S. Treasury security with the duration closest to and less than such rounded Weighted Average Life to Final Maturity. The "Calculation Time" for determining the yields of such United States Treasury securities shall be 10 a.m. (New York City time) on the second Business Day prior to the prepayment date pursuant to Section 2.02 or Section 6 of the Agreement or prior to the date of acceleration pursuant to Section 7.02, as the case may be. "Material" means material in relation to the business, operations, affairs, financial condition, assets, properties, or prospects of the Company and its Subsidiaries taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Company and its Subsidiaries taken as a whole, or (b) the ability of the Company to perform its obligations under the Agreement and the Notes, or (c) the validity or enforceability against the Company of the Agreement, or the Notes, or (d) the ability of the Company and its Subsidiaries (taken as a whole) to perform their respective obligations under the Pledge Agreements or the Guaranty Agreement. "Material Subsidiary" means a Subsidiary having (i) Assets with an aggregate book value in excess of $5,000,000 at the time of determination or (ii) Revenues in excess of 5% of Consolidated Revenues for the fiscal year most recently ended prior to the time of determination. "MetLife" means Metropolitan Life Insurance Company, a New York corporation, the original purchaser of all of the Notes, the 9.50% Notes and the 1996 Notes and which holds the entire principal amount of each thereof on May 30, 1996. "Moody's" means Moody's Investors Service, Inc. or any successor thereto. "Multiemployer Plan" means any Plan that is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). "1989 Agreement" means the Loan Agreement dated as of September 21, 1989 between Gibson and MetLife entered into in connection with the original issuance of the 9.50% Notes, as amended from time to time, including by the Assumption Agreement, and as assumed by the Company pursuant to the Assumption Agreement. "9.50% Notes" means the 9.50% Senior Notes due September 22, 1999 originally issued by Gibson pursuant to the 1989 Agreement, as amended from time to time, including by the Assumption Agreement, and as assumed by the Company pursuant to the Assumption Agreement. "1996 Agreement" means the Note Purchase Agreement, dated as of January 3, 1996, among the Company, MetLife and another institutional investor, pursuant to or in connection with which, inter alia, (i) MetLife acquired the 1996 Notes, (ii) the Pledge Agreements, the Guaranty Agreement and the Intercreditor Agreement were entered into, and (iii) the assumption of the Notes and the 9.50% Notes by the Company and the amendment thereof pursuant to the Assumption Agreement was contemplated. "1996 Notes" means the Company's 6.68% Series B Senior Notes due December 31, 2005 issued to MetLife in the aggregate principal amount of $15,000,000 pursuant to the 1996 Agreement. "Notes" means the Notes as amended from time to time, including by the Assumption Agreement, and as assumed by the Company pursuant to the Assumption Agreement. "Officer's Certificate" means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate. "Operating Rents" means, for any period, noncapitalized lease obligations of the Company and its Subsidiaries for such period but shall exclude all leases related to vehicles, computer and office equipment. "Overdue Interest Rate" means the greater (determined on a daily basis) of 9.31% per annum or the rate per annum which The Chase Manhattan Bank, N.A. announces publicly from time to time as its corporate base rate of interest. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. "Person" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. "Plan" means an "employee benefit plan" (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability. "Pledge Agreements" means (i) the Amended and Restated Pledge Agreement, dated as January 3, 1996, among the Company, as pledgor, SunTrust Bank, Nashville, N.A., National City Bank, Kentucky, First American National Bank, Nationsbank of Texas, N.A., Creditanstalt - Bankverein, MetLife and The Prudential Insurance Company of America, as pledgees, and SunTrust Bank, Nashville, N.A., as agent, pursuant to which the Company has, among other things, pledged to the pledgees a security interest in the outstanding common stock of Word, Incorporated owned by the Company, (ii) the Amended and Restated Pledge Agreement, dated as of January 3, 1996, among the Company, as pledgor, SunTrust Bank, Nashville, N.A., National City Bank, Kentucky, First American National Bank, Nationsbank of Texas, N.A., Creditanstalt - Bankverein, MetLife and The Prudential Insurance Company of America, as pledgees, and SunTrust Bank, Nashville, N.A., as agent, pursuant to which the Company has, among other things, pledged to the pledgees a security interest in the outstanding common stock of Gibson owned by the Company and (iii) any other pledge agreement or other similar security agreement executed by the Company or any Subsidiary pursuant to Sections 3.07, 3.08 or 3.09, as any such agreement may be amended, restated, modified, or supplemented from time to time in accordance with its terms, including by Amendment and Supplement No. 1 thereto, dated as of May 30, 1996, in the form of Exhibits C-1 and C-2, respectively, to the Assumption Agreement, to include as Secured Obligations (as defined in the Pledge Agreements) thereunder the Company's obligations under the Notes, the 9.50% Notes, the Agreement and the 1989 Agreement and MetLife as obligee of such obligations as pledgee thereunder. "Preferred Stock" means any class of Capital Stock of a corporation that is preferred over any other class of Capital Stock of such corporation as to the payment of dividends or the payment of any amount upon liquidation or dissolution of such corporation. "Priority Debt" means with respect any Person, at any time, without duplication, the sum of (i) Debt of each Subsidiary (other than Debt held by the Company or another Subsidiary); (ii) Debt secured by any Lien other than a Lien described in clauses (a) through (i) of Section 4.03; (iii) all Preferred Stock of Subsidiaries owned by a Person other than the Company or a Subsidiary; and (iv) any obligation or liability arising in connection with a Receivables Financing. "Receivables Financing" means a transaction pursuant to which funds are advanced to the Company and/or any of its Subsidiaries in exchange for which the Company and/or any of its Subsidiaries shall pledge, sell or otherwise transfer any or all of its notes or accounts receivable to secure, in whole or in part, the repayment of such funds. "Required Holders" means, at any time, the holders of at least 66 2/3% in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates). "Responsible Officer" means the chief executive officer, any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of the Agreement or the Notes. "Restricted Payment" is defined in Section 4.05. "Revenues" means, at any time, and with respect to any Person, revenues as determined in accordance with GAAP. "S&P" means Standard & Poor's Rating Group or any successor thereto. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Senior Financial Officer" means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company. "Senior Funded Debt" means (i) all Funded Debt of the Company other than Subordinated Funded Debt, and (ii) all Funded Debt of the Subsidiaries. "Shareholders' Equity" means shareholders' equity of the Company and its Subsidiaries on a consolidated basis as set forth in the Company's consolidated balance sheet prepared in accordance with GAAP. "Subordinated Funded Debt" means all Funded Debt of the Company which is expressly subordinate to other Funded Debt of the Company on terms and conditions approved by the Required Holders, which approval (or disapproval) shall be given within ten (10) Business Days of receipt by the holders of the Notes of the subordination terms of such Funded Debt. The Company's Convertible Subordinated Notes due 1999 shall constitute Subordinated Funded Debt. "Subsidiary" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. "Subsidiary Stock" means the outstanding Capital Stock of any Subsidiary. For purposes of Section 4.07, the book value of Subsidiary Stock that is sold or otherwise disposed of shall be equal to that percentage of book value of the assets of the Subsidiary that issued such stock as is equal to the percentage that the book value of such Subsidiary Stock represents of the book value of all of the outstanding Capital Stock of such Subsidiary (assuming, in making such calculations, that all securities convertible into such Capital Stock are so converted and giving full effect to all transactions that would occur or be required in connection with such conversion). "Swaps" means, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For the purposes of this Agreement, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined. "Total Capitalization" means the sum of (i) Total Funded Debt and (ii) Shareholders' Equity. "Total Funded Debt" means the sum of (i) Consolidated Senior Funded Debt and (ii) Consolidated Subordinated Funded Debt. "Weighted Average Life to Final Maturity" of the Notes as of the time of determination thereof means the number of years (rounded to the nearest one-twelfth) obtained by dividing the then Remaining Dollar-Years of the Notes by the then outstanding principal amount of the Notes. For the purposes of this definition, "Remaining Dollar-Years" means the sum of the amounts obtained by multiplying the amount of each then remaining mandatory prepayment, and repayment at final maturity, by the number of years (calculated to the nearest one-twelfth) which will elapse between the time of such determination and the date of such prepayment or repayment. "Wholly-Owned Subsidiary" means, at any time, any Subsidiary one hundred percent (100%) of all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company's other Wholly-Owned Subsidiaries at such time. All accounting terms used herein or in the Agreement and not expressly defined in this Note shall have the meanings respectively given to them in accordance with GAAP from time to time in effect. SECTION 7. DEFAULTS AND REMEDIES. 7.0l. Events of Default. An "Event of Default" shall exist if one or more of the following events shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): A. default in the payment of any interest upon any Note when such interest becomes due and payable and continuance of such default for a period of 5 Business Days; or B. default in the payment of principal of (or premium, if any, on) any Note for more than three Business Days after the same becomes due and payable, whether at maturity or at a date fixed for prepayment (including, without limitation, a prepayment as provided in Section 2.01, Section 2.02 or Section 2.03), or by acceleration or otherwise; or C. default in the performance or observance of any covenant, agreement or condition contained in Sections 4.01, 4.02, 4.03, 4.05, 4.06, 4.07 or 4.08; or D. default in the performance or observance of any other covenant, agreement or condition contained in this Note or in the Agreement and continuance of any such other default for a period of 45 days after the earlier of (i) written notice thereof, specifying such other default and requiring it to be remedied, shall have been given to the Company by the holder of any Note (any such notice to be identified as a "notice of default" and to refer specifically to this paragraph D of this Section 7.01), and (ii) a Responsible Officer obtaining actual knowledge of any such default; or E. any representation or warranty made in writing by or on behalf of the Company or Gibson or by any officer of the Company or Gibson in the Assumption Agreement or in any writing furnished in connection with the transactions contemplated thereby proves to have been false or incorrect in any material respect on the date as of which made; or F. (i) the Company or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal or premium or make-whole amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $5,000,000 beyond any period of grace provided with respect thereto, or (ii) the Company or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal amount of at least $5,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared (or one or more Persons are entitled to declare such Indebtedness to be), due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests), (x) the Company or any Subsidiary has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $5,000,000, or (y) one or more Persons have the right to require the Company or any Subsidiary so to purchase or repay such Indebtedness; or G. the Company or any Material Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or H. a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any of its Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any of its Subsidiaries, or any such petition shall be filed against the Company or any of its Subsidiaries and such petition shall not be stayed or dismissed within 60 days; or I. a final judgment or judgments for the payment of money aggregating in excess of $5,000,000 (exclusive of any insurance coverage for which the insurance company issuing such coverage shall have acknowledged in writing liability with respect thereto) shall be rendered against one or more of the Company and its Subsidiaries and (A) action shall be taken by a Person within 90 days after entry thereof to collect on such judgment or to secure such judgment with any property or assets of the Company or its Subsidiaries or (B) such judgments shall not, within 90 days after entry thereof, be bonded, discharged or stayed pending appeal, or shall not be discharged within 9O days after the expiration of such stay; or J. if (i) any Plan shall fail to satisfy the minimum funding standards of ERlSA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed $5,000,000, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary shall establish or amend any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect; or K. any Guarantor shall disavow the validity or enforceability of or attempt to terminate the Guaranty Agreement; or the Guaranty Agreement shall cease to be in full force and effect in whole or in part for any reason whatsoever (other than pursuant to Section 8(a) of the Intercreditor Agreement); or L. the security interests granted pursuant to any Pledge Agreement shall fail at any time to constitute a first priority security interest in or assignment of the collateral described in such Pledge Agreement (other than pursuant to Section 8(a) of the Intercreditor Agreement); or any Pledge Agreement shall cease to be in full force and effect in whole or in part for any reason whatsoever (other than pursuant to Section 8(a) of the Intercreditor Agreement); or the Company shall disavow the validity or enforceability of or attempt to terminate any or all of the Pledge Agreements. As used in Section 7.01J, the terms "employee benefit plan" and "employee welfare benefit plan" shall have the respective meanings assigned to such terms in Section 3 of ERlSA. 7.02. Remedies, Etc. A. Acceleration. (i) If an Event of Default with respect to the Company or any Material Subsidiary described in paragraph G or H of Section 7.01 (other than an Event of Default described in clause (i) of paragraph G) or described in clause (vi) of paragraph G by virtue of the fact that such clause encompasses clause (i) of paragraph G) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (ii) If any other Event of Default has occurred and is continuing (including, without limitation, an Event of Default described in paragraph H respect to a Subsidiary which is not a Material Subsidiary), any holder or holders of 51% or more in principal amount of the Notes at the time outstanding may at any time, at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable. (iii) If any Event of Default described in paragraph A or B of Section 7.01 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. Upon any Notes becoming due and payable under this Section 7.02, whether automatically or by declaration, such Notes will forthwith mature and the unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole Premium determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Premium by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. The Computing Holder shall give prompt written notice to the Company and all other holders of the Notes, whose names and addresses shall have been supplied to the Computing Holder by the Company, of the amount of the Make-Whole Premium, if any, with respect to any Notes accelerated, computed as of the second Business Day prior to the date of acceleration, which notice shall set forth in reasonable detail the computation thereof. The Make-Whole Premium, if any, set forth in such notice shall be binding on the Company and the other holders of the Notes absent manifest error. B. Other Remedies. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 7.02A, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether to enforce the payment of such Note, or for the specific performance of any agreement contained in the Agreement or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. The Company agrees that its obligations under Section 6 of the Agreement are of the essence of the Agreement, and upon application to any court of equity having jurisdiction in the premises, any holder of the Notes shall be entitled to a decree against the Company requiring specific performance of such obligations. If any holder of a Note shall demand payment thereof or take any other action in respect of an Event of Default, the Company will forthwith give written notice, as provided in Section 8.01, to the other holders of Notes specifying such action and the nature and status of the Event of Default. C. Rescission. At any time after any Notes have been declared due and payable pursuant to clause (ii) or (iii) of Section 7.02A, the holders of not less than 66 2/3% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Premium, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Premium, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Overdue Interest Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 5, and (c) no judgment or decree has been entered for the payment of any monies due pursuant to the Notes or the Agreement. No rescission and annulment under this Section 7.02C will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. D. No Waivers or Election of Remedies; Expenses, etc. No course of dealing and no delay on the part of any holder of a Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by any Note or by the Agreement upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 7.1 of the Agreement, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 7.02, including, without limitation, reasonable attorneys' fees, expenses and disbursements. SECTION 8. MISCELLANEOUS. 8.01. Notices. All notices to be given to any holder of this Note shall be in writing and delivered by a recognized overnight delivery service, or mailed (by registered or certified mail, return receipt requested) or sent by facsimile transmission followed by a confirmation copy sent on the same day by a recognized overnight delivery service, to such holder at its address designated on the date of such notice on the register or other record maintained by the Company. Any such notice so given shall be effective upon receipt, including receipt of a facsimile transmission. 8.02. Covenants Bind Successors and Assigns. All covenants and agreements in this Note by the Company shall bind its successors and assigns, whether so expressed or not. 8.03. Governing Law. This Note shall be construed in accordance with and governed by the internal laws of the State of New York. 8.04. Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. IN WITNESS WHEREOF, THOMAS NELSON, INC. has caused this Note to be signed in its corporate name by one of its officers thereunto duly authorized, and to be dated as of the day and year first above written. THOMAS NELSON, INC. By /s/ Joe L. Powers _______________________ Joe L. Powers Executive Vice President and Chief Financial Officer EXHIBIT B THIS AMENDMENT AND SUPPLEMENT NO. 1, dated as of May 30, 1996 ("this Amendment") among the parties which are signatories hereto, amends and supplements the Guaranty Agreement, dated as of January 3, 1996, among the same parties (the "Guaranty"). RECITALS: WHEREAS, the parties hereto have entered into the Guaranty with respect to all sums owing by Nelson to the Lender under the Note Purchase Agreement and the Notes; WHEREAS, Nelson, the Lender and The C. R. Gibson Company ("CR Gibson") have entered into that certain Assumption and Amendment Agreement, dated as of May 30, 1996, pursuant to which Nelson assumed CR Gibson's obligations under (w) the 9.50% Senior Note due September 22, 1999 held by the Lender and outstanding in the principal amount of $7,000,000 (as amended, the "9.50% Note"), (x) the Loan Agreement, dated as of September 21, 1989, between the Lender and CR Gibson, pursuant to which the 9.50% Note was originally issued, (y) the 8.31% Senior Note due June 23, 2004 held by the Lender and outstanding in the principal amount of $5,000,000 (the "8.31% Note"), and (z) the Loan Agreement, dated as of June 23, 1994, between the Lender and CR Gibson, pursuant to which the 8.31% Note was originally issued; and WHEREAS, Nelson and the Lender desire to include the CR Gibson Obligations as Obligations under the Guaranty, and the Guarantors are agreeable thereto. NOW, THEREFORE, in consideration of the premises and as contemplated in connection with the Note Purchase Agreement to induce the Lender to enter thereinto, the Guarantors hereby agree as follows: 1) Definitions. Terms defined in the Guaranty and not defined herein are used herein as defined therein. The term "CR Gibson Obligations" shall have the meaning set forth in the Intercreditor Agreement (as defined in the Note Purchase Agreement), as amended and supplemented by Amendment and Supplement No. 1 thereto dated as of the date hereof. 2) Amendment and Supplement to Guaranty. The Guaranty is amended and supplemented as follows: (a) The first Recital to the Guaranty is amended and supplemented by deleting the phrase "; terms defined therein and not otherwise defined herein being used herein as therein defined". (b) Section 1 of the Guaranty is amended and supplemented by: (i) substituting the phrase ", the Notes, the CR Gibson Loan Agreements and the CR Gibson Notes" for the phrase "and the Notes"; and (ii) adding the phrase "Make-Whole Premium (as defined in the CR Gibson Notes)," after the phrase "Yield Maintenance Amount,". (c) Section 2 of the Guaranty is amended and supplemented by: (i) adding the phrase "the CR Gibson Loan Agreements, the CR Gibson Notes," after the phrase "the Notes,"; and (ii) substituting the phrase "Pledge Agreements" for the phrase "Pledge Agreement". (d) Section 9 of the Guaranty is amended and supplemented by substituting the phrase "Event of Default under the Note Purchase Agreement or under the CR Gibson Notes ("Event of Default")" for the phrase "Event of Default". (e) Section 13 of the Guaranty is amended and supplemented by adding the phrase "or in Sections 7.01G or H of the CR Gibson Notes" after the phrase "Note Purchase Agreement" each time such phrase appears in Section 13. (f) Section 17 of the Guaranty is amended and supplemented by adding the phrase "and of the Assumption Agreement, and the consummation of the transactions contemplated by the Assumption Agreement" after the phrase "Credit Documents". (g) A new Section 20 of the Guaranty is added to read as follows: "SECTION 20. Defined Terms. Capitalized terms used in this Guaranty and not otherwise defined herein shall have the meanings ascribed thereto in the Note Purchase Agreement or in the Intercreditor Agreement, as amended and supplemented by Amendment and Supplement No. 1 thereto, dated as of May 30, 1996." 3) Construction; Ratification. Section 2 of this Amendment shall be construed to amend and supplement the Guaranty as if the provisions thereof were set forth in the Guaranty mutatis mutandis. The Guaranty, as amended and supplemented hereby, is in all respects ratified and confirmed by the Guarantors. 4) Representations and Warranties. Each Guarantor represents and warrants for itself only as follows: (a) The Guarantor has the corporate or partnership power and authority to execute and deliver this Amendment and to perform the provisions of the Guaranty as amended and supplemented hereby. (b) The execution and delivery of this Amendment and the performance of the obligations of the Guarantor under the Guaranty as amended and supplemented hereby have been duly authorized by all necessary corporate or partnership action of the Guarantor. Neither the execution and delivery of this Amendment nor the performance of the obligations of the Guarantor under the Guaranty as amended and supplemented hereby will violate the charter or bylaws (or the partnership agreement or the certificate of limited partnership, as the case may be) of the Guarantor, any contract or agreement to which the Guarantor is a party or by which it is bound or any laws, orders or decrees of Governmental Authorities having jurisdiction over the Guarantor. (c) Each of this Amendment and the Guaranty, as amended and supplemented hereby, constitutes a legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5) Counterparts. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. IN WITNESS WHEREOF, each Guarantor and the Lender have caused this Amendment to be duly executed and delivered by their respective duly authorized officers as of the date first above written. GUARANTORS: WORD, INCORPORATED By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary PPC, INC. By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary EDITORIAL CARIBE, INC. By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary MORNINGSTAR RADIO NETWORK, INC. By /s/ Joe L. Powers ______________________ Joe L. Powers Secretary NELSON WORD LIMITED (formerly known as Word (UK) Limited) By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary WORD COMMUNICATIONS, LTD. By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary WORD DIRECT, INC. By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary WORD DIRECT PARTNERS, L.P. By: Word Direct, Inc., General Partner By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary THE C.R. GIBSON COMPANY By /s/ Joe L. Powers ________________________ Joe L. Powers Secretary 855763 ONTARIO LIMITED By /s/ Joe L. Powers _________________________ Joe L. Powers Secretary LENDER: METROPOLITAN LIFE INSURANCE COMPANY By /s/ John R. Endres __________________________ Title: Assistant Vice President EXHIBIT C-1 THIS AMENDMENT AND SUPPLEMENT NO. 1, dated as of May 30, 1996 ("this Amendment"), among the parties which are signatories hereto, amends and supplements the Amended and Restated Pledge Agreement, dated as of January 3, 1996, among the same parties (the "Gibson Pledge Agreement"). RECITALS: WHEREAS, the parties hereto have entered into the Gibson Pledge Agreement with respect to the Stock of The C. R. Gibson Company (the "Company"); WHEREAS, Pledgor, MetLife and the Company have entered into that certain Assumption and Amendment Agreement, dated as of May 30, 1996, pursuant to which Pledgor assumed the Company's obligations under (w) the 9.50% Senior Note due September 22, 1999 held by MetLife and outstanding in the principal amount of $7,000,000 (as amended, the "9.50% Note"), (x) the Loan Agreement, dated as of September 21, 1989, between MetLife and the Company, pursuant to which the 9.50% Note was originally issued, (y) the 8.31% Senior Note due June 23, 2004 held by MetLife and outstanding in the principal amount of $5,000,000 (the "8.31% Note"), and (z) the Loan Agreement, dated as of June 23, 1994, between MetLife and the Company pursuant to which the 8.31% Note was originally issued; and WHEREAS, Pledgor and MetLife desire to include (x) the CR Gibson Obligations as Secured Obligations under the Gibson Pledge Agreement, and (y) MetLife as obligee of the CR Gibson Obligations as a Pledgee under the Gibson Pledge Agreement, and the other parties hereto are agreeable thereto. NOW, THEREFORE, in consideration of the premises and as contemplated in connection with the Note Agreement to induce MetLife to enter thereinto, and as further contemplated by Section 7(b) of the Intercreditor Agreement, the parties hereto agree as follows: 1) Definitions. Terms defined in the Gibson Pledge Agreement and not defined herein are used herein as defined therein. The term "CR Gibson Obligations" shall have the meaning set forth in the Intercreditor Agreement, as amended and supplemented by Amendment and Supplement No. 1 thereto dated as of the date hereof. 2) Amendment and Supplement to the Gibson Pledge Agreement. The Gibson Pledge Agreement is amended and supplemented as follows: (a) The first paragraph of the Gibson Pledge Agreement is amended and supplemented by substituting the phrase ", the Note Holders and MetLife as obligee of the CR Gibson Obligations (as hereinafter defined)" for the phrase "and the Note Holders". (b) Section 1 of the Gibson Pledge Agreement is amended and supplemented by adding the following sentence at the end thereof: "The terms "CR Gibson Obligations", "CR Gibson Notes", "CR Gibson Loan Agreements", "CR Gibson Documents" and "Assumption Agreement" shall have the respective meanings ascribed to them in the Intercreditor Agreement, as amended and supplemented by Amendment and Supplement No. 1 thereto, dated as of May 30, 1996.". (c) Section 2 of the Gibson Pledge Agreement is amended and supplemented by substituting the phrase ", to the Note Holders in connection with the Note Obligations and to MetLife in connection with the CR Gibson Obligations" for the phrase "and owed to the Note Holders in connection with the Note Obligations". (d) Section 4(b) of the Gibson Pledge Agreement is amended and supplemented by adding the phrase ", the CR Gibson Documents" after the phrase "Note Agreement". (e) Section 7(a) of the Gibson Pledge Agreement is amended and supplemented by adding the phrase ", with respect to MetLife as obligee of the CR Gibson Obligations automatically upon the indefeasible payment in full of all of the Secured Obligations consisting of CR Gibson Obligations owed to it" immediately prior to the phrase "and,". (f) Section 7(b) of the Gibson Pledge Agreement is amended and supplemented by: (i) adding the phrase ", the CR Gibson Documents" after the phrase ", the Note Agreement"; and (ii) substituting the phrase ", the Note Agreement or the CR Gibson Documents" for the phrase "or the Note Agreement". (g) Section 7(c) of the Gibson Pledge Agreement is amended and supplemented by adding the phrase "and/or MetLife as obligee of the CR Gibson Obligations" after the phrase "Note Holders". (h) Section 10(a) of the Gibson Pledge Agreement is amended and supplemented by adding the phrase "or the CR Gibson Notes" after the phrase "Note Agreement". (i) Section 10 of the Gibson Pledge Agreement is amended and supplemented by deleting the period at the end of subsection (d) and substituting a semi-colon, and by adding a new subsection (e) to read as follows: "(e) breach of any covenant, warranty, agreement or representation contained in any of the CR Gibson Documents that constitutes an Event of Default under the CR Gibson Notes.". (j) Section 14(h) of the Gibson Pledge Agreement is amended and supplemented by adding the phrase "or the CR Gibson Loan Agreements or the Assumption Agreement" after the phrase "Note Agreement". (k) Section 15 of the Gibson Pledge Agreement is amended and supplemented by: (i) adding the phrase ", MetLife as obligee of the CR Gibson Obligations" prior to the phrase ", and the Agent"; and (ii) substituting the phrase ", the Note Holders and MetLife as obligee of the CR Gibson Obligations" for the phrase "and the Note Holders". 3) Construction; Ratification. Section 2 of this Amendment and the Recitals hereto shall be construed to amend and supplement the Gibson Pledge Agreement as if the provisions thereof were set forth in the Gibson Pledge Agreement mutatis mutandis. The Gibson Pledge Agreement, as amended and supplemented, is in all respects ratified and confirmed by Pledgor. 4) Representations and Warranties. Pledgor represents and warrants as follows: (a) Pledgor has the corporate power and authority to execute and deliver this Amendment and to perform the provisions of the Gibson Pledge Agreement as amended and supplemented hereby. (b) The execution and delivery of this Amendment and the performance of the obligations of Pledgor under the Gibson Pledge Agreement as amended and supplemented hereby have been duly authorized by all necessary corporate action of Pledgor. Neither the execution and delivery of this Amendment nor the performance of the obligations of Pledgor under the Gibson Pledge Agreement as amended and supplemented hereby will violate the charter or bylaws of Pledgor, any contract or agreement to which Pledgor is a party or by which it is bound or any laws, orders or decrees of governmental authorities and courts having jurisdiction over Pledgor. (c) Each of this Amendment and the Gibson Pledge Agreement as amended and supplemented hereby constitutes a legal, valid and binding obligation of Pledgor enforceable against Pledgor in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5) Counterparts. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered in Nashville, Tennessee, by their duly authorized officers as of the day and year first above written. THOMAS NELSON, INC. By /s/ Joe L. Powers _______________________ Joe L. Powers Executive Vice President and Chief Financial Officer SUNTRUST BANK, NASHVILLE, N.A. (formerly known as Third National Bank in Nashville), as Agent By /s/ J. Fred Turner _______________________ Title: First Vice President NATIONAL CITY BANK, KENTUCKY (formerly known as First National Bank of Louisville) By /s/ Cheryl Mennen _______________________ Title: Assistant Vice President FIRST AMERICAN NATIONAL BANK By /s/ Scott M. Bane _______________________ Title: Senior Vice President NATIONSBANK OF TEXAS, N.A. By /s/ Jennifer Zydney _______________________ Title: Vice President CREDITANSTALT - BANKVEREIN By /s/ Robert M. Biringer _______________________ Title: Senior Vice President By /s/ Joseph R. Longosz _______________________ Title: Vice President METROPOLITAN LIFE INSURANCE COMPANY By /s/ John R. Endres _______________________ Title: Assistant Vice President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By /s/ Robert G. Gwin _______________________ Title: Vice President EXHIBIT C-2 THIS AMENDMENT AND SUPPLEMENT NO. 1, dated as of May 30, 1996 ("this Amendment"), among the parties which are signatories hereto, amends and supplements the Amended and Restated Pledge Agreement, dated as of January 3, 1996, among the same parties (the "Word Pledge Agreement"). RECITALS: WHEREAS, the parties hereto have entered into the Word Pledge Agreement with respect to the Stock of Word, Incorporated (the "Company"); WHEREAS, Pledgor, MetLife and The C.R. Gibson Company ("Gibson") have entered into that certain Assumption and Amendment Agreement, dated as of May 30, 1996, pursuant to which Pledgor assumed Gibson's obligations under (w) the 9.50% Senior Note due September 22, 1999 held by MetLife and outstanding in theprincipal amount of $7,000,000 (as amended, the "9.50% Note"), (x) the Loan Agreement, dated as of September 21, 1989, between MetLife and Gibson, pursuant to which the 9.50% Note was originally issued, (y) the 8.31% Senior Note due June 23, 2004 held by MetLife and outstanding in the principal amount of $5,000,000 (the "8.31% Note"), and (z) the Loan Agreement, dated as of June 23, 1994, between MetLife and Gibson pursuant to which the 8.31% Note was originally issued; and WHEREAS, Pledgor and MetLife desire to include (x) the CR Gibson Obligations as Secured Obligations under the Word Pledge Agreement, and (y) MetLife as obligee of the CR Gibson Obligations as a Pledgee under the Word Pledge Agreement, and the other parties hereto are agreeable thereto. NOW, THEREFORE, in consideration of the premises and as contemplated in connection with the Note Agreement to induce MetLife to enter thereinto, and as further contemplated by Section 7(b) of the Intercreditor Agreement, the parties hereto agree as follows: 1) Definitions. Terms defined in the Word Pledge Agreement and not defined herein are used herein as defined therein. The term "CR Gibson Obligations" shall have the meaning set forth in the Intercreditor Agreement, as amended and supplemented by Amendment and Supplement No. 1 thereto dated as of the date hereof. 2) Amendment and Supplement to the Word Pledge Agreement. The Word Pledge Agreement is amended and supplemented as follows: (a) The first paragraph of the Word Pledge Agreement is amended and supplemented by substituting the phrase ", the Note Holders and MetLife as obligee of the CR Gibson Obligations (as hereinafter defined)" for the phrase "and the Note Holders". (b) Section 1 of the Word Pledge Agreement is amended and supplemented by adding the following sentence at the end thereof: "The terms "CR Gibson Obligations", "CR Gibson Notes", "CR Gibson Loan Agreements", "CR Gibson Documents" and "Assumption Agreement" shall have the respective meanings ascribed to them in the Intercreditor Agreement, as amended and supplemented by Amendment and Supplement No. 1 thereto, dated as of May 30, 1996.". (c) Section 2 of the Word Pledge Agreement is amended and supplemented by substituting the phrase ", to the Note Holders in connection with the Note Obligations and to MetLife in connection with the CR Gibson Obligations" for the phrase "and owed to the Note Holders in connection with the Note Obligations". (d) Section 4(b) of the Word Pledge Agreement is amended and supplemented by adding the phrase ", the CR Gibson Documents" after the phrase "Note Agreement". (e) Section 7(a) of the Word Pledge Agreement is amended and supplemented by adding the phrase ", with respect to MetLife as obligee of the CR Gibson Obligations automatically upon the indefeasible payment in full of all of the Secured Obligations consisting of CR Gibson Obligations owed to it" immediately prior to the phrase "and,". (f) Section 7(b) of the Word Pledge Agreement is amended and supplemented by: (i) adding the phrase ", the CR Gibson Documents" after the phrase ", the Note Agreement"; and (ii) substituting the phrase ", the Note Agreement or the CR Gibson Documents" for the phrase "or the Note Agreement". (g) Section 7(c) of the Word Pledge Agreement is amended and supplemented by adding the phrase "and/or MetLife as obligee of the CR Gibson Obligations" after the phrase "Note Holders". (h) Section 10(a) of the Word Pledge Agreement is amended and supplemented by adding the phrase "or the CR Gibson Notes" after the phrase "Note Agreement". (i) Section 10 of the Word Pledge Agreement is amended and supplemented by deleting the period at the end of subsection (d) and substituting a semi-colon, and by adding a new subsection (e) to read as follows: "(e) breach of any covenant, warranty, agreement or representation contained in any of the CR Gibson Documents that constitutes an Event of Default under the CR Gibson Notes.". (j) Section 14(h) of the Word Pledge Agreement is amended and supplemented by adding the phrase "or the CR Gibson Loan Agreements or the Assumption Agreement" after the phrase "Note Agreement". (k) Section 15 of the Word Pledge Agreement is amended and supplemented by: (i) adding the phrase ", MetLife as obligee of the CR Gibson Obligations" prior to the phrase ", and the Agent"; and (ii) substituting the phrase ", the Note Holders and MetLife as obligee of the CR Gibson Obligations" for the phrase "and the Note Holders". 3) Construction; Ratification. Section 2 of this Amendment and the Recitals hereto shall be construed to amend and supplement the Word Pledge Agreement as if the provisions thereof were set forth in the Word Pledge Agreement mutatis mutandis. The Word Pledge Agreement, as amended and supplemented, is in all respects ratified and confirmed by Pledgor. 