-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, MxjHMw6Xg6zA4oo9zfFBEp0oCo8CYkQtgHVld8zLCXJ8ndPqs3Kc/WFJ6qd3c6Va VGlX7etH8jNoviUHy/dfAQ== 0000950144-95-001803.txt : 199506280000950144-95-001803.hdr.sgml : 19950628 ACCESSION NUMBER: 0000950144-95-001803 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19950627 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: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-60615 FILM NUMBER: 95549602 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 S-3 1 THOMAS NELSON FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 1995 REGISTRATION NO. 33- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- THOMAS NELSON, INC. (Exact name of registrant as specified in its charter) TENNESSEE 62-0679364 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number)
NELSON PLACE AT ELM HILL PIKE NASHVILLE, TENNESSEE 37214-1000 (615) 889-9000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) --------------------- JOE L. POWERS EXECUTIVE VICE PRESIDENT AND SECRETARY THOMAS NELSON, INC. NELSON PLACE AT ELM HILL PIKE NASHVILLE, TENNESSEE 37214-1000 (615) 889-9000 (Name, address, including zip code, and telephone number, including area code, of agent for service) --------------------- COPIES TO: JAMES H. CHEEK, III, ESQ. CHARLES I. WEISSMAN, ESQ. BASS, BERRY & SIMS SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN, LLP FIRST AMERICAN CENTER 919 THIRD AVENUE NASHVILLE, TENNESSEE 37238 NEW YORK, NY 10022
--------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. / / If this Form is registering additional securities pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / 33- --------------------- CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- PROPOSED PROPOSED MAXIMUM AMOUNT MAXIMUM AGGREGATE TITLE OF SHARES TO BE AGGREGATE PRICE OFFERING AMOUNT OF TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE - --------------------------------------------------------------------------------------------------- Common Stock, par value $1.00 per share............ 2,875,000 shares $19.625 $56,421,875 $19,455.82 - --------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------
(1) Includes 375,000 shares which the Underwriters have the option to purchase solely to cover over-allotments, if any. (2) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(c) on the basis of the average of the high and low prices of the Company's Common Stock on June 20, 1995, as reported on the New York Stock Exchange. --------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 EXPLANATORY NOTE This Registration Statement contains two forms of prospectus: one to be used in connection with a United States and Canadian offering (the "U.S. Prospectus") and one to be used in a concurrent international offering (the "International Prospectus"). The two prospectuses will be identical in all respects except for the front and back cover pages, pages 22 thru 25 of the U.S. Prospectus and pages 22 thru 27 of the International Prospectus. Final forms of each prospectus will be filed with the Securities and Exchange Commission in accordance with its rules. 3 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED JUNE 27, 1995 [LOGO] 2,500,000 SHARES THOMAS NELSON, INC. COMMON STOCK ------------------------ All of the shares of Common Stock offered hereby are being sold by Thomas Nelson, Inc. (the "Company"). Of the 2,500,000 shares of Common Stock offered hereby, 2,000,000 shares are being offered in the United States and Canada (the "U.S. Shares") and 500,000 shares are being offered in a concurrent international offering outside the United States and Canada. The price to the public and aggregate underwriting discounts and commissions per share will be identical for both offerings. See "Underwriting." The Company has two classes of authorized and issued common stock. Holders of the Common Stock, which is offered hereby, are entitled to one vote per share, and holders of the Class B Common Stock are entitled to ten votes per share on all matters submitted to a vote of shareholders of the Company. See "Description of Capital Stock." After completion of this offering, directors and executive officers of the Company will beneficially own Common Stock and Class B Common Stock representing approximately 36.1% of the voting power of the Company. On June 19, 1995, the Common Stock and Class B Common Stock began trading on the New York Stock Exchange (the "NYSE") under the symbols "TNM" and "TNM.B," respectively, and ceased to be quoted on the Nasdaq National Market System. On June 23, 1995, the last reported sale prices of the Common Stock and Class B Common Stock on the NYSE were $20 1/8 and $21 3/8 per share, respectively. See "Price Range of Common Stock and Class B Common Stock." ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Price to Proceeds to Public Underwriting Company(2) Discounts and Commissions(1) - ----------------------------------------------------------------------------------------------- Per Share................................ $ $ $ - ----------------------------------------------------------------------------------------------- Total.................................... $ $ $ - ----------------------------------------------------------------------------------------------- Total Assuming Full Exercise of Over- Allotment Option(3).................... $ $ $ - ----------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------
(1) See "Underwriting." (2) Before deducting expenses, estimated at $200,000, which are payable by the Company. (3) Assuming exercise in full of the 30-day option granted by the Company to the U.S. Underwriters to purchase up to 375,000 additional shares of Common Stock, on the same terms, solely to cover over-allotments. See "Underwriting." ------------------------ The U.S. Shares are offered by the U.S. Underwriters, subject to prior sale, when, as and if delivered to and accepted by the Underwriters, and subject to their right to reject orders in whole or in part. It is expected that delivery of the Common Stock will be made in New York City on or about July , 1995. ------------------------ PAINEWEBBER INCORPORATED MERRILL LYNCH & CO. J.C. BRADFORD & CO. ------------------------ THE DATE OF THIS PROSPECTUS IS , 1995. 4 [ARTWORK] IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OFFERED HEREBY AND CLASS B COMMON STOCK OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 2 5 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information appearing elsewhere in this prospectus or in documents incorporated by reference in this prospectus. Unless otherwise indicated, the information in this prospectus assumes that the Underwriters' over-allotment option is not exercised and reflects a five-for-four stock split of the Common Stock and Class B Common Stock in the form of a 25% stock dividend effected on March 24, 1995. THE COMPANY Thomas Nelson, Inc. 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 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. The Company's publishing operations, which accounted for approximately 55% of fiscal 1995 net revenues, involve the publication and distribution of hardback and trade paperback books with Christian, inspirational or family value themes and a broad line of Bibles and related publications. Authors published by the Company include some of the most well-known Christian and inspirational communicators in the field, including Chuck 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. In each of the last three fiscal years, the Company published over 300 new titles and, during that period, published over 50% of the top ten best selling Christian and inspirational books based on the monthly Bookstore Journal Christian Hardbound Bestsellers' Lists. The Company maintains a backlist of over 1,400 active titles which provide a stable source of recurring revenues. The Company publishes nine of the ten major English language Bible translations, four of which are proprietary to the Company, and introduced in June 1995 the Contemporary English Version ("CEV") Bible translation, which is designed to be understandable at virtually any reading level. The Company's music operations, which accounted for approximately 34% of fiscal 1995 net revenues, are comprised of the production and distribution of Christian and inspirational recorded music and related music publishing. Traditional and contemporary Christian and inspirational music is a genre which is defined by its lyrical content and encompasses a diverse range of musical styles including gospel, praise and worship, country, rock rhythm and blues, rap and metal. Recording artists under contract with the Company include Anointed, Helen Baylor, Shirley Caesar, Brian Duncan, Amy Grant, Sandi Patty, Petra and Point of Grace. In 1995, the Company's artists received ten Dove Awards, the Christian music industry's annual awards for outstanding recording artists and releases. In fiscal 1995, the Company released 90 new titles, and maintains a catalog of over 40,000 copyrighted songs which are licensed to independent publishers, record companies, churches and other organizations. In addition, the Company operates a music publishing business engaged in songwriter development, print music publishing and copyright administration. The Company has grown significantly over the last three years through a combination of internal product development, expanded product distribution and acquisitions, which have significantly enhanced its competitive position and enabled it to more comprehensively serve its customer base. 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. Through the acquisition of Word and the development of the combined music and book product lines and distribution channels, the Company has established leading market positions in the Christian and inspirational book and music businesses, which the Company believes are among the fastest growing segments within the publishing and recorded music industries. In March 1994, the Company expanded its gift products line and related distribution channels through its combination with PPC, Inc. ("Pretty Paper"), a designer and manufacturer of gift products and collections. 3 6 In conjunction with the development and acquisition of new product lines, the Company has significantly expanded its marketing and distribution channels. In addition to Christian bookstores, the Company distributes its products to general bookstores, such as B. Dalton Booksellers and Waldenbooks; to mass market 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. Utilizing an extensive direct sales force and independent sales representatives, the Company sells its products to over 50,000 retail and 90,000 church and religious organization accounts. The Company also distributes its products internationally in South America, Europe, Australia, New Zealand, South Africa, the Far East, Mexico and Canada. The Company believes that there has been increasing societal awareness of and interest in traditional, Christian and family values, which has contributed to a growing demand for media, educational and entertainment products and services that convey these themes. The Company's business strategy seeks to capitalize on this growing demand by expanding its core publishing, music and gift product lines, developing and acquiring complementary product lines that utilize common distribution channels, and expanding the marketing and distribution of its products through secular channels and in new geographic markets. The Company is also actively exploring the use of emerging digital, interactive and multimedia technologies through strategic partnerships and creative alliances to further capitalize on the commercial potential of its proprietary content. THE OFFERING Common Stock Offered by the Company: United States Offering..................... 2,000,000 shares International Offering..................... 500,000 shares ----------- Total Offering..................... 2,500,000 shares ----------- ----------- Shares to be Outstanding After the Offering: Common Stock............................... 14,869,080 shares Class B Common Stock....................... 1,085,843 shares ----------- Total.............................. 15,954,923 shares(1) ----------- ----------- Voting Rights................................ The Common Stock is entitled to one vote per share, while the Class B Common Stock is entitled to ten votes per share. Except for such voting rights, the Common Stock and the Class B Common Stock have substantially the same rights. After completion of this offering, members of the Board of Directors and executive officers of the Company will beneficially own Common Stock and Class B Common Stock representing approximately 36.1% of the voting power of the Company. See "Description of Capital Stock." Use of Proceeds.............................. To repay a portion of the Company's outstanding bank debt. See "Use of Proceeds." Common Stock NYSE Symbol..................... "TNM"
- --------------- (1) Does not include (i) 3,235,294 shares of Common Stock issuable upon conversion of the Company 5 3/4% Convertible Subordinated Notes due 1999 (the "Convertible Notes") and (ii) 330,765 shares reserved for issuance upon exercise of options outstanding at June 23, 1995, under the Company's stock option plans. 4 7 SUMMARY FINANCIAL INFORMATION
YEAR ENDED MARCH 31, ---------------------------------------- 1992 1993(1) 1994 1995 ------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF INCOME DATA: Net revenues........................................... $98,582 $143,072 $226,434 $265,107 Gross profit........................................... 44,704 68,097 111,233 131,457 Operating income....................................... 9,514 12,186 19,968 26,037 Interest expense....................................... 1,032 3,027 6,903 8,585 Income before income taxes............................. 8,893 9,337 13,292 18,349 Net income............................................. 5,824 6,282 9,081 11,710 Net income per share................................... $ 0.47 $ 0.47 $ 0.68 $ 0.88 Weighted average number of shares outstanding.......... 12,500 13,268 13,355 13,374 Fully diluted net income per share(2).................. $ 0.47 $ 0.47 $ 0.67 $ 0.83
MARCH 31, 1995 ------------------------- ACTUAL AS ADJUSTED(3) -------- -------------- (IN THOUSANDS) BALANCE SHEET DATA: Working capital...................................................... $129,441 $129,441 Total assets......................................................... 249,869 249,869 Long-term debt (including current portion)........................... 121,000 73,202 Shareholders' equity................................................. 72,729 120,527
- --------------- (1) Includes the operations of Word subsequent to its acquisition by the Company on November 30, 1992. (2) Reflects the impact of the conversion of the outstanding Convertible Notes into 3,235,294 shares of Common Stock and exercise of stock options, in periods in which such conversion or exercise would be dilutive. (3) Adjusted to reflect the sale of the 2,500,000 shares of Common Stock offered hereby and the proposed application of the estimated net proceeds therefrom. See "Use of Proceeds." 5 8 USE OF PROCEEDS The net proceeds to the Company from the sale of the 2,500,000 shares of Common Stock offered hereby are estimated to be approximately $47.8 million ($55.0 million if the Underwriters' over-allotment option is exercised in full), assuming a public offering price of $20.125 per share. All of the net proceeds will be used to repay a portion of the borrowings outstanding under the Company's $100 million bank credit facility (the "Credit Facility"). Borrowings under the Credit Facility bear interest at either the prime rate or, at the Company's option, the relevant London Interbank Offered Rate ("LIBOR") plus 1.5% (7.9% at June 23, 1995). The balance outstanding under the Credit Facility at May 31, 1997 will be converted into a four year term loan payable in equal quarterly principal installments thereafter. At June 23, 1995, the Company had $75.0 million outstanding, and $25.0 million available for borrowing under the Credit Facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and Note H of Notes to Consolidated Financial Statements. PRICE RANGE OF COMMON STOCK AND CLASS B COMMON STOCK 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 System 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 System for each of the quarters indicated through June 16, 1995 and the high and low sales prices as reported on the NYSE composite tape from June 19, 1995:
CLASS B COMMON STOCK COMMON STOCK ------------ ---------------- HIGH LOW HIGH LOW ---- ---- ---- --- FISCAL 1994: First quarter............................................. $14 3/8 $12 $14 $12 3/8 Second quarter............................................ 17 5/8 13 5/8 16 3/4 13 5/8 Third quarter............................................. 20 3/4 15 3/4 19 5/8 15 3/4 Fourth quarter............................................ 20 1/4 15 5/8 20 17 1/4 FISCAL 1995: First quarter............................................. 17 5/8 15 1/4 17 5/8 16 3/8 Second quarter............................................ 16 5/8 14 1/4 16 3/8 14 5/8 Third quarter............................................. 19 1/4 14 1/4 18 3/4 14 5/8 Fourth quarter............................................ 20 3/8 18 3/4 19 3/8 17 5/8 FISCAL 1996: First quarter (through June 23, 1995)..................... 20 1/4 17 5/8 23 18 1/2
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. On June 23, 1995, the last sale prices of the Common Stock and the Class B Common Stock on the NYSE composite tape were $20 1/8 and $21 3/8, respectively. As of June 22, 1995, there were 1,149 record holders of the Common Stock and 862 record holders of the Class B Common Stock. 6 9 DIVIDEND POLICY 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 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. In each quarter in fiscal 1994 and 1995, the Company paid a cash dividend of $.032 per share on its Common Stock and Class B Common Stock. On May 24, 1995, the Company declared a cash dividend of $.04 per share on its Common Stock and Class B Common Stock to be paid on August 14, 1995 to shareholders of record on July 31, 1995. CAPITALIZATION The following table sets forth the capitalization of the Company as of March 31, 1995 and as adjusted to reflect the sale of the 2,500,000 shares of Common Stock offered hereby and the proposed application of the estimated net proceeds therefrom. See "Use of Proceeds."