4) Representations and Warranties. Pledgor represents and warrants as follows: (a) Pledgor has the corporate power and authority to execute and deliver this Amendment and to perform the provisions of the Word Pledge Agreement as amended and supplemented hereby. (b) The execution and delivery of this Amendment and the performance of the obligations of Pledgor under the Word Pledge Agreement as amended and supplemented hereby have been duly authorized by all necessary corporate action of Pledgor. Neither the execution and delivery of this Amendment nor the performance of the obligations of Pledgor under the Word Pledge Agreement as amended and supplemented hereby will violate the charter or bylaws of Pledgor, any contract or agreement to which Pledgor is a party or by which it is bound or any laws, orders or decrees of governmental authorities and courts having jurisdiction over Pledgor. (c) Each of this Amendment and the Word Pledge Agreement as amended and supplemented hereby constitutes a legal, valid and binding obligation of Pledgor enforceable against Pledgor in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5) Counterparts. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered in Nashville, Tennessee, by their duly authorized officers as of the day and year first above written. THOMAS NELSON, INC. By /s/ Joe L. Powers _______________________ Joe L. Powers Executive Vice President and Chief Financial Officer SUNTRUST BANK, NASHVILLE, N.A. (formerly known as Third National Bank in Nashville), as Agent By /s/ J. Fred Turner _______________________ Title: First Vice President NATIONAL CITY BANK, KENTUCKY (formerly known as First National Bank of Louisville) By /s/ Cheryl Mennen _______________________ Title: Assistant Vice President FIRST AMERICAN NATIONAL BANK By /s/ Scott M. Bane _______________________ Title: Senior Vice President NATIONSBANK OF TEXAS, N.A. By /s/ Jennifer Zydney _______________________ Title: Vice President CREDITANSTALT - BANKVEREIN By /s/ Robert M. Biringer _______________________ Title: Senior Vice President By /s/ Joseph P. Longosz _______________________ Title: Vice President METROPOLITAN LIFE INSURANCE COMPANY By /s/ John R. Endres _______________________ Title: Assistant Vice President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By /s/ Robert G. Gwin _______________________ Title: Vice President EXHIBIT D THIS AMENDMENT AND SUPPLEMENT NO. 1, dated as of May 30, 1996 ("this Amendment") among the parties which are signatories hereto, amends and supplements the Intercreditor Agreement, dated as of January 3, 1996, among the same parties (the "Agreement"). RECITALS: WHEREAS, the parties hereto have entered into the Agreement with respect to the Lenders and the Obligations; WHEREAS, the Company, MetLife and The C. R. Gibson Company ("CR Gibson") have entered into that certain Assumption and Amendment Agreement, dated as of May 30, 1996 (the "Assumption Agreement"), pursuant to which the Company assumed CR Gibson's obligations under (w) the 9.50% Senior Note due September 22, 1999 held by MetLife and outstanding in the principal amount of $7,000,000 (as so assumed and amended, including as amended by the Assumption Agreement, the "9.50% Note"), (x) the Loan Agreement, dated as of September 21, 1989, between MetLife and CR Gibson, pursuant to which the 9.50% Note was originally issued (as so assumed and amended by the Assumption Agreement, the "1989 Agreement"), (y) the 8.31% Senior Note due June 23, 2004 held by MetLife and outstanding in the principal amount of $5,000,000 (as so assumed and amended by the Assumption Agreement, the "8.31% Note" and, collectively with the 9.50% Note, the "CR Gibson Notes"), and (z) the Loan Agreement, dated as of June 23, 1994, between MetLife and CR Gibson, pursuant to which the 8.31% Note was originally issued (as so assumed and amended by the Assumption Agreement, the "1994 Agreement" and, collectively with the 1989 Agreement, the "CR Gibson Loan Agreements"); and WHEREAS, MetLife desires to (x) more fully include the CR Gibson Obligations as Obligations under the Agreement, and (y) include itself, as obligee of the CR Gibson Obligations and as a party to the CR Gibson Documents, as a Lender under the Agreement, and the other parties hereto are agreeable thereto. NOW, THEREFORE, in consideration of the premises and as contemplated by Section 7(b) of the Agreement, the parties hereto agree as follows: 1) Definitions. Terms defined in the Agreement and not defined herein are used herein as defined therein. The terms "CR Gibson Documents" and "CR Gibson Obligations" shall have the meanings set forth in Sections 2(i)(iii) and 2(i)(iv) hereof, respectively. 2) Amendment and Supplement to the Agreement. The Agreement is amended and supplemented as follows: (a) The eighth Recital to the Agreement is deleted and the second recital of this Amendment is substituted therefor, mutatis mutandis. (b) The ninth Recital to the Agreement is amended and supplemented by adding the phrase "and, in the case of the Purchaser Guaranty Agreement to which MetLife is a party, the CR Gibson Obligations" after the phrase "Note Obligations". (c) The tenth Recital to the Agreement is amended and supplemented by adding the phrase "the CR Gibson Obligations," after the phrase "Note Obligations,". (d) The eleventh Recital to the Agreement is amended and supplemented by adding the phrase ", MetLife as obligee of the CR Gibson Obligations" after the phrase "Note Purchasers". (e) Section 1(d) of the Agreement is amended and supplemented by: (i) adding the phrase "the CR Gibson Documents, "after the phrase "Purchaser Agreements,"; and (ii) adding the phrase "CR Gibson Document," after the phrase "Purchaser Agreement,". (f) Section 1(g) of the Agreement is amended and supplemented by adding the phrase ", MetLife as obligee of the CR Gibson Obligations" after the phrase "Banks". (g) Section 7(a) of the Agreement is amended and supplemented by adding the phrase ", the CR Gibson Documents" after the phrase "Purchaser Agreements". (h) Section 7(b) of the Agreement is amended and supplemented by deleting the second sentence thereof. (i) Section 9 of the Agreement is amended and supplemented by: (i) adding the phrase ", the CR Gibson Documents" after the phrase "Purchaser Agreements" in the definition of "Additional Lien"; (ii) adding the following definition after the definition of "Additional Lien": "Assumption Agreement" shall have the meaning set forth in the introductory paragraphs hereof."; (iii) adding the following definitions after the definition of "CR Gibson": '"CR Gibson Documents" shall mean the CR Gibson Loan Agreements, the CR Gibson Notes, the Purchaser Guaranty Agreement to which MetLife is a party with respect to the CR Gibson Obligations, the Assumption Agreement and each other document, instrument or certificate executed in connection therewith, as any of these may be amended, supplemented or modified from time to time in accordance with its respective terms. "CR Gibson Loan Agreements" shall have the meaning set forth in the introductory paragraphs hereof. "CR Gibson Notes" shall have the meaning set forth in the introductory paragraphs hereof, and shall include each promissory note delivered in substitution or exchange for any such Note, including pursuant to Section 7a of the Assumption Agreement."'; (iv) deleting the definition of "CR Gibson Obligations" and substituting the following: "CR Gibson Obligations" shall mean the Company's obligations to MetLife with respect to the CR Gibson Notes (whether in respect of principal, interest, Make-Whole Premium (as defined in the CR Gibson Notes) or otherwise) and the CR Gibson Loan Agreements and the obligations under the other CR Gibson Documents (including any refinancing or refunding thereof)."; (v) adding the phrase ", the CR Gibson Documents" after the phrase "Purchaser Agreements" in the definition of "Event of Default"; (vi) adding the following sentence at the end of the definition of "Pledge Agreements": '"Pledge Agreements" shall include Amendment and Supplement No. 1, dated as of May 30, 1996, to each thereof."; (vii) adding the phrase ", including, in the case of the Purchaser Guaranty Agreement to which MetLife is a party, as amended and supplemented by Amendment and Supplement No. 1 thereto, dated as of May 30, 1996" immediately prior to the period at the end of the definition of "Purchaser Guaranty Agreements"; (viii) adding the phrase ", the CR Gibson Documents" after the phrase "Purchaser Agreements" in the definitions of "Sharing Payment" and "Third Party Guaranty"; and (ix) adding the phrase "and, in the case of MetLife, any CR Gibson Note" immediately prior to the period at the end of the definition of "Transferee". (j) Section 10(d) of the Agreement is amended and supplemented by adding the following sentence prior to the word "Notwithstanding": "MetLife may assign or otherwise transfer any of its rights with respect to the CR Gibson Obligations provided that such assignment is in accordance with the CR Gibson Notes, such assignee or transferee agrees in writing (pursuant to an agreement in form and substance reasonably satisfactory to the Majority Lenders) to be bound by the terms and provisions of this Agreement and written notice of such assignment or transfer is given to all the other Lenders.". (k) Section 10(h) of the Agreement is amended and supplemented by adding the phrase ", with respect to MetLife as obligee of the CR Gibson Obligations automatically upon the indefeasible payment in full of all the Obligations consisting of CR Gibson Obligations owed to it" prior to the phrase "and,". 3) Construction; Ratification. Section 2 of this Amendment and the Recitals hereto and the terms defined in such Recitals shall be construed to amend and supplement the Agreement as if the provisions thereof were set forth in the Agreement mutatis mutandis. The Agreement, as amended and supplemented hereby, is in all respects ratified and confirmed by the parties hereto. 4) Counterparts. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered in Nashville, Tennessee, by their duly authorized officers as of the day and year first above written. THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By /s/ Robert G. Gwin _______________________ Title: Vice President METROPOLITAN LIFE INSURANCE COMPANY By /s/ John R. Endres _______________________ Title: Assistant Vice President SUNTRUST BANK, NASHVILLE, N.A. as a Bank and as Collateral Agent By /s/ J. Fred Turner _______________________ Title: First Vice President FIRST AMERICAN NATIONAL BANK By /s/ Scott M. Bane _______________________ Title: Senior Vice President NATIONAL CITY BANK, KENTUCKY By /s/ Cheryl Mennen _______________________ Title: Assistant Vice President NATIONSBANK OF TEXAS, N.A. By /s/ Jennifer Zydney _______________________ Title: Vice President CREDITANSTALT - BANKVEREIN By /s/ Robert M. Biringer _______________________ Title: Senior Vice President By /s/ Joseph P. Longosz _______________________ Title: Vice President ACKNOWLEDGMENT AND AGREEMENT Each of the undersigned hereby acknowledges and, to the extent required, consents to the terms and conditions of Amendment and Supplement No. 1 to the Intercreditor Agreement attached hereto. Each of the undersigned agrees that the Acknowledgment and Agreement attached to the Intercreditor Agreement is hereby amended and supplemented by (x) adding the phrase ", the CR Gibson Documents" after the phrase "Purchaser Agreements" each time such phrase appears therein, and (y) adding the phrase ", as amended and supplemented by Amendment and Supplement No. 1, dated as of May 30,1996" after the phrase "Intercreditor Agreement" each time such phrase appears therein. IN WITNESS WHEREOF, the parties below have caused this Acknowledgment and Agreement to be duly executed as of May 30,1996. THOMAS NELSON, INC. By /s/ Joe L. Powers _______________________ Joe L. Powers Executive Vice President and Chief Financial Officer GUARANTORS: WORD, INCORPORATED By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary PPC, INC. By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary EDITORIAL CARIBE, INC. By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary MORNINGSTAR RADIO NETWORK, INC. By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary NELSON WORD LIMITED By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary WORD COMMUNICATIONS, LTD. By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary WORD DIRECT, INC. By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary WORD DIRECT PARTNERS, L.P. By: Word Direct, Inc., General Partner By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary THE C. R. GIBSON COMPANY By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary 855763 ONTARIO LIMITED By /s/ Joe L. Powers _______________________ Joe L. Powers Secretary EXHIBIT E The opinion of Bass, Berry & Sims referred to in Section 7i of the Assumption Agreement shall be substantially to the effect that: (a) The Company has the corporate power and authority to enter into the Assumption Agreement and to consummate the transactions contemplated thereby. The (i) execution, delivery and performance by the Company of the Assumption Agreement and the Pledge Agreement Amendments (as defined in (b) below), (ii) Assumption (as so defined), and (iii) issuance and delivery of the New Gibson Notes (as so defined) have been duly authorized by all necessary corporate action on the part of the Company and the Assumption Agreement, the Pledge Agreement Amendments and the New Gibson Notes have been duly executed and delivered by the Company. The Assumption Agreement, the Pledge Agreements as amended by the Pledge Agreement Amendments, the Gibson Notes and the Gibson Agreements (as assumed and amended by the Assumption Agreement) and the New Gibson Notes constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms subject to (A) the effect of bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance, fraudulent transfer and such other similar laws relating to or affecting the rights of creditors; and (B) general principles of equity (including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance, injunctive relief and other equitable remedies), regardless of whether in a proceeding at law or in equity. (b) (i) The execution, delivery and performance by the Company of the Assumption Agreement and Amendment and Supplement No. 1 to the Pledge Agreements referred to in Section 7c of the Assumption Agreement (the "Pledge Agreement Amendments"), (ii) the assumption and performance by the Company of the Gibson Notes and the Gibson Agreements (as amended by the Assumption Agreement) (the "Assumption"), and (iii) the issuance and delivery by the Company of the new Gibson Notes referred to in Section 7a of the Assumption Agreement (the "New Gibson Notes") do not contravene the charter or bylaws of the Company or any judgment, order or decree of any court or arbitrator known to such counsel specifically directed to the Company and do not constitute a Material default under or Material breach of the terms of, or an event that, with the lapse of time or giving of notice, or both, would constitute a Material default under or a Material breach of the terms of, result in the creation of any Material Lien upon any properties or assets of the Company under the terms of, or require the consent (which has not been obtained) of any Person under the terms of, any agreement listed in Schedule 5.15 to the 1996 Agreement. (c) No consent, approval, authorization or other action by or filing with any Federal or Tennessee governmental authority is required in connection with (i) the execution, delivery or performance by the Company of the Assumption Agreement and the Pledge Agreement Amendments, (ii) the Assumption, or (iii) the issuance and delivery of the New Gibson Notes or, if required, the requisite consent, approval or authorization has been obtained, the requisite action has been taken or the requisite filing has been made. (d) The assumption by the Company of the Gibson Notes pursuant to the Assumption Agreement and the issuance and delivery by the Company of the New Gibson Notes do not require registration under the Securities Act. (e) Gibson has the corporate power and authority to enter into the Assumption Agreement and to consummate the transactions contemplated thereby. The Assumption Agreement has been duly authorized by all necessary corporate action on the part of Gibson and has been duly executed and delivered by Gibson. (f) Each of Gibson and Word, Incorporated ("Word") has the corporate power and authority to execute and deliver Amendment and Supplement No. 1 to the Guaranty (the "Guaranty Amendment") and to perform the provisions of the Guaranty as amended and supplemented thereby. The execution and delivery by Gibson and Word, respectively, of the Guaranty Amendment and the performance of the respective obligations of Gibson and Word under the Guaranty as amended and supplemented thereby have been duly authorized by all necessary corporate action of Gibson and Word, respectively. (g) The Guaranty Amendment has been duly executed and delivered by each Guarantor. Each of the Guaranty Amendment and the Guaranty as amended and supplemented thereby constitutes a legal, valid and binding obligation of each of the Guarantors, enforceable against such Guarantor in accordance with its terms, subject to (A) the effect of bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance, fraudulent transfer and such other similar laws relating to or affecting the rights of creditors; and (B) general principles of equity (including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance, injunctive relief and other equitable remedies), regardless of whether in a proceeding at law or in equity. (h) The execution and delivery of the Guaranty Amendment by each Guarantor and the performance by each Guarantor of its obligations under the Guaranty as amended and supplemented thereby do not contravene each such Guarantor's charter or bylaws (or its partnership agreement or certificate of limited partnership, as the case may be), or any judgment, order or decree of any court or arbitrator known to such counsel specifically directed to such Guarantor and do not constitute a Material default under or Material breach of the terms of, or an event that, with the lapse of time or giving of notice, or both, would constitute a Material default under or a Material breach of the terms of, result in the creation of any Material Lien upon any properties or assets of the Company under, or require the consent (which has not been obtained) of any Person under the terms of, any agreement listed in Schedule 5.15 to the 1996 Agreement. (i) No consent, approval, authorization or other action by or filing with any Federal or Tennessee governmental authority is required for the execution and delivery by any Guarantor of the Guaranty Amendment or the consummation of the transactions contemplated thereby or by the Guaranty as amended and supplemented thereby or, if required, the requisite consent, approval or authorization has been obtained, the requisite action has been taken or the requisite filing has been made. With respect to each Guarantor other than Word and Gibson, such counsel may assume that each such Guarantor has the corporate (or partnership, as applicable) power and authority under the laws of its jurisdiction of organization to enter into the Guaranty Amendment and to perform its obligations under the Guaranty Amendment and the Guaranty, as amended and supplemented thereby, and that the Guaranty Amendment has been duly authorized by all necessary corporate (or partnership, as applicable) action on the part of such Guarantor. EXHIBIT F The opinion of Stuart Heaton, Esq., referred to in Section 7i of the Assumption Agreement shall be to the effect that each Guarantor has the corporate or other power and authority to enter into the Guaranty Amendment and to perform its obligations under the Guaranty Amendment and the Guaranty, as amended and supplemented thereby, and the Guaranty Amendment has been duly authorized by all necessary corporate or other action on the part of each such Guarantor. Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010-9680 June 28, 1996 Thomas Nelson, Inc. Nelson Place at Elm Hill Pike P.O. Box 141000 Nashville, TN 37214-1000 Attention: Joe L. Powers Executive Vice President and Chief Financial Officer Gentlemen: Reference is made to the Assumption and Amendment Agreement, dated as of May 30, 1996, among us, you and The C.R. Gibson Company, pursuant to which you issued to us your (x) 9.50% Senior Note due September 22, 1999 in the principal amount of $7,000,000, and (y) 8.31% senior Note due June 23, 2004 in the principal amount of $5,000,000 (collectively, the "Notes"). As holder of the Notes, we hereby consent and agree that Section 4 of each of the Notes shall be amended by adding two new Sections thereto to read as follows: "4.09. Covenants Incorporated by Reference. To the extent that the covenants set forth in the Credit Agreement referred to in clause (i) of the definition of "Bank Agreements" (as such Credit Amendment is amended through the date hereof) are more restrictive than the covenants set forth herein, or otherwise require the Company to comply with computable standards, the Notes shall be automatically amended so as to provide the benefit of similar covenants for the holders of the Notes. Any such covenants shall be deemed to be incorporated herein mutatis mutandis for the benefit of the holders of the Notes unless and until the Required Holders shall otherwise consent thereto. If requested by the Required Holders, the Company will enter into an amendment to the Notes to specifically incorporate any such covenant. 4.10. Conforming Debt Agreement Changes. The Company will not become or be a party to any agreement relating to any Debt entered into after January 3, 1996, or to any amendment of or supplement to any agreement relating to any Debt (which amendment or supplement is entered into after January 3, 1996) if, in any such case, the Company is agreeing therein to any financial covenants of a type specified in this Section 4 which are more restrictive than the covenants set forth herein, or to other covenants expressly requiring the Company to comply with computable standards, unless the Company shall offer to amend the Notes so as to provide the benefit of similar covenants for the holders of the Notes for so long as such covenants are in full force under such agreement, amendment or supplement. Any such offer shall be made in writing to the holders of the Notes prior to being effected in any such agreement, amendment or supplement and, absent such offer, shall be deemed to be incorporated herein mutatis mutandis for the benefit of holders of the Notes for so long as such covenants are in full force under such agreement, amendment or supplement, unless and until the Required Holders shall otherwise consent thereto." Very truly yours, METROPOLITAN LIFE INSURANCE COMPANY By /s/ John R. Endres ------------------------------- Accepted and agreed to for valuable consideration, the receipt whereof is hereby acknowledged. THOMAS NELSON, INC. By /s/ Joe L. Powers ------------------------------- Executive Vice President and Chief Financial Officer CONSENT The undersigned, as Guarantors under the Guaranty Agreement dated as of January 3, 1996, as amended and supplemented by Amendment and Supplement No. 1, dated as of May 30, 1996 (the "Guaranty Agreement") in favor of Metropolitan Life Insurance Company, hereby consent to the foregoing amendment to the Notes and hereby confirm and agree that, notwithstanding the effectiveness of said amendment, the Guaranty Agreement is, and shall continue to be in full force and effect and is hereby confirmed and ratified in all respects. WORD, INCORPORATED By /s/ Joe L. Powers ------------------------------ Title: Secretary PPC, INC. By /s/ Joe L. Powers ------------------------------ Title: Secretary EDITORIAL CARIBE, INC. By /s/ Joe L. Powers ------------------------------ Title: Secretary MORNINGSTAR RADIO NETWORK, INC. By /s/ Joe L. Powers ------------------------------ Title: Secretary NELSON WORD LIMITED By /s/ Joe L. Powers ------------------------------ Title: Secretary WORD COMMUNICATIONS, LTD. By /s/ Joe L. Powers ------------------------------ Title: Secretary WORD DIRECT, INC. By /s/ Joe L. Powers ------------------------------ Title: Secretary WORD DIRECT PARTNERS, L.P. By: Word Direct, Inc., as general partner By /s/ Joe L. Powers ------------------------------- Title: Secretary THE C.R. GIBSON COMPANY By /s/ Joe L. Powers ------------------------------- 855763 ONTARIO LIMITED By /s/ Joe L. Powers ------------------------------- 14647.113228 67 EX-10 5 EXHIBIT 10.7 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made and entered into as of May 13, 1996, by and between Thomas Nelson, Inc., a Tennessee corporation (the "Company"), and Sam Moore ("Executive"). Executive is currently employed by the Company as President and Chairman of the Board. Executive has served in a senior executive capacity with the Company for many years thereby acquiring an intimate knowledge of the business and affairs of the Company and has demonstrated his ability and has performed valuable services for the Company. The Company desires to incentivize the Executive to remain in its employ as well as to contractually protect the Company from the misuse of proprietary, confidential information and from the Executive competing with the Company. Accordingly, the Company hereby offers to enter into this Agreement with Executive. The Company's Board of Directors (the "Board") considers the establishment and continuity of competent management to be essential to protecting and enhancing the best interests of the Company and its shareholders. Thus, the Board has determined that it is appropriate to provide Executive with compensation and benefits arrangements upon a Change in Control (as defined below) which ensure that the compensation and benefits expectations of Executive will be satisfied and which are competitive with those of other corporations. Therefore, the Company wishes to secure the services of Executive for a period to and including March 31, 2001 on the terms and conditions set forth below, and Executive is willing to enter into this Agreement. In consideration of the premises hereof and of new mutual promises and agreements contained herein, the parties therefore agree as follows: A. TERM OF AGREEMENT 1. Original Term. This Agreement shall be effective as of the date first set forth above (the "Effective Date"). The Company shall employ Executive as President of the Company for a term (the "Employment Period") commencing on the Effective Date and continuing until March 31, 2001 unless sooner terminated pursuant to Section F or H hereof. 2. Renewals. The Employment Period shall automatically be extended for additional one-year periods unless written notice of nonextension is given in writing by either party no less than 60 days prior to the scheduled expiration date. B. POSITION AND DUTIES During the Employment Period, subject to the power of the Board of Directors to elect and remove officers, Executive shall serve as President and Chairman of the Board of the Company. Executive shall have the authority, functions, duties, powers and responsibilities for Executive's corporate offices and positions which are set forth in the Company's bylaws from time to time in effect and such other authority, functions, duties, powers and responsibilities as the Board of Directors of the Company may from time to time prescribe or delegate to Executive, in all cases to be consistent with Executive's corporate offices and positions. Executive agrees, subject to his election or appointment as such and without additional compensation, to serve during the Employment Period in such particular additional offices of comparable stature and responsibility to which he may be elected from time to time in the Company and its subsidiaries and to serve as a Director and as a member of any committee of the Board of Directors of any subsidiary of the Company. During the Employment Period, (i) Executive's services shall be rendered on a full-time, exclusive basis, (ii) he will apply on a full-time basis all of his skill and experience to the performance of his duties in such employment and shall report only to the Company's Board of Directors and committees of the Board of Directors, (iii) he shall have no other employment and, without the prior written consent of the Compensation Committee of the Company's Board of Directors, no outside business activities which require the devotion of substantial amounts of Executive's time, and (iv) unless Executive otherwise consents in writing, the headquarters for the performance of his services shall be the principal executive offices of the Company in Nashville, Tennessee, subject to such reasonable travel as the performance of his duties in the business of the Company may require. Notwithstanding the foregoing sentence, Executive may devote a reasonable amount of his time to civic, community, charitable, or passive investment activities and, with the prior approval of the Board of Directors, to serve as a director of other corporations and to other types of business or public activities not expressly mentioned in this paragraph. C. COMPENSATION 1. Base Salary. Executive shall be paid an annual base salary as set forth on Exhibit A hereto, subject to such increase as may from time to time be approved by the Compensation Committee of the Company's Board of Directors; provided, however, that following any such increase in Executive's base salary by the Compensation Committee, such base salary shall not be reduced without the prior written consent of Executive. Base salary shall be payable according to the Company's regular practice for salary payment. 2. Incentive Compensation. Executive shall be eligible to receive annual incentive and bonus compensation, shall be eligible to participate in the Company's long-term equity-based incentive compensation plans, including, without limitation, the Company's 1986 Executive Stock Purchase Plan, 1986 Stock Incentive Plan, and Amended and Restated 1992 Employee Stock Incentive Plan, and in all incentive, gainsharing, savings and retirement plans, practices, policies and programs applicable to other peer executives of the Company and its subsidiaries, but in no event shall such plans, practices, policies and programs provide Executive with incentive, gainsharing, savings and retirement benefits opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its subsidiaries for Executive under such plans, practices, policies and programs as in effect at any time during the 90-day period immediately preceding the date (the "Change in Control Date") on which a Change in Control (as defined below) occurs, or if more favorable to Executive, those provided generally at any time on or after the Change in Control Date to other peer executives of the Company. 3. Other Benefits. During the Employment Period Executive shall be entitled to all of the fringe benefits which the Company and its subsidiaries make available to senior management if and to the extent that the Executive is eligible to participate in accordance with the terms of the benefit plans or policies, provided, however, that the termination benefits hereunder are in lieu of any severance benefits to which the Executive would otherwise be entitled. Such benefits may include, but are not limited to, (i) medical, hospital, dental, disability and life insurance plans and coverages, (ii) pension, profit sharing, 401(k), employee stock ownership plan, deferred compensation and similar plans or arrangements, and (iii) any other benefit plan, program or arrangement, including those relating to automobiles, clubs, vacations, and expense reimbursement, which the Company and its subsidiaries from time to time may make available either to their employees generally or to some or all of their senior executive officers, but in no event shall such plans, practices, policies and arrangements provide benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and arrangements in effect at any time during the 90-day period immediately preceding the Change in Control Date or if more favorable to Executive, those provided generally at any time on or after the Change in Control Date to other senior executives of the Company. 4. Life Insurance. During the Employment Period, the Company will provide the Executive with sufficient compensation to enable him to pay the after income tax cost of the insurance premiums on those life insurance policies provided to Executive under Executive's agreement with the company dated May 17, 1991 (the "Survivorship Policies"). In the event that the employment of the Executive is terminated for any reason other than for "Cause" (as hereinafter defined), then the Company shall continue to pay to the Executive (or his estate) in each year an amount which will permit the Executive (or his estate) to continue to pay the after income tax cost of the total insurance premiums due on the Survivorship Policies until the values in the Survivorship Policies are sufficient to maintain a net death benefit of $10,000,000 upon the last to die of the two insureds without the payment of additional premiums (that is, until the premiums can "vanish") according to the projections approved by the Compensation Committee of the Company's Board of Directors. D. NONDISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION 1. Confidential Information. (a) Executive acknowledges and agrees that the information, observations and data obtained by him during the course of his performance under the Agreement and the Prior Agreement concerning the business or affairs of the Company and its subsidiaries and affiliates is the property of the Company or such subsidiary or affiliate, as the case may be. Therefore, during the Employment Period and at all times thereafter, Executive (i) shall hold in a fiduciary capacity for the benefit of the Company, its subsidiaries and affiliates, and (ii) without the prior written consent of the Board of Directors or except to the extent required by law (and upon prompt written notice of such requirement to the Company and such subsidiary or affiliate), shall not directly or indirectly, divulge, furnish, disclose, use or make accessible for any purpose (except in the course of his employment under this Agreement and in furtherance of the business of the Company and its subsidiaries and affiliates) any Confidential Information (as defined below). Executive acknowledges and agrees that the disclosure of any Confidential Information will be damaging or harmful to the business activities of the Company, its subsidiaries and affiliates, and that such disclosure can direct or divert corporate opportunities, product sales and/or profits away from the Company, its subsidiaries or affiliates. In the event Executive shall be required by law to make any disclosure as set forth above, Executive shall promptly notify the Company and any subsidiary or affiliate which may reasonably be affected by such disclosure and shall cooperate with the Company, such subsidiary and such affiliate to preserve in full the confidentiality of all Confidential Information of the Company, such subsidiary or such affiliate. Confidential Information shall be considered confidential or proprietary unless and to the extent that such Confidential Information become generally known to and available for use by the public other than as a result of any act or omission to act by Executive. Executive will take all appropriate steps to safeguard Confidential Information and to protect it against disclosure, misuse, espionage, loss and theft. (b) As used in this Agreement, the term "Confidential Information" means information that is not generally known to the public and that is used, developed or obtained by the Company or any of its subsidiaries and affiliates in connection with the Company's or such subsidiary's or affiliate's business, including but not limited to (i) products or services, (ii) fees, costs and pricing structures, (iii) designs, plans or manufacturing data, (iv) analysis, observations or data, (v) drawings, artwork, photographs, videotapes, audio tapes, other recordings, and reports, (vi) computer software, including operating systems, applications program listings, and computer files, (vii) flow charts, manuals and documentation, (viii) data bases, (ix) accounting and business methods, (x) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (xi) customers, clients, authors or artist and customer, client, author or artist lists, (xii) other copyrightable works, (xiii) all technology and trade secrets, (xiv) intellectual property, unique business information, or confidential or proprietary information, and (xv) all similar and related information in whatever form. Confidential Information will not include any information that has been published in a form generally available to the public prior to the date Executive proposes to disclose or use such information. Information will not be deemed to have been published merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination. 2. Product Development. In the event that Executive as part of his activities on behalf of the Company generates, authors or contributes, individually or with the assistance of others, to any invention, design, new development, device, product, method or process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Company or any of its subsidiaries or affiliates as now or hereafter conducted (collectively, the "Intellectual Property"), Executive acknowledges that such Intellectual Property is the exclusive property of the Company and hereby assigns all right, title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by Executive will be deemed "a work made for hire" under Section 201(b) of the 1976 Copyright Act, and the Company will own all of the rights comprised in the copyright therein. Executive will cooperate with the Company in all reasonable respects to protect the Company's interests in and rights to such Intellectual Property (including, without limitation, providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company whether such requests occur prior to or after termination of Executive's employment with the Company). 3. Delivery of Materials Upon Termination of Employment. As requested by the Company from time to time and upon the termination of the Executive's employment with the Company for any reason, Executive will promptly deliver to the Company all copies and embodiments, in whatever form, of all Confidential Information or Intellectual Property in Executive's possession or within his control (including, but not limited to, written records, memoranda, notes, photographs, plans, records, video tapes, audiotapes, other recordings, reports, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that all such materials have been delivered to the Company. E. NONCOMPETITION 1. Covenant Not to Compete. Executive acknowledges and agrees with the Company that Executive's services to the Company and its subsidiaries are unique in nature and that the Company and its subsidiaries would be irreparably damaged if Executive were to provide similar services to any person or entity competing with the Company or any of its subsidiaries, or engaged in similar business. Executive accordingly covenants and agrees with the Company that during the Employment Period and for two years following the termination of Executive's employment with the Company for any reason (the "Noncompetition Period"), Executive will not, directly or indirectly, either for himself or for any other individual, corporation, partnership, joint venture or other entity, participate in (as defined below) any business (including, without limitation, any division, group or franchise of a larger organization) competing with any of the book publishing, music, and/or gift businesses then conducted (or, to the knowledge of Executive, planned to be conducted within two years) by the Company or any of its successors or then subsidiaries within any geographical area in which the Company or its subsidiaries engage or plan within two years to engage in any such businesses. For purposes of this Agreement, the term "participate in" will include, without limitation, having any direct or indirect interest in any corporation, partnership, joint venture or other entity, whether as a sole proprietor, owner, stockholder, partner, joint venturer, creditor or otherwise, or rendering any direct or indirect service or assistance to any individual, corporation, partnership, joint venture and other business entity (whether as a director, officer, manager, supervisor, employee, agent, consultant or otherwise). 