AT MARCH 31, 1995 ------------------------ ACTUAL AS ADJUSTED -------- ----------- (IN THOUSANDS) Long-term debt (including current portion)(1): Credit agreements............................................. $ 63,133 $ 15,335 5 3/4% Convertible Subordinated Notes, due in 1999(2)......... 55,000 55,000 Industrial revenue bonds, due through 2005.................... 2,700 2,700 Other......................................................... 167 167 -------- ----------- Total long-term debt........................................ 121,000 73,202 -------- ----------- Shareholders' equity: Preferred Stock, $1.00 par value, authorized 1,000,000 shares, none issued................................................. -- -- Common Stock, $1.00 par value, authorized 20,000,000 shares, issued 12,362,377 shares (issued 14,862,377 shares, as adjusted)(3)................................................ 12,362 14,862 Class B Common Stock, $1.00 par value, authorized 5,000,000 shares, issued 1,067,094 shares(3).......................... 1,067 1,067 Additional paid-in capital.................................... 18,211 63,509 Retained earnings............................................. 40,538 40,538 Foreign currency translation adjustments...................... 551 551 -------- ----------- Total shareholders' equity.................................. 72,729 120,527 -------- ----------- Total capitalization..................................... $193,729 $ 193,729 ======== =========
- --------------- (1) For additional information regarding the Company's long-term debt, see Note H of Notes to Consolidated Financial Statements. (2) The Convertible Notes are convertible at their principal amount into shares of Common Stock at any time prior to redemption or maturity at $17.00 per share, subject to adjustment in certain circumstances. See Note H of Notes to Consolidated Financial Statements. (3) Does not include (i) 3,235,294 shares of Common Stock issuable upon conversion of the Convertible Notes and (ii) 375,765 shares reserved for issuance upon the exercise of options outstanding at March 31, 1995 under the Company's stock option plans. See Notes H and J of Notes to Consolidated Financial Statements. 7 10 SELECTED CONSOLIDATED FINANCIAL DATA The following selected statement of income data for the fiscal years ended March 31, 1995, 1994, 1993 and 1992 and selected balance sheet data at March 31, 1995 have been derived from the consolidated financial statements of the Company which have been audited by Arthur Andersen LLP. All of this information should be read in conjunction with the audited consolidated financial statements and notes thereto contained elsewhere herein and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
YEAR ENDED MARCH 31, ---------------------------------------- 1992 1993(1) 1994 1995 ------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF INCOME DATA: Net revenues........................................... $98,582 $143,072 $226,434 $265,107 Cost of goods sold..................................... 53,878 74,975 115,201 133,650 ------- -------- -------- -------- Gross profit........................................... 44,704 68,097 111,233 131,457 Selling, general and administrative expenses........... 35,144 55,193 89,649 103,614 Amortization of goodwill and non-compete agreements.... 46 718 1,616 1,806 ------- -------- -------- -------- Operating income....................................... 9,514 12,186 19,968 26,037 Other income........................................... 411 178 227 897 Interest expense....................................... 1,032 3,027 6,903 8,585 ------- -------- -------- -------- Income before income taxes............................. 8,893 9,337 13,292 18,349 Provision for income taxes............................. 3,069 3,055 4,547 6,639 ------- -------- -------- -------- Income before cumulative effect of change in accounting principle............................................ 5,824 6,282 8,745 11,710 Cumulative effect of change in accounting principle for income taxes......................................... -- -- 336 -- ------- -------- -------- -------- Net income............................................. $ 5,824 $ 6,282 $ 9,081 $ 11,710 ======= ======== ======== ======== Net income per share: Income before cumulative effect of change in accounting principle.............................. $ 0.47 $ 0.47 $ 0.65 $ 0.88 Cumulative effect of change in accounting principle......................................... -- -- 0.03 -- ------- -------- -------- -------- Net income........................................... $ 0.47 $ 0.47 $ 0.68 $ 0.88 ======= ======== ======== ======== Weighted average number of shares outstanding.......... 12,500 13,268 13,355 13,374 ======= ======== ======== ======== Fully diluted net income per share(2): Income before cumulative effect of change in accounting principle.............................. $ 0.47 $ 0.47 $ 0.65 $ 0.83 Cumulative effect of change in accounting principle......................................... -- -- 0.02 -- ------- -------- -------- -------- Net income........................................... $ 0.47 $ 0.47 $ 0.67 $ 0.83 ======= ======== ======== ========
MARCH 31, 1995 ------------------------- ACTUAL AS ADJUSTED(3) -------- -------------- (IN THOUSANDS) BALANCE SHEET DATA: Working capital...................................................... $129,441 $129,441 Total assets......................................................... 249,869 249,869 Long-term debt (including current portion)........................... 121,000 73,202 Shareholders' equity................................................. 72,729 120,527
- --------------- (1) Includes the operations of Word subsequent to its acquisition by the Company on November 30, 1992. (2) Reflects the impact of the conversion of the outstanding Convertible Notes into 3,235,294 shares of Common Stock and exercise of stock options, in periods in which such conversion or exercise would be dilutive. (3) Adjusted to reflect the sale of the 2,500,000 shares of Common Stock offered hereby and the proposed application of the estimated net proceeds therefrom. See "Use of Proceeds." 8 11 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 39%. This growth in net revenues has resulted from increased sales of existing product lines and through the development and acquisition of new product lines. In November 1992, the Company acquired Word for approximately $72 million in cash, and in March 1994 acquired all of the outstanding shares of Pretty Paper in exchange for the issuance of 115,551 shares of the Company's Common Stock. The acquisition of Word was 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 $31 million. 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 Pretty Paper expanded the Company's gift product lines and distribution network, which enabled the gift division to grow significantly in fiscal 1995. This shift in sales mix and distribution channels has positively impacted the Company's gross profit, as a percentage of net revenues, in each of fiscal 1994 and fiscal 1995. In particular, the increase in music and book products has enabled the Company to increase sales through direct marketing. Sales through direct marketing typically produce a higher gross margin than sales through other distribution channels. The increase in the Company's gross margins resulting from these factors has been partially offset by increased sales to mass merchandisers. These customers typically earn volume discounts due to the significantly larger quantities purchased as compared to the typical bookstore; however, sales to mass merchandisers have relatively lower selling and marketing costs than sales through other distribution channels. The following table sets forth for the periods indicated certain selected statement of income 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 ----------------------- --------------------------- 1995 1994 1993 1994 TO 1995 1993 TO 1994 ----- ----- ----- ------------ ------------ NET REVENUES: Publishing: Book......................................... 32.8% 34.0% 33.9% 12.9% 58.7% Bible........................................ 22.0 23.5 33.0 10.0 12.4 ----- ----- ----- Total publishing.......................... 54.8 57.5 66.9 11.7 35.9 Music.......................................... 33.8 32.2 17.7 22.9 188.1 Gift........................................... 9.6 8.8 13.0 27.1 7.2 Other.......................................... 1.8 1.5 2.4 38.7 0.9 ----- ----- ----- Total net revenues........................ 100.0 100.0 100.0 17.1 58.3 EXPENSES: Cost of goods sold............................. 50.4 50.9 52.4 16.0 53.7 Selling, general and administrative expenses... 39.1 39.6 38.6 15.6 62.4 Amortization of goodwill and non-compete agreements................................... 0.7 0.7 0.5 11.8 125.1 ----- ----- ----- Total expenses............................ 90.2 91.2 91.5 15.8 57.7 ----- ----- ----- Operating income............................... 9.8 8.8 8.5 30.4 63.9 Income before income taxes..................... 6.9 5.9 6.5 38.0 42.4 Income before cumulative effect of accounting change....................................... 4.4 3.9 4.4 33.9 39.2 Net income..................................... 4.4 4.0 4.4 28.9 44.6
9 12 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. RESULTS OF OPERATIONS Fiscal 1995 compared to Fiscal 1994 Net revenues for fiscal 1995 increased by $38.7 million or 17.1% 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 $16.7 million or 22.9%; book products increased by $9.9 million or 12.9%; Bible products increased by $5.3 million or 10.0%; and gift products increased by $5.4 million or 27.1%. Price increases did not have a material effect on net revenues. The Company's cost of goods sold in fiscal 1995 increased by $18.4 million or 16.0% over fiscal 1994 and, as a percentage of net revenues, decreased slightly to 50.4% in fiscal 1995 from 50.9% 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 has 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 15.6% over fiscal 1994. These expenses, expressed as a percentage of net revenues, decreased slightly to 39.1% in fiscal 1995 from 39.6% 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 $1.7 million or 24.4% 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. Fiscal 1994 compared to Fiscal 1993 Net revenues for fiscal 1994 increased by $83.4 million or 58.3% over fiscal 1993. This increase was due to volume increases associated with the acquisition of Word, whose results of operations were included in all of fiscal 1994 as compared to four months in fiscal 1993, as well as the introduction of new products and distribution channels. Net revenues increased for fiscal 1994 over 1993 as follows: music products increased by $47.7 million or 188.1%; book products increased by $28.5 million or 58.7%; Bible products increased by $5.9 million or 12.4%; and gift products increased by $1.3 million or 7.2%. Price increases did not have a material effect on net revenues. The Company's cost of goods sold in fiscal 1994 increased by $40.2 million or 53.7% over fiscal 1993 and, as a percentage of net revenues, decreased to 50.9% in fiscal 1994 from 52.4% in fiscal 1993. The decrease in 10 13 cost of goods sold, as a percentage of net revenues, resulted from changes in the mix of products and distribution channels as well as improved purchasing power as a result of the combined operations of the Company and Word. Selling, general and administrative expenses for fiscal 1994 increased by $34.5 million or 62.4% over fiscal 1993. These expenses, expressed as a percentage of net revenues, increased to 39.6% in fiscal 1994 from 38.6% in fiscal 1993. These increases were primarily due to changes in the mix of products and distribution channels from the prior year and Word's higher selling, general and administrative expenses as a percentage of net revenues. Amortization of goodwill and non-compete agreements in fiscal 1994 increased by $0.9 million over fiscal 1993 due to the acquisition of Word. Interest expense in fiscal 1994 increased by $3.9 million over fiscal 1993 due to increased borrowings used for working capital needs and a full year of borrowings incurred in connection with the acquisition of Word, compared to four months in fiscal 1993. The Company's effective tax rate in fiscal 1994 was 34.2% as compared to 32.7% in fiscal 1993. This increase resulted from an increase in the statutory federal tax rate, proportionately more income in states and foreign countries with higher effective tax rates, and additional non-deductible goodwill amortization as a result of the acquisition of Word. 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, 1995, the Company had working capital of $129.4 million. At June 23, 1995, the Company had $75.0 million outstanding, and $25.0 million available for borrowing, under its credit facilities. The Company intends to use the net proceeds from this offering to repay a portion of the outstanding borrowings under the Credit Facility. Net cash used in operating activities was $9.0 million, $0.3 million and $1.3 million in fiscal 1995, 1994 and 1993, respectively. The increase in cash used in operations during fiscal 1995 was principally attributable to the increase in accounts receivable and prepaid expenses. Net accounts receivable increased by $27.1 million primarily as a result of a 31.7% increase in net revenues in the fourth quarter of fiscal 1995 as compared to the prior year period and increased sales through those distribution channels which typically have slightly longer payment periods for receivables. Prepaid expenses increased by $9.3 million principally because of increased royalty advances and advance production costs related to the signing and re-signing of certain key authors and artists during the year and an increase in direct marketing sales, which resulted in an increase in prepaid direct marketing costs in connection with the addition of new club members. As a result of the Company's focus on inventory management, inventories increased by only $2.4 million in fiscal 1995, which did not materially impact the Company's working capital requirements. During fiscal 1995, capital expenditures totaled approximately $2.2 million. The majority of this amount related to capital expenditures for computer equipment and leasehold improvements. In fiscal 1996, the Company anticipates capital expenditures of approximately $3 million, consisting of warehouse improvements and purchases of in-store promotional fixtures and computer equipment. The Company's bank credit facilities are unsecured and consist of the $100 million Credit Facility and a $5 million credit facility (collectively, the "Credit Agreements"). Balances outstanding under the Credit Facility at May 31, 1997 will be converted into a four-year term loan payable in equal quarterly principal installments thereafter. The Credit Facility bears interest at either the prime rate or, at the Company's option, LIBOR plus 1.50%, subject to adjustment based on certain financial ratios. The $5 million credit facility bears interest at the prime rate and matures on July 31, 1996. Under the terms of the Credit Agreements, the Company has agreed to limit the payment of dividends and to maintain certain interest coverage, fixed charge coverage and debt-to-total capital ratios. Due to the seasonality of the Company's business, borrowings under the Credit Agreements typically peak during the third quarter of the fiscal year. 11 14 The Company also has outstanding $55 million of 5 3/4% Convertible Subordinated Notes due November 30, 1999. The Convertible Notes presently are convertible into Common Stock at $17.00 per share and are redeemable at the Company's option on or 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 1996. Although the Company has no present definitive agreements or agreements in principle with respect to any acquisitions, the Company's growth strategy includes strategic acquisitions using stock, cash, debt or a combination thereof. Depending on the terms of any such acquisition, the Company may need to incur additional indebtedness or issue additional equity securities. 12 15 BUSINESS 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 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. 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, ---------------------------------------------------------- 1995 1994 1993 ---------------- ---------------- ---------------- AMOUNT % AMOUNT % AMOUNT % -------- ----- -------- ----- -------- ----- Publishing: Book.......................... $ 86,894 32.8 $ 76,985 34.0 $ 48,507 33.9 Bible......................... 58,395 22.0 53,073 23.5 47,208 33.0 -------- ----- -------- ----- -------- ----- Total publishing........... 145,289 54.8 130,058 57.5 95,715 66.9 Music........................... 89,676 33.8 72,969 32.2 25,324 17.7 Gifts........................... 25,337 9.6 19,942 8.8 18,599 13.0 Other........................... 4,805 1.8 3,465 1.5 3,434 2.4 -------- ----- -------- ----- -------- ----- $265,107 100.0 $226,434 100.0 $143,072 100.0 ======== ===== ======== ===== ======== =====