2. Nonsolicitation and Noninterference. During the Noncompetition Period, Executive will not directly or indirectly, on behalf of himself or another entity, (i) induce, attempt to induce, or assist others to induce any artist, composer, songwriter, lyricist, musician, author, writer, editor, programmer, technician, cable operator, employee, consultant, customer, supplier, licensee or other person or entity to terminate its, his or her association with the Company or its subsidiaries, or to cease doing business with the Company or its subsidiaries, or do anything to interfere with the relationship between the Company or its subsidiaries, on the one hand, and any artist, composer, songwriter, lyricist, musician, author, writer, editor, programmer, technician, cable operator, employee, consultant or other person or entity doing business and/or under contract with the Company or any of its subsidiaries, or with whom the Company or any of its subsidiaries is then negotiating, or with whom the Company or any of its subsidiaries enters into any contract or agreement during the Noncompetition Period, or (ii) hire, without the written consent of the Company, any person who was an employee of the Company or any of its subsidiaries at any time within twelve (12) months of the termination of the Employment Period. 3. Limitations. (a) Nothing contained in this Section E shall prevent Executive from owning up to a 5% interest in any corporation or entity having one or more classes of its securities listed on a national securities exchange or market, or publicly traded in the over-the-counter market, provided that Executive is not actively involved in any manner whatsoever in the operation or management of such corporation or entity. (b) If under the circumstances existing at the time of enforcement of this Section E, the period, scope or geographic area described in this Section E shall be found or held to be unreasonable, the parties hereto agree that the maximum period, scope or geographic area reasonable under the circumstances shall be substituted for the stated period, scope or geographic area. 4. Special Remedies. The Parties hereto agree that in the event of the breach of any provision of Section D or Section E by Executive, monetary damages alone would not be an adequate remedy to the Company and its subsidiaries for the injury that would result from such breach, and that the Company and its subsidiaries shall be entitled, at any time after such breach, to immediately obtain injunctive relief prohibiting any further breach of this Agreement. Executive further agrees that any such injunctive relief obtained by the Company or any of its subsidiaries shall be in addition to monetary damages. F. TERMINATION OF EMPLOYMENT (OTHER THAN SUBSEQUENT TO A CHANGE IN CONTROL). 1. Applicability. This Section F shall apply only to termination of the employment Period prior to the occurrence of a Change in Control (as defined below) during the Employment Period. Termination of the Employment Period following the occurrence of a Change in Control shall be governed by Section H. 2. Events of Termination and Related Payments. (a) Disability. In the event that during the Employment Period Executive should become Disabled, the Company (acting by resolution of the Board) may elect to terminate the Employment Period by written notice to Executive, his guardian or personal representative and Executive, his guardian or personal representative, as the case may be, shall be entitled to receive (i) full compensation pursuant to Section C at his then base salary rate from the date of termination of employment continuing for the lesser of (a) one year following the date of such notice and (b) the remainder of the then effective Employment Period, and (ii) bonus for the calendar year in which Executive's termination of employment occurs as determined in good faith by the Compensation Committee of the Board of Directors in its sole discretion. Notwithstanding the foregoing provisions of this Section F(2)(a), the payments provided herein with respect to any period of Disability shall be reduced by the amount of any benefits payable to Executive, his guardian or personal representative, as the case may be, during such period under any disability or similar plan or program of the Company of any of its subsidiaries in respect of Executive's Disability. (b) Death. In the event of Executive's death during the Employment Period, his personal representative shall be entitled to receive any compensation pursuant to Section C which is accrued and unpaid as of the date of his death. (c) Termination Due to Serious Misconduct. In the event that during the Employment Period Executive should commit Serious Misconduct (as defined below), the Company (acting by resolution of the Board) may elect to terminate the Employment Period by written notice to Executive, and, except as set forth in subparagraph "f" hereunder, Executive shall be entitled only to any compensation and benefits which are vested but unpaid as of the date of termination of employment. (d) Termination for Reasons Other Than Death, Disability, Serious Misconduct or Voluntary Action by the Executive. In the event that the Employment Period is terminated at the option of the Company for any reason other than for serious misconduct, death, disability, or voluntary action by the Executive, the Executive shall be paid a lump sum payment equal to the lesser of (1) current base salary and target bonus for the remainder of the term hereunder, and (2) a sum equal to twice current base salary and target bonus, and the Company shall pay such sum to Executive within thirty (30) business days following such termination. Executive's voluntary resignation resulting from harassment, unwarranted demotion and/or material diminution of responsibilities shall be governed by the terms of this provision and shall not be considered a voluntary termination as defined in subparagraph (e) hereunder. In the event of such termination, the Company shall reimburse the Executive for the premium paid by the Executive for the continued coverage for the Executive (and any dependents of the Executive covered by the Company's health care plans as of the date of termination) under the Company's health care plan pursuant to COBRA (or any of the mandatory health care continuation law then in effect), such coverage being substantially similar to that provided the Executive on the date of his termination, but such reimbursement shall be only for a period which is of (1) the remainder of the term hereof, and (2) two years from the date of termination. (e) Voluntary Termination by Executive. In the event that Executive voluntary terminates his employment with the Company prior to the end of the Employment Period, the Company shall pay any earned but unpaid portion of Executive's base salary and incentive compensation through the date of his termination provided that the Executive is in full compliance with the provisions of Sections D and E hereof. (f) In special recognition of the many services provided to the Company by Executive throughout his lifetime and of Executive's unique abilities which have furthered the growth and prosperity of the Company, upon Executive's retirement, following expiration of the term hereunder, Executive shall be entitled to a lump sum payment by the Company equivalent to two years' base salary, calculated at the salary rate in effect at termination. 3. Definition of Certain Terms. (a) "Disabled" means such physical or mental condition of Executive as is determined by the Company's Board of Directors in its sole discretion to be expected to continue indefinitely and which renders him incapable of performing any substantial portion of the services contemplated hereby (as confirmed by competent medical evidence). (b) "Serious Misconduct" means embezzlement or misappropriation of corporate funds, other acts of dishonesty or misconduct materially harmful to the business or reputation of the Company or its subsidiaries, the conviction of a felony, refusal to perform or disregard of the duties properly assigned by the Board, or a material breach of any of the provisions of Sections D or E above or of any of the other provisions of this Agreement which violations are not cured within sixty (60) days of written notice to the Executive of the breach. 4. Effect of Breach of Noncompetition of Nondisclosure Provisions. In the event Executive materially breaches or otherwise fails to comply in any material respect with the provisions of Sections D or E above, then, in addition to any other remedies provided herein or at law on in equity, the Company shall not have any further obligation to make any additional payments to Executive pursuant to this Agreement. Termination of such payments pursuant to the preceding sentence shall not relieve Executive's obligations pursuant to Sections D or E above. G. CHANGE IN CONTROL For purposes hereof, a "Change in Control" shall have occurred if: (1) any "person" other than any trustee or other fiduciary holding securities under an employee benefit plan of the Company within the meaning of Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") becomes the "beneficial owner" as defined in Rule 13D-3 thereunder, directly or indirectly, of 20% or more of either the then outstanding shares of the Company's Common Stock (the "Outstanding Company Common Stock") or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Company Voting Securities"); provided, however, that any acquisition by the Company or its subsidiaries, or by Sam Moore, S. Joseph Moore, members of their families, relatives, certain family partnerships, trusts associated with the Moore family and other entities who have as of July 1, 1995 jointly filed a Statement on Schedule 13D under the Exchange Act, or by any reconstituted version of such filing group or any corporation with respect to which, following such acquisition, more than 80% of, respectively, the then outstanding share of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Company Voting Securities immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Company Common Stock and Company Voting Securities, as the case may be, shall not constitute a Change in Control; (2) during any two-year period, individuals who constitute the Board of Directors of the Company (the "Incumbent Board") as of the beginning of the period cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director during such period whose election or nomination for election by the Company's stockholders was approved by an affirmative vote of at least two- thirds of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director without objection to such nomination) shall be, for the purposes of this subparagraph (b), considered as though person were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company (as such terms are used in Rule 14A-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents; or (3) approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the Common Stock and voting securities of the Company immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 80% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation, or a complete liquidation or dissolution of the Company or of the sale or other disposition of all or substantially all of the assets of the Company. Notwithstanding the foregoing, a Change in Control for purposes of this Agreement shall not be considered to occur as a result of a transaction which is approved by the Company's Board of Directors in advance of the transaction and prior to the consummation of the transaction if such transaction is specifically excluded by the Board of Directors from the definition of "Change of Control" for purposes of this Agreement and such exclusion is approved by an affirmative vote of at least two-thirds of the directors then comprising the Incumbent Board. Furthermore, anything in this Agreement to the contrary notwithstanding, if Executive's employment with the Company is terminated prior to the date on which a Change in Control occurs, and if it is reasonably demonstrated by Executive that such termination of employment (1) was at the request of a third party who has taken steps reasonably calculated to effect the Change in Control or (2) otherwise arose in connection with or in anticipation of the Change in Control, then for all purposes of this Agreement, a Change in Control shall be considered to have occurred immediately prior to Executive's employment termination date. In the event the Board adopts any plan or takes any action which, if consummated, would result in a Change in Control of the Company, the Company shall take any action determined by the Board to be necessary or appropriate to ensure the prompt payment when due of any amounts which may thereafter become payable hereunder upon termination by the Company of Executive during the Employment Period, including but not limited to the placement of sufficient funds to pay all such amounts in an escrow account with a bank or other fiduciary institution. On the Change in Control Date, to the extent permitted by law, regardless of date or grant, all stock options previously granted shall be come exercisable and all restrictions on restricted stock shall lapse. All previously deferred compensation (including interest or earnings) shall, at Executive's election, be paid to Executive within 10 days of the Change in Control Date. H. TERMINATION FOLLOWING CHANGE IN CONTROL Following a Change in Control of the Company, the provisions of this Section H shall apply exclusively with respect to (i) the termination of Executive's employment during the Employment Period and (ii) amounts payable to Executive upon such termination. If a Change in Control of the Company shall have occurred, Executive shall be entitled to the benefits provided herein upon Executive's subsequent termination of employment during the Employment Period, unless such termination is (i) because of Executive's death, (ii) by the Company because of Executive's Disability or Serious Misconduct or (iii) by Executive other than for Good Reason. For purposes hereof, "Good Reason" shall mean the occurrence or continuation, without consent of Executive, after a Change in Control of the Company of any of the following events within 24 months after the Change in Control Date: (1) the assignment to Executive of any duties materially inconsistent with the position with the Company that Executive held immediately prior to the Change in Control of the Company, or an adverse change in the status, position or conditions of Executive's employment or the nature of Executive's responsibilities in effect immediately prior to such Change in Control, or any removal of Executive from or any failure to re-elect Executive to any of such positions, except in connection with the termination of his employment by the Company for Serious Misconduct, Disability or death or by Executive other than for Good Reason; (2) a reduction by the Company in Executive's annual base salary as in effect immediately prior to such Change in Control which is not consistent with general compensation reduction for a Senior Executive of the Company; (3) the relocation of Executive' principal office to a location outside a 25 mile radius from Executive's principal office immediately prior to such Change in Control, except for required travel on the Company's business to an extent substantially consistent with Executive's business travel obligations immediately prior to such Change in Control; (4) the failure by the Company to pay to Executive any portion of Executive's salary within seven days of the date such salary is due; (5) the failure by the Company to continue in effect any benefit or compensation plan in which Executive participates immediately prior to the Change in Control which is material to Executive's total compensation, including but not limited to the stock option, employee stock ownership, bonus, insurance, disability and vacation plans which the Company currently has or any substitute or additional plans adopted prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan or plans) has been made with respect to such plan, or the failure by the Company to continue Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of Executive's participation relative to other participants, as in existence immediately prior to such Change in Control; or (6) the failure of the Company to obtain an agreement from any successor to assume and agree to perform this Agreement, as contemplated herein. Executive's right to terminate his employment for Good Reason pursuant to this section shall not be affected by Executive's incapacity due to physical or mental illness. Executive's continued employment shall not constitute consent to, or a waiver of with respect to, any circumstance constituting Good Reason hereunder. In the event of any dispute between Executive and the Company as to whether any event constituting Good Reason shall have occurred, the burden of proving by clear and convincing evidence that such event does not constitute Good Reason shall rest on the Company. Any termination of Executive's employment by the Company or by Executive pursuant to this Section H shall be communicated by written notice of termination (the "Notice of Termination") to the other party hereto, and shall indicate the specific termination provision in the Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment. For the purposes hereof, "Date of Termination" shall mean (i) if Executive's employment is terminated for Disability, 30 days after Notice of Termination is given (provided that Executive shall not have returned to the full-time performance of his duties during such 30 days) or (ii) if Executive's employment is terminated for any other reason other than death, the date specified in the Notice of Termination. I. PAYMENTS UPON TERMINATION SUBSEQUENT TO CHANGE IN CONTROL Following a Change in Control, Executive shall be entitled to the following benefits upon termination of employment during the 36-month period following the Change in Control Date: 1. Death, Disability, Serious Misconduct or Termination by Executive Other Than for Good Reason. Following a termination of Executive's employment because of Executive's death or by the Company because of Executive's Disability or Serious Misconduct or by Executive other than for Good Reason, the Company's only remaining obligations under this Agreement shall be to pay any base salary earned through the Date of Termination plus the amount of any compensation previously deferred by Executive, in each case to the extent theretofore unpaid, and Executive's benefits shall be limited to vested benefits provided under any retirement, insurance and other benefit programs of the Company then in effect determined in accordance with the terms thereof. 2. Other. If the employment shall be terminated by Executive for Good Reason or by the Company other than for death, Disability or Serious Misconduct, Executive shall be entitled to the amounts provided below, such amounts to be paid in cash in a lump sum no later than the tenth business day following the Date of Termination: (a) the Company shall pay to Executive his full base salary, and earned or accrued, but unpaid vacation pay, through the Date of Termination at the rate in effect at such time, plus all other amounts, including but not limited to incentive compensation for a past fiscal year which has not yet been awarded or paid to Executive under incentive plans, programs or arrangements, including any deferred awards (it being understood that with respect to any incentive compensation which has not been awarded, the individual performance component of the award shall be determined on at least the basis that Executive has met all applicable standards) to which Executive is entitled under any compensation or benefit plan of the Company; (b) a lump-sum severance payment (the "Severance Payment") equal to 2.99 times the sum of (i) Executive's annual base salary as of the date of termination of employment and (ii) any cash bonus received by Executive in the immediately preceding fiscal year; provided, that such amount shall be paid in lieu of, and Executive hereby waives the right to receive, any other amount of severance relating to salary or bonus continuation to be received by Executive upon termination of employment of Executive under any severance plan, policy or arrangement of the Company; (c) at the election of Executive, the cash-out of any or all of Executive's stock or stock-based awards granted pursuant to both the Thomas Nelson, Inc. 1986 Stock Incentive Plan and the 1992 Employee Stock Incentive Plan at the "Change in Control Price" provisions set for therein. 3. Legal Expenses. In addition to any other amounts payable hereunder, the Company also shall reimburse Executive for all legal fees and expenses reasonably incurred by Executive as a result of any termination of the Employment Period (including all such fees and expenses, if any, incurred in contesting or disputing any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), to any payment of benefit provided hereunder). 4. Continuation of Benefits. For the remainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the plan, programs, practices and policies described in Sections C(3) and (4) of this Agreement if Executive's employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of the Company the its subsidiaries applicable generally to other peer executives and their families during the 90-day period immediately preceding the Change in Control Date or, if more favorable to Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its subsidiaries and their families; provided, however, that if Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility of Executive for retiree benefits pursuant to such plans, practices, programs and policies, Executive shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of the Employment Period. To the extent not theretofore paid to provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive pursuant to this Agreement under any plan, program, policy or practice or contract or agreement of the Company and its subsidiaries, but excluding solely purposes of this Section J(4) amounts waived by Executive pursuant to Section J(2)(b). 5. Certain Reduction in Payments by the Company. For purposes of this Section, (i) a "Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of Executive, whether paid or payable pursuant to this Agreement or otherwise; (ii) an "Agreement Payment" shall mean a Payment paid or payable pursuant to this Agreement (disregarding this Section); (iii) "Net After Tax Receipt" shall mean the Present Value (as defined below) of a Payment net of all taxes imposed on Executive with respect thereto under Sections 1 and 4999 of the Code, determined by applying the highest marginal rate under Section 1 of the Code which applied to Executive's taxable income for the immediately preceding taxable year' (iv) "Present Value" shall mean such value determined in accordance with Section 280G(d)(4) of the Code; and (v) "Reduced Amount" shall mean the smallest aggregate amount of Agreement Payments which (a) is less than the sum of all Agreement Payments and (b) results in aggregate Net After Tax Receipts which are equal to or greater than the Net After Tax Receipts which would result if the aggregate Agreement Payments were any other amount less than the sum of all Agreement Payments. Anything in this Agreement to the contrary notwithstanding, in the event Arthur Andersen LLP (the "Accounting Firm") shall determine that receipt of all Payments would subject Executive to tax under Section 4999 of the Code, the Accounting Firm shall determine whether some amount of Payments would meet the definition of a Reduced Amount. If the Accounting Firm determined that there is a Reduced Amount, the aggregate Payments shall be reduced to such Reduced Amount. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the change in Control, Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. If the Accounting Firm determined that aggregate Agreement Payments should be reduced to the Reduced Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof, and Executive may then elect, in his sole discretion, which and how much of the Agreement Payments shall be eliminated or reduced (as long as after such election the present value of the aggregate Agreement Payments equals the Reduced Amount), and shall advise the Company in writing of his election within 10 days of his receipt of notice. If no such election is made by Executive within such 10- day period, the Company may elect which of such Agreement Payments shall be eliminated or reduced (as long as after such election the present value of the aggregate Agreement Payments equals the Reduced Amount) and shall notify Executive promptly of such election. All determinations made by the Accounting Firm under this Section shall be binding upon the Company and Executive and shall be made within 60 days of a termination of employment of Executive. As promptly as practicable following such determination, the Company shall pay to or distribute for the benefit of Executive such Agreement Payments as are then due to Executive under this Agreement and shall promptly pay to or distribute for the benefit of Executive in the future such Agreement Payments as become due to Executive under this Agreement. While it is the intention of the Company and Executive to reduce the amounts payable or distributable to Executive hereunder only if the aggregate Net After Tax Receipts to Executive would thereby be increased as a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefits of Executive pursuant to this Agreement which should not have been so paid or distributed ("Overpayment") or that additional amounts which will have not been paid or distributed by the Company for the benefit of the Executive pursuant to this Agreement could have been so paid or distributed ("Underpayment"), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based either upon the assertion of a deficiency by the Internal Revenue Service against the Company or Executive which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of Executive shall be treated for all purposes as a loan to Executive which Executive shall repay to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to have been made and no amount shall be payable by the Executive to the Company if an to the extent such deemed loan and payment would not either reduce the amount on which the Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determined that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. 6. Full Settlement. Except as otherwise provided herein, the Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provision of this Agreement and, except as provided to Executive under any of the provisions of this Agreement and, except as provided in Section J(2)(b) of this Agreement, such amounts shall not be reduced whether or not Executive obtains other employment. J. REMEDIES Executive acknowledges that he will receive privileged information from the Company and that he will have substantial access to the Company's trade secrets, business information and personnel data. In consideration of his employment and the privilege of access to the Company's trade secrets, information, business methods and procedures, and personnel data, Executive acknowledges that the restrictions contained within Sections D and E are reasonable and necessary in order to preserve the Company's legitimate interests and that any violation thereof would result in irreparable injury to the Company for which monetary damages would be an inadequate remedy. Therefore, Executive acknowledges and agrees that in the event of any violations thereof, the Company may seek from any court of competent jurisdiction preliminary and permanent injunctive relief as well as an equitable account of all Executive'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 the Company may be entitled. K. SUCCESSORS (a) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as herein before defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach hereof and shall entitle Executive to terminate his employment for Good Reason. L. NOTICES All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Sam Moore, President Thomas Nelson, Inc. Nelson Place at Elm Hill Pike Nashville, Tennessee 37214-1000 If to the Company: Thomas Nelson, Inc. Nelson Place at Elm Hill Pike Post Office Box 141000 Nashville, Tennessee 37214-1000 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. M. MISCELLANEOUS 1. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of the Agreement. 2. The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 3. Executive's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other promotion or right of this Agreement. N. WAIVERABILITY OF PROVISIONS 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 Executive and an executive officer of the Company. No waiver by either party hereto of the 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. O. ENTIRE AGREEMENT 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, except for the Agreement between the company and Executive dated __________________, providing for certain payments necessary to fund certain insurance policies, which agreement shall remain in full force and effect. P. 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 or 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. The cost of any such litigation to enforce all or part of this Agreement, including, without limitation, court costs and attorney's 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. IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of the day and year first written above. ACCEPTED BY: THOMAS NELSON, INC. /s/ Sam Moore /s/ Millard V. Oakley - -------------------- ------------------------- Sam Moore Name President Chairman, Compensation Committee -------------------------- Title May 13, 1996 May 13, 1996 - --------------------- -------------------------- Date Date 31 /dld 32 EX-10 6 EXHIBIT 10.8 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made and entered into as of May 10, 1996, by and between Thomas Nelson, Inc., a Tennessee corporation (the "Company"), and S. Joseph Moore ("Executive"). Executive is currently employed by the Company as Executive Vice President. Executive has served in a senior executive capacity with the Company for many years thereby acquiring an intimate knowledge of the business and affairs of the Company and has demonstrated his ability and has performed valuable services for the Company. The Company desires to incentivize the Executive to remain in its employ for the full term of this Agreement and to contractually protect the Company from the misuse of proprietary, confidential information and from the Executive competing with the Company. Accordingly, the Company, hereby offers to enter into this Agreement with Executive. The Company's Board of Directors (the "Board") considers the establishment and continuity of competent management to be essential to protecting and enhancing the best interests of the Company and its shareholders. Thus, the Board has determined that it is appropriate to provide Executive with compensation and benefits arrangements upon a Change in Control (as defined below) which ensure that the compensation and benefits expectations of Executive will be satisfied and which are competitive with those of other corporations. Therefore, the Company wishes to secure the services of Executive for a period to and including March 31, 2001 on the terms and conditions set forth below, and Executive is willing to enter into this Agreement. In consideration of the premises hereof and of the mutual promises and agreements contained herein, the parties therefore agree as follows: A. TERM OF AGREEMENT 1. Original Term. This Agreement shall be effective as of the date first set forth above (the "Effective Date"). The Company shall employ Executive as Executive Vice President of the Company for a term (the "Employment Period") commencing on the Effective Date and continuing until March 31, 2001 unless sooner terminated pursuant to Section F or H hereof. 2. Renewals. The Employment Period shall automatically be extended for additional one-year periods unless written notice of nonextension is given in writing by either party no less than 60 days prior to the scheduled expiration date. B. POSITION AND DUTIES During the Employment Period, Executive shall serve as Executive Vice President of the Company. Executive shall have the authority, functions, duties, powers and responsibilities for Executive's corporate offices and positions which are set forth in the Company's bylaws from time to time in effect and such other authority, functions, duties, powers and responsibilities as the Board of Directors or President of the Company may from time to time prescribe or delegate to Executive, in all cases to be consistent with Executive's corporate offices and positions. Executive agrees, subject to his election or appointment as such and without additional compensation, to serve during the Employment Period in such particular additional offices of comparable stature and responsibility to which he may be elected from time to time in the Company and its subsidiaries and to serve as a Director and as a member of any committee of the Board of Directors of the Company. During the Employment Period, (i) Executive's services shall be rendered on a full-time, exclusive basis, (ii) he will apply on a full-time basis all of his skill and experience to the performance of his duties in such employment and shall report only to the Company's President, (iii) he shall have no other employment and, without the prior written consent of the Compensation Committee of the Company's Board of Directors, no outside business activities which require the devotion of substantial amounts of Executive's time, and (iv) unless Executive otherwise consents in writing, the headquarters for the performance of his services shall be the principal executive offices of the Company in Nashville, Tennessee, subject to such reasonable travel as the performance of his duties in the business of the Company may require. Notwithstanding the foregoing sentence, Executive may devote a reasonable amount of his time to civic, community, charitable, or passive investment activities and to serve as a director and/or officer of personally owned corporations and to other types of business or public activities not expressly mentioned in this paragraph. C. COMPENSATION 1. Base Salary. Executive shall be paid an annual base salary as set forth on Exhibit A hereto, subject to such increase as may from time to time be approved by the Compensation Committee of the Company's Board of Directors; provided, however, that following any such increase in Executive's base salary by the Compensation Committee, such base salary shall not be reduced without the prior written consent of Executive. Base salary shall be payable according to the Company's regular practice for salary payment. 2. Incentive Compensation. Executive shall be eligible to receive annual incentive and bonus compensation, shall be eligible to participate in the Company's long-term equity-based incentive compensation plans, including, without limitation, the Company's 1986 Executive Stock Purchase Plan, 1986 Stock Incentive Plan, and Amended and Restated 1992 Employee Stock Incentive Plan, and in all incentive, gainsharing, savings and retirement plans, practices, policies and programs applicable to other peer executives of the Company and its subsidiaries, but in no event shall such plans, practices, policies and programs provide Executive with incentive, gainsharing, savings and retirement benefits opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its subsidiaries for Executive under such plans, practices, policies and programs as in effect at any time during the 90-day period immediately preceding the date (the "Change in Control Date") on which a Change in Control (as defined below) occurs, or if more favorable to Executive, those provided generally at any time on or after the Change in Control Date to other peer executives of the Company. 3. Other Benefits. During the Employment Period Executive shall be entitled to all of the fringe benefits which the Company and its subsidiaries make available to senior management if and to the extent that the Executive is eligible to participate in accordance with the terms of the benefit plans or policies, provided, however, that the termination benefits hereunder are in lieu of any severance benefits to which the Executive would otherwise be entitled. Such benefits may include, but are not limited to, (i) medical, hospital, dental, disability and life insurance plans and coverages, (ii) pension, profit sharing, 401(k), employee stock ownership plan, deferred compensation and similar plans or arrangements, and (iii) any other benefit plan, program or arrangement, including those relating to automobiles, clubs, vacations, and expense reimbursement, which the Company and its subsidiaries from time to time may make available either to their employees generally or to some or all of their senior executive officers, but in no event shall such plans, practices, policies and arrangements provide benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and arrangements in effect at any time during the 90-day period immediately preceding the Change in Control Date or if more favorable to Executive, those provided generally at any time on or after the Change in Control Date to other senior executives of the Company and its subsidiaries. D. NONDISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION 1. Confidential Information. (a) Executive acknowledges and agrees that the information, observations and data obtained by him during the course of his performance under the Agreement and the Prior Agreement concerning the business or affairs of the Company and its subsidiaries and affiliates is the property of the Company or such subsidiary or affiliate, as the case may be. Therefore, during the Employment Period and at all times thereafter, Executive (i) shall hold in a fiduciary capacity for the benefit of the Company, its subsidiaries and affiliates, and (ii) without the prior written consent of the Board of Directors or except to the extent required by law (and upon prompt written notice of such requirement to the Company and such subsidiary or affiliate), shall not directly or indirectly, divulge, furnish, disclose, use or make accessible for any purpose (except in the course of his employment under this Agreement and in furtherance of the business of the Company and its subsidiaries and affiliates) any Confidential Information (as defined below). Executive acknowledges and agrees that the disclosure of any Confidential Information will be damaging or harmful to the business activities of the Company, its subsidiaries and affiliates, and that such disclosure can direct or divert corporate opportunities, product sales and/or profits away from the Company, its subsidiaries or affiliates. In the event Executive shall be required by law to make any disclosure as set forth above, Executive shall promptly notify the Company and any subsidiary or affiliate which may reasonably be affected by such disclosure and shall cooperate with the Company, such subsidiary and such affiliate to preserve in full the confidentiality of all Confidential Information of the Company, such subsidiary or such affiliate. Confidential Information shall be considered confidential or proprietary unless and to the extent that such Confidential Information become generally known to and available for use by the public other than as a result of any act or omission to act by Executive. Executive will take all appropriate steps to safeguard Confidential Information and to protect it against disclosure, misuse, espionage, loss and theft. (b) As used in this Agreement, the term "Confidential Information" means information that is not generally known to the public and that is used, developed or obtained by the Company or any of its subsidiaries and affiliates in connection with the Company's or such subsidiary's or affiliate's business, including but not limited to (i) products or services, (ii) fees, costs and pricing structures, (iii) designs, plans or manufacturing data, (iv) analysis, observations or data, (v) drawings, artwork, photographs, videotapes, audio tapes, other recordings, and reports, (vi) computer software, including operating systems, applications program listings, and computer files, (vii) flow charts, manuals and documentation, (viii) data bases, (ix) accounting and business methods, (x) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (xi) customers, clients, authors or artist and customer, client, author or artist lists, (xii) other copyrightable works, (xiii) all technology and trade secrets, (xiv) intellectual property, unique business information, or confidential or proprietary information, and (xv) all similar and related information in whatever form. Confidential Information will not include any information that has been published in a form generally available to the public prior to the date Executive proposes to disclose or use such information. Information will not be deemed to have been published merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination. 2. Product Development. In the event that Executive as part of his activities on behalf of the Company generates, authors or contributes, individually or with the assistance of others, to any invention, design, new development, device, product, method or process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Company or any of its subsidiaries or affiliates as now or hereafter conducted (collectively, the "Intellectual Property"), Executive acknowledges that such Intellectual Property is the exclusive property of the Company and hereby assigns all right, title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by Executive will be deemed "a work made for hire" under Section 201(b) of the 1976 Copyright Act, and the Company will own all of the rights comprised in the copyright therein. Executive will cooperate with the Company in all reasonable respects to protect the Company's interests in and rights to such Intellectual Property (including, without limitation, providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company whether such requests occur prior to or after termination of Executive's employment with the Company). 3. Delivery of Materials Upon Termination of Employment. As requested by the Company from time to time and upon the termination of the Executive's employment with the Company for any reason, Executive will promptly deliver to the Company all copies and embodiments, in whatever form, of all Confidential Information or Intellectual Property in Executive's possession or within his control (including, but not limited to, written records, memoranda, notes, photographs, plans, records, video tapes, audiotapes, other recordings, reports, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that all such materials have been delivered to the Company. E. NONCOMPETITION 1. Covenant Not to Compete. Executive acknowledges and agrees with the Company that Executive's services to the Company and its subsidiaries are unique in nature and that the Company and its subsidiaries would be irreparably damaged if Executive were to provide similar services to any person or entity competing with the Company or any of its subsidiaries, or engaged in similar business. Executive accordingly covenants and agrees with the Company that during the Employment Period and for two years following the termination of Executive's employment with the Company for any reason (the "Noncompetition Period"), Executive will not, directly or indirectly, either for himself or for any other individual, corporation, partnership, joint venture or other entity, participate in (as defined below) any business (including, without limitation, any division, group or franchise of a larger organization) competing with the book publishing, Bible publishing, and/or music businesses then conducted (or, to the knowledge of Executive, planned to be conducted within two years) by the Company or any of its successors or then subsidiaries within any geographical area in which the Company or its subsidiaries engage or plan within two years to engage in any such businesses. For purposes of this Agreement, the term "participate in" will include, without limitation, having any direct or indirect interest in any corporation, partnership, joint venture or other entity, whether as a sole proprietor, owner, stockholder, partner, joint venturer, creditor or otherwise, or rendering any direct or indirect service or assistance to any individual, corporation, partnership, joint venture and other business entity (whether as a director, officer, manager, supervisor, employee, agent, consultant or otherwise). 2. Nonsolicitation and Noninterference. During the Noncompetition Period, Executive will not directly or indirectly, on behalf of himself or another entity, (i) induce, attempt to induce, or assist others to induce any artist, composer, songwriter, lyricist, musician, author, writer, editor, programmer, technician, cable operator, employee, consultant, customer, supplier, licensee or other person or entity to terminate its, his or her association with the Company or its subsidiaries, or to cease doing business with the Company or its subsidiaries, or do anything to interfere with the relationship between the Company or its subsidiaries, on the one hand, and any artist, composer, songwriter, lyricist, musician, author, writer, editor, programmer, technician, cable operator, employee, consultant or other person or entity doing business and/or under contract with the Company or any of its subsidiaries, or with whom the Company or any of its subsidiaries is then negotiating, or with whom the Company or any of its subsidiaries enters into any contract or agreement during the Noncompetition Period, or (ii) hire, without the written consent of the Company, any person who was an employee of the Company or any of its subsidiaries at any time within twelve (12) months of the termination of the Employment Period. 3. Limitations. (a) Nothing contained in this Section E shall prevent Executive from owning up to a 5% interest in any corporation or entity having one or more classes of its securities listed on a national securities exchange or market, or publicly traded in the over-the-counter market, provided that Executive is not actively involved in any manner whatsoever in the operation or management of such corporation or entity. (b) If under the circumstances existing at the time of enforcement of this Section E, the period, scope or geographic area described in this Section E shall be found or held to be unreasonable, the parties hereto agree that the maximum period, scope or geographic area reasonable under the circumstances shall be substituted for the stated period, scope or geographic area. F. TERMINATION OF EMPLOYMENT (OTHER THAN SUBSEQUENT TO A CHANGE IN CONTROL). 1. Applicability. This Section F shall apply only to termination of the employment Period prior to the occurrence of a Change in Control (as defined below) during the Employment Period. Termination of the Employment Period following the occurrence of a Change in Control shall be governed by Section H. 2. Events of Termination and Related Payments. (a) Disability. In the event that during the Employment Period Executive should become Disabled, the Company (acting by resolution of the Board) may elect to terminate the Employment Period by written notice to Executive, his guardian or personal representative and Executive, his guardian or personal representative, as the case may be, shall be entitled to receive (i) full compensation pursuant to Section C at his then base salary rate from the date of termination of employment continuing for the lesser of (a) one year following the date of such notice and (b) the remainder of the then effective Employment Period, and (ii) bonus for the calendar year in which Executive's termination of employment occurs as determined in good faith by the Compensation Committee of the Board of Directors in its sole discretion. Notwithstanding the foregoing provisions of this Section F(2)(a), the payments provided herein with respect to any period of Disability shall be reduced by the amount of any benefits payable to Executive, his guardian or personal representative, as the case may be, during such period under any disability or similar plan or program of the Company of any of its subsidiaries in respect of Executive's Disability. (b) Death. In the event of Executive's death during the Employment Period, his personal representative shall be entitled to receive any compensation pursuant to Section C which is accrued and unpaid as of the date of his death. (c) Termination Due to Serious Misconduct. In the event that during the Employment Period Executive should commit Serious Misconduct (as defined below), the Company (acting by resolution of the Board) may elect to terminate the Employment Period by written notice to Executive, and Executive shall be entitled only to any compensation and benefits which are vested and unpaid as of the date of termination of employment. (d) Termination for Reasons Other Than Death, Disability, Serious Misconduct or Voluntary Action by the Executive. In the event that the Employment Period is terminated at the option of the Company for any reason other than for serious misconduct, death, disability, or voluntary action by the Executive, the Executive's base salary for the remainder of the term hereunder shall immediately vest and accelerate, and the Company shall pay such vested sum to Executive within ten (10) business days following such termination. Employee's voluntary resignation resulting from harassment, unwarranted demotion and/or material diminution of responsibilities shall be governed by the terms of this provision and shall not be considered a voluntary termination as defined in subparagraph (e) hereunder. In the event of such termination, the Company shall, for the life of the Executive, reimburse the Executive for the premium paid by the Executive for the continued coverage for the Executive (and any dependents of the Executive covered by the Company's health care plans as of the date of termination) under the Company's health care plan pursuant to COBRA (or any of the mandatory health care continuation laws then in effect), such coverage being substantially similar to that provided the Executive on the date of his termination. (e) Voluntary Termination by Executive. In the event that Executive, for reasons other than those set forth in subparagraph (d) hereinabove, voluntarily terminates his employment with the Company prior to the end of the Employment Period, the Company shall pay any earned but unpaid portion of Executive's base salary and incentive compensation through the date of his termination provided that the Executive is in full compliance with the provisions of Sections D and E hereof. 3. Definition of Certain Terms. (a) "Disabled" means such physical or mental condition of Executive as is determined by the Company's Board of Directors in its sole discretion to be expected to continue indefinitely and which renders him incapable of performing any substantial portion of the services contemplated hereby (as confirmed by competent medical evidence). (b) "Serious Misconduct" means embezzlement or misappropriation of corporate funds, other acts of dishonesty or reckless or intentional misconduct which is materially harmful to the business or reputation of the Company or its subsidiaries, the conviction of a felony, willful refusal to perform or substantial disregard of the duties properly assigned by the Board, or a material breach of any of the provisions of Sections D or E above or of any of the other provisions of this Agreement which violations are not cured within sixty (60) days of written notice to the Executive of the breach. 4. Effect of Breach of Noncompetition of Nondisclosure Provisions. In the event Executive materially breaches or otherwise fails to comply in any material respect with the provisions of Sections D or E above, then, in addition to any other remedies provided herein or at law on in equity, the Company shall not have any further obligation to make any additional payments to Executive pursuant to this Agreement. Termination of such payments pursuant to the preceding sentence shall not relieve Executive's obligations pursuant to Sections D or E above. G. CHANGE IN CONTROL For purposes hereof, a "Change in Control" shall have occurred if: (1) any "person" other than any trustee or other fiduciary holding securities under an employee benefit plan of the Company within the meaning of Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") becomes the "beneficial owner" as defined in Rule 13D-3 thereunder, directly or indirectly, of 20% or more of either the then outstanding shares of the Company's Common Stock (the "Outstanding Company Common Stock") or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Company Voting Securities"); provided, however, that any acquisition by the Company or its subsidiaries, or by Sam Moore, S. Joseph Moore, members of their families, relatives, certain family partnerships, trusts associated with the Moore family and other entities who have as of July 1, 1995 jointly filed a Statement on Schedule 13D under the Exchange Act, or by any reconstituted version of such filing group or any corporation with respect to which, following such acquisition, more than 80% of, respectively, the then outstanding share of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Company Voting Securities immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Company Common Stock and Company Voting Securities, as the case may be, shall not constitute a Change in Control; (2) during any two-year period, individuals who constitute the Board of Directors of the Company (the "Incumbent Board") as of the beginning of the period cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director during such period whose election or nomination for election by the Company's stockholders was approved by an affirmative vote of at least two- thirds of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director without objection to such nomination) shall be, for the purposes of this subparagraph (b), considered as though person were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company (as such terms are used in Rule 14A-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents; or (3) approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the Common Stock and voting securities of the Company immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 80% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation, or a complete liquidation or dissolution of the Company or of the sale or other disposition of all or substantially all of the assets of the Company. Notwithstanding the foregoing, a Change in Control for purposes of this Agreement shall not be considered to occur as a result of a transaction which is approved by the Company's Board of Directors in advance of the transaction and prior to the consummation of the transaction if such transaction is specifically excluded by the Board of Directors from the definition of "Change of Control" for purposes of this Agreement and such exclusion is approved by an affirmative vote of at least two-thirds of the directors then comprising the Incumbent Board. Furthermore, anything in this Agreement to the contrary notwithstanding, if Executive's employment with the Company is terminated prior to the date on which a Change in Control occurs, and if it is reasonably demonstrated by Executive that such termination of employment (1) was at the request of a third party who has taken steps reasonably calculated to effect the Change in Control or (2) otherwise arose in connection with or in anticipation of the Change in Control, then for all purposes of this Agreement, a Change in Control shall be considered to have occurred immediately prior to Executive's employment termination date. In the event the Board adopts any plan or takes any action which, if consummated, would result in a Change in Control of the Company, the Company shall take any action determined by the Board to be necessary or appropriate to ensure the prompt payment when due of any amounts which may thereafter become payable hereunder upon termination by the Company of Executive during the Employment Period, including but not limited to the placement of sufficient funds to pay all such amounts in an escrow account with a bank or other fiduciary institution. On the Change in Control Date, to the extent permitted by law, regardless of date or grant, all stock options previously granted shall be come exercisable and all restrictions on restricted stock shall lapse. All previously deferred compensation (including interest or earnings) shall, at Executive's election, be paid to Executive within 10 days of the Change in Control Date. H. TERMINATION FOLLOWING CHANGE IN CONTROL Following a Change in Control of the Company, the provisions of this Section H shall apply exclusively with respect to (i) the termination of Executive's employment during the Employment Period and (ii) amounts payable to Executive upon such termination. If a Change in Control of the Company shall have occurred, Executive shall be entitled to the benefits provided herein upon Executive's subsequent termination of employment during the Employment Period, unless such termination is (i) because of Executive's death, (ii) by the Company because of Executive's Disability or Serious Misconduct or (iii) by Executive other than for Good Reason. For purposes hereof, "Good Reason" shall mean the occurrence or continuation, without consent of Executive, after a Change in Control of the Company of any of the following events within 36 months after the Change in Control Date: (1) the assignment to Executive of any duties materially inconsistent with the position with the Company that Executive held immediately prior to the Change in Control of the Company, or an adverse change in the status, position or conditions of Executive's employment or the nature of Executive's responsibilities in effect immediately prior to such Change in Control, or any removal of Executive from or any failure to re-elect Executive to any of such positions, except in connection with the termination of his employment by the Company for Serious Misconduct, Disability or death or by Executive other than for Good Reason; (2) a reduction by the Company in Executive's annual base salary as in effect immediately prior to such Change in Control, or the failure by the Company to increase such base salary the year in which a Change in Control occurs and each year thereafter by an amount which at least equals on a percentage basis, the average percentage increase in base salary for all officers of the Company during the two full calendar years immediately preceding the Change in Control; (3) the relocation of Executive' principal office to a location outside a 25 mile radius from Executive's principal office immediately prior to such Change in Control, except for required travel on the Company's business to an extent substantially consistent with Executive's business travel obligations immediately prior to such Change in Control; (4) the failure by the Company to pay to Executive any portion of Executive's salary within seven days of the date such salary is due; (5) the failure by the Company to continue in effect any benefit or compensation plan in which Executive participates immediately prior to the Change in Control which is material to Executive's total compensation, including but not limited to the stock option, employee stock ownership, bonus, insurance, disability and vacation plans which the Company currently has or any substitute or additional plans adopted prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan or plans) has been made with respect to such plan, or the failure by the Company to continue Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of Executive's participation relative to other participants, as in existence immediately prior to such Change in Control; or (6) the failure of the Company to obtain an agreement from any successor to assume and agree to perform this Agreement, as contemplated herein. Executive's right to terminate his employment for Good Reason pursuant to this section shall not be affected by Executive's incapacity due to physical or mental illness. Executive's continued employment shall not constitute consent to, or a waiver of with respect to, any circumstance constituting Good Reason hereunder. In the event of any dispute between Executive and the Company as to whether any event constituting Good Reason shall have occurred, the burden of proving by clear and convincing evidence that such event does not constitute Good Reason shall rest on the Company. Any termination of Executive's employment by the Company or by Executive pursuant to this Section H shall be communicated by written notice of termination (the "Notice of Termination") to the other party hereto, and shall indicate the specific termination provision in the Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment. For the purposes hereof, "Date of Termination" shall mean (i) if Executive's employment is terminated for Disability, 30 days after Notice of Termination is given (provided that Executive shall not have returned to the full-time performance of his duties during such 30 days) or (ii) if Executive's employment is terminated for any other reason other than death, the date specified in the Notice of Termination. I. PAYMENTS UPON TERMINATION SUBSEQUENT TO CHANGE IN CONTROL Following a Change in Control, Executive shall be entitled to the following benefits upon termination of employment during the 36-month period following the Change in Control Date: 1. Death, Disability, Serious Misconduct or Termination by Executive Other Than for Good Reason. Following a termination of Executive's employment because of Executive's death or by the Company because of Executive's Disability or Serious Misconduct or by Executive other than for Good Reason, the Company's only remaining obligations under this Agreement shall be to pay any base salary earned through the Date of Termination plus the amount of any compensation previously deferred by Executive, in each case to the extent theretofore unpaid, and Executive's benefits shall be limited to vested benefits provided under any retirement, insurance and other benefit programs of the Company then in effect determined in accordance with the terms thereof. 2. Other. If the employment shall be terminated by Executive for Good Reason or by the Company other than for death, Disability or Serious Misconduct, Executive shall be entitled to the amounts provided below, such amounts to be paid in cash in a lump sum no later than the tenth business day following the Date of Termination: (a) the Company shall pay to Executive his full base salary, and earned or accrued, but unpaid vacation pay, through the Date of Termination at the rate in effect at such time, plus all other amounts, including but not limited to incentive compensation for a past fiscal year which has not yet been awarded or paid to Executive under incentive plans, programs or arrangements, including any deferred awards (it being understood that with respect to any incentive compensation which has not been awarded, the individual performance component of the award shall be determined on at least the basis that Executive has met all applicable standards) to which Executive is entitled under any compensation or benefit plan of the Company; (b) a lump-sum severance payment (the "Severance Payment") equal to two (2) times the sum of (i) Executive's annual base salary as of the date of termination of employment and (ii) any cash bonus received by Executive in the immediately preceding fiscal year; provided, that such amount shall be paid in lieu of, and Executive hereby waives the right to receive, any other amount of severance relating to salary or bonus continuation to be received by Executive upon termination of employment of Executive under any severance plan, policy or arrangement of the Company; (c) at the election of Executive, the cash-out of any or all of Executive's stock or stock-based awards granted pursuant to both the Thomas Nelson, Inc. 1986 Stock Incentive Plan and the 1992 Employee Stock Incentive Plan at the "Change in Control Price" provisions set for therein. 3. Legal Expenses. In addition to any other amounts payable hereunder, the Company also shall reimburse Executive for all legal fees and expenses reasonably incurred by Executive as a result of any termination of the Employment Period (including all such fees and expenses, if any, incurred in contesting or disputing any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), to any payment of benefit provided hereunder). 4. Continuation of Benefits. For the remainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the plan, programs, practices and policies described in Sections C(3) and (4) of this Agreement if Executive's employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of the Company the its subsidiaries applicable generally to other peer executives and their families during the 90-day period immediately preceding the Change in Control Date or, if more favorable to Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its subsidiaries and their families; provided, however, that if Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility of Executive for retiree benefits pursuant to such plans, practices, programs and policies, Executive shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of the Employment Period. To the extent not theretofore paid to provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive pursuant to this Agreement under any plan, program, policy or practice or contract or agreement of the Company and its subsidiaries, but excluding solely purposes of this Section J(4) amounts waived by Executive pursuant to Section J(2)(b). 5. Certain Reduction in Payments by the Company. For purposes of this Section, (i) a "Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of Executive, whether paid or payable pursuant to this Agreement or otherwise; (ii) an "Agreement Payment" shall mean a Payment paid or payable pursuant to this Agreement (disregarding this Section); (iii) "Net After Tax Receipt" shall mean the Present Value (as defined below) of a Payment net of all taxes imposed on Executive with respect thereto under Sections 1 and 4999 of the Code, determined by applying the highest marginal rate under Section 1 of the Code which applied to Executive's taxable income for the immediately preceding taxable year' (iv) "Present Value" shall mean such value determined in accordance with Section 280G(d)(4) of the Code; and (v) "Reduced Amount" shall mean the smallest aggregate amount of Agreement Payments which (a) is less than the sum of all Agreement Payments and (b) results in aggregate Net After Tax Receipts which are equal to or greater than the Net After Tax Receipts which would result if the aggregate Agreement Payments were any other amount less than the sum of all Agreement Payments. Anything in this Agreement to the contrary notwithstanding, in the event Arthur Andersen LLP (the "Accounting Firm") shall determine that receipt of all Payments would subject Executive to tax under Section 4999 of the Code, the Accounting Firm shall determine whether some amount of Payments would meet the definition of a Reduced Amount. If the Accounting Firm determined that there is a Reduced Amount, the aggregate Payments shall be reduced to such Reduced Amount. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the change in Control, Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. If the Accounting Firm determined that aggregate Agreement Payments should be reduced to the Reduced Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof, and Executive may then elect, in his sole discretion, which and how much of the Agreement Payments shall be eliminated or reduced (as long as after such election the present value of the aggregate Agreement Payments equals the Reduced Amount), and shall advise the Company in writing of his election within 10 days of his receipt of notice. If no such election is made by Executive within such 10- day period, the Company may elect which of such Agreement Payments shall be eliminated or reduced (as long as after such election the present value of the aggregate Agreement Payments equals the Reduced Amount) and shall notify Executive promptly of such election. All determinations made by the Accounting Firm under this Section shall be binding upon the Company and Executive and shall be made within 60 days of a termination of employment of Executive. As promptly as practicable following such determination, the Company shall pay to or distribute for the benefit of Executive such Agreement Payments as are then due to Executive under this Agreement and shall promptly pay to or distribute for the benefit of Executive in the future such Agreement Payments as become due to Executive under this Agreement. While it is the intention of the Company and Executive to reduce the amounts payable or distributable to Executive hereunder only if the aggregate Net After Tax Receipts to Executive would thereby be increased as a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefits of Executive pursuant to this Agreement which should not have been so paid or distributed ("Overpayment") or that additional amounts which will have not been paid or distributed by the Company for the benefit of the Executive pursuant to this Agreement could have been so paid or distributed ("Underpayment"), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based either upon the assertion of a deficiency by the Internal Revenue Service against the Company or Executive which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of Executive shall be treated for all purposes as a loan to Executive which Executive shall repay to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to have been made and no amount shall be payable by the Executive to the Company if an to the extent such deemed loan and payment would not either reduce the amount on which the Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determined that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. 6. Full Settlement. Except as otherwise provided herein, the Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provision of this Agreement and, except as provided to Executive under any of the provisions of this Agreement and, except as provided in Section J(2)(b) of this Agreement, such amounts shall not be reduced whether or not Executive obtains other employment. J. REMEDIES Executive acknowledges that he will receive privileged information from the Company and that he will have substantial access to the Company's trade secrets, business information and personnel data. In consideration of his employment and the privilege of access to the Company's trade secrets, information, business methods and procedures, and personnel data, Executive acknowledges that the restrictions contained within Sections D and E are reasonable and necessary in order to preserve the Company's legitimate interests and that any violation thereof would result in irreparable injury to the Company for which monetary damages would be an inadequate remedy. Therefore, Executive acknowledges and agrees that in the event of any violations thereof, the Company may seek from any court of competent jurisdiction preliminary and permanent injunctive relief as well as an equitable account of all Executive'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 the Company may be entitled. K. SUCCESSORS (a) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as herein before defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach hereof and shall entitle Executive to terminate his employment for Good Reason. L. NOTICES All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: S. Joseph Moore, Executive Vice President Thomas Nelson, Inc. Nelson Place at Elm Hill Pike Nashville, Tennessee 37214-1000 If to the Company: Thomas Nelson, Inc. Nelson Place at Elm Hill Pike Post Office Box 141000 Nashville, Tennessee 37214-1000 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. M. MISCELLANEOUS 1. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of the Agreement. 2. The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 3. Executive's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other promotion or right of this Agreement. N. WAIVERABILITY OF PROVISIONS 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 Executive and an executive officer of the Company. No waiver by either party hereto of the 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. O. ENTIRE AGREEMENT 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. P. 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 or 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. The cost of any such litigation to enforce all or part of this Agreement, including, without limitation, court costs and attorney's 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. IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of the day and year first written above. ACCEPTED BY: THOMAS NELSON, INC. /s/ S. Joseph Moore /s/ Joe L. Powers - ------------------------- ---------------------- S. Joseph Moore Name Executive Vice President Executive Vice President ---------------------- Title May 10, 1996 May 10, 1996 - ------------------------- ---------------------- Date Date /dld EX-10 7 EXHIBIT 10.9 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made and entered into as of May 10, 1996, by and between Thomas Nelson, Inc., a Tennessee corporation (the "Company"), and Joe L. Powers ("Executive"). Executive is currently employed by the Company as Executive Vice President. Executive has served in a senior executive capacity with the Company for many years thereby acquiring an intimate knowledge of the business and affairs of the Company and has demonstrated his ability and has performed valuable services for the Company. The Company desires to incentivize the Executive to remain in its employ for the full term of this Agreement and to contractually protect the Company from the misuse of proprietary, confidential information and from the Executive competing with the Company. Accordingly, the Company, hereby offers to enter into this Agreement with Executive. The Company's Board of Directors (the "Board") considers the establishment and continuity of competent management to be essential to protecting and enhancing the best interests of the Company and its shareholders. Thus, the Board has determined that it is appropriate to provide Executive with compensation and benefits arrangements upon a Change in Control (as defined below) which ensure that the compensation and benefits expectations of Executive will be satisfied and which are competitive with those of other corporations. Therefore, the Company wishes to secure the services of Executive for a period to and including March 31, 1999 on the terms and conditions set forth below, and Executive is willing to enter into this Agreement. In consideration of the premises hereof and of the mutual promises and agreements contained herein, the parties therefore agree as follows: A. TERM OF AGREEMENT 1. Original Term. This Agreement shall be effective as of the date first set forth above (the "Effective Date"). The Company shall employ Executive as Executive Vice President of the Company for a term (the "Employment Period") commencing on the Effective Date and continuing until March 31, 1999 unless sooner terminated pursuant to Section F or H hereof. 2. Renewals. The Employment Period shall automatically be extended for additional one-year periods unless written notice of nonextension is given in writing by either party no less than 60 days prior to the scheduled expiration date. B. POSITION AND DUTIES During the Employment Period, subject to the power of the Board of Directors to elect and remove officers, Executive shall serve as Executive Vice President of the Company. Executive shall have the authority, functions, duties, powers and responsibilities for Executive's corporate offices and positions which are set forth in the Company's bylaws from time to time in effect and such other authority, functions, duties, powers and responsibilities as the Board of Directors or President of the Company may from time to time prescribe or delegate to Executive, in all cases to be consistent with Executive's corporate offices and positions. Executive agrees, subject to his election or appointment as such and without additional compensation, to serve during the Employment Period in such particular additional offices of comparable stature and responsibility to which he may be elected from time to time in the Company and its subsidiaries and to serve as a Director of any subsidiary of the Company. During the Employment Period, (i) Executive's services shall be rendered on a full-time, exclusive basis, (ii) he will apply on a full-time basis all of his skill and experience to the performance of his duties in such employment and shall report only to the Company's President, (iii) he shall have no other employment and, without the prior written consent of the Compensation Committee of the Company's Board of Directors, no outside business activities which require the devotion of substantial amounts of Executive's time, and (iv) unless Executive otherwise consents in writing, the headquarters for the performance of his services shall be the principal executive offices of the Company in Nashville, Tennessee, subject to such reasonable travel as the performance of his duties in the business of the Company may require. Notwithstanding the foregoing sentence, Executive may devote a reasonable amount of his time to civic, community, charitable, or passive investment activities and to serve as a director and/or officer of personally owned corporations and to other types of business or public activities not expressly mentioned in this paragraph. C. COMPENSATION 1. Base Salary. Executive shall be paid an annual base salary as set forth on Exhibit A hereto, subject to such increase as may from time to time be approved by the Compensation Committee of the Company's Board of Directors; provided, however, that following any such increase in Executive's base salary by the Compensation Committee, such base salary shall not be reduced without the prior written consent of Executive. Base salary shall be payable according to the Company's regular practice for salary payment. 2. Incentive Compensation. Executive shall be eligible to receive annual incentive and bonus compensation, shall be eligible to participate in the Company's long-term equity-based incentive compensation plans, including, without limitation, the Company's 1986 Executive Stock Purchase Plan, 1986 Stock Incentive Plan, and Amended and Restated 1992 Employee Stock Incentive Plan, and in all incentive, gainsharing, savings and retirement plans, practices, policies and programs applicable to other peer executives of the Company and its subsidiaries, but in no event shall such plans, practices, policies and programs provide Executive with incentive, gainsharing, savings and retirement benefits opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its subsidiaries for Executive under such plans, practices, policies and programs as in effect at any time during the 90-day period immediately preceding the date (the "Change in Control Date") on which a Change in Control (as defined below) occurs, or if more favorable to Executive, those provided generally at any time on or after the Change in Control Date to other peer executives of the Company. 