STRATEGY The Company believes that there has been increasing societal awareness of and interest in traditional, Christian and family values, which has contributed to a growing demand for media, educational and entertainment products and services that convey these themes. The Company's business strategy seeks to capitalize on this growing demand by expanding its core publishing, music and gift product lines, developing and acquiring complementary product lines that utilize common distribution channels, and expanding the marketing and distribution of its products through secular channels and in new geographic markets. The Company is also actively exploring the use of emerging digital, interactive and multimedia technologies through strategic partnerships and creative alliances to further capitalize on the commercial potential of its proprietary content. 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 1995, approximately 17% of the book division's net revenues related to the distribution of books published by other companies. In each of the last three fiscal years, the Company has published over 300 new titles. The Company publishes some of the most well-known communicators in the Christian and inspirational field, including Chuck 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 13 16 Osborn, Nolan Ryan and Zig Ziglar. In each of the last three fiscal years, the Company published over 50% of the top ten best selling Christian and inspirational books based on the monthly Bookstore Journal Christian Hardbound 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 60% of the book division's net revenues in fiscal 1995. 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 author's 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. Approximately 60% of the Company's net revenues from Bible publishing in fiscal 1995 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 best selling 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 NKJV and NCV are the 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. 14 17 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 1,200 different 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 1995 released 90 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 under contract with the Company include Anointed, Helen Baylor, Shirley Caesar, Bryan Duncan, Amy Grant, Sandi Patty, Petra, and Point of Grace. In 1993 and 1994, the Company had under exclusive contract the artists (Cindy Morgan and Point of Grace, respectively) named "New Artist of the Year" by the Gospel Music Association. In 1995, the Company's artists received ten 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 1995, 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 1995, 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 50 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. 15 18 GIFTS The Company established a gift division in fiscal 1989 to develop and market gift and stationery items and other products for social expression. In fiscal 1994, the gift division was expanded through the Company's combination with Pretty Paper. Current product lines offered by the Company include 80 collections and over 800 separate items, such as journals and blank books, diaries, address books, photo albums, gift bags, calendar and desk sets, baby gifts, kitchen accessories, and stationery. Products are marketed under the Markings(TM), Pretty Paper(R) and Markings Inspirations(TM) 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 licensed from artists such as Sam Butcher, Carol Endres, Larry Stephenson and Susan Wheeler and classic oriental, tapestry and country print fabric designs. 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. The Company sells its gift products through its primary market channels, including Christian bookstores, general bookstores and mass merchandisers, as well as through independent and chain gift and specialty stores, such as Hallmark stores. ROYAL MEDIA In fiscal 1995, the Company formed the Royal Media division 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. The Royal Media division includes the existing operations of the Royal Magazine Group and the Morningstar Radio Network. To date, revenues from the Royal Media division have not been significant to the Company's operations. The Company complements its publishing, music and gift operations with the publication of four periodicals under the Royal Magazine Group tradename. Aspire, the Company's first newsstand-distributed magazine, covers a broad range of Christian lifestyle issues and features celebrities such as Kathie Lee Gifford, John Tesh and Amy Grant. A Better Tomorrow, a magazine designed for mature readers, received the 1994 Award of Excellence from the Evangelical Press Association. The Company also publishes two controlled circulation journals: Release, which features Christian recording artists and targets the Christian music industry; and Release Ink, which features Christian authors and targets the Christian book industry. These four periodicals, marketed by the Company's sales force directly to consumers and to Christian and general bookstores, achieved combined bi-monthly circulation in excess of 400,000 copies in fiscal 1995. The Royal Media division also operates the Morningstar Radio Network, a 24-hour satellite delivered, digital network featuring adult contemporary Christian music and "High Country" programming formats. At the end of fiscal 1995, the Morningstar Radio Network was broadcast on 138 affiliate stations in 130 cities nationwide. This network generates revenues through the sale of commercial airtime to advertisers and through affiliate fees and also provides significant exposure for the Company's products, artists and authors. The Company also is actively exploring the use of emerging digital, interactive and multimedia technologies, including on-line services, CD-ROM multimedia and electronic products, as well as television and video production and broadcasting, through strategic partnerships and creative alliances to further capitalize on the commercial potential of its proprietary content. There can be no assurance, however, that the Company will successfully develop or commercialize products for these mediums. 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. 16 19 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 300,000 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 200,000 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 90,000 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, 1995, the Company employed a sales force of approximately 160 people. In addition, the Company contracts with approximately 120 independent sales representatives, who work on a commission basis, and maintains a 24-hour-a-day telemarketing capability to serve these accounts. These employees and sales representatives service over 50,000 retail accounts and 90,000 church and religious organization 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 1995. 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. Over 200 of the titles released by the Company in fiscal 1995 were translated into foreign languages. The Company distributes its products internationally in South America, Europe, Australia, New Zealand, South Africa, the Far East, Mexico and Canada. In fiscal 1995, the Company's international and export operations accounted for approximately 9% of the Company's total net revenues. Substantially all of the Company's products are manufactured by domestic and foreign commercial printers, binders and manufacturers which are selected on the basis of competitive bids. The Company may contract separately for paper and certain other supplies used by its manufacturers. 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 and the leading producer, distributor and publisher of Christian and inspirational music in the United States. The publishing and music divisions each compete with numerous other companies that publish and distribute Christian and inspirational books and/or music, 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 Company's competitive position 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. In the gift product line, the Company competes with numerous other companies, many of which have significantly longer operating histories and larger revenue bases. 17 20 MANAGEMENT Following is certain information regarding the executive officers and directors of the Company:
DIRECTOR/OFFICER NAME AGE SINCE POSITION WITH THE COMPANY - ------------------------------------ --- ---------------- ------------------------------------------ Sam Moore(1)........................ 64 1961 Chairman of the Board of Directors, Chief Executive Officer and President and Director S. Joseph Moore..................... 32 1995 Executive Vice President Joe L. Powers....................... 49 1980 Executive Vice President and Secretary Charles Z. Moore.................... 61 1983 Senior Vice President, International Ray Capp............................ 42 1995 Senior Vice President, Operations Roland Lundy........................ 45 1993 President, Word Records and Music Division Byron O. Williamson................. 49 1993 President, Word Publishing Division Vance Lawson........................ 36 1988 Vice President, Finance Stuart A. Heaton.................... 39 1989 Vice President and General Counsel Phyllis E. Williams................. 47 1988 Treasurer Brownlee O. Currey, Jr.(3).......... 65 1984 Director W. Lipscomb Davis, Jr.(2)........... 65 1984 Director Robert J. Niebel, Sr.(2)............ 56 1973 Director Millard V. Oakley(2)................ 64 1972 Director Joe M. Rodgers(3)................... 60 1992 Director Cal Turner, Jr.(1).................. 54 1991 Director Andrew J. Young(1).................. 62 1993 Director
- --------------- (1) Term expires at the 1995 Annual Meeting of Shareholders (2) Term expires at the 1996 Annual Meeting of Shareholders (3) Term expires at the 1997 Annual Meeting of Shareholders Except as indicated below, each director and executive officer has been an employee of the firm(s) listed below as his principal occupation for more than the past five years. Sam Moore has been the 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 of the Company in 1995, and, prior to such appointment, 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 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 since 1989. Byron O. Williamson has been the President of the Company's Word Publishing Division since 1993. Mr. Williamson was formerly Executive Vice President of Word Publishing since 1988. 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. 18 21 Stuart A. Heaton has been the 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. Brownlee O. Currey, Jr. is the Chairman of the Board and President of the Nashville Banner Publishing Company, a newspaper company, a Director of OCC, Inc., the principal subsidiary of Osborn Communications Corporation, a diversified media company, and A+ Communications Inc., a provider of paging communications and telemessaging services. W. Lipscomb Davis, Jr. is a Partner of Hillsboro Enterprises, an investment company, and a Director of Third National Bank, a Tennessee bank, American General Corporation, an insurance holding company, and Genesco, Inc., a consumer products company. Robert J. Niebel is the Senior Vice President of 20th Century Christian, Inc., a publishing company. Millard V. Oakley is a businessman managing private investments. Joe M. Rodgers is the Chairman of the JMR Group (investments), a Director of AMR Corporation, an airline, BellSouth Telecommunications, a telecommunications company, Gaylord Entertainment Company, a diversified entertainment and communications company, Gryphon Holding, Inc., an insurance company, LaFarge Corp., a cement and construction materials company, and Willis Corroon plc, an insurance holding company. Mr. Rogers previously was the Chairman and CEO of Berlitz International from December 1991 until February 1993. Cal Turner, Jr. is the Chairman and Chief Executive Officer of Dollar General Corp., an operator of general merchandise stores, and a Director of First American Corporation, a Tennessee bank holding company, and Shoney's, Inc., a national restaurant company. Andrew J. Young is the Vice President of Law Companies Group, an engineering company, Chairman of the Atlanta Commission for Olympic Games, and a Director of Delta Airlines and Host Marriott Corporation, a lodging company. Mr. Young previously served as the Mayor of Atlanta, Georgia from 1980 to 1990. DESCRIPTION OF CAPITAL STOCK The Company is authorized to issue 26,000,000 shares of capital stock, consisting of 20,000,000 shares of Common Stock, $1.00 par value, 5,000,000 shares of Class B Common Stock, $1.00 par value, and 1,000,000 shares of Preferred Stock, $1.00 par value. At March 31, 1995, there were 12,362,377 shares of Common Stock outstanding, 1,067,094 shares of Class B Common Stock outstanding and no shares of Preferred Stock outstanding. The following summary is qualified in its entirety by reference to the Company's Amended and Restated Charter, which sets forth the full rights, powers and limitations of each class of the Company's capital stock. COMMON STOCK AND CLASS B COMMON STOCK Voting. The voting rights, powers and limitations of the shares of Common Stock are identical in all respects with those of the shares of the Class B Common Stock, except that each holder of Common Stock is entitled to one vote for each share of such stock held on all matters submitted to the shareholders and each holder of Class B Common Stock is entitled to ten votes for each share of such stock held on all such matters. Except as otherwise provided by law, all actions submitted to a vote of shareholders are voted on by holders of Common Stock, Class B Common Stock and Preferred Stock, voting together as a single class. Shareholders of the Company do not have the right to cumulate votes in the election of directors. At March 31, 1995, Class B Common Stock represented 7.9% of the Company's outstanding equity, but had 46.3% of the voting power of the Company's outstanding capital stock. The Company's Amended and Restated Charter provides that, subject to certain exceptions, the affirmative vote of two-thirds of the 19 22 outstanding capital stock of the Company, voting together as a class, is required to approve certain actions, including an amendment to the Company's charter or bylaws, merger, consolidation, sale of all or substantially all of the Company's assets, dissolution or removal of a director. The holders of Class B Common Stock currently have the ability to prevent such actions requiring a two-thirds vote of shareholders (assuming (i) no change in the total number of shares of capital stock currently outstanding and (ii) that all shares of Class B Common Stock vote together). Dividends and Other Distributions. Subject to the rights of holders of Preferred Stock and other provisions of the Amended and Restated Charter, holders of Common Stock and Class B Common Stock, treated together as a single class, are entitled to receive such dividends and other distributions in cash, stock or property of the Company when and as declared by the Board of Directors out of assets or funds legally available therefor. In the event of a liquidation, dissolution or winding up of the Company, holders of Common Stock and Class B Common Stock have the right to a ratable portion with the Preferred Stock of the assets remaining after payment of all liabilities and any liquidation preferences of outstanding Preferred Stock, Common Stock and Class B Common Stock, if any. Under the Credit Agreements, the Company is restricted as to the payment of cash dividends. See "Dividend Policy." Other Matters. The holders of Common Stock and Class B Common Stock have no preemptive rights and are not subject to future calls or assessments by the Company. Shares of Class B Common Stock are convertible at the option of the holder thereof, and without cost to the shareholder, into shares of Common Stock on a share-for-share basis. Shares of Class B Common Stock so converted shall become authorized but unissued shares to be disposed of by resolution of the Board of Directors of the Company. Common Stock is not convertible into Class B Common Stock. All outstanding shares of Common Stock and Class B Common Stock are fully paid and non-assessable. It is expected that the voting rights of the Class B Common Stock may make the Company less attractive as the potential target of a hostile tender offer, proxy contest or other proposal to acquire the stock or business of the Company, and merger proposals might be rendered more difficult, even if such actions would be in the best interests of the holders of the Common Stock. Accordingly, increases in the market price of the Common Stock, temporary or otherwise, which might result from actual or rumored hostile takeover attempts, will be inhibited. The Company is not aware of any pending effort by any person to acquire control of the Company or to change its management or to propose to enter into any transaction of the type to which reference is made above. PREFERRED STOCK The Company is authorized to issue 1,000,000 shares of Preferred Stock, $1.00 par value, in one or more series, and to designate the rights, preferences, limitations and restrictions of and upon shares of each series, including voting, redemption and conversion rights. The Board of Directors also may designate dividend rights and preferences in liquidation. It is not possible to state the actual effect of the authorization and issuance of Preferred Stock upon the rights of holders of Common Stock and Class B Common Stock until the Board of Directors determines the specific terms, rights and preferences of a series of Preferred Stock. However, such effects might include, among other things, restricting dividends on the Common Stock and Class B Common Stock, diluting the voting power of the Common Stock and Class B Common Stock, or impairing liquidation rights of such shares without further action by holders of Common Stock or Class B Common Stock. In addition, under certain circumstances, the issuance of Preferred Stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of the Company's securities or the removal of incumbent management. No shares of Preferred Stock are currently outstanding. 20 23 DESCRIPTION OF CERTAIN PROVISIONS OF THE CHARTER AND BYLAWS OF THE COMPANY In addition to the existence of the Class B Common Stock and the authorization of Preferred Stock, the Company's Amended and Restated Charter and the Amended Bylaws contain provisions that tend to make more difficult the acquisition of control of the Company by means of a tender offer, open market purchases, proxy fight or otherwise. These provisions are intended to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of the Company first to negotiate with the Company. The Company believes that the benefits of increased protection of its potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to take over or restructure the Company outweigh the disadvantages of discouraging such proposals because, among other things, negotiation of such proposals could result in an improvement of their terms. Classified Board and Shareholder Actions. The Company's Amended and Restated Charter and Amended Bylaws provide for a Board of Directors that is divided into three classes of as equal size as possible, serving staggered three-year terms. The number of directors is to be fixed from time to time by a vote of 75% of the members of the Board, but such number shall not be less than three nor more than 15. The vote of 75% of the members of the Board then in office is also required to fill vacancies occurring in the Board as well as to adopt, amend or repeal provisions of the Amended Bylaws. In addition, the Company's Amended Bylaws contain provisions which require strict procedural compliance as a prerequisite for a shareholder to nominate a director or raise a matter for consideration at a meeting of shareholders. The overall effect of these provisions is to render more difficult a change in control of the Company or the removal of incumbent management. Extraordinary Corporate Transaction. The affirmative vote of at least two-thirds of the votes represented by the outstanding shares of the Company's Common Stock, Class B Common Stock and Preferred Stock entitled to vote at elections of directors, voting as a class, is required to authorize (i) the amendment, alteration or repeal of any provision of the Amended and Restated Charter or Amended Bylaws of the Company; (ii) a merger or consolidation by the Company; (iii) the sale of all or substantially all the Company's property and assets; (iv) the dissolution of the Company; or (v) the removal of a director; provided that such two-thirds approval shall not be required if shareholder approval of any of the foregoing is not required under Tennessee law or 75% of the Board of Directors has approved the transaction in question. NYSE LISTING The Common Stock and the Class B Common Stock are listed on the NYSE under the symbols "TNM" and "TNM.B," respectively. The current rules of the NYSE effectively preclude the listing on the NYSE of any securities of an issuer which has issued securities or taken other corporate action that would have the effect of nullifying, restricting or disparately reducing the per share voting rights of holders of an outstanding class or classes of equity securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company does not intend to issue any additional shares of any stock that would make either the Common Stock or the Class B Common Stock ineligible for continued listing or cause the Common Stock or the Class B Common Stock to be delisted from the NYSE. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar for the Common Stock is Trust Company Bank, Atlanta, Georgia. 21 24 UNDERWRITING The U.S. Underwriters named below, for whom PaineWebber Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.C. Bradford & Co. are acting as the representatives (the "U.S. Representatives"), have severally agreed, subject to the terms and conditions of the U.S. Underwriting Agreement (the "U.S. Underwriting Agreement"), to purchase from the Company, and the Company has agreed to sell to the U.S. Underwriters, the number of shares of Common Stock set forth opposite their names.