3. Other Benefits. During the Employment Period Executive shall be entitled to all of the fringe benefits which the Company and its subsidiaries make available to senior management if and to the extent that the Executive is eligible to participate in accordance with the terms of the benefit plans or policies, provided, however, that the termination benefits hereunder are in lieu of any severance benefits to which the Executive would otherwise be entitled. Such benefits may include, but are not limited to, (i) medical, hospital, dental, disability and life insurance plans and coverages, (ii) pension, profit sharing, 401(k), employee stock ownership plan, deferred compensation and similar plans or arrangements, and (iii) any other benefit plan, program or arrangement, including those relating to automobiles, clubs, vacations, and expense reimbursement, which the Company and its subsidiaries from time to time may make available either to their employees generally or to some or all of their senior executive officers, but in no event shall such plans, practices, policies and arrangements provide benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and arrangements in effect at any time during the 90-day period immediately preceding the Change in Control Date or if more favorable to Executive, those provided generally at any time on or after the Change in Control Date to other senior executives of the Company and its subsidiaries. D. NONDISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION 1. Confidential Information. (a) Executive acknowledges and agrees that the information, observations and data obtained by him during the course of his performance under the Agreement and the Prior Agreement concerning the business or affairs of the Company and its subsidiaries and affiliates is the property of the Company or such subsidiary or affiliate, as the case may be. Therefore, during the Employment Period and at all times thereafter, Executive (i) shall hold in a fiduciary capacity for the benefit of the Company, its subsidiaries and affiliates, and (ii) without the prior written consent of the Board of Directors or except to the extent required by law (and upon prompt written notice of such requirement to the Company and such subsidiary or affiliate), shall not directly or indirectly, divulge, furnish, disclose, use or make accessible for any purpose (except in the course of his employment under this Agreement and in furtherance of the business of the Company and its subsidiaries and affiliates) any Confidential Information (as defined below). Executive acknowledges and agrees that the disclosure of any Confidential Information will be damaging or harmful to the business activities of the Company, its subsidiaries and affiliates, and that such disclosure can direct or divert corporate opportunities, product sales and/or profits away from the Company, its subsidiaries or affiliates. In the event Executive shall be required by law to make any disclosure as set forth above, Executive shall promptly notify the Company and any subsidiary or affiliate which may reasonably be affected by such disclosure and shall cooperate with the Company, such subsidiary and such affiliate to preserve in full the confidentiality of all Confidential Information of the Company, such subsidiary or such affiliate. Confidential Information shall be considered confidential or proprietary unless and to the extent that such Confidential Information become generally known to and available for use by the public other than as a result of any act or omission to act by Executive. Executive will take all appropriate steps to safeguard Confidential Information and to protect it against disclosure, misuse, espionage, loss and theft. (b) As used in this Agreement, the term "Confidential Information" means information that is not generally known to the public and that is used, developed or obtained by the Company or any of its subsidiaries and affiliates in connection with the Company's or such subsidiary's or affiliate's business, including but not limited to (i) products or services, (ii) fees, costs and pricing structures, (iii) designs, plans or manufacturing data, (iv) analysis, observations or data, (v) drawings, artwork, photographs, videotapes, audio tapes, other recordings, and reports, (vi) computer software, including operating systems, applications program listings, and computer files, (vii) flow charts, manuals and documentation, (viii) data bases, (ix) accounting and business methods, (x) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (xi) customers, clients, authors or artist and customer, client, author or artist lists, (xii) other copyrightable works, (xiii) all technology and trade secrets, (xiv) intellectual property, unique business information, or confidential or proprietary information, and (xv) all similar and related information in whatever form. Confidential Information will not include any information that has been published in a form generally available to the public prior to the date Executive proposes to disclose or use such information. Information will not be deemed to have been published merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination. 2. Product Development. In the event that Executive as part of his activities on behalf of the Company generates, authors or contributes, individually or with the assistance of others, to any invention, design, new development, device, product, method or process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Company or any of its subsidiaries or affiliates as now or hereafter conducted (collectively, the "Intellectual Property"), Executive acknowledges that such Intellectual Property is the exclusive property of the Company and hereby assigns all right, title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by Executive will be deemed "a work made for hire" under Section 201(b) of the 1976 Copyright Act, and the Company will own all of the rights comprised in the copyright therein. Executive will cooperate with the Company in all reasonable respects to protect the Company's interests in and rights to such Intellectual Property (including, without limitation, providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company whether such requests occur prior to or after termination of Executive's employment with the Company). 3. Delivery of Materials Upon Termination of Employment. As requested by the Company from time to time and upon the termination of the Executive's employment with the Company for any reason, Executive will promptly deliver to the Company all copies and embodiments, in whatever form, of all Confidential Information or Intellectual Property in Executive's possession or within his control (including, but not limited to, written records, memoranda, notes, photographs, plans, records, video tapes, audiotapes, other recordings, reports, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that all such materials have been delivered to the Company. E. NONCOMPETITION 1. Covenant Not to Compete. Executive acknowledges and agrees with the Company that Executive's services to the Company and its subsidiaries are unique in nature and that the Company and its subsidiaries would be irreparably damaged if Executive were to provide similar services to any person or entity competing with the Company or any of its subsidiaries, or engaged in similar business. Executive accordingly covenants and agrees with the Company that during the Employment Period and for two years following the termination of Executive's employment with the Company for any reason (the "Noncompetition Period"), Executive will not, directly or indirectly, either for himself or for any other individual, corporation, partnership, joint venture or other entity, participate in (as defined below) any business (including, without limitation, any division, group or franchise of a larger organization) competing with any of the businesses then conducted (or, to the knowledge of Executive, planned to be conducted within two years) by the Company or any of its successors or then subsidiaries within any geographical area in which the Company or its subsidiaries engage or plan within two years to engage in any such businesses. For purposes of this Agreement, the term "participate in" will include, without limitation, having any direct or indirect interest in any corporation, partnership, joint venture or other entity, whether as a sole proprietor, owner, stockholder, partner, joint venturer, creditor or otherwise, or rendering any direct or indirect service or assistance to any individual, corporation, partnership, joint venture and other business entity (whether as a director, officer, manager, supervisor, employee, agent, consultant or otherwise). 2. Nonsolicitation and Noninterference. During the Noncompetition Period, Executive will not directly or indirectly, on behalf of himself or another entity, (i) induce, attempt to induce, or assist others to induce any artist, composer, songwriter, lyricist, musician, author, writer, editor, programmer, technician, cable operator, employee, consultant, customer, supplier, licensee or other person or entity to terminate its, his or her association with the Company or its subsidiaries, or to cease doing business with the Company or its subsidiaries, or do anything to interfere with the relationship between the Company or its subsidiaries, on the one hand, and any artist, composer, songwriter, lyricist, musician, author, writer, editor, programmer, technician, cable operator, employee, consultant or other person or entity doing business and/or under contract with the Company or any of its subsidiaries, or with whom the Company or any of its subsidiaries is then negotiating, or with whom the Company or any of its subsidiaries enters into any contract or agreement during the Noncompetition Period, or (ii) hire, without the written consent of the Company, any person who was an employee of the Company or any of its subsidiaries at any time within twelve (12) months of the termination of the Employment Period. 3. Limitations. (a) Nothing contained in this Section E shall prevent Executive from owning up to a 5% interest in any corporation or entity having one or more classes of its securities listed on a national securities exchange or market, or publicly traded in the over-the-counter market, provided that Executive is not actively involved in any manner whatsoever in the operation or management of such corporation or entity. (b) If under the circumstances existing at the time of enforcement of this Section E, the period, scope or geographic area described in this Section E shall be found or held to be unreasonable, the parties hereto agree that the maximum period, scope or geographic area reasonable under the circumstances shall be substituted for the stated period, scope or geographic area. F. TERMINATION OF EMPLOYMENT (OTHER THAN SUBSEQUENT TO A CHANGE IN CONTROL). 1. Applicability. This Section F shall apply only to termination of the employment Period prior to the occurrence of a Change in Control (as defined below) during the Employment Period. Termination of the Employment Period following the occurrence of a Change in Control shall be governed by Section H. 2. Events of Termination and Related Payments. (a) Disability. In the event that during the Employment Period Executive should become Disabled, the Company (acting by resolution of the Board) may elect to terminate the Employment Period by written notice to Executive, his guardian or personal representative and Executive, his guardian or personal representative, as the case may be, shall be entitled to receive (i) full compensation pursuant to Section C at his then base salary rate from the date of termination of employment continuing for the lesser of (a) one year following the date of such notice and (b) the remainder of the then effective Employment Period, and (ii) bonus for the calendar year in which Executive's termination of employment occurs as determined in good faith by the Compensation Committee of the Board of Directors in its sole discretion. Notwithstanding the foregoing provisions of this Section F(2)(a), the payments provided herein with respect to any period of Disability shall be reduced by the amount of any benefits payable to Executive, his guardian or personal representative, as the case may be, during such period under any disability or similar plan or program of the Company of any of its subsidiaries in respect of Executive's Disability. (b) Death. In the event of Executive's death during the Employment Period, his personal representative shall be entitled to receive any compensation pursuant to Section C which is accrued and unpaid as of the date of his death. (c) Termination Due to Serious Misconduct. In the event that during the Employment Period Executive should commit Serious Misconduct (as defined below), the Company (acting by resolution of the Board) may elect to terminate the Employment Period by written notice to Executive, and Executive shall be entitled only to any compensation and benefits which are vested but unpaid as of the date of termination of employment. (d) Termination for Reasons Other Than Death, Disability, Serious Misconduct or Voluntary Action by the Executive. In the event that the Employment Period is terminated at the option of the Company for any reason other than for serious misconduct, death, disability, or voluntary action by the Executive, the Executive shall be paid a lump sum payment equal to the lesser of (1) current base salary and target bonus for the remainder of the term hereunder, and (2) a sum equal to twice current base salary and target bonus, and the Company shall pay such sum to Executive within thirty (30) business days following such termination. Executive's voluntary resignation resulting from harassment, unwarranted demotion and/or material diminution of responsibilities shall be governed by the terms of this provision and shall not be considered a voluntary termination as defined in subparagraph (e) hereunder. In the event of such termination, the Company shall reimburse the Executive for the premium paid by the Executive for the continued coverage for the Executive (and any dependents of the Executive covered by the Company's health care plans as of the date of termination) under the Company's health care plan pursuant to COBRA (or any of the mandatory health care continuation law then in effect), such coverage being substantially similar to that provided the Executive on the date of his termination, but such reimbursement shall be only for a period which is of (1) the remainder of the term hereof, and (2) two years from the date of termination. (e) Voluntary Termination by Executive. In the event that Executive, for reasons other than those set forth in subparagraph (d) hereinabove, voluntarily terminates his employment with the Company prior to the end of the Employment Period, the Company shall pay any earned but unpaid portion of Executive's base salary and incentive compensation through the date of his termination provided that the Executive is in full compliance with the provisions of Sections D and E hereof. 3. Definition of Certain Terms. (a) "Disabled" means such physical or mental condition of Executive as is determined by the Company's Board of Directors in its sole discretion to be expected to continue indefinitely and which renders him incapable of performing any substantial portion of the services contemplated hereby (as confirmed by competent medical evidence). (b) "Serious Misconduct" means embezzlement or misappropriation of corporate funds, other acts of dishonesty or reckless or intentional misconduct which is materially harmful to the business or reputation of the Company or its subsidiaries, the conviction of a felony, refusal to perform or disregard of the duties properly assigned by the Chief Executive of the Company or the Board, or a material breach of any of the provisions of Sections D or E above or of any of the other provisions of this Agreement which violations are not cured within sixty (60) days of written notice to the Executive of the breach. 4. Effect of Breach of Noncompetition of Nondisclosure Provisions. In the event Executive materially breaches or otherwise fails to comply in any material respect with the provisions of Sections D or E above, then, in addition to any other remedies provided herein or at law on in equity, the Company shall not have any further obligation to make any additional payments to Executive pursuant to this Agreement. Termination of such payments pursuant to the preceding sentence shall not relieve Executive's obligations pursuant to Sections D or E above. G. CHANGE IN CONTROL For purposes hereof, a "Change in Control" shall have occurred if: (1) any "person" other than any trustee or other fiduciary holding securities under an employee benefit plan of the Company within the meaning of Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") becomes the "beneficial owner" as defined in Rule 13D-3 thereunder, directly or indirectly, of 20% or more of either the then outstanding shares of the Company's Common Stock (the "Outstanding Company Common Stock") or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Company Voting Securities"); provided, however, that any acquisition by the Company or its subsidiaries, or by Sam Moore, S. Joseph Moore, members of their families, relatives, certain family partnerships, trusts associated with the Moore family and other entities who have as of July 1, 1995 jointly filed a Statement on Schedule 13D under the Exchange Act, or by any reconstituted version of such filing group or any corporation with respect to which, following such acquisition, more than 80% of, respectively, the then outstanding share of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Company Voting Securities immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Company Common Stock and Company Voting Securities, as the case may be, shall not constitute a Change in Control; (2) during any two-year period, individuals who constitute the Board of Directors of the Company (the "Incumbent Board") as of the beginning of the period cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director during such period whose election or nomination for election by the Company's stockholders was approved by an affirmative vote of at least two- thirds of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director without objection to such nomination) shall be, for the purposes of this subparagraph (b), considered as though person were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company (as such terms are used in Rule 14A-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents; or (3) approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the Common Stock and voting securities of the Company immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 80% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation, or a complete liquidation or dissolution of the Company or of the sale or other disposition of all or substantially all of the assets of the Company. Notwithstanding the foregoing, a Change in Control for purposes of this Agreement shall not be considered to occur as a result of a transaction which is approved by the Company's Board of Directors in advance of the transaction and prior to the consummation of the transaction if such transaction is specifically excluded by the Board of Directors from the definition of "Change of Control" for purposes of this Agreement and such exclusion is approved by an affirmative vote of at least two-thirds of the directors then comprising the Incumbent Board. Furthermore, anything in this Agreement to the contrary notwithstanding, if Executive's employment with the Company is terminated prior to the date on which a Change in Control occurs, and if it is reasonably demonstrated by Executive that such termination of employment (1) was at the request of a third party who has taken steps reasonably calculated to effect the Change in Control or (2) otherwise arose in connection with or in anticipation of the Change in Control, then for all purposes of this Agreement, a Change in Control shall be considered to have occurred immediately prior to Executive's employment termination date. In the event the Board adopts any plan or takes any action which, if consummated, would result in a Change in Control of the Company, the Company shall take any action determined by the Board to be necessary or appropriate to ensure the prompt payment when due of any amounts which may thereafter become payable hereunder upon termination by the Company of Executive during the Employment Period, including but not limited to the placement of sufficient funds to pay all such amounts in an escrow account with a bank or other fiduciary institution. On the Change in Control Date, to the extent permitted by law, regardless of date or grant, all stock options previously granted shall be come exercisable and all restrictions on restricted stock shall lapse. All previously deferred compensation (including interest or earnings) shall, at Executive's election, be paid to Executive within 10 days of the Change in Control Date. H. TERMINATION FOLLOWING CHANGE IN CONTROL Following a Change in Control of the Company, the provisions of this Section H shall apply exclusively with respect to (i) the termination of Executive's employment during the Employment Period and (ii) amounts payable to Executive upon such termination. If a Change in Control of the Company shall have occurred, Executive shall be entitled to the benefits provided herein upon Executive's subsequent termination of employment during the Employment Period, unless such termination is (i) because of Executive's death, (ii) by the Company because of Executive's Disability or Serious Misconduct or (iii) by Executive other than for Good Reason. For purposes hereof, "Good Reason" shall mean the occurrence or continuation, without consent of Executive, after a Change in Control of the Company of any of the following events within 24 months after the Change in Control Date: (1) the assignment to Executive of any duties materially inconsistent with the position with the Company that Executive held immediately prior to the Change in Control of the Company, or an adverse change in the status, position or conditions of Executive's employment or the nature of Executive's responsibilities in effect immediately prior to such Change in Control, or any removal of Executive from or any failure to re-elect Executive to any of such positions, except in connection with the termination of his employment by the Company for Serious Misconduct, Disability or death or by Executive other than for Good Reason; (2) a reduction by the Company in Executive's annual base salary as in effect immediately prior to such Change in Control which is not consistent with general compensation reduction for a Senior Executive of the Company; (3) the relocation of Executive' principal office to a location outside a 25 mile radius from Executive's principal office immediately prior to such Change in Control, except for required travel on the Company's business to an extent substantially consistent with Executive's business travel obligations immediately prior to such Change in Control; (4) the failure by the Company to pay to Executive any portion of Executive's salary within seven days of the date such salary is due; (5) the failure by the Company to continue in effect any benefit or compensation plan in which Executive participates immediately prior to the Change in Control which is material to Executive's total compensation, including but not limited to the stock option, employee stock ownership, bonus, insurance, disability and vacation plans which the Company currently has or any substitute or additional plans adopted prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan or plans) has been made with respect to such plan, or the failure by the Company to continue Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of Executive's participation relative to other participants, as in existence immediately prior to such Change in Control; or (6) the failure of the Company to obtain an agreement from any successor to assume and agree to perform this Agreement, as contemplated herein. Executive's right to terminate his employment for Good Reason pursuant to this section shall not be affected by Executive's incapacity due to physical or mental illness. Executive's continued employment shall not constitute consent to, or a waiver of with respect to, any circumstance constituting Good Reason hereunder. In the event of any dispute between Executive and the Company as to whether any event constituting Good Reason shall have occurred, the burden of proving by clear and convincing evidence that such event does not constitute Good Reason shall rest on the Company. Any termination of Executive's employment by the Company or by Executive pursuant to this Section H shall be communicated by written notice of termination (the "Notice of Termination") to the other party hereto, and shall indicate the specific termination provision in the Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment. For the purposes hereof, "Date of Termination" shall mean (i) if Executive's employment is terminated for Disability, 30 days after Notice of Termination is given (provided that Executive shall not have returned to the full-time performance of his duties during such 30 days) or (ii) if Executive's employment is terminated for any other reason other than death, the date specified in the Notice of Termination. I. PAYMENTS UPON TERMINATION SUBSEQUENT TO CHANGE IN CONTROL Following a Change in Control, Executive shall be entitled to the following benefits upon termination of employment during the 36-month period following the Change in Control Date: 1. Death, Disability, Serious Misconduct or Termination by Executive Other Than for Good Reason. Following a termination of Executive's employment because of Executive's death or by the Company because of Executive's Disability or Serious Misconduct or by Executive other than for Good Reason, the Company's only remaining obligations under this Agreement shall be to pay any base salary earned through the Date of Termination plus the amount of any compensation previously deferred by Executive, in each case to the extent theretofore unpaid, and Executive's benefits shall be limited to vested benefits provided under any retirement, insurance and other benefit programs of the Company then in effect determined in accordance with the terms thereof. 2. Other. If the employment shall be terminated by Executive for Good Reason or by the Company other than for death, Disability or Serious Misconduct, Executive shall be entitled to the amounts provided below, such amounts to be paid in cash in a lump sum no later than the tenth business day following the Date of Termination: (a) the Company shall pay to Executive his full base salary, and earned or accrued, but unpaid vacation pay, through the Date of Termination at the rate in effect at such time, plus all other amounts, including but not limited to incentive compensation for a past fiscal year which has not yet been awarded or paid to Executive under incentive plans, programs or arrangements, including any deferred awards (it being understood that with respect to any incentive compensation which has not been awarded, the individual performance component of the award shall be determined on at least the basis that Executive has met all applicable standards) to which Executive is entitled under any compensation or benefit plan of the Company; (b) a lump-sum severance payment (the "Severance Payment") equal to two (2) times the sum of (i) Executive's annual base salary as of the date of termination of employment and (ii) any cash bonus received by Executive in the immediately preceding fiscal year; provided, that such amount shall be paid in lieu of, and Executive hereby waives the right to receive, any other amount of severance relating to salary or bonus continuation to be received by Executive upon termination of employment of Executive under any severance plan, policy or arrangement of the Company; (c) at the election of Executive, the cash-out of any or all of Executive's stock or stock-based awards granted pursuant to both the Thomas Nelson, Inc. 1986 Stock Incentive Plan and the 1992 Employee Stock Incentive Plan at the "Change in Control Price" provisions set for therein. 3. Legal Expenses. In addition to any other amounts payable hereunder, the Company also shall reimburse Executive for all legal fees and expenses reasonably incurred by Executive as a result of any termination of the Employment Period (including all such fees and expenses, if any, incurred in contesting or disputing any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), to any payment of benefit provided hereunder). 4. Continuation of Benefits. For the remainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the plan, programs, practices and policies described in Sections C(3) and (4) of this Agreement if Executive's employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of the Company the its subsidiaries applicable generally to other peer executives and their families during the 90-day period immediately preceding the Change in Control Date or, if more favorable to Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its subsidiaries and their families; provided, however, that if Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility of Executive for retiree benefits pursuant to such plans, practices, programs and policies, Executive shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of the Employment Period. To the extent not theretofore paid to provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive pursuant to this Agreement under any plan, program, policy or practice or contract or agreement of the Company and its subsidiaries, but excluding solely purposes of this Section J(4) amounts waived by Executive pursuant to Section J(2)(b). 5. Certain Reduction in Payments by the Company. For purposes of this Section, (i) a "Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of Executive, whether paid or payable pursuant to this Agreement or otherwise; (ii) an "Agreement Payment" shall mean a Payment paid or payable pursuant to this Agreement (disregarding this Section); (iii) "Net After Tax Receipt" shall mean the Present Value (as defined below) of a Payment net of all taxes imposed on Executive with respect thereto under Sections 1 and 4999 of the Code, determined by applying the highest marginal rate under Section 1 of the Code which applied to Executive's taxable income for the immediately preceding taxable year' (iv) "Present Value" shall mean such value determined in accordance with Section 280G(d)(4) of the Code; and (v) "Reduced Amount" shall mean the smallest aggregate amount of Agreement Payments which (a) is less than the sum of all Agreement Payments and (b) results in aggregate Net After Tax Receipts which are equal to or greater than the Net After Tax Receipts which would result if the aggregate Agreement Payments were any other amount less than the sum of all Agreement Payments. Anything in this Agreement to the contrary notwithstanding, in the event Arthur Andersen LLP (the "Accounting Firm") shall determine that receipt of all Payments would subject Executive to tax under Section 4999 of the Code, the Accounting Firm shall determine whether some amount of Payments would meet the definition of a Reduced Amount. If the Accounting Firm determined that there is a Reduced Amount, the aggregate Payments shall be reduced to such Reduced Amount. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the change in Control, Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. If the Accounting Firm determined that aggregate Agreement Payments should be reduced to the Reduced Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof, and Executive may then elect, in his sole discretion, which and how much of the Agreement Payments shall be eliminated or reduced (as long as after such election the present value of the aggregate Agreement Payments equals the Reduced Amount), and shall advise the Company in writing of his election within 10 days of his receipt of notice. If no such election is made by Executive within such 10- day period, the Company may elect which of such Agreement Payments shall be eliminated or reduced (as long as after such election the present value of the aggregate Agreement Payments equals the Reduced Amount) and shall notify Executive promptly of such election. All determinations made by the Accounting Firm under this Section shall be binding upon the Company and Executive and shall be made within 60 days of a termination of employment of Executive. As promptly as practicable following such determination, the Company shall pay to or distribute for the benefit of Executive such Agreement Payments as are then due to Executive under this Agreement and shall promptly pay to or distribute for the benefit of Executive in the future such Agreement Payments as become due to Executive under this Agreement. While it is the intention of the Company and Executive to reduce the amounts payable or distributable to Executive hereunder only if the aggregate Net After Tax Receipts to Executive would thereby be increased as a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefits of Executive pursuant to this Agreement which should not have been so paid or distributed ("Overpayment") or that additional amounts which will have not been paid or distributed by the Company for the benefit of the Executive pursuant to this Agreement could have been so paid or distributed ("Underpayment"), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based either upon the assertion of a deficiency by the Internal Revenue Service against the Company or Executive which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of Executive shall be treated for all purposes as a loan to Executive which Executive shall repay to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to have been made and no amount shall be payable by the Executive to the Company if an to the extent such deemed loan and payment would not either reduce the amount on which the Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determined that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. 6. Full Settlement. Except as otherwise provided herein, the Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provision of this Agreement and, except as provided to Executive under any of the provisions of this Agreement and, except as provided in Section J(2)(b) of this Agreement, such amounts shall not be reduced whether or not Executive obtains other employment. J. REMEDIES Executive acknowledges that he will receive privileged information from the Company and that he will have substantial access to the Company's trade secrets, business information and personnel data. In consideration of his employment and the privilege of access to the Company's trade secrets, information, business methods and procedures, and personnel data, Executive acknowledges that the restrictions contained within Sections D and E are reasonable and necessary in order to preserve the Company's legitimate interests and that any violation thereof would result in irreparable injury to the Company for which monetary damages would be an inadequate remedy. Therefore, Executive acknowledges and agrees that in the event of any violations thereof, the Company may seek from any court of competent jurisdiction preliminary and permanent injunctive relief as well as an equitable account of all Executive'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 the Company may be entitled. K. SUCCESSORS (a) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as herein before defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach hereof and shall entitle Executive to terminate his employment for Good Reason. L. NOTICES All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Joe L. Powers, Executive Vice President Thomas Nelson, Inc. Nelson Place at Elm Hill Pike Nashville, Tennessee 37214-1000 If to the Company: Thomas Nelson, Inc. Nelson Place at Elm Hill Pike Post Office Box 141000 Nashville, Tennessee 37214-1000 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. M. MISCELLANEOUS 1. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of the Agreement. 2. The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 3. Executive's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other promotion or right of this Agreement. N. WAIVERABILITY OF PROVISIONS 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 Executive and an executive officer of the Company. No waiver by either party hereto of the 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. O. ENTIRE AGREEMENT 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. P. 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 or 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. The cost of any such litigation to enforce all or part of this Agreement, including, without limitation, court costs and attorney's 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. IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of the day and year first written above. ACCEPTED BY: THOMAS NELSON, INC. /s/ Joe L. Powers /s/ Sam Moore - ------------------------ --------------------- Joe L. Powers Name Executive Vice President CEO --------------------- Title May 10, 1996 May 10, 1996 - ------------------------ --------------------- Date Date /dld 30 EX-10 8 EXHIBIT 10.10 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made and entered into as of May 13, 1996, by and between Thomas Nelson, Inc., a Tennessee corporation (the "Company"), and Charles Moore ("Executive"). Executive is currently employed by the Company as Senior Vice President. Executive has served in a senior executive capacity with the Company for many years thereby acquiring an intimate knowledge of the business and affairs of the Company and has demonstrated his ability and has performed valuable services for the Company. The Company desires to incentivize the Executive to remain in its employ for the full term of this Agreement and to contractually protect the Company from the misuse of proprietary, confidential information and from the Executive competing with the Company. Accordingly, the Company, hereby offers to enter into this Agreement with Executive. The Company's Board of Directors (the "Board") considers the establishment and continuity of competent management to be essential to protecting and enhancing the best interests of the Company and its shareholders. Thus, the Board has determined that it is appropriate to provide Executive with compensation and benefits arrangements upon a Change in Control (as defined below) which ensure that the compensation and benefits expectations of Executive will be satisfied and which are competitive with those of other corporations. Therefore, the Company wishes to secure the services of Executive for a period to and including March 31, 1999 on the terms and conditions set forth below, and Executive is willing to enter into this Agreement. In consideration of the premises hereof and of the mutual promises and agreements contained herein, the parties therefore agree as follows: A. TERM OF AGREEMENT 1. Original Term. This Agreement shall be effective as of the date first set forth above (the "Effective Date"). The Company shall employ Executive as Senior Vice President of the Company for a term (the "Employment Period") commencing on the Effective Date and continuing until March 31, 1999 unless sooner terminated pursuant to Section F or H hereof. 2. Renewals. The Employment Period shall automatically be extended for additional one-year periods unless written notice of nonextension is given in writing by either party no less than 60 days prior to the scheduled expiration date. B. POSITION AND DUTIES During the Employment Period, Executive shall serve as Senior Vice President of the Company. Executive shall have the authority, functions, duties, powers and responsibilities for Executive's corporate offices and positions which are set forth in the Company's bylaws from time to time in effect and such other authority, functions, duties, powers and responsibilities as the Board of Directors or President of the Company may from time to time prescribe or delegate to Executive, in all cases to be consistent with Executive's corporate offices and positions. Executive agrees, subject to his election or appointment as such and without additional compensation, to serve during the Employment Period in such particular additional offices of comparable stature and responsibility to which he may be elected from time to time in the Company and its subsidiaries and to serve as a Director of any subsidiary of the Company. During the Employment Period, (i) Executive's services shall be rendered on a full-time, exclusive basis, (ii) he will apply on a full-time basis all of his skill and experience to the performance of his duties in such employment and shall report only to the Company's President, (iii) he shall have no other employment and, without the prior written consent of the Compensation Committee of the Company's Board of Directors, no outside business activities which require the devotion of substantial amounts of Executive's time, and (iv) unless Executive otherwise consents in writing, the headquarters for the performance of his services shall be the principal executive offices of the Company in Nashville, Tennessee, subject to such reasonable travel as the performance of his duties in the business of the Company may require. Notwithstanding the foregoing sentence, Executive may devote a reasonable amount of his time to civic, community, charitable, or passive investment activities and to serve as a director and/or officer of personally owned corporations and to other types of business or public activities not expressly mentioned in this paragraph. C. COMPENSATION 1. Base Salary. Executive shall be paid an annual base salary as set forth on Exhibit A hereto, subject to such increase as may from time to time be approved by the Compensation Committee of the Company's Board of Directors; provided, however, that following any such increase in Executive's base salary by the Compensation Committee, such base salary shall not be reduced without the prior written consent of Executive. Base salary shall be payable according to the Company's regular practice for salary payment. 2. Incentive Compensation. Executive shall be eligible to receive annual incentive and bonus compensation, shall be eligible to participate in the Company's long-term equity-based incentive compensation plans, including, without limitation, the Company's 1986 Executive Stock Purchase Plan, 1986 Stock Incentive Plan, and Amended and Restated 1992 Employee Stock Incentive Plan, and in all incentive, gainsharing, savings and retirement plans, practices, policies and programs applicable to other peer executives of the Company and its subsidiaries, but in no event shall such plans, practices, policies and programs provide Executive with incentive, gainsharing, savings and retirement benefits opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its subsidiaries for Executive under such plans, practices, policies and programs as in effect at any time during the 90-day period immediately preceding the date (the "Change in Control Date") on which a Change in Control (as defined below) occurs, or if more favorable to Executive, those provided generally at any time on or after the Change in Control Date to other peer executives of the Company. 3. Other Benefits. During the Employment Period Executive shall be entitled to all of the fringe benefits which the Company and its subsidiaries make available to senior management if and to the extent that the Executive is eligible to participate in accordance with the terms of the benefit plans or policies, provided, however, that the termination benefits hereunder are in lieu of any severance benefits to which the Executive would otherwise be entitled. Such benefits may include, but are not limited to, (i) medical, hospital, dental, disability and life insurance plans and coverages, (ii) pension, profit sharing, 401(k), employee stock ownership plan, deferred compensation and similar plans or arrangements, and (iii) any other benefit plan, program or arrangement, including those relating to automobiles, clubs, vacations, and expense reimbursement, which the Company and its subsidiaries from time to time may make available either to their employees generally or to some or all of their senior executive officers, but in no event shall such plans, practices, policies and arrangements provide benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and arrangements in effect at any time during the 90-day period immediately preceding the Change in Control Date or if more favorable to Executive, those provided generally at any time on or after the Change in Control Date to other senior executives of the Company and its subsidiaries. D. NONDISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION 1. Confidential Information. (a) Executive acknowledges and agrees that the information, observations and data obtained by him during the course of his performance under the Agreement and the Prior Agreement concerning the business or affairs of the Company and its subsidiaries and affiliates is the property of the Company or such subsidiary or affiliate, as the case may be. Therefore, during the Employment Period and at all times thereafter, Executive (i) shall hold in a fiduciary capacity for the benefit of the Company, its subsidiaries and affiliates, and (ii) without the prior written consent of the Board of Directors or except to the extent required by law (and upon prompt written notice of such requirement to the Company and such subsidiary or affiliate), shall not directly or indirectly, divulge, furnish, disclose, use or make accessible for any purpose (except in the course of his employment under this Agreement and in furtherance of the business of the Company and its subsidiaries and affiliates) any Confidential Information (as defined below). Executive acknowledges and agrees that the disclosure of any Confidential Information will be damaging or harmful to the business activities of the Company, its subsidiaries and affiliates, and that such disclosure can direct or divert corporate opportunities, product sales and/or profits away from the Company, its subsidiaries or affiliates. In the event Executive shall be required by law to make any disclosure as set forth above, Executive shall promptly notify the Company and any subsidiary or affiliate which may reasonably be affected by such disclosure and shall cooperate with the Company, such subsidiary and such affiliate to preserve in full the confidentiality of all Confidential Information of the Company, such subsidiary or such affiliate. Confidential Information shall be considered confidential or proprietary unless and to the extent that such Confidential Information become generally known to and available for use by the public other than as a result of any act or omission to act by Executive. Executive will take all appropriate steps to safeguard Confidential Information and to protect it against disclosure, misuse, espionage, loss and theft. (b) As used in this Agreement, the term "Confidential Information" means information that is not generally known to the public and that is used, developed or obtained by the Company or any of its subsidiaries and affiliates in connection with the Company's or such subsidiary's or affiliate's business, including but not limited to (i) products or services, (ii) fees, costs and pricing structures, (iii) designs, plans or manufacturing data, (iv) analysis, observations or data, (v) drawings, artwork, photographs, videotapes, audio tapes, other recordings, and reports, (vi) computer software, including operating systems, applications program listings, and computer files, (vii) flow charts, manuals and documentation, (viii) data bases, (ix) accounting and business methods, (x) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (xi) customers, clients, authors or artist and customer, client, author or artist lists, (xii) other copyrightable works, (xiii) all technology and trade secrets, (xiv) intellectual property, unique business information, or confidential or proprietary information, and (xv) all similar and related information in whatever form. Confidential Information will not include any information that has been published in a form generally available to the public prior to the date Executive proposes to disclose or use such information. Information will not be deemed to have been published merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination. 2. Product Development. In the event that Executive as part of his activities on behalf of the Company generates, authors or contributes, individually or with the assistance of others, to any invention, design, new development, device, product, method or process (whether or not patentable or reduced to practice or comprising Confidential Information), any copyrightable work (whether or not comprising Confidential Information) or any other form of Confidential Information relating directly or indirectly to the business of the Company or any of its subsidiaries or affiliates as now or hereafter conducted (collectively, the "Intellectual Property"), Executive acknowledges that such Intellectual Property is the exclusive property of the Company and hereby assigns all right, title and interest in and to such Intellectual Property to the Company. Any copyrightable work prepared in whole or in part by Executive will be deemed "a work made for hire" under Section 201(b) of the 1976 Copyright Act, and the Company will own all of the rights comprised in the copyright therein. Executive will cooperate with the Company in all reasonable respects to protect the Company's interests in and rights to such Intellectual Property (including, without limitation, providing reasonable assistance in securing patent protection and copyright registrations and executing all documents as reasonably requested by the Company whether such requests occur prior to or after termination of Executive's employment with the Company). 3. Delivery of Materials Upon Termination of Employment. As requested by the Company from time to time and upon the termination of the Executive's employment with the Company for any reason, Executive will promptly deliver to the Company all copies and embodiments, in whatever form, of all Confidential Information or Intellectual Property in Executive's possession or within his control (including, but not limited to, written records, memoranda, notes, photographs, plans, records, video tapes, audiotapes, other recordings, reports, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information or Intellectual Property) irrespective of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that all such materials have been delivered to the Company. E. NONCOMPETITION 1. Covenant Not to Compete. Executive acknowledges and agrees with the Company that Executive's services to the Company and its subsidiaries are unique in nature and that the Company and its subsidiaries would be irreparably damaged if Executive were to provide similar services to any person or entity competing with the Company or any of its subsidiaries, or engaged in similar business. Executive accordingly covenants and agrees with the Company that during the Employment Period and for two years following the termination of Executive's employment with the Company for any reason (the "Noncompetition Period"), Executive will not, directly or indirectly, either for himself or for any other individual, corporation, partnership, joint venture or other entity, participate in (as defined below) any business (including, without limitation, any division, group or franchise of a larger organization) competing with any of the businesses then conducted (or, to the knowledge of Executive, planned to be conducted within two years) by the Company or any of its successors or then subsidiaries within any geographical area in which the Company or its subsidiaries engage or plan within two years to engage in any such businesses. For purposes of this Agreement, the term "participate in" will include, without limitation, having any direct or indirect interest in any corporation, partnership, joint venture or other entity, whether as a sole proprietor, owner, stockholder, partner, joint venturer, creditor or otherwise, or rendering any direct or indirect service or assistance to any individual, corporation, partnership, joint venture and other business entity (whether as a director, officer, manager, supervisor, employee, agent, consultant or otherwise). 2. Nonsolicitation and Noninterference. During the Noncompetition Period, Executive will not directly or indirectly, on behalf of himself or another entity, (i) induce, attempt to induce, or assist others to induce any artist, composer, songwriter, lyricist, musician, author, writer, editor, programmer, technician, cable operator, employee, consultant, customer, supplier, licensee or other person or entity to terminate its, his or her association with the Company or its subsidiaries, or to cease doing business with the Company or its subsidiaries, or do anything to interfere with the relationship between the Company or its subsidiaries, on the one hand, and any artist, composer, songwriter, lyricist, musician, author, writer, editor, programmer, technician, cable operator, employee, consultant or other person or entity doing business and/or under contract with the Company or any of its subsidiaries, or with whom the Company or any of its subsidiaries is then negotiating, or with whom the Company or any of its subsidiaries enters into any contract or agreement during the Noncompetition Period, or (ii) hire, without the written consent of the Company, any person who was an employee of the Company or any of its subsidiaries at any time within twelve (12) months of the termination of the Employment Period. 3. Limitations. (a) Nothing contained in this Section E shall prevent Executive from owning up to a 5% interest in any corporation or entity having one or more classes of its securities listed on a national securities exchange or market, or publicly traded in the over-the-counter market, provided that Executive is not actively involved in any manner whatsoever in the operation or management of such corporation or entity. (b) If under the circumstances existing at the time of enforcement of this Section E, the period, scope or geographic area described in this Section E shall be found or held to be unreasonable, the parties hereto agree that the maximum period, scope or geographic area reasonable under the circumstances shall be substituted for the stated period, scope or geographic area. F. TERMINATION OF EMPLOYMENT (OTHER THAN SUBSEQUENT TO A CHANGE IN CONTROL). 1. Applicability. This Section F shall apply only to termination of the employment Period prior to the occurrence of a Change in Control (as defined below) during the Employment Period. Termination of the Employment Period following the occurrence of a Change in Control shall be governed by Section H. 2. Events of Termination and Related Payments. (a) Disability. In the event that during the Employment Period Executive should become Disabled, the Company (acting by resolution of the Board) may elect to terminate the Employment Period by written notice to Executive, his guardian or personal representative and Executive, his guardian or personal representative, as the case may be, shall be entitled to receive (i) full compensation pursuant to Section C at his then base salary rate from the date of termination of employment continuing for the lesser of (a) one year following the date of such notice and (b) the remainder of the then effective Employment Period, and (ii) bonus for the calendar year in which Executive's termination of employment occurs as determined in good faith by the Compensation Committee of the Board of Directors in its sole discretion. Notwithstanding the foregoing provisions of this Section F(2)(a), the payments provided herein with respect to any period of Disability shall be reduced by the amount of any benefits payable to Executive, his guardian or personal representative, as the case may be, during such period under any disability or similar plan or program of the Company of any of its subsidiaries in respect of Executive's Disability. (b) Death. In the event of Executive's death during the Employment Period, his personal representative shall be entitled to receive any compensation pursuant to Section C which is accrued and unpaid as of the date of his death. (c) Termination Due to Serious Misconduct. In the event that during the Employment Period Executive should commit Serious Misconduct (as defined below), the Company (acting by resolution of the Board) may elect to terminate the Employment Period by written notice to Executive, and Executive shall be entitled only to any compensation and benefits which are vested but unpaid as of the date of termination of employment. (d) Termination for Reasons Other Than Death, Disability, Serious Misconduct or Voluntary Action by the Executive. In the event that the Employment Period is terminated at the option of the Company for any reason other than for serious misconduct, death, disability, or voluntary action by the Executive, the Executive shall be paid a lump sum payment equal to the lesser of (1) current base salary and target bonus for the remainder of the term hereunder, and (2) a sum equal to twice current base salary and target bonus, and the Company shall pay such sum to Executive within thirty (30) business days following such termination. Executive's voluntary resignation resulting from harassment, unwarranted demotion and/or material diminution of responsibilities shall be governed by the terms of this provision and shall not be considered a voluntary termination as defined in subparagraph (e) hereunder. In the event of such termination, the Company shall reimburse the Executive for the premium paid by the Executive for the continued coverage for the Executive (and any dependents of the Executive covered by the Company's health care plans as of the date of termination) under the Company's health care plan pursuant to COBRA (or any of the mandatory health care continuation law then in effect), such coverage being substantially similar to that provided the Executive on the date of his termination, but such reimbursement shall be only for a period which is of (1) the remainder of the term hereof, and (2) two years from the date of termination. (e) Voluntary Termination by Executive. In the event that Executive, for reasons other than those set forth in subparagraph (d) hereinabove, voluntarily terminates his employment with the Company prior to the end of the Employment Period, the Company shall pay any earned but unpaid portion of Executive's base salary and incentive compensation through the date of his termination provided that the Executive is in full compliance with the provisions of Sections D and E hereof. 3. Definition of Certain Terms. (a) "Disabled" means such physical or mental condition of Executive as is determined by the Company's Board of Directors in its sole discretion to be expected to continue indefinitely and which renders him incapable of performing any substantial portion of the services contemplated hereby (as confirmed by competent medical evidence). (b) "Serious Misconduct" means embezzlement or misappropriation of corporate funds, other acts of dishonesty or reckless or intentional misconduct which is materially harmful to the business or reputation of the Company or its subsidiaries, the conviction of a felony, refusal to perform or disregard of the duties properly assigned by the Chief Executive of the Company or the Board, or a material breach of any of the provisions of Sections D or E above or of any of the other provisions of this Agreement which violations are not cured within sixty (60) days of written notice to the Executive of the breach. 4. Effect of Breach of Noncompetition of Nondisclosure Provisions. In the event Executive materially breaches or otherwise fails to comply in any material respect with the provisions of Sections D or E above, then, in addition to any other remedies provided herein or at law on in equity, the Company shall not have any further obligation to make any additional payments to Executive pursuant to this Termination of such payments pursuant to the preceding sentence shall not relieve Executive's obligations pursuant to Sections D or E above. G. CHANGE IN CONTROL For purposes hereof, a "Change in Control" shall have occurred if: (1) any "person" other than any trustee or other fiduciary holding securities under an employee benefit plan of the Company within the meaning of Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") becomes the "beneficial owner" as defined in Rule 13D-3 thereunder, directly or indirectly, of 20% or more of either the then outstanding shares of the Company's Common Stock (the "Outstanding Company Common Stock") or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Company Voting Securities"); provided, however, that any acquisition by the Company or its subsidiaries, or by Sam Moore, S. Joseph Moore, members of their families, relatives, certain family partnerships, trusts associated with the Moore family and other entities who have as of July 1, 1995 jointly filed a Statement on Schedule 13D under the Exchange Act, or by any reconstituted version of such filing group or any corporation with respect to which, following such acquisition, more than 80% of, respectively, the then outstanding share of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Company Voting Securities immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Company Common Stock and Company Voting Securities, as the case may be, shall not constitute a Change in Control; (2) during any two-year period, individuals who constitute the Board of Directors of the Company (the "Incumbent Board") as of the beginning of the period cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director during such period whose election or nomination for election by the Company's stockholders was approved by an affirmative vote of at least two- thirds of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director without objection to such nomination) shall be, for the purposes of this subparagraph (b), considered as though person were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company (as such terms are used in Rule 14A-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents; or (3) approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the Common Stock and voting securities of the Company immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 80% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation, or a complete liquidation or dissolution of the Company or of the sale or other disposition of all or substantially all of the assets of the Company. Notwithstanding the foregoing, a Change in Control for purposes of this Agreement shall not be considered to occur as a result of a transaction which is approved by the Company's Board of Directors in advance of the transaction and prior to the consummation of the transaction if such transaction is specifically excluded by the Board of Directors from the definition of "Change of Control" for purposes of this Agreement and such exclusion is approved by an affirmative vote of at least two-thirds of the directors then comprising the Incumbent Board. Furthermore, anything in this Agreement to the contrary notwithstanding, if Executive's employment with the Company is terminated prior to the date on which a Change in Control occurs, and if it is reasonably demonstrated by Executive that such termination of employment (1) was at the request of a third party who has taken steps reasonably calculated to effect the Change in Control or (2) otherwise arose in connection with or in anticipation of the Change in Control, then for all purposes of this Agreement, a Change in Control shall be considered to have occurred immediately prior to Executive's employment termination date. In the event the Board adopts any plan or takes any action which, if consummated, would result in a Change in Control of the Company, the Company shall take any action determined by the Board to be necessary or appropriate to ensure the prompt payment when due of any amounts which may thereafter become payable hereunder upon termination by the Company of Executive during the Employment Period, including but not limited to the placement of sufficient funds to pay all such amounts in an escrow account with a bank or other fiduciary institution. On the Change in Control Date, to the extent permitted by law, regardless of date or grant, all stock options previously granted shall be come exercisable and all restrictions on restricted stock shall lapse. All previously deferred compensation (including interest or earnings) shall, at Executive's election, be paid to Executive within 10 days of the Change in Control Date. H. TERMINATION FOLLOWING CHANGE IN CONTROL Following a Change in Control of the Company, the provisions of this Section H shall apply exclusively with respect to (i) the termination of Executive's employment during the Employment Period and (ii) amounts payable to Executive upon such termination. If a Change in Control of the Company shall have occurred, Executive shall be entitled to the benefits provided herein upon Executive's subsequent termination of employment during the Employment Period, unless such termination is (i) because of Executive's death, (ii) by the Company because of Executive's Disability or Serious Misconduct or (iii) by Executive other than for Good Reason. For purposes hereof, "Good Reason" shall mean the occurrence or continuation, without consent of Executive, after a Change in Control of the Company of any of the following events within 24 months after the Change in Control Date: (1) the assignment to Executive of any duties materially inconsistent with the position with the Company that Executive held immediately prior to the Change in Control of the Company, or an adverse change in the status, position or conditions of Executive's employment or the nature of Executive's responsibilities in effect immediately prior to such Change in Control, or any removal of Executive from or any failure to re-elect Executive to any of such positions, except in connection with the termination of his employment by the Company for Serious Misconduct, Disability or death or by Executive other than for Good Reason; (2) a reduction by the Company in Executive's annual base salary as in effect immediately prior to such Change in Control which is not consistent with general compensation reduction for a Senior Executive of the Company. (3) the relocation of Executive' principal office to a location outside a 25 mile radius from Executive's principal office immediately prior to such Change in Control, except for required travel on the Company's business to an extent substantially consistent with Executive's business travel obligations immediately prior to such Change in Control; (4) the failure by the Company to pay to Executive any portion of Executive's salary within seven days of the date such salary is due; (5) the failure by the Company to continue in effect any benefit or compensation plan in which Executive participates immediately prior to the Change in Control which is material to Executive's total compensation, including but not limited to the stock option, employee stock ownership, bonus, insurance, disability and vacation plans which the Company currently has or any substitute or additional plans adopted prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan or plans) has been made with respect to such plan, or the failure by the Company to continue Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of Executive's participation relative to other participants, as in existence immediately prior to such Change in Control; or (6) the failure of the Company to obtain an agreement from any successor to assume and agree to perform this Agreement, as contemplated herein. Executive's right to terminate his employment for Good Reason pursuant to this section shall not be affected by Executive's incapacity due to physical or mental illness. Executive's continued employment shall not constitute consent to, or a waiver of with respect to, any circumstance constituting Good Reason hereunder. In the event of any dispute between Executive and the Company as to whether any event constituting Good Reason shall have occurred, the burden of proving by clear and convincing evidence that such event does not constitute Good Reason shall rest on the Company. Any termination of Executive's employment by the Company or by Executive pursuant to this Section H shall be communicated by written notice of termination (the "Notice of Termination") to the other party hereto, and shall indicate the specific termination provision in the Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment. For the purposes hereof, "Date of Termination" shall mean (i) if Executive's employment is terminated for Disability, 30 days after Notice of Termination is given (provided that Executive shall not have returned to the full-time performance of his duties during such 30 days) or (ii) if Executive's employment is terminated for any other reason other than death, the date specified in the Notice of Termination. I. PAYMENTS UPON TERMINATION SUBSEQUENT TO CHANGE IN CONTROL Following a Change in Control, Executive shall be entitled to the following benefits upon termination of employment during the 36-month period following the Change in Control Date: 1. Death, Disability, Serious Misconduct or Termination by Executive Other Than for Good Reason. Following a termination of Executive's employment because of Executive's death or by the Company because of Executive's Disability or Serious Misconduct or by Executive other than for Good Reason, the Company's only remaining obligations under this Agreement shall be to pay any base salary earned through the Date of Termination plus the amount of any compensation previously deferred by Executive, in each case to the extent theretofore unpaid, and Executive's benefits shall be limited to vested benefits provided under any retirement, insurance and other benefit programs of the Company then in effect determined in accordance with the terms thereof. 2. Other. If the employment shall be terminated by Executive for Good Reason or by the Company other than for death, Disability or Serious Misconduct, Executive shall be entitled to the amounts provided below, such amounts to be paid in cash in a lump sum no later than the tenth business day following the Date of Termination: (a) the Company shall pay to Executive his full base salary, and earned or accrued, but unpaid vacation pay, through the Date of Termination at the rate in effect at such time, plus all other amounts, including but not limited to incentive compensation for a past fiscal year which has not yet been awarded or paid to Executive under incentive plans, programs or arrangements, including any deferred awards (it being understood that with respect to any incentive compensation which has not been awarded, the individual performance component of the award shall be determined on at least the basis that Executive has met all applicable standards) to which Executive is entitled under any compensation or benefit plan of the Company; (b) a lump-sum severance payment (the "Severance Payment") equal to two (2) times the sum of (i) Executive's annual base salary as of the date of termination of employment and (ii) any cash bonus received by Executive in the immediately preceding fiscal year; provided, that such amount shall be paid in lieu of, and Executive hereby waives the right to receive, any other amount of severance relating to salary or bonus continuation to be received by Executive upon termination of employment of Executive under any severance plan, policy or arrangement of the Company; (c) at the election of Executive, the cash-out of any or all of Executive's stock or stock-based awards granted pursuant to both the Thomas Nelson, Inc. 1986 Stock Incentive Plan and the 1992 Employee Stock Incentive Plan at the "Change in Control Price" provisions set for therein. 3. Legal Expenses. In addition to any other amounts payable hereunder, the Company also shall reimburse Executive for all legal fees and expenses reasonably incurred by Executive as a result of any termination of the Employment Period (including all such fees and expenses, if any, incurred in contesting or disputing any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), to any payment of benefit provided hereunder). 4. Continuation of Benefits. For the remainder of the Employment Period, or such longer period as any plan, program, practice or policy may provide the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the plan, programs, practices and policies described in Sections C(3) and (4) of this Agreement if Executive's employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of the Company the its subsidiaries applicable generally to other peer executives and their families during the 90-day period immediately preceding the Change in Control Date or, if more favorable to Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its subsidiaries and their families; provided, however, that if Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility of Executive for retiree benefits pursuant to such plans, practices, programs and policies, Executive shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of the Employment Period. To the extent not theretofore paid to provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive pursuant to this Agreement under any plan, program, policy or practice or contract or agreement of the Company and its subsidiaries, but excluding solely purposes of this Section J(4) amounts waived by Executive pursuant to Section J(2)(b). 5. Certain Reduction in Payments by the Company. For purposes of this Section, (i) a "Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of Executive, whether paid or payable pursuant to this Agreement or otherwise; (ii) an "Agreement Payment" shall mean a Payment paid or payable pursuant to this Agreement (disregarding this Section); (iii) "Net After Tax Receipt" shall mean the Present Value (as defined below) of a Payment net of all taxes imposed on Executive with respect thereto under Sections 1 and 4999 of the Code, determined by applying the highest marginal rate under Section 1 of the Code which applied to Executive's taxable income for the immediately preceding taxable year' (iv) "Present Value" shall mean such value determined in accordance with Section 280G(d)(4) of the Code; and (v) "Reduced Amount" shall mean the smallest aggregate amount of Agreement Payments which (a) is less than the sum of all Agreement Payments and (b) results in aggregate Net After Tax Receipts which are equal to or greater than the Net After Tax Receipts which would result if the aggregate Agreement Payments were any other amount less than the sum of all Agreement Payments. Anything in this Agreement to the contrary notwithstanding, in the event Arthur Andersen LLP (the "Accounting Firm") shall determine that receipt of all Payments would subject Executive to tax under Section 4999 of the Code, the Accounting Firm shall determine whether some amount of Payments would meet the definition of a Reduced Amount. If the Accounting Firm determined that there is a Reduced Amount, the aggregate Payments shall be reduced to such Reduced Amount. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the change in Control, Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. If the Accounting Firm determined that aggregate Agreement Payments should be reduced to the Reduced Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof, and Executive may then elect, in his sole discretion, which and how much of the Agreement Payments shall be eliminated or reduced (as long as after such election the present value of the aggregate Agreement Payments equals the Reduced Amount), and shall advise the Company in writing of his election within 10 days of his receipt of notice. If no such election is made by Executive within such 10- day period, the Company may elect which of such Agreement Payments shall be eliminated or reduced (as long as after such election the present value of the aggregate Agreement Payments equals the Reduced Amount) and shall notify Executive promptly of such election. All determinations made by the Accounting Firm under this Section shall be binding upon the Company and Executive and shall be made within 60 days of a termination of employment of Executive. As promptly as practicable following such determination, the Company shall pay to or distribute for the benefit of Executive such Agreement Payments as are then due to Executive under this Agreement and shall promptly pay to or distribute for the benefit of Executive in the future such Agreement Payments as become due to Executive under this Agreement. While it is the intention of the Company and Executive to reduce the amounts payable or distributable to Executive hereunder only if the aggregate Net After Tax Receipts to Executive would thereby be increased as a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefits of Executive pursuant to this Agreement which should not have been so paid or distributed ("Overpayment") or that additional amounts which will have not been paid or distributed by the Company for the benefit of the Executive pursuant to this Agreement could have been so paid or distributed ("Underpayment"), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based either upon the assertion of a deficiency by the Internal Revenue Service against the Company or Executive which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of Executive shall be treated for all purposes as a loan to Executive which Executive shall repay to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to have been made and no amount shall be payable by the Executive to the Company if an to the extent such deemed loan and payment would not either reduce the amount on which the Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determined that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. 6. Full Settlement. Except as otherwise provided herein, the Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provision of this Agreement and, except as provided to Executive under any of the provisions of this Agreement and, except as provided in Section J(2)(b) of this Agreement, such amounts shall not be reduced whether or not Executive obtains other employment. J. REMEDIES Executive acknowledges that he will receive privileged information from the Company and that he will have substantial access to the Company's trade secrets, business information and personnel data. In consideration of his employment and the privilege of access to the Company's trade secrets, information, business methods and procedures, and personnel data, Executive acknowledges that the restrictions contained within Sections D and E are reasonable and necessary in order to preserve the Company's legitimate interests and that any violation thereof would result in irreparable injury to the Company for which monetary damages would be an inadequate remedy. Therefore, Executive acknowledges and agrees that in the event of any violations thereof, the Company may seek from any court of competent jurisdiction preliminary and permanent injunctive relief as well as an equitable account of all Executive'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 the Company may be entitled. K. SUCCESSORS (a) This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as herein before defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach hereof and shall entitle Executive to terminate his employment for Good Reason. L. NOTICES All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Charles Moore, Senior Vice President Thomas Nelson, Inc. Nelson Place at Elm Hill Pike Nashville, Tennessee 37214-1000 If to the Company: Thomas Nelson, Inc. Nelson Place at Elm Hill Pike Post Office Box 141000 Nashville, Tennessee 37214-1000 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. M. MISCELLANEOUS 1. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of the Agreement. 2. The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 3. Executive's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other promotion or right of this Agreement. N. WAIVERABILITY OF PROVISIONS 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 Executive and an executive officer of the Company. No waiver by either party hereto of the 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. O. ENTIRE AGREEMENT 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. P. 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 or 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. The cost of any such litigation to enforce all or part of this Agreement, including, without limitation, court costs and attorney's 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. IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of the day and year first written above. ACCEPTED BY: THOMAS NELSON, INC. /s/ Charles Moore /s/ Sam Moore - --------------------- -------------------------- Charles Moore Name Senior Vice President CEO -------------------------- Title May 13, 1996 May 13, 1996 - --------------------- -------------------------- Date Date /dld EX-11 9 EXHIBIT 11 STATEMENT RE-COMPUTATION OF PER SHARE EARNINGS