NUMBER UNDERWRITER OF SHARES -------------------------------------------------------------------------- --------- PaineWebber Incorporated.................................................. Merrill Lynch, Pierce, Fenner & Smith Incorporated................................................. J.C. Bradford & Co. ...................................................... --------- Total........................................................... 2,000,000 ========
The Company has also entered into an International Underwriting Agreement (the "International Underwriting Agreement") with certain International Underwriters (the "International Underwriters", together with the U.S. Underwriters, the "Underwriters"), for whom PaineWebber International (U.K.) Ltd., Merrill Lynch International Limited and J.C. Bradford & Co. are acting as the representatives. Subject to the terms and conditions of the International Underwriting Agreement, and concurrently with the sale of 2,000,000 shares of Common Stock to the U.S. Underwriters, the Company has agreed to sell to the International Underwriters, and the International Underwriters have severally agreed to purchase, an aggregate of 500,000 shares of Common Stock. The public offering price per share and the total underwriting discounts and commissions per share will be identical in the U.S. Underwriting Agreement and the International Underwriting Agreement with respect to all shares of Common Stock being purchased by the Underwriters from the Company. The U.S. Underwriting Agreement provides that the obligations of the U.S. Underwriters to purchase the shares of Common Stock are subject to certain conditions. The U.S. Underwriters are committed to purchase, and the Company is obligated to sell, all the shares of Common Stock offered by this prospectus, if any are purchased. In general, the closing with respect to the sale of the shares of Common Stock pursuant to the U.S. Underwriting Agreement is a condition to the closing with respect to the sale of the shares of Common Stock pursuant to the International Underwriting Agreement and vice versa. PaineWebber International (U.K.) Ltd. is an affiliate of PaineWebber Incorporated, and Merrill Lynch International Limited is an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated. The Company has been advised by the U.S. Representatives that the U.S. Underwriters propose initially to offer the shares of Common Stock to the public at the public offering price set forth on the cover page of this prospectus, and to certain securities dealers at such price less a concession not in excess of $ per share. The U.S. Underwriters may allow, and such dealers may reallow, concessions of not more than $ per share on sales to certain other dealers. After the public offering, the public offering price and concessions may be changed by the U.S. Representatives. Each U.S. Underwriter has represented and agreed that, as part of the distribution of the shares of Common Stock, (a) it is not purchasing any shares of Common Stock for the account of anyone other than a U.S. or Canadian Person and (b) it has not offered or sold, and will not offer or sell, directly or indirectly, any shares of Common Stock or distribute this prospectus to any person outside the United States or Canada. Each International Underwriter has represented and agreed that, as part of the distribution of the shares of 22 25 Common Stock, (a) it is not purchasing any shares of Common Stock for the account of any U.S. or Canadian Person, and (b) it has not offered or sold, and will not offer or sell, directly or indirectly, any shares of Common Stock or distribute the international prospectus to any person within the United States or to any U.S. or Canadian Person. The foregoing limitations do not apply to stabilization transactions or to certain other transactions specified in the Agreement Between U.S. and International Underwriters described below. As used herein, "U.S. or Canadian Person" means any individual who is resident in the United States or Canada, or any corporation, pension, profit-sharing or other trust or other entity organized under or governed by the laws of the United States or Canada or any political subdivision thereof (other than a foreign branch of any U.S. or Canadian Person), and includes any U.S. or Canadian branch of a non-U.S. or Canadian Person. The U.S. Underwriters and the International Underwriters have entered into an Agreement Between U.S. and International Underwriters that provides for the coordination of their activities. Pursuant to the Agreement Between U.S. and International Underwriters, sales may be made between the U.S. Underwriters and the International Underwriters of such number of shares of Common Stock as may be mutually agreed upon. The per share price of any shares so sold shall be the public offering price set forth on the cover page of this prospectus, less an amount not greater than the per share amount of the concession to dealers set forth above. To the extent there are sales between the U.S. Underwriters and the International Underwriters, the number of shares of Common Stock initially available for sale by the U.S. Underwriters or by the International Underwriters may be more or less than the amount appearing on the cover page of this prospectus. The Company has granted to the U.S. Underwriters an option, exercisable within the 30-day period after the date of the prospectus, to purchase up to an additional 375,000 shares of Common Stock at the public offering price set forth on the cover page of this prospectus, less the underwriting discounts and commissions. The U.S. Underwriters may exercise such option only to cover over-allotments, if any, in the sale of the shares of Common Stock offered hereby. To the extent that such option is exercised, each U.S. Underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares of Common Stock as the percentage it was obligated to purchase pursuant to the U.S. Underwriting Agreement. The Company and its executive officers and directors have agreed not to sell, offer to sell or otherwise dispose of (a) shares of Common Stock, Class B Common Stock or securities convertible into Common Stock or Class B Common Stock or (b) sell, offer to sell or grant rights, options or warrants with respect to Common Stock, Class B Common Stock or securities convertible into Common Stock or Class B Common Stock prior to the expiration of 90 days from the date of this prospectus, without the prior written consent of PaineWebber Incorporated, other than pursuant to existing employee stock option plans or in connection with other employee incentive compensation arrangements of the Company and issuances of Common Stock upon conversion of securities outstanding as of the date of this prospectus. The Company has agreed to indemnify the U.S. Underwriters and the International Underwriters and their controlling persons against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"), or to contribute to payments the U.S. Underwriters and the International Underwriters may be required to make in respect thereof. 23 26 LEGAL MATTERS The validity of the shares of Common Stock offered hereby will be passed upon for the Company by Bass, Berry & Sims, Nashville, Tennessee. Certain legal matters relating to the offering will be passed upon for the Underwriters by Shereff, Friedman, Hoffman & Goodman, LLP, New York, New York. EXPERTS The financial statements and schedules included or incorporated by reference in this prospectus and elsewhere in the registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon authority of said firm as experts in giving said reports. AVAILABLE INFORMATION The Company has filed with the Securities and Exchange Commission (the "Commission") in Washington, D.C., a Registration Statement on Form S-3 (together with all amendments and exhibits thereto, the "Registration Statement") under the Securities Act, with respect to the shares of Common Stock offered hereby. This prospectus constitutes a part of the Registration Statement and does not contain all the information set forth therein, certain portions of which have been omitted as permitted by the rules and regulations of the Commission. Any statements contained herein concerning the provisions of any contract or other document are not necessarily complete and, in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement or otherwise filed with the Commission. Each such statement is qualified in its entirety by such reference. For further information regarding the Company and the securities offered hereby, reference is made to the Registration Statement and to the exhibits thereto. The Company is subject to the informational requirements of the Exchange Act, and, in accordance therewith, files reports, proxy statements and other information with the Commission. The Registration Statement (with exhibits), as well as such reports, proxy statements and other information filed by the Company with the Commission, may be inspected and copied at the public reference facilities maintained by the Commission at its principal offices at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following Regional Offices of the Commission: 7 World Trade Center, 13th Floor, New York, New York, 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may be obtained from the Public Reference Section of the Commission at 450 Fifth Street. N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The Common Stock and Class B Common Stock are listed on the NYSE. The aforementioned material also can be inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005. The Company is organized under the laws of the State of Tennessee, its executive offices are located at Nelson Place at Elm Hill Pike, Nashville, Tennessee 37214-1000, and its telephone number is (615) 889-9000. 24 27 INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The following documents, heretofore filed by the Company with the Commission (File No. 0-4095) pursuant to the Exchange Act, are incorporated and made a part of this prospectus by reference, except as superseded or modified herein: (1) The Company's Annual Report on Form 10-K for the year ended March 31, 1995. (2) The description of the Company's Common Stock and Class B Common Stock contained in the Registration Statement on Form 8-A filed on May 26, 1995. All documents subsequently filed by the Company pursuant to Section 13 (a), 13 (c), 14, or 15 (d) of the Exchange Act prior to the termination of this offering shall be deemed to be incorporated by reference in this prospectus and shall be part hereof from the date of filing of such documents. Any statement contained herein or in any document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein or in any subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as modified or superseded, to constitute a part of this prospectus. The Company undertakes to provide without charge to each person, including any beneficial owner, to whom a copy of this prospectus is delivered, upon the written or oral request of any such person, a copy of any document described herein (not including exhibits to those documents unless such exhibits are specifically incorporated by reference into the information incorporated into this prospectus). Requests for such copies should be directed to Joe L. Powers, Executive Vice President and Secretary, Thomas Nelson, Inc., Nelson Place at Elm Hill Pike, Nashville, Tennessee 37214-1000, telephone number (615) 889-9000. 25 28 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Public Accountants.............................................. F-2 Consolidated Statements of Income for the Years Ended March 31, 1995, 1994 and 1993... F-3 Consolidated Balance Sheets at March 31, 1995 and 1994................................ F-4 Consolidated Statements of Shareholders' Equity for the Years Ended March 31, 1995, 1994 and 1993....................................................................... F-5 Consolidated Statements of Cash Flows for the Years Ended March 31, 1995, 1994 and 1993................................................................................ F-6 Notes to Consolidated Financial Statements............................................ F-7
F-1 29 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 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. and Subsidiaries (a Tennessee corporation) as of March 31, 1995 and 1994, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended March 31, 1995. 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, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 1995 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. ARTHUR ANDERSEN LLP Nashville, Tennessee May 19, 1995 F-2 30 THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED MARCH 31, ---------------------------------- 1995 1994 1993 -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net revenues............................................... $265,107 $226,434 $143,072 Cost of goods sold......................................... 133,650 115,201 74,975 -------- -------- -------- Gross profit............................................... 131,457 111,233 68,097 Selling, general and administrative expenses............... 103,614 89,649 55,193 Amortization of goodwill and non-compete agreements........ 1,806 1,616 718 -------- -------- -------- Operating income........................................... 26,037 19,968 12,186 Other income............................................... 897 227 178 Interest expense........................................... 8,585 6,903 3,027 -------- -------- -------- Income before income taxes................................. 18,349 13,292 9,337 Provision for income taxes................................. 6,639 4,547 3,055 -------- -------- -------- Income before cumulative effect of change in accounting principle................................................ 11,710 8,745 6,282 Cumulative effect of change in accounting principle for income taxes............................................. -- 336 -- -------- -------- -------- Net income............................................ $ 11,710 $ 9,081 $ 6,282 ======== ======== ======== Weighted average number of shares outstanding.............. 13,374 13,355 13,268 ======== ======== ======== Net income per share: Income before cumulative effect of change in accounting principle............................................. $ .88 $ .65 $ .47 Cumulative effect of change in accounting principle...... -- .03 -- -------- -------- -------- Net income............................................... $ .88 $ .68 $ .47 ======== ======== ======== Fully diluted net income per share: Income before cumulative effect of change in accounting principle............................................. $ .83 $ .65 $ .47 Cumulative effect of change in accounting principle...... -- .02 -- -------- -------- -------- Net income............................................... $ .83 $ .67 $ .47 ======== ======== ========
See Notes to Consolidated Financial Statements F-3 31 THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
MARCH 31, --------------------- 1995 1994 -------- -------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) ASSETS CURRENT ASSETS Cash and cash equivalents.............................................. $ 779 $ 788 Accounts receivable, less allowances of $9,029 and $8,916, respectively......................................................... 85,100 58,038 Inventories............................................................ 69,351 66,994 Prepaid expenses....................................................... 20,683 11,400 Deferred tax asset..................................................... 7,714 13,235 -------- -------- Total current assets......................................... 183,627 150,455 Other assets........................................................... 14,688 12,054 Property, plant and equipment, net..................................... 16,226 17,359 Deferred charges....................................................... 4,149 4,179 Goodwill, less accumulated amortization of $2,046 and $1,087, respectively......................................................... 31,179 32,278 -------- -------- Total assets................................................. $249,869 $216,325 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable....................................................... $ 32,419 $ 20,798 Accrued expenses....................................................... 19,558 18,618 Dividends payable...................................................... 537 428 Income taxes currently payable......................................... -- 4,471 Current portion of long-term debt...................................... 892 878 Current portion of capital lease obligations........................... 780 723 -------- -------- Total current liabilities.................................... 54,186 45,916 Long-term debt......................................................... 120,108 102,618 Capital lease obligations.............................................. 80 861 Deferred tax liability................................................. 1,410 1,330 Other liabilities...................................................... 1,356 2,875 Commitments and contingencies SHAREHOLDERS' EQUITY Preferred stock, $1.00 par value, authorized 1,000,000 shares; none issued............................................................... -- -- Common stock, $1.00 par value, authorized 20,000,000 shares; issued 12,362,377 and 9,891,233, respectively............................... 12,362 9,891 Class B common stock, $1.00 par value, authorized 5,000,000 shares; issued 1,067,094 and 799,933, respectively........................... 1,067 800 Additional paid-in capital............................................. 18,211 20,982 Retained earnings...................................................... 40,538 30,651 Foreign currency translation adjustments............................... 551 401 -------- -------- Total shareholders' equity............................................. 72,729 62,725 -------- -------- Total liabilities and shareholders' equity................... $249,869 $216,325 ======== ========
See Notes to Consolidated Financial Statements F-4 32 THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOREIGN CLASS B ADDITIONAL CURRENCY COMMON COMMON PAID-IN RETAINED TRANSLATION DEFERRED STOCK STOCK CAPITAL EARNINGS ADJUSTMENTS COMPENSATION ------- ------- ---------- -------- ----------- ------------ (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) BALANCE AT MARCH 31, 1992........... $ 6,565 $ 490 $ 23,349 $ 18,759 $ -- $ (120) Net income.......................... 6,282 Common stock issued: Executive Stock Purchase Plan -- 30,733 shares.................. 30 554 Option plans -- 29,519 common and 80,038 Class B common shares... 30 80 260 Stock dividend -- 50%............... 3,243 244 (3,496) Dividends declared -- $0.117........ (1,548) PPC, Inc. common stock dividends declared.......................... (30) Contributions to ESOP............... 120 Foreign currency translation adjustments....................... 480 Class B common stock converted to common stock...................... 9 (9) ------- ------- ---------- -------- ----------- ------------ BALANCE AT MARCH 31, 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 $ -- ======= ====== ======= ======= ========= ==========