March 31, 1996 March 31, 1995 March 31, 1994 ------------ ------------ ------------- Primary Earnings Per Share: Weighted average shares outstanding 15,718,116 13,374,301 13,355,416 ============ ============ ============= Income (Loss) from continuing operations ($ 6,236,000) $ 12,717,000 $ 9,684,000 Loss from discontinued operations ( 4,678,000) ( 1,007,000) ( 939,000) ------------ ------------ ------------- Income (Loss) before cumulative effect of change in accounting principle ( 10,914,000) 11,710,000 8,745,000 Cumulative effect of change in accounting principle for income taxes -- -- 336,000 ------------ ------------ ------------- Net Income (Loss) ($10,914,000) $ 11,710,000 $ 9,081,000 ============ ============ ============= Income (Loss) Per Share from continuing operations ($ 0.39) $ 0.95 $ 0.72 Loss Per Share from discontinued operations ( 0.30) ( 0.07) ( 0.07) ------------ ------------ ------------- Income (Loss) Per Share before cumulative effect of change in accounting principle ( 0.69) 0.88 0.65 Cumulative effect per share of change in accounting principle for income taxes -- -- 0.03 ------------ ------------ ------------- Net Income (Loss) Per Share ($ 0.69) $ 0.88 $ 0.68 ============ ============ ============= Fully Diluted Earnings Per Share: Weighted average shares outstanding 15,718,116 13,374,301 13,355,416 Convertible Notes 3,235,000 3,235,000 3,235,000 Dilutive stock options - based on treasury stock method using the year- end market price, if higher than the average market price 76,428 111,320 118,014 ------------ ------------ ------------- Total Shares 19,029,544 16,720,621 16,708,430 ============ ============ ============= Income (Loss) from continuing operations ($ 4,218,000) $ 14,848,000 $ 11,881,000 Loss from discontinued operations ( 4,678,000) ( 1,007,000) ( 939,000) ------------ ------------ ------------- Income (Loss) before cumulative effect of change in accounting principle ( 8,896,000) 13,841,000 10,942,000 Cumulative effect of change in accounting principle for income taxes -- -- 336,000 ------------ ------------ ------------- Net Income (Loss) ($ 8,896,000) $ 13,841,000 $ 11,278,000 ============ ============ ============= Income (Loss) Per Share from continuing operations ($ 0.22) $ 0.90 $ 0.72 Loss Per Share from discontinued operations ( 0.25) ( 0.07) ( 0.07) ------------ ------------ ------------- Income (Loss) Per Share before cumulative effect of change in accounting principle ( 0.47) 0.83 0.65 Cumulative effect per share of change in accounting principle for income taxes -- -- 0.02 ------------ ------------ ------------- Net Income (Loss) Per Share ($ 0.47)$ 0.83 $ 0.67 ============ ============ ============= Adjusted for interest on convertible debt Anti-dilutive for 1996; use primary earnings per share
EX-13 10 EXHIBIT 13 SELECTED FINANCIAL DATA
YEARS ENDED March 31, 1996 1995 1994 1993 1992 (Dollars in thousands, except per share data) =========================================================================== OPERATING RESULTS Continuing operations: Net revenues $308,410 $263,711 $225,329 $142,068 $ 98,290 Operating income (loss) ( 287) 27,406 21,307 13,271 10,299 Net income (loss) ( 6,236) 12,717 10,020 7,012 6,338 Net loss from discon- tinued operations ( 4,678) ( 1,007) ( 939) ( 730) ( 514) -------- -------- -------- -------- -------- Total net income (loss) ( 10,914) 11,710 9,081 6,282 5,824 ============================================================================ FINANCIAL POSITION Total assets $373,596 $249,419 $216,325 $194,850 $ 79,726 Working capital 171,417 124,416 104,539 82,711 44,582 Long-term debt and other non-current liabilities 185,649 122,954 107,684 100,070 11,074 Shareholders' equity 122,370 72,729 62,725 55,292 49,043 Current ratio 3.6 3.3 3.3 3.1 3.3 Long-term debt to total capitalization 60.3% 62.8% 63.1% 64.4% 18.4% ============================================================================ PER SHARE DATA Net income (loss) per share from continuing operations ($ .39) $ .95 $ .75 $ .53 $ .51 Net loss per share from discontinued operations ( .30) ( .07) ( .07) ( .06) ( .04) -------- -------- -------- -------- -------- Total net income (loss) per share ( .69) .88 .68 .47 .47 Dividends declared per share .160 .136 .128 .117 .085 Book value per share 7.15 5.42 4.70 4.14 3.70 Weighted average number of shares outstanding (in thousands) 15,718 13,374 13,355 13,268 12,500 ============================================================================ Includes C.R. Gibson operations subsequent to acquisition on October 31, 1995 and Word, Incorporated operations subsequent to acquisition on November 30, 1992. All financial information has been restated to reflect the pooling of interests with PPC, Inc. Per share data has been restated for stock dividends. Operating results and per share data have been restated for discontinued operations. For 1994 net income and per share data from continuing operations includes $336,000 and $0.03, respectively, for accumulated effects of change in accounting principle. During March 1996, the Company adopted plans to sell the Christian- lifestyle magazines and the radio networks of the Royal Media division and the projected loss on disposal and results of operations for this discontinued operation are included herein.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ================================================================= OVERVIEW During the last three fiscal years, the Company's net revenues have grown at a compound annual rate of approximately 29%. This growth in net revenues has resulted from increased sales of the existing product lines and through the development and acquisition of new product lines. In October 1995, the Company acquired The C.R. Gibson Company ("Gibson") for approximately $67 million in cash; in November 1992 the Company acquired Word, Incorporated ("Word") for approximately $72 million in cash; and in March 1994 the Company merged with PPC, Inc. ("Pretty Paper") in exchange for the issuance of 115,551 shares of the Company's Common Stock. The acquisitions of Gibson and Word were accounted for using the purchase method of accounting with the excess of the purchase price over the fair value of the net assets acquired allocated to goodwill of approximately $46 million and $31 million, respectively. The combination with Pretty Paper was accounted for as a pooling of interests. See Note B of Notes to Consolidated Financial Statements. As a result of the acquisition of Word and the further development of the combined product lines, there has been a shift in the Company's product revenue mix with each of music and book products contributing a larger percentage of the Company's net revenues than Bible products. The broader mix of products has also enabled the Company to expand its distribution channels from bookstores to mass market accounts, direct marketing programs, gift stores and specialty retail stores. The acquisition of Gibson and the merger with Pretty Paper expanded the Company's gift product lines and distribution network, which enabled the gift division to grow significantly in fiscal 1996 and fiscal 1995. As a result of operating trends which began to adversely affect fiscal 1996 operating results in the second quarter of the fiscal year, the Company decided during the fourth quarter of the fiscal year to discontinue the operations of its Royal Media division, a division which published magazines and operated radio networks directed toward the Christian markets. The negative operating results of the Royal Media division, together with returns at materially higher levels and reduced fourth quarter sales in its publishing and music divisions and its direct marketing division, were the primary factors which resulted in a net loss of $10.9 million for the 1996 fiscal year, including a $4.7 million loss from the discontinued operations of the Royal Media division. The following table sets forth for the periods indicated certain selected statements 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 Year Ended March 31, Increase (Decrease) ---------------------------- -------------------------- 1996 1995 1994 1995 to 1996 1994 to 1995 ---------------------------- ------------ ------------ (%) (%) (%) (%) (%) Net revenues Publishing: Book 28.6 32.5 34.2 3.1 11.3 Bible 23.9 22.8 23.6 22.2 13.2 ---------------------------- Total publishing 52.5 55.3 57.8 11.0 12.0 Music 28.7 33.8 32.4 ( 0.6) 22.2 Gift 17.8 9.6 8.8 116.3 27.2 Other 1.0 1.3 1.0 ( 7.3) 48.7 ---------------------------- Total net revenues 100.0 100.0 100.0 16.9 17.0 Expenses: Cost of goods sold 56.1 50.4 51.0 30.1 15.7 Selling, general and administrative expenses 43.3 38.5 38.8 31.5 16.0 Amortization of goodwill and non- compete agreements 0.7 0.7 0.7 15.7 11.8 ---------------------------- Total expenses 100.1 89.6 90.5 30.6 15.8 ---------------------------- Operating income (loss) ( 0.1) 10.4 9.5 ( 101.0) 28.6 Income (loss) from continuing operations before income taxes ( 3.4) 7.6 6.5 ( 152.1) 35.4 Loss from discon- tinued operations ( 1.5)( 0.4)( 0.4) 364.5 7.2 Net income (loss) ( 3.5) 4.4 4.0 ( 193.2) 29.0
The Company's net revenues fluctuate seasonally, with net revenues in the second and third fiscal quarters historically being greater than those in the first and fourth fiscal quarters. This seasonality is the result of increased consumer purchases of the Company's products during the traditional year-end holidays. Due to this seasonality, the Company has historically incurred a loss during the first quarter of each fiscal year. In addition, the Company's quarterly operating results may fluctuate significantly due to the seasonality of new product introductions, the timing of selling and marketing expenses and changes in sales and product mixes. See Note N of Notes to Consolidated Financial Statements. The following discussion includes certain forward-looking statements. Actual results could differ materially from those reflected by the forward-looking statements and a number of factors may affect future results, liquidity and capital resources. These factors include softness in the general retail environment, the timing of products being introduced to the market, the level of returns experienced by the operating divisions, the level of margins achievable in the marketplace and the ability to minimize operating expenses. Although the Company believes it has the business strategy and resources needed for improved operations, future revenue and margin trends cannot be reliably predicted and may cause the Company to adjust its business strategy during the 1997 fiscal year. RESULTS OF OPERATIONS Fiscal 1996 compared to Fiscal 1995. Net revenues for fiscal 1996 increased $44.7 million or 16.9% over fiscal 1995 primarily due to volume increases arising from the introduction of new products in the book, Bible and gift product divisions and the purchase of Gibson on October 31, 1995. Net revenues increased for fiscal 1996 over fiscal 1995 in each of the Company's product lines, except music, as follows: gift products increased by $29.5 million or 116.3%; Bible products increased by $13.3 million or 22.2%; book products increased by $2.7 million or 3.1%; and music products decreased by $0.5 million or 0.6%. Of the increase in net revenues derived from gift products, approximately $26 million was attributed to Gibson for fiscal 1996. Price increases did not have a material effect on net revenues. The Company's cost of goods sold for fiscal 1996 increased by $40.1 million or 30.1% over fiscal 1995 and, as a percentage of net revenues, increased from 50.4% to 56.1%. The increase of cost of goods sold, as a percentage of net revenues, was the result of a change in sales mix of market channels as well as additional provisions for obsolescence and unearned royalty advances. Sales through the gift market channels more than doubled from the prior year as a result of the Gibson acquisition while sales through the direct market channels decreased as a percentage of total sales. Sales made through the direct marketing to consumers channel approximate retail prices while sales through the gift market channel are at wholesale prices. Therefore, as gift market channel sales increased and direct marketing sales decreased as a percentage of the total Company's revenues, cost of sales as a percent of revenues increased for fiscal 1996 over 1995. Furthermore, the increased cost of goods sold resulted from a shift in the mix of sales revenues within the Company's music division from propri- etary music products to non-proprietary (distributed) music products. Distributed music products have lower gross margins. This distributed product revenue increase resulted from the timing and popularity of distributed product releases. During the fourth quarter of fiscal 1996, the Company provided for additional product obsolescence and anticipated unearned royalty advances of approximately $6 million greater than in fiscal 1995. These provisions were required as a result of an increase in actual return rates from domestic sales, excluding direct sales to consumers, which primarily occurred during the fourth quarter when return rates increased to 29% from 19% a year ago and had the effect of increasing the return rate for the full year of fiscal 1996 to 17.8% as compared to a return rate of 14.5% during fiscal 1995. Selling, general and administrative expenses for fiscal 1996 increased by $32.0 million or 31.5% over the comparable period in fiscal 1995. These expenses, expressed as a percentage of net revenues, increased to 43.3% for fiscal 1996 from 38.5% for fiscal 1995. These increases resulted from the expansion of certain direct marketing programs beyond the Company's capacity for fulfillment combined with a more competitive direct marketing sales environment which increased advertising, bad debt and freight costs as a percentage of revenues. In addition, these increases resulted from higher than anticipated marketing program costs within the music division incurred to promote sales of proprietary product. The Company has implemented several initiatives to improve operating margins, including staff reductions and limiting the Company's testing of new product offerings and sale of existing product offerings through direct marketing. Interest expense increased 27.7% for fiscal 1996 due to increased average borrowings for the first quarter of the fiscal year for working capital needs and for the third and fourth quarter to fund the Gibson acquisition. The Company's effective tax (benefit) rate in fiscal 1996 was (39.9)% compared to 36.2% for fiscal 1995. This increased rate resulted primarily from higher effective state tax rates. The acquisition of Gibson and expanded sales in states with higher tax rates were contributing factors. See Note M in the notes to consolidated financial statements. The Company had a net loss of approximately $10.9 million for fiscal 1996. Included in that loss is a loss from discontinued operations of approximately $4.7 million as a result of the Company's decision during the fourth quarter to discontinue the Christian-lifestyle magazines and the radio networks of the Royal Media division. The loss from discontinued operations includes an operating loss of approximately $2 million and a net loss from the sales and/or disposal of these operations of $2.6 million with expected completion during fiscal 1997. Fiscal 1995 compared to Fiscal 1994. Net revenues for fiscal 1995 increased by $38.4 million or 17.0% over fiscal 1994 primarily due to volume increases arising from the introduction of new products in each of the Company's product lines. Net revenues increased for fiscal 1995 over fiscal 1994 as follows: music products increased by $16.2 million or 22.2%; book products increased by $8.7 million or 11.3%; Bible products increased by $7.0 million or 13.2%; and gift products increased by $5.4 million or 27.2%. Price increases did not have a material effect on net revenues. The Company's cost of goods sold in fiscal 1995 increased by $18.1 million or 15.7% over fiscal 1994 and, as a percentage of net revenues, decreased slightly to 50.4% in fiscal 1995 from 51.0% in fiscal 1994. The slight decrease in cost of goods sold, as a percentage of net revenues, resulted from a change in the mix of product types and distribution channels. During fiscal 1995, the Company derived a greater percentage of its net revenues from direct marketing which typically have higher gross margins than sales through other distribution channels, and higher music sales as a percentage of total sales, which also have greater gross margins than other product types. Selling, general and administrative expenses for fiscal 1995 increased by $14.0 million or 16.0% over fiscal 1994. These expenses, expressed as a percentage of net revenues, decreased slightly to 38.5% in fiscal 1995 from 38.8% in fiscal 1994 primarily as a result of volume increases and from cost savings resulting from the consolidation of certain operational departments. This improvement was partially offset by increased sales through direct marketing programs, which have relatively higher selling and marketing costs than sales through other distribution channels. Other income for fiscal 1995 increased by $0.7 million over fiscal 1994 due to a gain on the sale of substantially all of the assets of a bindery plant in Camden, New Jersey. See Note B of Notes to Consolidated Financial Statements. Interest expense for fiscal 1995 increased $1.6 million or 22.9% over fiscal 1994 due to increased borrowings and an increase in interest rates. The Company's effective tax rate in fiscal 1995 was 36.2% as compared to 34.2% for fiscal 1994. This increase resulted from an increase in the statutory federal tax rate and proportionately more income in states and foreign countries with higher effective tax rates. See Note M of Notes to Consolidated Financial Statements. LIQUIDITY AND CAPITAL RESOURCES The primary sources of liquidity to meet the Company's future obligations and working capital needs are cash generated from operations and borrowings available under bank credit facilities. At March 31, 1996, the Company had working capital of $171.4 million. At March 31, 1996, the Company had $57.8 million outstanding, and $77.2 million available for borrowing, under its two credit facilities. Net cash used in operating activities was $24.2 million, $8.9 million and $0.7 million in fiscal 1996, 1995 and 1994, respectively. The increase in cash used in operations during fiscal 1996 was principally attributable to the loss from operations and the increase in inventories. Inventories increased by $13.2 million primarily as a result of Bible products inventory increases from the introduction of a new translation and in new Bible styles to be utilized over an extended time period. Accounts receivable decreased by $3.9 million in fiscal 1996. During fiscal 1996, capital expenditures totaled approximately $4.2 million. The majority of this amount related to capital expenditures for computer equipment, convention booth and building improvements. In fiscal 1997, the Company anticipates capital expenditures of approximately $3.8 million, consisting of computer equipment, warehousing and manufacturing equipment and building improvements. The Company's bank credit facilities are unsecured and consist of a $125 million credit facility and a $10 million credit facility (collectively, the "Credit Agreements"). The $125 million 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 and matures on December 13, 2002. The $10 million credit facility, bears interest at the prime rate and matures on July 30, 1997. 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 July 18, 1995, the Company consummated the sale of 2,875,000 shares of its common stock with net proceeds to the Company of approximately $54.4 million. The net proceeds were used to repay a portion of the borrowings under the Credit Agreements. The Company has outstanding $62 million of senior notes ("Senior Notes") which are unsecured. The Senior Notes bear interest at rates from 6.93% to 9.5% due through fiscal 2008. Under the terms of the Credit Agreements and Senior Notes, the Company has agreed to limit the payment of dividends and to maintain certin interest coverage and debt-to-total capital ratios which are similarly calculated for each debt agreement. At March 31, 1996, the Company was in compliance with all covenants of these debt agreements except for the interest coverage ratio as to which agreements have been executed to provide waivers, modified ratios for each fiscal quarter through quarter ending December 31, 1996, and a return to the original ratio of 1.75 to 1 for the fiscal year March 31, 1997. The Company expects to be in compliance with all of its covenants for each quarter of fiscal 1997 although no assurance can be given that such compliance will be maintained. The Company also has outstanding $55 million of 5.75% convertible subordinated notes ("Convertible Subordinated Notes") due November 30, 1999. The Convertible Subordinated Notes presently are convertible into common stock at $17.00 per share and are redeemable at the Company's option after November 30, 1995, at 103.29% of the principal amount, declining annually thereafter to 100% on November 30, 1999. Management believes cash generated by operations and borrowings available under the Credit Agreements will be sufficient to fund anticipated working capital requirements for existing operations through fiscal 1997. CONSOLIDATED STATEMENTS OF OPERATIONS ======================================================================= Thomas Nelson, Inc. and Subsidiaries (Dollars in thousands, except per share data)
Years Ended March 31, --------------------------------- 1996 1995 1994 ---------- ---------- ---------- Net revenues $ 308,410 $ 263,711 $ 225,329 Cost of goods sold 172,956 132,891 114,839 ----------- ---------- ----------- Gross profit 135,454 130,820 110,490 Selling, general and administrative expenses 133,651 101,608 87,567 Amortization of goodwill and non-compete agreements 2,090 1,806 1,616 ---------- ----------- ----------- Operating income (loss) ( 287) 27,406 21,307 Other income 595 897 227 Interest expense 10,691 8,375 6,815 ---------- ----------- ----------- Income (loss) from continuing operations before income taxes ( 10,383) 19,928 14,719 Provision (benefit) for income taxes ( 4,147) 7,211 5,035 ---------- ----------- ----------- Income (loss) from continuing operations before cumulative effect of change in accounting principle ( 6,236) 12,717 9,684 Discontinued operations: Operating loss, net of applicable tax benefits of $1,357, $572, and $488, respectively ( 2,045) ( 1,007) ( 939) Loss on disposal, net of applicable tax benefit of $1,748 ( 2,633) -- -- ---------- ----------- ----------- Loss from discontinued operations ( 4,678) ( 1,007) ( 939) ---------- ----------- ----------- Income (loss) before cumulative effect of change in accounting principle ( 10,914) 11,710 8,745 Cumulative effect of change in accounting principle for income taxes -- -- 336 ---------- ----------- ----------- NET INCOME (LOSS) ($ 10,914) $ 11,710 $ 9,081 ========== =========== =========== Weighted average number of shares outstanding 15,718 13,374 13,355 ========== =========== =========== NET INCOME (LOSS) PER SHARE: Income (loss) from continuing operations ($ .39) $ .95 $ .72 Loss from discontinued operations ( .30) ( .07) ( .07) ---------- ----------- ----------- Income (loss) before cumulative effect of change in accounting principle ( .69) .88 .65 Cumulative effect of change in accounting principle -- -- .03 ---------- ----------- ----------- NET INCOME (LOSS) ($ .69) $ .88 $ .68 ========== =========== =========== Fully diluted: Income (loss) from continuing operations ($ .39) $ .90 $ .72 Loss from discontinued operations ( .30) ( .07) ( .07) ---------- ----------- ----------- Income (loss) before cumulative effect of change in accounting principle ( .69) .83 .65 Cumulative effect of change in accounting principle -- -- .02 ---------- ----------- ----------- NET INCOME (LOSS) ($ .69) $ .83 $ .67 ========== =========== ===========
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS ====================================================================== Thomas Nelson, Inc. and Subsidiaries (Dollars in thousands, except per share data)
March 31, ---------------------------- 1996 1995 ------------ ------------ ASSETS Current assets Cash and cash equivalents $ 672 $ 767 Accounts receivable, less allowances of $10,959 and $9,001, respectively 99,221 84,725 Income tax refunds receivable 4,440 870 Inventories, net 97,496 69,351 Prepaid expenses 18,045 14,725 Deferred tax asset 17,120 7,714 ------------ ------------ Total current assets 236,994 178,152 Other assets 19,347 19,855 Property, plant and equipment, net 36,634 16,084 Deferred charges 3,658 4,149 Goodwill, less accumulated amortization of $3,353 and $2,046, respectively 76,963 31,179 ------------ ------------ TOTAL ASSETS $ 373,596 $ 249,419 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 30,158 $ 32,419 Accrued expenses 28,858 19,108 Dividends payable 685 537 Current portion of long-term debt 2,376 892 Current portion of capital lease obligations 249 780 Net liability of discontinued operations 3,251 -- ------------ ------------ Total current liabilities 65,577 53,736 Long-term debt 179,489 120,108 Capital lease obligations 527 80 Deferred tax liability 3,127 1,410 Other liabilities 2,506 1,356 Commitments and contingencies Shareholders' equity Preferred stock, $l.00 par value, authorized l,000,000 shares; none issued -- -- Common stock, $1.00 par value, authorized 20,000,000 shares; issued 16,004,368 and 12,362,377, respectively 16,004 12,362 Class B common stock, $l.00 par value, authorized 5,000,000 shares; issued 1,112,075 and 1,067,094, respectively 1,112 1,067 Additional paid-in capital 78,825 18,211 Retained earnings 26,952 40,538 Deferred compensation ( 828) -- Foreign currency translation adjustments 305 551 ------------ ------------ Total shareholders' equity 122,370 72,729 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 373,596 $ 249,419 ============ ============
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ====================================================================== Thomas Nelson, Inc. and Subsidiaries (Dollars in thousands, except per share data)
Foreign Class B Additional Currency Deferred Common Common Paid-in Retained Translation Compensa- Stock Stock Capital Earnings Adjustments tion -------- ------- -------- --------- ----------- -------- Balance at April 1, 1993 $ 9,877 $ 805 $ 20,667 $ 23,463 $ 480 $ -- Net income 9,081 Common stock issued: Option plans - 9,000 common 9 36 Dividends declared - $0.128 ( 1,696) PPC, Inc. common stock: Dividends declared ( 197) Net issued 279 Foreign currency translation adjustments ( 79) Class B common stock converted to common stock 5 ( 5) -------- ------- -------- --------- ----------- -------- Balance at March 31, 1994 9,891 800 20,982 30,651 401 -- Net income 11,710 Common stock issued: Option plans - 10,500 common and 60,000 Class B common shares 11 60 306 Retirement for option payments 15,038 common and 180 Class B common shares ( 15) ( 348) Dividends declared - $0.136 ( 1,823) Executive Stock Purchase Plan Retired 2,255 shares of common ( 2) ( 26) Foreign currency translation adjustments 150 Stock dividend - 25% 2,471 213 ( 2,703) Class B common stock converted to common stock 6 ( 6) -------- ------- -------- --------- ----------- -------- Balance at March 31, 1995 12,362 1,067 18,211 40,538 551 -- Net loss ( 10,914) Common stock issued: Option plans - 26,738 common and 18,750 Class B common shares 27 19 153 Retirement for option payments 7,349 common shares ( 7) ( 141) Incentive plan stock awards - 49,294 common shares and 26,250 Class B common shares 49 26 614 Common stock offering 2,875 51,521 C.R. Gibson ESOP - 698,308 common shares 698 8,467 Dividends declared - $0.16 ( 2,672) Deferred compensation ( 828) Foreign currency translation adjustments ( 246) -------- ------- -------- --------- ----------- -------- Balance at March 31, 1996 $16,004 $ 1,112 $ 78,825 $ 26,952 $ 305 ($ 828) ======== ======= ======== ========= =========== =======
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF CASH FLOWS ====================================================================== Thomas Nelson, Inc. and Subsidiaries
(Dollars in thousands) Years Ended March 31, ---------------------------------- 1996 1995 1994 ---------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ($ 6,236) $ 12,717 $ 10,020 Adjustments to reconcile net income to net cash provided by (used in) operations: Depreciation and amortization 9,018 5,862 5,343 Deferred income taxes ( 3,924) 5,601 ( 1,062) Cumulative effect of change in accounting principle -- -- ( 336) Effect of exchange rate changes on cash ( 23) 2 ( 7) Loss (gain) on sale of property, plant and equipment ( 449) ( 702) 61 Deferred compensation 222 -- -- Changes in assets and liabilities, net of acquisitions and disposals: Accounts receivable, net 3,918 ( 26,853) ( 8,685) Income tax refunds receivable ( 3,570) ( 870) -- Inventories ( 13,200) ( 2,713) ( 13,025) Prepaid expenses ( 1,116) ( 7,841) ( 800) Accounts payable and accrued expenses ( 8,336) 12,194 3,651 Income taxes currently payable and deferred -- ( 4,471) 5,244 ----------- ---------- ---------- Net cash provided by (used) in continuing operations ( 23,696) ( 7,074) 404 ----------- ---------- ---------- Discontinued operations: Loss from discontinued operations ( 2,045) ( 1,007) ( 939) Loss on disposal of discontinued operations ( 2,633) -- -- Items not affecting cash, net 4,503 -- -- Cash used for discontinued operations ( 362) ( 867) ( 193) ----------- ---------- ---------- Net cash used by discontinued operations ( 537) ( 1,874) ( 1,132) ----------- ---------- ---------- Net cash used in operating activities ( 24,233) ( 8,948) ( 728) ----------- ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 4,194) ( 2,191) ( 2,284) Proceeds from sale of property, plant and equipment 854 23 34 Proceeds from sale of business assets -- 2,823 4,155 Purchase of net assets of acquired companies - net of cash received ( 70,217) ( 187) -- Changes in other assets and deferred charges ( 1,809) ( 4,975) ( 5,487) ----------- ---------- ---------- Net cash used in investing activities ( 75,366) ( 4,507) ( 3,582) ----------- ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings (payments) under line of credit ( 1,000) 18,300 9,298 Proceeds from issuance of long-term debt 50,000 -- -- Payments on long-term debt ( 9,375) ( 892) ( 195) Payments on capital lease obligations ( 901) ( 723) ( 566) Changes in other liabilities ( 774) ( 1,646) ( 2,542) Dividends paid ( 2,524) ( 1,713) ( 1,888) Proceeds from issuance of common stock 64,449 377 433 Common stock retired ( 148) ( 391) ( 108) ----------- ---------- ---------- Net cash provided by financing activities 99,727 13,312 4,432 ----------- ---------- ---------- EFFECT OF TRANSLATION RATE CHANGES ( 223) 148 ( 72) ----------- ---------- ---------- Net increase (decrease) in cash and cash equivalents ( 95) 5 50 Cash and cash equivalents at beginning of year 767 762 712 ----------- ---------- ---------- Cash and cash equivalents at end of year $ 672 $ 767 $ 762 =========== ========== ========== Supplemental disclosures of noncash investing and financing activities: Non-compete agreements $ -- $ -- $ 300 Capital lease obligations incurred to lease new equipment $ 674 $ -- $ 764 Dividends accrued and unpaid $ 685 $ 537 $ 428
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================= Thomas Nelson, Inc. and Subsidiaries 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 books and recorded music emphasizing Christian, inspirational and family value themes. The Company also designs and markets a broad line of gift and stationery products. The principal markets for the Company's products are Christian bookstores, general bookstores, mass merchandisers, gift stores 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, Word, Incorporated ("Word"), The C.R. Gibson Company ("Gibson"), and PPC, Inc. ("Pretty Paper"). See Note B for additional information. The consolidated statement of operations for the year ended March 31, 1996, includes Gibson operations for the five months ended March 31, 1996. All financial data presented in the consolidated financial statements and notes thereto have been restated for all periods shown to include the accounts of Pretty Paper under the pooling-of-interests method of accounting. All intercompany transactions and balances have been eliminated. SALES RETURNS: Provision is made for the estimated effect of sales returns where right-of-return privileges exist. Returns of products from customers are accepted in accordance with standard industry practice. The full amount of the returns allowance (estimated returns to be received net of inventory and royalty costs) is shown, along with the allowance for doubtful accounts, as a reduction of accounts receivable in the accompanying financial statements. INVENTORIES: Inventories are stated at the lower of cost or market using the first-in, first-out (FIFO) valuation method. Costs of the production and publication of products are included in inventory and charged to operations when sold or when otherwise disposed. Costs of abandoned publishing projects and appropriate provisions for inventory obsolescence and decreases in market value are charged to operations on a current basis. 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. GOODWILL: Goodwill is being amortized on a straight-line basis over forty years. Subsequent to acquisitions, the Company continually evaluates whether later events and circumstances have occurred that indicate the remaining estimated useful life of goodwill may warrant revision or that the remaining balance of goodwill may not be recoverable. In the evaluation of possible impairment, the Company uses the most appropriate method of evaluation given the circumstances surrounding the particular acquisition, which has generally been an estimate of the related business unit's undiscounted operating income before interest and taxes over the remaining life of the goodwill. PREPAID EXPENSES: Prepaid expenses consist primarily of royalty advances and certain production costs of music products. 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. Also included are 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 to exceed 60 months. OTHER ASSETS: Other assets consist primarily of costs of copyright production masters which are amortized over periods not to exceed 60 months, a non-compete agreement related to the Word acquisition which is being amortized over 60 months (the term of the agreement), prepaid royalty and production advances for works and projects which are not expected to be released within the next fiscal year and direct marketing costs expected to benefit future periods. INCOME TAXES: Income taxes are accounted for in accordance with SFAS 109, "Accounting for Income Taxes." Deferred income taxes are provided for temporary differences between the financial statement and income tax basis of assets and liabilities. The Company had adopted SFAS 109 effective April 1, 1993, the first day of its fiscal 1994 operations. See Note M for additional information. FOREIGN CURRENCY TRANSLATION: Assets and liabilities of foreign subsidiaries are translated at year-end rates of exchange and revenues and expenses are translated at the average rate of exchange for the year. Gains and losses resulting from translation are accumulated in a separate component of shareholders' equity. Gains and losses resulting from foreign currency transactions are not material. COMPUTATION OF NET INCOME PER SHARE: Net income per share is computed by dividing net income by the weighted average number of common and Class B common shares outstanding during the year, which includes the additional dilution related to stock options. The fully diluted per share computation reflects the effect of common shares contingently issuable upon conversion of convertible debt securities in periods in which such exercise would cause dilution and the effect on net income of converting the debt securities. STATEMENT OF CASH FLOWS: For purposes of the statement of cash flows, the Company considers as cash equivalents all highly liquid debt instruments with a maturity of three months or less. ACCOUNTING ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. NEWLY ISSUED ACCOUNTING STANDARD: In 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of" ("SFAS 121"). Adoption of SFAS 121 is required for fiscal years beginning after December 15, 1995. Although the Company does not plan to adopt SFAS 121 until fiscal 1997, it has determined that the adoption of the pronouncement will not have a material impact on its financial statements. RECLASSIFICATIONS: Certain reclassifications of prior period amounts have been made to conform to the current year's presentation. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) ================================================================= Thomas Nelson, Inc. and Subsidiaries NOTE B-ACQUISITIONS AND DISPOSITIONS In March 1994, Pretty Paper became a wholly-owned subsidiary of the Company, and 115,551 shares of the Company's common stock were issued in exchange for all of the outstanding common stock of Pretty Paper. The combination was accounted for as a pooling of interests, and accordingly, the accompanying financial statements have been restated to include the accounts and operations of Pretty Paper for all periods prior to the combination. The Company completed its $9.00 per share cash tender offer effective October 31, 1995, for the outstanding shares of common stock of Gibson for approximately $67 million. The purchase price was funded by the Company's issuance of $50 million of the Company's Senior Notes and by borrowings under the Company's Credit Agreements. See Note H for additional information. Gibson, headquartered in Norwalk, Connecticut, manufactures and markets a wide range of paper, gift and stationery products, primarily under the C.R. Gibson, Creative Papers and Clinton Prints brand names. Products include baby and wedding memory books, stationery, giftwrap, greeting cards and paper tableware. The Gibson acquisition has been accounted for as a purchase, and Gibson's results of operations are included in the Company's consolidated financial statements since the date of acquisition. The total acquisition cost has been allocated to the net assets acquired based on the information currently available as to the estimated fair values. An evaluation of the acquired assets and liabilities is in progress. Upon completion of the evaluation, net additions or reduction, if any, in the fair values currently assigned will be credited, or charged, to cost in excess of fair value of assets acquired (goodwill). The purchase price has been tentatively allocated to the purchased assets and assumed liabilities as follows (in thousands): Working capital, net $ 7,428 Property, plant and equipment, net 20,138 Goodwill 45,974 Other assets 9,607 Other liabilities ( 15,743) --------- $ 67,404 ========= The following unaudited pro forma information combines the consolidated results of operations of the Company and Gibson as if the acquisition had occurred on April 1, 1994, after giving effect to amortization of goodwill and interest expense on borrowings to finance the acquisition. The pro forma information is not necessarily indicative of the results of operations which would have actually been obtained during such periods. While the Company believes that it will realize certain long-term synergies through the integration of certain operating functions, there can be no assurances that such synergies can be realized, and no amounts have been reflected in the pro forma adjustments to reflect such anticipated synergies.
Unaudited Years Ended March 31, ---------------------- 1996 l995 --------- --------- (In thousands, except per share data) Net revenues $ 348,939 $ 314,132 Net income (loss) from continuing operations ($ 12,415) $ 11,860 Net income (loss) per share from continuing operations ($ .79) $ .89
NOTE C-INVENTORIES Inventories consisted of the following at March 31 (in thousands):
1996 l995 --------- --------- Finished goods $ 77,318 $ 59,116 Work in process and raw materials 20,178 10,235 --------- --------- $ 97,496 $ 69,351 ========= =========
NOTE D-PREPAID EXPENSES Prepaid expenses consisted of the following at March 31 (in thousands):
1996 1995 --------- --------- Royalties and production costs $ 16,236 $ 11,516 Other 1,809 3,209 --------- --------- $ 18,045 $ 14,725 ========= =========
NOTE E-PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following at March 31 (in thousands):
1996 l995 --------- --------- Land $ 4,948 $ 1,916 Buildings 19,885 11,314 Machinery and equipment 25,317 8,817 Furniture and fixtures 4,541 3,521 Assets under capital leases 3,475 2,800 --------- --------- 58,166 28,368 Less allowance for depreciation and amortization ( 21,532) ( 12,284) --------- --------- $ 36,634 $ 16,084 ========= =========
NOTE F-OTHER ASSETS Other assets consisted of the following at March 31 (in thousands):
1996 l995 --------- --------- Prepaid royalties $ 10,531 $ 9,050 Direct marketing costs 1,605 4,562 Production masters, net of accumulated amortization of $1,785 and $1,267, respectively 1,734 2,089 Non-compete agreements, net of accumulated amortization of $3,059 and $2,121, respectively 1,744 2,682 Other 3,733 1,472 --------- --------- $ 19,347 $ 19,855 ========= =========
NOTE G-ACCRUED EXPENSES Accrued expenses consisted of the following at March 31 (in thousands):
1996 l995 --------- --------- Accrued royalties $ 12,361 $ 10,992 Accrued payroll 6,111 4,960 Accrued integration costs 3,296 -- Accrued interest 3,263 1,247 Other 3,827 1,909 --------- --------- $ 28,858 $ 19,108 ========= =========
Cash payments for interest were $9.6 million in 1996, $8.0 million in 1995 and $6.2 million in 1994. NOTE H-LONG-TERM DEBT Long-term debt consisted of the following at March 31 (in thousands):
1996 1995 --------- --------- Industrial Revenue Bonds, 7.75% to 8.35%, due through 2005 $ 2,475 $ 2,700 Loan Agreement 3,667 4,333 Credit Agreements 57,800 58,800 Senior Notes 62,000 -- Convertible Subordinated Notes 55,000 55,000 Other 923 167 --------- --------- 181,865 121,000 Less current portion ( 2,376) ( 892) --------- --------- $ 179,489 $ 120,108 ========= =========
At March 31, 1996, Industrial Revenue Bonds were secured by property, plant and equipment with a net book value of approximately $2.1 million. The Loan Agreement indebtedness is secured by property, plant and equipment related to the Company's Nashville warehouse and distribution center expansion completed in June 1992. Interest payable monthly is at the London Interbank Offered Rate ("LIBOR") plus 1.25%, which was 6.6875% at March 31, 1996. Semi- annual principal payments are due through March 2002. The Company has Credit Agreements totaling $135 million as of March 31, 1996. In January 1996, the primary credit facility ("Credit Facility") was amended to provide $125 million maturing in fiscal 2003. The Credit Facility bears interest at either the prime rate or, at the Company's option, the LIBOR plus a percentage, based on certain financial ratios. At March 31, 1996, the average interest rate was 6.0%. The Credit Facility is guaranteed by all of the Company's material subsidiaries and the Company has agreed, among other things, to limit the payment of cumulative cash dividends and to maintain certain interest coverage and debt-to-total-capital ratios. The maximum dividends which the Company may pay for fiscal 1997 are $2.9 million. Additionally, the Company has a $10 million credit facility which matures July 30, 1997, and bears interest at the prime rate, with covenants which are the same as the Credit Facility. At March 31, 1996, the Company was in compliance with all covenants of the Credit Agreements or had obtained appropriate waivers. At March 31, 1996, the Company had $77.2 million available under its Credit Agreements. The Company has outstanding $62 million of Senior Notes which bear interest at rates from 6.93% to 9.5% and are due through fiscal 2008. 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. The maximum dividends which the Company may pay for fiscal 1997 are $2.9 million. At March 31, 1996, the Company was in compliance with all covenants of the Senior Notes or had obtained appropriate waivers. The Company has issued $55 million of Convertible Subordinated Notes due November 30, 1999, priced at par to yield 5.75%. The notes are convertible into common stock initially at $17.00 per share and are redeemable at the Company's option after November 30, 1995, at 103.29% of the principal amount, declining thereafter to 100% on November 30, 1999. This conversion would result in 3,235,294 additional shares outstanding. Maturities of long-term debt for the years ending March 31, are as follows (in thousands): 1997 $ 2,376 1998 3,780 1999 4,838 2000 60,889 2001 3,889 2002 and thereafter 106,093 --------- $ 181,865 ========= NOTE I-LEASES Total rental expense for all operating leases, including short-term leases of less than a year, amounted to approximately $3.1 million in 1996, $2.2 million in 1995, and $2.2 million in 1994. 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 leases for the years ending March 31, are as follows (in thousands):
Operating Capital Leases Leases --------- --------- 1997 $ 2,981 $ 249 1998 2,159 289 1999 1,643 254 2000 564 89 2001 428 -- 2002 and thereafter 1,845 -- --------- --------- Total minimum lease payments $ 9,620 881 ========= Less amount representing interest ( 105) --------- Present value of net lease payments 776 Less current portion ( 249) --------- $ 527 =========
NOTE J-STOCK PLANS 1986 STOCK INCENTIVE PLAN: The Company adopted the 1986 Stock Incentive Plan, which is administered by the Company's Compensation Committee. Stock options were granted under the 1986 Stock Incentive Plan at a price not less than the fair market value ("FMV") of the stock on the date the option is granted and must be exercised not later than five years after the date of grant. Stock options issued to a person then owning more than 10% of the voting power in all classes of the Company's outstanding stock were granted at a purchase price of not less than 110% of the FMV and must be exercised within five years from the date of grant. The 1986 Stock Incentive Plan terminated in March 1996 and options outstanding remain in effect until exercised or expired. Options outstanding under this plan are as follows: CAPTION COMMON STOCK CLASS B COMMON STOCK FMV --------------------- ---------------------- ------------- Remaining Out- Remaining Out- Shares standing Shares standing Exercise Reserved Optioned Reserved Optioned Prices For Grant Shares For Grant Shares Per Share ---------- --------- ---------- ---------- -------------- April 1, 1993 56,738 46,500 190,487 75,000 $ 5.00-$ 6.23 Exercised -- ( 9,000) -- -- 5.00 Cancelled 1,500 ( 1,500) -- -- 5.00 ---------- --------- ---------- ---------- -------------- March 31, 1994 58,238 36,000 190,487 75,000 5.00- 6.23 Granted ( 60,238) 200,000 ( 189,762) 50,000 14.40- 18.40 Stock Dividend -- 54,750 181 16,250 ( 1.00)-(1.83) Exercised -- ( 15,000) -- ( 60,000) 4.00- 4.40 Cancelled 2,000 ( 2,000) -- -- 4.00 ---------- --------- ---------- ---------- -------------- March 31, 1995 -- 273,750 906 81,250 4.00- 18.40 Exercised -- ( 21,094) -- ( 18,750) 4.00 Cancelled 29,344 ( 29,344) -- -- 4.00 Plan terminated ( 29,344) -- ( 906) -- -- ---------- --------- ---------- ---------- -------------- March 31, 1996 -- 223,312 -- 62,500 $14.40-$15.84 ========== ========= ========== ========== ==============
1990 DEFERRED COMPENSATION OPTION PLAN FOR OUTSIDE DIRECTORS: The Company has adopted the 1990 Deferred Compensation Option Plan for Outside Directors, which is administered by the Company's Compensation Committee. Options may be awarded, on or prior to the annual meeting of shareholders or on initial election to the Board of Directors ("Board"), to each Director of the Company who files with the Company an irrevocable election to receive options in lieu of not less than fifty percent (50%) of the retainer fees to be earned during each fiscal year. The option price shall be $1.00 per share with the number of shares being determined by dividing the amount of the annual retainer fee by the fair market value of the shares on the option date less $1.00 per share. The amount of annual retainer fee for options is expensed by the Company as earned. Options granted and outstanding under this plan are as follows:
COMMON STOCK -------------------------- Remaining Shares Outstanding Reserved Optioned For Grant Shares --------- --------- April 1, 1993 132,105 8,597 Granted ( 3,840) 3,840 --------- --------- March 31, 1994 128,265 12,437 Stock Dividend 31,023 4,153 Granted ( 4,175) 4,175 --------- --------- March 31, 1995 155,113 20,765 Granted ( 3,030) 3,030 --------- --------- March 31, 1996 152,083 23,795 ======== =========
1992 EMPLOYEE STOCK INCENTIVE PLAN: The Company has adopted the 1992 Amended and Restated Employee 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. In addition, for fiscal 1995 and 1996, restricted stock awards were granted. Under the provision of the restricted stock awards, employees may earn 50% of the award in fiscal years 1995 and 1996 based upon achieving performance goals in each year provided the employee does not terminate his or her employment for two years subsequent to when an award is earned. During fiscal 1996, the Company issued 51,376 shares of common stock and 24,168 shares of Class B common stock pursuant to such restricted stock awards. Compensation expense of $0.7 million related to this plan was recognized during fiscal 1996.
Outstanding Outstanding FMV Remaining Award Shares Option Shares -------- Shares --------------- -------------- Exercise Reserved Common Class B Common Class B Prices For Grant Stock Stock Stock Stock Per Share --------- -------- ------- ------- ------- --------- Balance at April 1, 1994 750,000 -- -- -- -- $ -- Awards Granted ( 187,084) 132,084 55,000 -- -- -- Stock Dividend 187,500 -- -- -- -- -- ---------- -------- -------- ------- ------- --------- Balance at March 31, 1995 750,416 132,084 55,000 -- -- -- Awards Cancelled 21,136 ( 17,804) ( 3,332) -- -- -- Awards Issued -- ( 51,376) (24,168) -- -- -- Options Granted ( 635,500) -- -- 305,500 330,000 18.375 Shares Authorized 1,202,500 -- -- -- -- -- ---------- -------- -------- ------- ------- -------- Balance at March 31, 1996 1,338,552 62,904 27,500 305,500 330,000 $ 18.375 ========== ======== ======== ======= ======= ========
NOTE K-RETIREMENT PLANS The Company has adopted the Thomas Nelson, Inc. Employee Stock Ownership Plan ("Company ESOP") which includes a 401(k) 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 ESOP 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, at its discretion, matches each Gibson employee's 401(k) contributions annually and contributes 4% of the first $6,600 of a participant's compensation in the Gibson 401(k) Plan. Annual contributions to the Gibson ESOP are a percentage of compensation in accordance with the plan provisions and are used to repay the loan to the Company and to acquire additional shares of common stock. The shares acquired by the Gibson ESOP through the loan are released and allocated to the participants as the loan is paid by contributions. The Company's contributions to these retirement plans including matching contributions totaled $1.5 million, $1.0 million and $0.9 million in 1996, 1995 and 1994, respectively. NOTE L-COMMON STOCK On March 24, 1995, the Company effected a five-for-four stock split in the form of a 25% stock dividend. All common stock, Class B common stock, dividends per share and earnings per share data has been restated to reflect this five-for-four stock split. On July 24, 1995, the Company sold 2,875,000 shares of Common Stock at $20.00 per share to a group of underwriters in a registered public offering. The net proceeds to the Company of approximately $54.6 million were used to repay amounts outstanding under the Company's bank Credit Agreements. NOTE M-INCOME TAXES The Company adopted SFAS 109 "Accounting for Income Taxes" effective April 1, 1993. The adoption of SFAS 109 at the inception of its fiscal 1994 resulted in a cumulative effect of change in accounting principle of $0.3 million, or $.03 per share, and is reported in the consolidated statement of operations for fiscal year ended March 31, 1994. The income tax provision is comprised of the expense (benefit) as follows (in thousands):
1996 1995 1994 -------- -------- -------- Current: U.S. federal ($ 3,604) $ 97 $ 4,973 State 150 839 417 Foreign 126 102 219 -------- -------- -------- Total current ( 3,328) 1,038 5,609 Deferred ( 3,924) 5,601 ( 1,062) -------- -------- -------- Total tax provision ($ 7,252) $ 6,639 $ 4,547 ======== ======== ========
SFAS 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 of $14.0 million will be realized on future tax returns, primarily from the generation of future taxable income. The net deferred tax asset is comprised of the following (in thousands):
1996 1995 -------- -------- Accelerated depreciation ($ 2,913) ($ 1,396) Deferred charges ( 779) ( 424) Contributions 1,663 450 Inventory obsolescence reserve 4,748 3,032 Bad debt and returns reserves 4,051 3,298 Inventory-unicap tax adjustment 3,142 3,486 Advances and prepaid expenses 2,478 1,540 Accrued liabilities 3,559 1,442 Discontinued operations 1,665 -- Other 1,769 ( 51) Valuation allowance ( 5,390) ( 5,073) -------- -------- Net deferred tax asset $ 13,993 $ 6,304 ======== ========
Reconciliation of the statutory federal income tax rate to the Company's effective rate is as follows:
1996 1995 1994 -------- -------- -------- U.S. federal statutory tax rate provision (benefit) ( 34.0%) 34.5% 34.2% State taxes on income ( 6.7%) 4.6% 3.1% Other .8% ( 2.9%)( 3.1%) -------- -------- -------- Effective tax rate ( 39.9%) 36.2% 34.2% ======== ======== ========
Cash payments for income taxes were $0.9 million, $6.0 million, and $0.4 million in 1996, 1995 and 1994, respectively. NOTE N-QUARTERLY RESULTS (UNAUDITED) Summarized results for each quarter in the fiscal years ended March 31, 1996 and 1995 are as follows (dollars in thousands, except per share data):
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter ----------- ----------- ----------- ----------- 1996 - ----- Net revenues $ 60,299 $ 80,531 $ 86,238 $ 81,342 Gross profit $ 31,721 $ 37,393 $ 40,716 $ 25,624 Net income (loss) from continuing operations ($ 86) $ 3,943 $ 2,081 ($ 12,174) Net loss from discontinued operations ($ 272) ($ 501) ($ 433) ($ 3,470) Net income (loss) ($ 358) $ 3,442 $ 1,648 ($ 15,646) Net income (loss) per share from continuing operations ($ 0.01) $ 0.25 $ 0.13 ($ 0.72) Net loss per share from discontinued operations ($ 0.02) ($ 0.03) ($ 0.03) ($ 0.21) Net income (loss) per share ($ 0.03) $ 0.22 $ 0.10 ($ 0.93) 1995 - ----- Net revenues $ 48,874 $ 70,177 $ 70,761 $ 73,899 Gross profit $ 23,696 $ 34,926 $ 35,386 $ 36,812 Net income (loss) from continuing operations ($ 445) $ 6,065 $ 5,022 $ 2,075 Net loss from discontinued operations ($ 99) ($ 442) ($ 207) ($ 259) Net income (loss) ($ 544) $ 5,623 $ 4,815 $ 1,816 Net income (loss) per share from continuing operations ($ 0.03) $ 0.45 $ 0.38 $ 0.16 Net loss per share from discontinued operations ($ 0.01) ($ 0.03) ($ 0.02) ($ 0.02) Net income (loss) per share ($ 0.04) $ 0.42 $ 0.36 $ 0.14
NOTE O-COMMITMENTS AND CONTINGENCIES The Company has commitments to provide advances to certain artists and authors in connection with products they are developing for the Company. Estimated commitments totaled $23.9 million at March 31, 1996. The timing of payments will be dependent upon the performance by the authors and artists of conditions provided in the applicable contracts. It is anticipated that a substantial portion of the commitments will be completed within the next five years. The Company is subject to various 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 P-FINANCIAL INSTRUMENTS The following disclosure of estimated fair value of financial instruments as of March 31, 1996 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, 1996 and 1995, respectively. The estimates presented are not necessarily indicative of amounts the Company could realize in a current market transaction (in thousands):
1996 1995 -------------------- ---------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value -------------------- ---------------------- CASH AND CASH EQUIVALENTS $ 672 $ 672 $ 767 $ 767 LONG-TERM DEBT: Industrial Revenue Bonds $ 2,475 $ 2,475 $ 2,700 $ 2,700 Capital Lease Obligations $ 776 $ 776 $ 860 $ 860 Loan Agreement $ 3,667 $ 3,667 $ 4,333 $ 4,333 Credit Agreements $ 57,800 $ 57,800 $ 58,800 $ 58,800 Senior Notes $ 62,000 $ 58,733 -- -- Convertible Subordinated Notes $ 55,000 $ 57,200 $ 55,000 $ 65,450
The fair values of the Convertible Subordinated Notes and the Senior Notes are based on the unofficial market for these privately placed instruments. The carrying value of the Company's Credit Agreements and Loan Agreement approximates 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 and the Capital Lease Obligation approximates the fair value. Outstanding letters of credit totaled $3.6 million and $4.1 million as of March 31, 1996 and 1995, respectively. 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, 1996 and 1995. Financial instruments which 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 Q-DISCONTINUED OPERATIONS During March 1996, the Company adopted plans to sell the Christian-lifestyles magazines and the radio networks of the Company's Royal Media division. These operations are 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. Net revenues, operating costs and expenses, other income and expense, and income taxes for all periods presented have been reclassified for amounts associated with the discontinued operations. Sales, losses and income tax benefits associated with the discontinued operations were as follows (in thousands):
1996 1995 1994 ---------- ---------- ---------- Net revenues $ 3,258 $ 1,396 $ 1,105 ========== ========== ========== Loss from operations before income tax benefit ($ 3,402) ($ 1,579) ($ 1,427) Income tax benefit ( 1,357) ( 572) ( 488) ---------- ---------- ---------- Loss from operations ( 2,045) ( 1,007) ( 939) ---------- ---------- ---------- Loss on disposal before income tax benefit: Estimated unrecovered costs through disposal date ( 4,381) -- -- Income tax benefit ( 1,748) -- -- ---------- ---------- ---------- Loss on disposal ( 2,633) -- -- ---------- ---------- ---------- Total loss from discontinued operations ($ 4,678) ($ 1,007) ($ 939) ========== ========== ==========
Assets and liabilities for all periods presented have been reclassified for amounts associated with the discontinued operations. Net assets from discontinued operations for fiscal 1995 has been classified as other assets on the consolidated balance sheet due to immateriality. Summarized balance sheet data for the discontinued operations is as follows (in thousands):
1996 1995 ---------- ---------- Current assets $ 1,717 $ 913 Property, plant and equipment, net 240 142 Other assets 190 285 ---------- ---------- Total assets 2,147 1,340 Current liabilities 5,271 450 Other non-current liabilities 127 -- ---------- ---------- Net assets (liabilities) ($ 3,251) $ 890 ========== ==========
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ================================================================= Thomas Nelson, Inc. and Subsidiaries To the Shareholders and Board of Directors of 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, 1996 and 1995, and the related consolidated statements of operations shareholders' equity and cash flows for each of the three years in the period ended March 31, 1996. 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 generally accepted auditing standards. 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 financial statements referred to above present fairly, in all material respects, the financial position of Thomas Nelson, Inc. and Subsidiaries as of March 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 1996 in conformity with generally accepted accounting principles. As explained in Note M to the financial statements, effective April 1, 1993, the Company changed its method of accounting for income taxes. /s/ Arthur Andersen LLP Nashville, Tennessee May 21, 1996 OTHER FINANCIAL INFORMATION ================================================================ The common stock and the Class B common stock are traded on the NYSE under the symbols "TNM" and "TNM.B," respectively. Until June 19, 1995, the common stock and the Class B common stock were quoted on the Nasdaq National Market under the symbols "TNEL" and "TNELB," respectively. The following table sets forth, for the periods indicated, the high and low bid prices of the common stock and Class B common stock as reported on the Nasdaq National Market for each of the quarters indicated through June 16, 1995 and the high and low closing sales prices as reported on the NYSE composite tape from June 19, 1995:
Common Class B Stock Common Stock ------------------- ----------------- Dividends Paid High Low High Low Per Share ------------------- ----------------- ----------- Fiscal l996 - ----------- First Quarter $ 20 1/4 $ 19 5/8 $ 23 $ 18 1/2 $ .040 Second Quarter 26 3/8 19 1/8 26 20 7/8 .040 Third Quarter 26 1/8 12 1/2 25 3/4 18 3/8 .040 Fourth Quarter 16 3/4 12 3/8 19 1/4 16 1/2 .040 ---------- $ .160 ========== Fiscal l995 - ----------- First Quarter $ 17 5/8 $ 15 1/4 $ 17 5/8 $ 16 3/8 $ .032 Second Quarter 16 5/8 14 1/4 16 3/8 14 5/8 .032 Third Quarter 19 1/4 14 1/4 18 3/4 14 5/8 .032 Fourth Quarter 20 3/8 18 3/4 19 3/8 17 5/8 .032 --------- $ .128 =========
The Company effected a five-for-four stock split of the common stock and Class B common stock in the form of a 25% stock dividend on March 24, 1995. The prices in the table set forth above have been adjusted to give effect to the stock dividend. As of June 4, 1996, there were 1,188 record holders of the common stock and 809 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. See Note H of Notes to Consolidated Financial Statements. On May 23, 1996, the Company declared a cash dividend of $.04 per share on its common stock and Class B common stock to be paid on August 19, 1996 to shareholders of record on August 5, 1996. EX-21 11 EXHIBIT 21 SUBSIDIARIES OF THE COMPANY
Percentage Jurisdiction of Ownership of Subsidiary Incorporation Capital Stock ============================================================================= Word, Incorporated Delaware 100% Word Communications, Ltd. British Columbia, 100% Canada Word Direct Partners, LP Texas 100% NelsonWord, Ltd. (UK) United Kingdom 100% Word Direct, Inc. Delaware 100% Editorial Caribe, Inc. Florida 100% PPC, Inc. North Carolina 100% Morningstar Radio Network, Inc. Texas 80% The C.R. Gibson Company Delaware 100% 855763 Ontario Limited Ontario, Canada 100%
EX-23 12 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 report dated May 21, 1996 included in Thomas Nelson, Inc.'s annual report to 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, 1996 EX-27 13
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF THOMAS NELSON, INC. FOR NINE MONTHS ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS MAR-31-1996 APR-01-1995 MAR-31-1996 672 0 110,180 10,959 97,496 236,994 58,166 21,532 373,596 65,577 180,016 17,116 0 0 105,254 373,596 304,393 308,410 172,956 306,607 2,090 5,724 10,691 (10,383) (4,147) (6,236) (4,678) 0 0 (10,914) (0.69) (0.69)
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