See Notes to Consolidated Financial Statements F-5 33 THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, ------------------------------ 1995 1994 1993 -------- -------- -------- (DOLLARS IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income..................................................... $ 11,710 $ 9,081 $ 6,282 Adjustments to reconcile net income to net cash provided by (used in) operations: Depreciation and amortization................................ 5,870 5,362 3,829 Deferred income taxes........................................ 5,601 (1,062) (273) Cumulative effect of change in accounting principle.......... (--) (336) (--) Loss (gain) on sale of property, plant and equipment......... (702) 61 (6) Changes in assets and liabilities, net of acquisitions and disposals: Accounts receivable, net.................................. (27,011) (8,327) 3,930 Inventories............................................... (2,713) (13,025) (10,869) Prepaid expenses.......................................... (9,234) (801) (3,734) Accounts payable and accrued expenses..................... 11,945 3,516 1,295 Income taxes currently payable and deferred............... (4,471) 5,244 (1,734) -------- -------- -------- Net cash used in operating activities.......................... (9,005) (287) (1,280) -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures........................................... (2,245) (2,400) (4,952) Proceeds from sale of property, plant and equipment............ 23 34 20 Proceeds from sale of business assets.......................... 2,823 4,155 -- Purchase of net assets of acquired companies -- net of cash received..................................................... (187) -- (67,260) Changes in other assets and deferred charges................... (4,880) (5,867) (11,281) -------- -------- -------- Net cash used in investing activities.......................... (4,466) (4,078) (83,473) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under line of credit................................ 18,300 9,298 25,741 Borrowings (payments) under construction and term loan......... (667) -- 3,123 Proceeds from issuance of long-term debt....................... -- -- 55,000 Payments under industrial revenue bonds........................ (225) (195) (190) Payments under capital lease obligations....................... (723) (566) (372) Changes in other liabilities................................... (1,646) (2,542) 1,592 Dividends paid................................................. (1,713) (1,888) (1,433) Proceeds from issuance of common stock......................... 377 433 944 Common stock retired........................................... (391) (108) -- -------- -------- -------- Net cash provided by financing activities...................... 13,312 4,432 84,405 -------- -------- -------- Effect of translation rate changes............................. 150 (79) 480 -------- -------- -------- Net increase (decrease) in cash and cash equivalents........... (9) (12) 132 Cash and cash equivalents at beginning of year................. 788 800 668 -------- -------- -------- Cash and cash equivalents at end of year....................... $ 779 $ 788 $ 800 ======== ======== ======== SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES: Non-compete agreements......................................... $ -- $ 300 $ -- Capital lease obligations incurred to lease new equipment...... $ -- $ 764 $ 214 Contribution to ESOP using previously funded advances.......... $ -- $ -- $ 120 Dividends accrued and unpaid................................... $ 537 $ 428 $ 423
See Notes to Consolidated Financial Statements F-6 34 THOMAS NELSON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The consolidated financial statements consist of the accounts of Thomas Nelson, Inc. and subsidiary companies (the "Company"). All intercompany transactions and balances have been eliminated. As discussed further in Note B, the Company acquired PPC, Inc. ("Pretty Paper Company") in a pooling-of-interests transaction in March 1994 and acquired Word, Incorporated ("Word") through a purchase effective November 30, 1992. All financial data presented in the consolidated financial statements and notes thereto have been restated for all periods shown to include the accounts of PPC, Inc. under the pooling-of-interests method of accounting. The consolidated statement of income for the year ended March 31, 1993, includes Word operations for the four months ended March 31, 1993. 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, certain production costs of music products, direct marketing costs, and production and distribution costs relating to marketing programs that are expected to benefit future periods. 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) and prepaid royalty and production advances for works and projects which are not expected to be released within the next fiscal year. Income Taxes: Effective April 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". Deferred income taxes are provided for temporary differences in bases between financial statement and income tax assets and liabilities. F-7 35 THOMAS NELSON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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 conversion would cause dilution and the effect on net income of converting the debt securities. Fully diluted earnings per share also reflect additional dilution related to stock options using the market price at the end of the period, when higher than the average price for the period. 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. Reclassifications: Certain reclassifications of prior period amounts have been made to conform to the current year's presentation. NOTE B -- ACQUISITIONS AND DISPOSITIONS In March 1994, Pretty Paper Company 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 Company. 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 Company for all periods prior to the combination. Pretty Paper Company had net revenues of $8.0 million and $5.6 million, and net income (loss) of $342,000 and ($74,000), for the fiscal years 1994 and 1993, respectively. Costs and expenses incurred in connection with this transaction were immaterial and have been charged to expenses in March 1994. In addition, certain shareholders of Pretty Paper Company entered into agreements not to compete with the Company for a period of five years from the date of the pooling in consideration of an aggregate of $300,000. Effective November 30, 1992, the Company consummated the acquisition of all of the issued and outstanding capital stock of Word. Word produces and distributes Christian recorded and printed music products, and also publishes Christian and inspirational books and Bibles. The purchase price of the capital stock was $68.4 million. The purchase price was funded by the Company's issuance of $55 million of 5 3/4% Convertible Subordinated Notes due in 1999 and by borrowings under the Company's credit facilities. The acquisition has been accounted for as a purchase, and Word's results of operations are included in the Company's consolidated financial statements since the date of acquisition. The total acquisition cost was allocated to the net assets acquired and adjusted in fiscal year 1994, primarily for the recognition of approximately $8 million in a deferred tax asset. There may be additional tax assets available in future years, however, at this time, the Company has not recorded these assets. Any related tax assets recorded in the future will result in an adjustment to goodwill. In addition, the seller entered into an agreement not to compete with the Company for a period of five years from the date of the acquisition for a payment of $3.6 million. Effective September 27, 1993, the Company sold certain assets of a subsidiary of Word for approximately $4.2 million, which was approximately book value. No gain or loss was recorded in connection therewith. On a combined basis, the Company and Word would have had unaudited pro forma net revenues of $223.2 million for fiscal 1993. In March, 1995 the Company sold substantially all of the assets of a bindery plant for $2.8 million. A $0.7 million gain on the sale is included in other income in the accompanying financial statements. F-8 36 THOMAS NELSON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE C -- INVENTORIES Inventories consisted of the following at March 31 (in thousands):
1995 1994 ------- ------- Finished goods................................................. $59,116 $58,463 Work in process and raw materials.............................. 10,235 8,531 ------- ------- $69,351 $66,994 ======= =======
NOTE D -- PREPAID EXPENSES Prepaid expenses consisted of the following at March 31 (in thousands):
1995 1994 ------- ------- Direct marketing costs......................................... $ 4,562 $ 2,650 Prepaid advertising............................................ 1,423 670 Royalties and production costs................................. 11,516 7,096 Other.......................................................... 3,182 984 ------- ------- $20,683 $11,400 ======= =======
NOTE E -- PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following at March 31 (in thousands):
1995 1994 ------- ------- Land........................................................... $ 1,916 $ 1,933 Buildings...................................................... 11,314 11,229 Machinery and equipment........................................ 8,959 8,171 Assets under capital leases.................................... 2,800 2,800 Furniture and fixtures......................................... 3,521 3,190 ------- ------- 28,510 27,323 Less allowance for depreciation and amortization............... (12,284) (9,964) ------- ------- $16,226 $17,359 ======= =======
NOTE F -- OTHER ASSETS Other assets consisted of the following at March 31 (in thousands):
1995 1994 ------- ------- Prepaid royalties.............................................. $ 9,050 $ 6,200 Production masters, net of accumulated amortization of $1,267 and $789, respectively....................................... 2,089 1,209 Non-compete agreements, net of accumulated amortization of $2,121 and $1,214, respectively.............................. 2,682 3,489 Other.......................................................... 867 1,156 ------- ------- $14,688 $12,054 ======= =======
F-9 37 THOMAS NELSON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE G -- ACCRUED EXPENSES Accrued expenses consisted of the following at March 31 (in thousands):
1995 1994 ------- ------- Accrued interest............................................... $ 1,247 $ 969 Accrued royalties.............................................. 10,992 9,980 Accrued payroll................................................ 4,369 3,043 Other.......................................................... 2,950 4,626 ------- ------- $19,558 $18,618 ======= =======
Cash payments for interest were $8.0 million in 1995, $6.2 million in 1994 and $2.4 million in 1993. NOTE H -- LONG-TERM DEBT Long-term debt consisted of the following at March 31 (in thousands):
1995 1994 -------- -------- Industrial Revenue Bonds, 7.65% to 8.35%, due through 2005... $ 2,700 $ 2,920 Loan Agreement............................................... 4,333 5,000 Credit Agreements............................................ 58,800 40,500 5.75% Convertible Subordinated Notes, due in 1999............ 55,000 55,000 Other........................................................ 167 76 -------- -------- 121,000 103,496 Less current portion......................................... (892) (878) -------- -------- $120,108 $102,618 ======== ========
At March 31, 1995, Industrial Revenue Bonds were secured by property, plant and equipment with a net book value of approximately $2.3 million. The Loan Agreement indebtedness is secured by property, plant and equipment related to the warehouse and distribution center expansion completed in June 1992. Interest is at the London Interbank Offered Rate ("LIBOR") plus 1.25%, which was 7.4% at March 31, 1995. Semi-annual principal payments are due through March 2002. The Credit Agreements totaling $80 million were obtained in November 1992 from a group of banks, and increased in March 1995 to $105 million. The primary credit facility provides for a $100 million facility, with any outstanding balance at May 31, 1997 converting to a term loan payable in 16 equal quarterly principal installments thereafter. This credit facility bears interest at either the prime rate or, at the Company's option, at LIBOR plus 1.5%, based on certain financial ratios. At March 31, 1995, the average interest rate was 8.0%. This facility is guaranteed by all of the Company's subsidiaries and the Company has agreed, among other things, to limit the payment of cash dividends to $1.6 million, plus 30% of the Company's cumulative consolidated net income earned after March 31, 1992, and to maintain certain interest coverage, fixed charge coverage, debt-to-total-capital ratios and working capital of at least $60 million. The maximum dividends which the Company may pay for fiscal 1996 would be $4.2 million. Additionally, the Company has a $5 million credit facility which matures July 31, 1996 and bears interest at the prime rate, with covenants which are the same as the $100 million facility. At March 31, 1995, the Company was in compliance with all covenants of the credit facilities. At March 31, 1995, the Company had $46.2 million available under its Credit Agreements. During November 1992, the Company 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 F-10 38 THOMAS NELSON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $17.00 per share and are redeemable at the Company's option on or 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): 1996...................................................................... $ 892 1997...................................................................... 3,207 1998...................................................................... 15,092 1999...................................................................... 15,117 2000...................................................................... 70,117 2001 and thereafter....................................................... 16,575 -------- $121,000 ========
NOTE I -- LEASES Total rental expense for all operating leases, including short-term leases of less than a year, amounted to approximately $2.2 million in 1995, $2.2 million in 1994, and $1.0 million in 1993. 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 --------- ------- 1996................................................................ $ 2,419 $ 818 1997................................................................ 2,058 51 1998................................................................ 1,622 34 1999................................................................ 1,103 -- 2000................................................................ 495 -- 2001 and thereafter................................................. 2,103 -- --------- ------- Total minimum lease payments.............................. $ 9,800 903 ======= Less amount representing interest................................... (43) ------- Present value of net lease payments................................. 860 Less current portion................................................ (780) ------- $ 80 =====
NOTE J -- STOCK PLANS Executive Stock Purchase Plan of 1986: The Company has adopted the Executive Stock Purchase Plan of 1986, which is administered by the Company's Compensation Committee. There were no offers of investment rights under the Executive Stock Purchase Plan of 1986 that required a contribution by the Company for fiscal 1995, 1994 and 1993. Under this plan, there were 99,186 shares of common stock and 371,809 shares of Class B common stock reserved at March 31, 1995. 1986 Stock Incentive Plan: The Company has adopted the 1986 Stock Incentive Plan, which is administered by the Company's Compensation Committee. Stock options may be 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 F-11 39 THOMAS NELSON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) a person then owning more than 10% of the voting power in all classes of the Company's outstanding stock must be granted at a purchase price of not less than 110% of the FMV and exercised within five years from the date of grant. Shares reserved and options outstanding under this plan are as follows:
COMMON STOCK CLASS B COMMON STOCK ----------------------- ----------------------- FMV REMAINING REMAINING -------------------- SHARES OUTSTANDING SHARES OUTSTANDING EXERCISE RESERVED OPTIONED RESERVED OPTIONED PRICES FOR GRANT SHARES FOR GRANT SHARES PER SHARE --------- ----------- --------- ----------- -------------------- APRIL 1, 1992............... 30,000 59,000 126,700 103,700 $ 4.05 - $ 9.35 Stock Dividend.............. 16,000 26,700 63,375 51,750 (1.35) - (3.12) Exercised................... (28,462) (80,038) 2.70 - 5.00 Cancelled................... 10,738 (10,738) 412 (412) 2.70 - 5.00 --------- ----------- --------- ----------- -------------------- MARCH 31, 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 ======== ========= ======== ========= ====================
1990 Deferred Compensation Option Plan for Outside Directors: The Company has adopted the 1990 Deferred Compensation Option Plan for Outside Directors. 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, 1992............................................... 90,630 4,228 Stock Dividend.............................................. 44,035 2,866 Exercised................................................... (1,057) Granted..................................................... (2,560) 2,560 --------- ----------- MARCH 31, 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 ======= =========
1992 Employee Stock Incentive Plan: In 1992, the Company's shareholders approved the 1992 Employee Stock Incentive Plan. Stock options, stock appreciation rights, restricted stock, deferred stock, stock F-12 40 THOMAS NELSON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) purchase rights and other stock-based awards may be granted under this plan. There are 562,500 shares of common stock and 375,000 shares of Class B common stock reserved under this plan at fiscal year end. Restricted stock awards of 132,084 shares of common stock and 55,000 shares of Class B common stock were granted during fiscal 1995. 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 voluntarily terminate his or her employment for two years subsequent to when an award is earned. Due to the results of fiscal 1995, the Company will issue approximately 66,000 shares of common stock and recognize compensation of approximately $1.3 million over two years which is the period in which the risk of forfeiture lapses. NOTE K -- RETIREMENT PLANS The Company has adopted an Employee Stock Ownership Plan ("ESOP") for all eligible officers and employees who are not covered under a profit-sharing plan established through collective bargaining. The Company matches 25% of each employee's 401(k) contributions annually and, in addition, may make retirement contributions to the ESOP at its discretion. Contributions to the ESOP including the Company's matching 401(k) contribution totaled $1.0 million, $0.9 million and $0.7 million in 1995, 1994 and 1993, 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 September 30, 1992, the Company effected a three-for-two stock split in the form of a 50% stock dividend. All common stock, Class B common stock, dividends per share and earnings per share data has been restated to reflect this three-for-two stock split. NOTE M -- INCOME TAXES The summary below sets forth the components of the federal and state income tax provision (benefit) for the years ending March 31 (in thousands):
1995 1994 1993 ------- ------- ------- Current: Federal................................................... $ 97 $ 4,973 $ 3,051 State..................................................... 839 417 313 Foreign................................................... 102 219 -- ------- ------- ------- 1,038 5,609 3,364 Deferred.................................................... 5,601 (1,062) (309) ------- ------- ------- Total............................................. $ 6,639 $ 4,547 $ 3,055 ====== ====== ======
F-13 41 THOMAS NELSON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The deferred income tax provision (benefit) is comprised of the following for the years ending March 31 (in thousands):
1995 1994 1993 ------ ------- ------- Accelerated depreciation................................... $ 176 $ 91 $ 88 Contributions.............................................. (386) 48 147 Inventory reserve.......................................... 2,100 (539) 246 Bad debt and return reserves............................... 1,281 (468) (1,262) Inventory -- tax over book................................. 612 (588) (1,111) Advances and prepaid expenses.............................. 1,717 889 382 Deferred charges........................................... 95 (172) 573 Accrued liabilities........................................ 6 (323) 459 Other...................................................... -- -- 169 ------ ------- ------- $5,601 $(1,062) $ (309) ====== ======= =======
The effective income tax rate applicable to income differs from the U.S. federal income tax rate ("statutory rate") for the following reasons:
PERCENT OF PRE-TAX INCOME ---------------------------- 1995 1994 1993 ------ ------ ------ Effective tax rate......................................... 36.2% 34.2% 32.7% State taxes on income...................................... (4.6) (3.1) (3.3) Other...................................................... 2.9 3.1 4.6 ---- ---- ---- Statutory rate............................................. 34.5% 34.2% 34.0% ==== ==== ====
The deferred tax asset consists primarily of temporary differences in inventory, accounts receivable, advances and prepaid expenses. The Company's federal income tax returns have been examined by the Internal Revenue Service for the fiscal years through 1987. As discussed in Note A, the Company adopted SFAS No. 109 as of the beginning of fiscal 1994. The cumulative effect on the prior years of this change in accounting principle increased fiscal 1994 net income by $0.3 million, or $.03 per share, and is reported in the consolidated statements of income for the year ended March 31, 1994 as a cumulative effect of accounting change. Fiscal 1993 financial statements have not been restated to apply the provisions of SFAS No. 109. Cash payments for income taxes were $6.0 million, $0.4 million, and $3.4 million in 1995, 1994 and 1993, respectively. A Federal Income Tax receivable of approximately $0.9 million is included in current year consolidated prepaid expenses. F-14 42 THOMAS NELSON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE N -- QUARTERLY RESULTS (UNAUDITED) Summarized results for each quarter in the fiscal years ended March 31, 1995 and March 31, 1994 are as follows (dollars in thousands, except per share data):
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER ----------- ----------- ----------- ----------- 1995 Net revenues............................... $49,103 $70,512 $71,086 $74,406 Gross profit............................... 23,829 35,165 35,452 37,011 Net income (loss).......................... (544) 5,623 4,815 1,816 Net income (loss) per share................ (.04) .42 .36 .14 1994 Net revenues............................... $44,839 $64,363 $60,728 $56,504 Gross profit............................... 21,877 31,234 29,450 28,672 Net income (loss).......................... (829) 4,560 3,823 1,527 Net income (loss) per share................ (.06) .34 .29 .11
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 totalled $28 million at March 31, 1995. 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 three 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, 1995 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, 1995 and 1994, respectively. The estimates presented are not necessarily indicative of amounts the Company could realize in a current market transaction.
1995 1994 --------------------- --------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE -------- ---------- -------- ---------- (DOLLARS IN THOUSANDS) CASH AND CASH EQUIVALENTS....................... $ 779 $ 779 $ 788 $ 788 LONG-TERM DEBT: 5.75% Convertible Subordinated Notes............ 55,000 65,450 55,000 65,450 Credit Agreements............................... 58,800 58,800 40,500 40,500 Loan Agreement.................................. 4,333 4,333 5,000 5,000 Industrial Revenue Bonds........................ 2,700 2,700 2,920 2,920
The fair value of the 5.75% Convertible Subordinated Notes is 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 F-15 43 THOMAS NELSON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company approximates the current market rate demanded by investors; therefore, the instruments are valued at par. The carrying value of the Industrial Revenue Bonds approximates the fair value. 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. F-16 44 - ------------------------------------------------------ - ------------------------------------------------------ NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. ------------------------ TABLE OF CONTENTS
PAGE ---- Prospectus Summary.................... 3 Use of Proceeds....................... 6 Price Range of Common Stock and Class B Common Stock...................... 6 Dividend Policy....................... 7 Capitalization........................ 7 Selected Consolidated Financial Data................................ 8 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 9 Business.............................. 13 Management............................ 18 Description of Capital Stock.......... 19 Underwriting.......................... 22 Legal Matters......................... 24 Experts............................... 24 Available Information................. 24 Incorporation of Certain Information by Reference........................ 25 Index to Consolidated Financial Statements.......................... F-1
- ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ 2,500,000 SHARES [LOGO] THOMAS NELSON, INC. COMMON STOCK ------------------------ PROSPECTUS ------------------------ PAINEWEBBER INCORPORATED MERRILL LYNCH & CO. J.C. BRADFORD & CO. ------------------------ , 1995 - ------------------------------------------------------ - ------------------------------------------------------ 45 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. [ALTERNATE INTERNATIONAL PAGE] SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED JUNE 27, 1995 [LOGO] 2,500,000 SHARES THOMAS NELSON, INC. COMMON STOCK ------------------------ All of the shares of Common Stock offered hereby are being sold by Thomas Nelson, Inc. (the "Company"). Of the 2,500,000 shares of Common Stock offered hereby, 500,000 shares are being offered in an international offering outside the United States and Canada (the "International Shares") and 2,000,000 shares are being offered in a concurrent offering in the United States and Canada. The price to the public and aggregate underwriting discounts and commissions per share will be identical for both offerings. See "Underwriting." The Company has two classes of authorized and issued common stock. Holders of the Common Stock, which is offered hereby, are entitled to one vote per share, and holders of the Class B Common Stock are entitled to ten votes per share on all matters submitted to a vote of shareholders of the Company. See "Description of Capital Stock." After completion of this offering, directors and executive officers of the Company will beneficially own Common Stock and Class B Common Stock representing approximately 36.1% of the voting power of the Company. On June 19, 1995, the Common Stock and Class B Common Stock began trading on the New York Stock Exchange (the "NYSE") under the symbols "TNM" and "TNM.B," respectively, and ceased to be quoted on the Nasdaq National Market System. On June 23, 1995 the last reported sale prices of the Common Stock and Class B Common Stock on the NYSE were $20 1/8 and $21 3/8 per share, respectively. See "Price Range of Common Stock and Class B Common Stock." ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Price to Proceeds to Public Underwriting Company(2) Discounts and Commissions(1) - ----------------------------------------------------------------------------------------------- Per Share................................ $ $ $ - ----------------------------------------------------------------------------------------------- Total.................................... $ $ $ - ----------------------------------------------------------------------------------------------- Total Assuming Full Exercise of Over- Allotment Option(3).................... $ $ $ - ----------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------
(1) See "Underwriting." (2) Before deducting expenses, estimated at $200,000, which are payable by the Company. (3) Assuming exercise in full of the 30-day option granted by the Company to the U.S. Underwriters to purchase up to 375,000 additional shares of Common Stock, on the same terms, solely to cover over-allotments. See "Underwriting." ------------------------ The International Shares are offered by the International Underwriters, subject to prior sale, when, as and if delivered to and accepted by the International Underwriters, and subject to their right to reject orders in whole or in part. It is expected that delivery of the Common Stock will be made in New York City on or about July , 1995. ------------------------ PAINEWEBBER INTERNATIONAL MERRILL LYNCH INTERNATIONAL LIMITED J.C. BRADFORD & CO. ------------------------ THE DATE OF THIS PROSPECTUS IS , 1995. 46 [ALTERNATE INTERNATIONAL PAGE] UNITED STATES TAXATION OF NON-U.S. SHAREHOLDERS GENERAL The following is a general discussion of certain anticipated United States federal tax consequences of the ownership, holding and disposition of Common Stock by a person that, for United States federal income tax purposes, is not a "United States Person" (a "Non-U.S. Holder"). For these purposes, a "United States Person" means a citizen or resident of the United States, a corporation, a partnership or other entity created or organized in or under the laws of the United States or any state thereof, or an estate or trust, the income of which is subject to United States federal income taxation regardless of its source. The following discussion does not consider specific facts and circumstances that may be relevant to a particular Non-U.S. Holder's tax position, including the benefits that may be available to any person under an applicable tax treaty to which the United States is a party. Specifically, without limitation, this discussion does not address the United States tax consequences to any Non-U.S. Holder who at any time owns (directly or through attribution) more than 5% of the Common Stock or to any Non-U.S. Holder that is a controlled foreign corporation, a foreign personal holding company, a foreign private foundation or a foreign government. Furthermore, the following discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and on administrative and judicial pronouncements thereunder, all of which are subject to change possibly retroactively. Each prospective Non-U.S. Holder is urged to consult a tax advisor with respect to the United states tax consequences of acquiring, holding and disposing of Common Stock, as well as any tax consequences that may arise under the laws of any foreign, state, local or other tax jurisdiction. DIVIDENDS In each quarter of fiscal 1994 and 1995, the Company paid a cash dividend of $.032 per share on its Common Stock and Class B Common Stock. On May 24, 1995, the Company declared a cash dividend of $.04 per share on its Common Stock and Class B Common Stock to be paid on August 14, 1995 to shareholders of record on July 31, 1995. See "Dividend Policy." Dividends paid on shares of Common Stock will generally be subject to withholding of United States federal income tax at a rate of 30% of such payment unless either (i) such holder is eligible for a reduced tax rate or a tax exemption under an applicable income tax treaty or (ii) such holder is engaged in the conduct of a trade or business within the United States and the dividend is effectively connected with that trade or business. If the dividend is effectively connected with the conduct of a trade or business within the United States by a Non-U.S. Holder, the dividend (as adjusted by any applicable deductions) will be subject to United States federal income tax at regular rates generally applicable to United States Persons. Any such effectively connected dividends received by a corporate Non-U.S. Holder may, under certain circumstances, be subject to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. Certain certification requirements may have to be satisfied to claim treaty benefits or exemption from withholding under the foregoing rules. Non-U.S. Holders that are partnerships or trusts may be subject to certain additional withholding requirements and are urged to consult their tax advisors as to the application of such requirements. GAIN ON DISPOSITION OF COMMON STOCK Except as described below, a Non-U.S. Holder will generally not be subject to United States federal income tax (and no tax will generally be withheld) with respect to gain recognized on a sale or the disposition of the Common Stock unless the gain is effectively connected with a trade or business conducted by the Non-U.S. Holder in the United States. FEDERAL ESTATE TAXES Common Stock held by a Non-U.S. holder who is a non-resident alien individual (as specially defined for United States federal estate tax purposes) at the date of his or her death will be included in his or her gross estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. 22 47 [ALTERNATE INTERNATIONAL PAGE] UNITED STATES INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX The Company must report annually to the Internal Revenue Service and to each Non-U.S. Holder the amount of dividends and other payments distributed to and the tax withheld with respect to such holder. These information reporting requirements apply regardless of whether withholding is reduced or eliminated by an applicable treaty or is not required because the dividends are effectively connected with a U.S. trade or business of a Non-U.S. Holder. Under certain treaties, the Internal Revenue Service may make this information available to their tax authorities in the country of a Non-U.S. Holder's residence. Backup withholding tax (which generally is a withholding tax imposed at the rate of 31% on certain payments to persons that are not "exempt recipients" and that fail to furnish certain information under United States information reporting requirements) and information reporting relating thereto (which is separate from the reporting described in the preceding paragraph) generally will not apply to dividends and other payments paid to a Non-U.S. Holder that are either (i) subject to the 30% tax discussed above (under the heading "Dividends"), (ii) not so subject because a tax treaty applies that reduces or eliminates such withholding or (iii) not so subject because the Non-U.S. Holder provides to the Internal Revenue Service Form 4224, indicating that such payments are effectively connected with a trade or business conducted by the Non-U.S. Holder in the United States. These backup withholding requirements and information reporting rules will apply to the gross proceeds paid by or through a United States office of a broker to a Non-U.S. Holder upon the disposition of shares of the Company, unless the Non-U.S. Holder certifies under penalty of perjury that it is an exempt foreign person (as specifically defined for this purpose) or the Non-U.S. Holder otherwise establishes an exemption. Under existing regulations, information reporting but not backup withholding will also apply to the payment of gross proceeds of a sale or other disposition of Common Stock by or through a foreign office of a broker with certain United States connections, unless the broker has documentary evidence (other than merely a foreign address) that the holder is a Non-U.S. Holder and the broker has no actual knowledge to the contrary. Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder will be refunded (or credited against the Non-U.S. Holder's United States federal income tax liability, if any), provided that an appropriate claim for refund is filed with the Internal Revenue Service. These backup withholding and information reporting requirements are under review by the United States Treasury Department. Their application to the ownership and disposition of shares of Common Stock could be changed by future regulations. 23 48 [ALTERNATE INTERNATIONAL PAGE] UNDERWRITING The International Underwriters named below, for whom PaineWebber International (U.K.) Ltd., Merrill Lynch International Limited and J.C. Bradford & Co. are acting as the representatives (the "International Representatives"), have severally agreed, subject to the terms and conditions of the International Underwriting Agreement (the "International Underwriting Agreement"), to purchase from the Company, and the Company has agreed to sell to the International Underwriters, the number of shares of Common Stock set forth opposite their names.
NUMBER UNDERWRITER OF SHARES - ------------------------------------- --------- PaineWebber International (U.K.) Ltd........................................... Merrill Lynch International Limited............................................ J.C. Bradford & Co............................................................. --------- Total................................................................ 500,000 =======
The Company has also entered into a U.S. Underwriting Agreement (the "U.S. Underwriting Agreement") with certain U.S. Underwriters (the "U.S. Underwriters", together with the International Underwriters, the "Underwriters"), for whom PaineWebber Incorporated, Merrill Lynch Pierce, Fenner & Smith Incorporated and J.C. Bradford & Co. are acting as the representatives. Subject to the terms and conditions of the U.S. Underwriting Agreement, and concurrently with the sale of 500,000 shares of Common Stock to the International Underwriters, the Company has agreed to sell to the U.S. Underwriters, and the U.S. Underwriters have severally agreed to purchase, an aggregate of 2,000,000 shares of Common Stock. The public offering price per share and the total underwriting discounts and commissions per share will be identical in the International Underwriting Agreement and the U.S. Underwriting Agreement with respect to all shares of Common Stock being purchased by the Underwriters from the Company. The International Underwriting Agreement provides that the obligations of the International Underwriters to purchase the shares of Common Stock are subject to certain conditions. The International Underwriters are committed to purchase, and the Company is obligated to sell, all the shares of Common Stock offered by this prospectus, if any are purchased. In general, the closing with respect to the sale of the shares of Common Stock pursuant to the International Underwriting Agreement is a condition to the closing with respect to the sale of the shares of Common Stock pursuant to the U.S. Underwriting Agreement and vice versa. PaineWebber International (U.K.) Ltd. is an affiliate of PaineWebber Incorporated, and Merrill Lynch International Limited is an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated. The Company has been advised by the International Representatives that the International Underwriters propose initially to offer the shares of Common Stock to the public at the public offering price set forth on the cover page of this prospectus, and to certain securities dealers at such price less a concession not in excess of $ per share. The International Underwriters may allow, and such dealers may reallow, concessions of not more than $ per share on sales to certain other dealers. After the public offering, the public offering price and concessions may be changed by the International Representatives. Each International Underwriter has represented and agreed that, as part of the distribution of the shares of Common Stock, (a) it is not purchasing any shares of Common Stock for the account of any U.S. or Canadian Person and (b) it has not offered or sold, and will not offer or sell, directly or indirectly, any shares of Common Stock or distribute this prospectus to any person within the United States or Canada or to any U.S. or Canadian Person. Each U.S. Underwriter has represented and agreed that, as part of the distribution of the shares of Common Stock, (a) it is not purchasing any shares of Common Stock for the account of anyone other than a U.S. or Canadian Person, and (b) it has not offered or sold, and will not offer or sell, 24 49 [ALTERNATE INTERNATIONAL PAGE] directly or indirectly, any shares of Common Stock or distribute the U.S. Prospectus to any person outside the United States or to anyone other than a U.S. or Canadian Person. The foregoing limitations do not apply to stabilization transactions or to certain other transactions specified in the Agreement Between U.S. and International Underwriters described below. As used herein, "U.S. or Canadian Person" means any individual who is resident in the United States or Canada, or any corporation, pension, profit-sharing or other trust or other entity organized under or governed by the laws of the United States or Canada or any political subdivision thereof (other than a foreign branch of any U.S. or Canadian Person), and includes any U.S. or Canadian branch of a non-U.S. or Canadian Person. Each International Underwriter has represented and agreed not to offer or sell Common Stock in Great Britain by means of any document except to persons whose ordinary business it is to buy or sell shares or debentures, whether as principal or agent (except in circumstances which do not constitute an offer to the public within the meaning of the Companies Act 1985 of Great Britain), and, unless such International Underwriter is a person permitted to do so under the securities laws of Great Britain, it will not distribute this prospectus or any other offering material in respect of any proposed offer or sale of Common Stock in or from Great Britain other than to persons whose business involves the acquisition and disposal, or the holding, of securities whether as principal or agent. The U.S. Underwriters and the International Underwriters have entered into an Agreement Between U.S. and International Underwriters that provides for the coordination of their activities. Pursuant to the Agreement Between U.S. and International Underwriters, sales may be made between the U.S. Underwriters and the International Underwriters of such number of shares of Common Stock as may be mutually agreed upon. The per share price of any shares so sold shall be the public offering price set forth on the cover page of this prospectus, less an amount not greater than the per share amount of the concession to dealers set forth above. To the extent there are sales between the U.S. Underwriters and the International Underwriters, the number of shares of Common Stock initially available for sale by the U.S. Underwriters or by the International Underwriters may be more or less than the amount appearing on the cover page of this prospectus. The Company has granted to the U.S. Underwriters an option, exercisable within the 30-day period after the date of the prospectus, to purchase up to an additional 375,000 shares of Common Stock at the public offering price set forth on the cover page of this prospectus, less the underwriting discounts and commissions. The U.S. Underwriters may exercise such option only to cover over-allotments, if any, in the sale of the shares of Common Stock offered hereby. To the extent that such option is exercised, each U.S. Underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares of Common Stock as the percentage it was obligated to purchase pursuant to the U.S. Underwriting Agreement. The Company and its executive officers and directors have agreed not to sell, offer to sell or otherwise dispose of shares of Common Stock, Class B Common Stock or securities convertible into Common Stock or Class B Common Stock or sell, offer to sell or grant rights, options or warrants with respect to Common Stock, Class B Common Stock or securities convertible into Common Stock or Class B Common Stock prior to the expiration of 90 days from the date of this prospectus, without the prior written consent of PaineWebber Incorporated, other than pursuant to existing employee stock option plans or in connection with other employee incentive compensation arrangement of the Company and issuances of Common Stock upon conversion of securities outstanding as of the date of this prospectus. The Company has agreed to indemnify the International Underwriters and the U.S. Underwriters and their controlling persons against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"), or to contribute to payments the U.S. Underwriters and the International Underwriters may be required to make in respect thereof. 25 50 [ALTERNATE INTERNATIONAL PAGE] LEGAL MATTERS The validity of the shares of Common Stock offered hereby will be passed upon for the Company by Bass, Berry & Sims, Nashville, Tennessee. Certain legal matters relating to the offering will be passed upon for the Underwriters by Shereff, Friedman, Hoffman & Goodman, LLP, New York, New York. EXPERTS The financial statements and schedules included or incorporated by reference in this prospectus and elsewhere in the registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon authority of said firm as experts in giving said reports. AVAILABLE INFORMATION The Company has filed with the Securities and Exchange Commission (the "Commission") in Washington, D.C., a Registration Statement on Form S-3 (together with all amendments and exhibits thereto, the "Registration Statement") under the Securities Act, with respect to the shares of Common Stock offered hereby. This prospectus constitutes a part of the Registration Statement and does not contain all the information set forth therein, certain portions of which have been omitted as permitted by the rules and regulations of the Commission. Any statements contained herein concerning the provisions of any contract or other document are not necessarily complete and, in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement or otherwise filed with the Commission. Each such statement is qualified in its entirety by such reference. For further information regarding the Company and the securities offered hereby, reference is made to the Registration Statement and to the exhibits thereto. The Company is subject to the informational requirements of the Exchange Act, and, in accordance therewith, files reports, proxy statements and other information with the Commission. The Registration Statement (with exhibits), as well as such reports, proxy statements and other information filed by the Company with the Commission, may be inspected and copied at the public reference facilities maintained by the Commission at its principal offices at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following Regional Offices of the Commission: 7 World Trade Center, 13th Floor, New York, New York, 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may be obtained from the Public Reference Section of the Commission at 450 Fifth Street. N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The Common Stock and Class B Common Stock are listed on the NYSE. The aforementioned material also can be inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005. The Company is organized under the laws of the State of Tennessee, its executive offices are located at Nelson Place at Elm Hill Pike, Nashville, Tennessee 37214-1000, and its telephone number is (615) 889-9000. 26 51 [ALTERNATE INTERNATIONAL PAGE] INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The following documents, heretofore filed by the Company with the Commission (File No. 0-4095) pursuant to the Exchange Act, are incorporated and made a part of this prospectus by reference, except as superseded or modified herein: (1) The Company's Annual Report on Form 10-K for the year ended March 31, 1995. (2) The description of the Company's Common Stock and Class B Common Stock contained in the Registration Statement on Form 8-A filed on May 26, 1995. All documents subsequently filed by the Company pursuant to Section 13 (a), 13 (c), 14, or 15 (d) of the Exchange Act prior to the termination of this offering shall be deemed to be incorporated by reference in this prospectus and shall be part hereof from the date of filing of such documents. Any statement contained herein or in any document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein or in any subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as modified or superseded, to constitute a part of this prospectus. The Company undertakes to provide without charge to each person, including any beneficial owner, to whom a copy of this prospectus is delivered, upon the written or oral request of any such person, a copy of any document described herein (not including exhibits to those documents unless such exhibits are specifically incorporated by reference into the information incorporated into this prospectus). Requests for such copies should be directed to Joe L. Powers, Executive Vice President and Secretary, Thomas Nelson, Inc., Nelson Place at Elm Hill Pike, Nashville, Tennessee 37214-1000, telephone number (615) 889-9000. 27 52 [ALTERNATE INTERNATIONAL PAGE] - ------------------------------------------------------ - ------------------------------------------------------ NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. ------------------------ TABLE OF CONTENTS
PAGE ---- Prospectus Summary.................... 3 Use of Proceeds....................... 6 Price Range of Common Stock and Class B Common Stock...................... 6 Dividend Policy....................... 7 Capitalization........................ 7 Selected Consolidated Financial Data................................ 8 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 9 Business.............................. 13 Management............................ 18 Description of Capital Stock.......... 19 United States Taxation of Non-U.S. Shareholders........................ 22 Underwriting.......................... 24 Legal Matters......................... 26 Experts............................... 26 Available Information................. 26 Incorporation of Certain Information by Reference........................ 27 Index to Consolidated Financial Statements.......................... F-1
- ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ 2,500,000 SHARES [LOGO] THOMAS NELSON, INC. COMMON STOCK ------------------------- PROSPECTUS ------------------------- PAINEWEBBER INTERNATIONAL MERRILL LYNCH INTERNATIONAL LIMITED J.C. BRADFORD & CO. ------------------------- , 1995 - ------------------------------------------------------ - ------------------------------------------------------ 53 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION SEC Registration Fee...................................................... $ 19,456 NASD Filing Fee........................................................... 6,142 Listing Fees.............................................................. 36,900 Legal Fees and Expenses................................................... 60,000 Blue Sky Fees and Expenses................................................ 5,000 Accounting Fees and Expenses.............................................. 20,000 Printing and Engraving.................................................... 50,000 Miscellaneous............................................................. 2,502 -------- Total........................................................... $200,000 ========
Except for the SEC Registration Fee and the NASD Filing Fee, all expenses are estimated. All of the above-mentioned expenses will be borne by the Registrant. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Tennessee Business Corporation Act ("TBCA") provides that a corporation may indemnify any of its directors and officers against liability incurred in connection with a proceeding if (i) such person acted in good faith; (ii) in the case of conduct in an official capacity with the corporation, such person reasonably believed such conduct was in the corporation's best interests; (iii) in all other cases, such person reasonably believed that his or her conduct was at least not opposed to the best interests of the corporation; and (iv) in connection with any criminal proceeding, such person had no reasonable cause to believe his conduct was unlawful. In actions brought by or in the right of the corporation, however, the TBCA provides that no indemnification may be made if the director or officer was adjudged to be liable to the corporation. The TBCA also provides that in connection with any proceeding charging improper personal benefit to an officer or director, no indemnification may be made if such officer or director is adjudged liable on the basis that such personal benefit was improperly received. Notwithstanding the foregoing, the TBCA provides that a court of competent jurisdiction, unless the corporation's charter provides otherwise, upon application, may order that an officer or director be indemnified for reasonable expenses if, in consideration of all relevant circumstances, the court determines that such individual is fairly and reasonably entitled to indemnification, notwithstanding the fact that (i) such officer or director was adjudged liable to the corporation in a proceeding by or in right of the corporation; (ii) such officer or director was adjudged liable on the basis that personal benefit was improperly received by him; or (iii) such officer or director breached his duty of care to the corporation. The Company's Amended and Restated Charter and Amended Bylaws provide that to the fullest extent permitted by law no director shall be personally liable to the Company or its shareholders for monetary damages for breach of any fiduciary duty as a director. Under the TBCA, this provision relieves the Company's directors from personal liability to the Company or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability arising from a judgment or other final adjudication establishing (i) any breach of the director's duty of loyalty, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or (iii) any unlawful distributions. Reference is made to the U.S. Underwriting Agreement and the International Underwriting Agreement filed as Exhibits 1.1 and 1.2, respectively, to this Registration Statement for certain provisions as to the indemnification of the Company's officers and directors by the Underwriters in connection with this offering. The Company currently has in effect an executive liability insurance policy which provides coverage for its directors and officers in amounts of $20 million per claim and $20 million for annual aggregate claims. The policy covers any error, misstatement, act or omission, or breach of duty committed by a director or officer, subject to certain specified exclusions. II-1 54 ITEM 16. EXHIBITS See Index to Exhibits on page II-4. ITEM 17. UNDERTAKINGS The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bone fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to the initial bona fide offering thereof. II-2 55 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form S-3, and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Nashville, State of Tennessee, on the 27th day of June, 1995. THOMAS NELSON, INC. By: /s/ JOE L. POWERS ------------------------------------ Joe L. Powers Executive Vice President and Secretary KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Sam Moore and Joe L. Powers, and each of them, his or her true and lawful attorneys-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to sign any and all amendments to this Registration Statement, and to file the same with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------------------------------------------- -------------------------------- -------------- /s/ SAM MOORE Chairman of the Board of June 27, 1995 - --------------------------------------------- Directors, Chief Executive Sam Moore Officer and President (Principal Executive Officer) /s/ JOE L. POWERS Executive Vice President and June 27, 1995 - --------------------------------------------- Secretary (Principal Financial Joe L. Powers and Accounting Officer) /s/ JOE M. RODGERS Director June 27, 1995 - --------------------------------------------- Joe M. Rodgers Director - --------------------------------------------- Brownlee O. Currey, Jr. /s/ W. LIPSCOMB DAVIS, JR. Director June 27, 1995 - --------------------------------------------- W. Lipscomb Davis, Jr. /s/ ROBERT J. NIEBEL, SR. Director June 27, 1995 - --------------------------------------------- Robert J. Niebel, Sr. /s/ MILLARD V. OAKLEY Director June 27, 1995 - --------------------------------------------- Millard V. Oakley Director - --------------------------------------------- Andrew Young /s/ CAL TURNER, JR. Director June 27, 1995 - --------------------------------------------- Cal Turner, Jr.
II-3 56 INDEX TO EXHIBITS
SEQUENTIAL EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------ -------------------------------------------------------------------------- ---------- 1.1 -- Form of U.S. Underwriting Agreement. 1.2 -- Form of International Underwriting Agreement(1) 4.1 -- Amended and Restated Charter of the Registrant (filed as Exhibit 4.1 to Registrant's Registration Statement on Form S-8 (Commission File No. 33-80086)) is hereby incorporated by reference. 4.2 -- Amended Bylaws of the Registrant (filed as Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1990) are hereby incorporated by reference. 4.3 -- Loan Agreement dated December 1, 1976, between the Registrant and The Industrial Development Board of Metropolitan Government of Nashville and Davidson County (filed as Exhibit 3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1977 and incorporated herein by reference). 4.4 -- Promissory Note dated December 1, 1976, of the Registrant payable to The Industrial Development Board of the Metropolitan Government of Nashville and Davidson County (filed as Exhibit 4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1977 and incorporated herein by reference). 4.5 -- Deed of Trust and Security Agreement dated December 1, 1976, from the Registrant to Third National Bank in Nashville (filed as Exhibit 5 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1977 and incorporated herein by reference). 4.6 -- Loan Agreement dated May 18, 1990, between the Registrant and The Industrial Development Board of The Metropolitan Government of Nashville and Davidson County (filed as Exhibit 4(e) to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1990 and incorporated herein by reference). 4.7 -- Promissory Note dated May 18, 1990, of the Registrant payable to The Industrial Development Board of the Metropolitan Government of Nashville and Davidson County (filed as Exhibit 4(f) to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1990 and incorporated herein by reference). 4.8 -- Deed of Trust and Security Agreement dated May 18, 1990, from the Registrant to Third National Bank in Nashville (filed as Exhibit 4.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1991 and incorporated herein by reference). 4.9 -- Construction and Term Loan Agreement dated March 31, 1992, between the Registrant and Third National Bank in Nashville (filed as Exhibit 4.7 to Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1992 and incorporated herein by reference). 4.10 -- Promissory Note dated March 31, 1992, of the Registrant payable to Third National Bank in Nashville (filed as Exhibit 4.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1992 and incorporated herein by reference). 4.11 -- Deed of Trust and Security Agreement dated March 31, 1992, from the Registrant to Third National Bank in Nashville (filed as Exhibit 4.9 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1992 and incorporated herein by reference).
II-4 57
SEQUENTIAL EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------ -------------------------------------------------------------------------- ---------- 4.12 -- Credit Agreement dated as of November 30, 1992, among the Registrant, Third National Bank in Nashville, First National 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 28 to the Registrant's Form 8-K dated December 11, 1992 and incorporated herein by reference). 4.13 -- First Amendment to Credit Agreement dated as of February 26, 1993, among the Registrant, Third National Bank in Nashville, First National 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 4.11 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1995 and incorporated herein by reference). 4.14 -- Second Amendment to Credit Agreement dated as of September 19, 1994, among the Registrant, Third National Bank in Nashville, First National Bank of Louisville, First American National Bank of Nashville, NationsBank of Texas, N.A. in Dallas, and Creditanstalt-Bankverein in New York. (filed as Exhibit 4.12 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1995 and incorporated herein by reference). 4.15 -- Third Amendment to Credit Agreement dated as of December 23, 1994, among the Registrant, Third National Bank in Nashville, First National 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 4.13 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1995 and incorporated herein by reference). 4.16 -- Fourth Amendment to Credit Agreement and First Amendment to Revolving Credit Notes dated as of March 13, 1995, among the Registrant, Third National Bank in Nashville, First National 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 4.14 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1995 and incorporated herein by reference). 4.17 -- Indenture dated as of November 30, 1992, by and between Thomas Nelson, Inc. and Boatman's Trust Registrant (filed as Exhibit 4 to the Registrant's Form 8-K dated December 11, 1992 and incorporated herein by reference). 5 -- Opinion of Bass, Berry & Sims, counsel to Registrant, as to the legality of the Common Stock being registered. 23.1 -- Consent of Arthur Andersen LLP. 23.2 -- Consent of Bass, Berry & Sims (included in Exhibit 5). 24 -- Power of Attorney (included on page II-3 of this Registration Statement).
- --------------- (1) To be filed by amendment. II-5 EX-1.1 2 U.S. UNDERWRITING AGREEMENT 1 EXHIBIT 1 2,000,000 SHARES THOMAS NELSON, INC. COMMON STOCK UNDERWRITING AGREEMENT (U.S. version) July __, 1995 PAINEWEBBER INCORPORATED MERRILL LYNCH & CO. J.C. BRADFORD & CO. As Representatives of the several U.S. Underwriters c/o PaineWebber Incorporated 1285 Avenue of the Americas New York, New York 10019 Dear Sirs: Thomas Nelson, Inc., a Tennessee corporation (the "Company") proposes to sell an aggregate of 2,000,000 shares (the "Firm U.S. Firm Shares") of the Company's Common Stock, $1.00 par value per share (the "Common Stock"), to you and to the other underwriters named in Schedule I (collectively, the "U.S. Underwriters"), for whom you are acting as representatives (the "Representatives"). The Company has also agreed to grant to you and the other U.S. Underwriters an option (the "U.S. Option") to purchase up to an additional 375,000 shares of Common Stock (the "U.S. Option Shares") on the terms and for the purposes set forth in Section 1 (b). The Firm U.S. Firm Shares and the U.S. Option Shares are hereinafter collectively referred to as the "U.S. Firm Shares" and the International Shares (as hereinafter defined) and the U.S. Firm Shares are referred to collectively herein as the "Shares." It is understood that the Company is concurrently entering into an agreement (the "International Underwriting Agreement") providing for the sale by the Company of an aggregate of 500,000 shares of Common Stock, through arrangements with certain underwriters outside the United States and Canada (the "International Underwriters"), for whom PaineWebber Intentional (U.K.) Ltd. and Merrill Lynch International Limited are acting as lead managers (the "Managers"), in connection with the offering and the sale of such shares of Common Stock outside the United States and Canada to persons other than United States or Canadian Persons. The U.S. Underwriters and International Underwriters are referred to herein collectively as the "Underwriters". As used herein, "United States or 2 Canadian Person" means any individual who is resident in the United States or Canada, or any corporation, pension, profit-sharing or other trust or other entity organized under or governed by the laws of the United States or Canada or any political subdivision thereof (other than the foreign branch of any United States or Canadian Person) and includes any United States or Canadian branch of a person other than a United States or Canadian Person. The U.S. Underwriters have entered into an agreement with the International Underwriters (the "Agreement Between U.S. Underwriters and International Underwriters") contemplating the coordination of certain transactions between the U.S. Underwriters and the International Underwriters and any such transactions between the U.S. Underwriters and the International Underwriters shall be governed by the Agreement Between U.S. Underwriters and International Underwriters and shall not be governed by terms of this Agreement. The initial public offering price per share for the U.S. Firm Shares and the purchase price per share for the U.S. Firm Shares to be paid by the several U.S. Underwriters shall be agreed upon by the Company and the Representatives, acting on behalf of the several U.S. Underwriters, and such agreement shall be set forth in a separate written instrument substantially in the form of Exhibit A hereto (the "Price Determination Agreement"). The Price Determination Agreement may take the form of an exchange of any standard form of written telecommunication among the Company and the Representatives and shall specify such applicable information as is indicated in Exhibit A hereto. The offering of the U.S. Firm Shares will be governed by this Agreement, as supplemented by the Price Determination Agreement. From and after the date of the execution and delivery of the Price Determination Agreement, this Agreement shall be deemed to incorporate, and, unless the context otherwise indicates, all references contained herein to "this Agreement" and to the phrase "herein" shall be deemed to include the Price Determination Agreement. The purchase price per share to be paid by the several International Underwriters and the initial public offering price per share for the International Shares shall be identical to the purchase price per share to be paid by the several U.S. Underwriters and the initial public offering price per share, for the U.S. Firm Shares hereunder, respectively. The Company confirms as follows its agreements with the Representatives and the several other U.S. Underwriters. 1. Agreement to Sell and Purchase. (a) On the basis of the representations, warranties and agreements of the Company herein contained and subject to all the terms and conditions of this Agreement, the Company agrees to sell to each U.S. Underwriter named below, and each U.S. Underwriter, severally and not jointly, agrees to purchase from the Company in accordance with Section 1(c) or 1(d) and set forth in the Price Determination Agreement, the number of Firm U.S. Firm Shares set forth opposite the name of such U.S. Underwriter in Schedule I, plus such additional number of Firm U.S. Firm Shares which such U.S. Underwriter may become obligated to purchase pursuant to Section 8 hereof. If the - 2 - 3 Company elects to rely on Rule 430A (as defined), Schedule I may be attached to the Price Determination Agreement. (b) Subject to all the terms and conditions of this Agreement, the Company grants the U.S. Option to the several U.S. Underwriters to purchase, severally and not jointly, up to 375,000 U.S. Option Shares from the Company at the same price per share as the U.S. Underwriters shall pay for the Firm U.S. Firm Shares. The U.S. Option may be exercised only to cover over-allotments in the sale of the Firm U.S. Firm Shares by the U.S. Underwriters and may be exercised in whole or in part at any time (but not more than once) on or before the 30th day after the date of this Agreement (or, if the Company has elected to rely on Rule 430A, on or before the 30th day after the date of the Price Determination Agreement) upon written or telegraphic notice (the "U.S. Option Shares Notice") by the Representatives to the Company no later than 12:00 noon, New York City time, at least [two and no more than five] business days before the date specified for closing in the U.S. Option Shares Notice (the "U.S. Option Closing Date") setting forth the aggregate number of U.S. Option Shares to be purchased and the time and date for such purchase. On the U.S. Option Closing Date, the Company will issue and sell to the U.S. Underwriters the number of U.S. Option Shares set forth in the U.S. Option Shares Notice, and each U.S. Underwriter will purchase such percentage of the U.S. Option Shares as is equal to the percentage of Firm U.S. Firm Shares that such U.S. Underwriter is purchasing, as adjusted by the Representatives in such manner as they deem advisable to avoid fractional shares. (c) If the Company has elected not to rely on Rule 430A, the initial public offering price per share for the Firm U.S. Firm Shares and the purchase price per share for the Firm U.S. Firm Shares to be paid by the several U.S. Underwriters shall be agreed upon and set forth in the Price Determination Agreement, which shall be dated the date hereof, and an amendment to the Registration Statement (as hereinafter defined) containing such per share price information shall be filed before the Registration Statement becomes effective. (d) If the Company has elected to rely on Rule 430A, the initial public offering price per share for the Firm U.S. Firm Shares and the purchase price per share for the Firm U.S. Firm Shares to be paid by the several U.S. Underwriters shall be agreed upon and set forth in the Price Determination Agreement. In the event that the Price Determination Agreement has not been executed by the close of business on the fourth business day following the date on which the Registration Statement becomes effective, this Agreement shall terminate forthwith, without liability of any party to any other party except that Section 6 shall remain in effect. 2. Delivery and Payment. Delivery of the Firm U.S. Firm Shares shall be made (either physically or via Depository Trust Company transfer) to the Representatives for the accounts of the U.S. Underwriters against payment of the purchase price by certified or official bank check in New York Clearing House (next-day) funds to the order of the Company at the office of Shereff, Friedman, Hoffman & Goodman, LLP, 919 Third - 3 - 4 Avenue, New York, New York 10022, at 10:00 a.m., New York City time, on the third business day following the date of this Agreement or, if the Company has elected to rely on Rule 430A, the third business day after the date on which the first bona fide offering of the U.S. Firm Shares to the public is made by the U.S. Underwriters, or at such time on such other date, not later than seven business days after the date of this Agreement, as may be agreed upon by the Company and the U.S. Underwriters (such date is hereinafter referred to as the "Closing Date"). To the extent the U.S. Option is exercised, delivery of the U.S. Option Shares against payment by the U.S. Underwriters (in the manner specified above) will take place at the offices specified above for the Closing Date at the time and date (which may be the Closing Date) specified in the U.S. Option Shares Notice. Certificates evidencing the U.S. Firm Shares, if any, shall be in definitive form and shall be registered in such names and in such denominations as the U.S. Underwriters shall request at least two business days prior to the Closing Date or the U.S. Option Closing Date, as the case may be, by written notice to the Company. For the purpose of expediting the checking and packaging of certificates for the U.S. Firm Shares, the Company agrees to make such certificates available for inspection at least 24 hours prior to the Closing Date or the U.S. Option Closing Date, as the case may be. The cost of original issue tax stamps, if any, in connection with the issuance and delivery of the Firm U.S. Firm Shares and U.S. Option Shares by the Company to each of the U.S. Underwriters shall be borne by the Company. The Company will pay and save each U.S. Underwriter and any subsequent holder of the U.S. Firm Shares harmless from any and all liabilities with respect to or resulting from any failure or delay in paying Federal and state stamp and other transfer taxes, if any, which may be payable or determined to be payable in connection with the original issuance or sale to such U.S. Underwriter of the Firm U.S. Firm Shares and U.S. Option Shares. 3. Representations and Warranties of the Company. The Company represents, warrants and covenants to each U.S. Underwriter that: (a) The Company meets the requirements for use of Form S-3 and a registration statement (Registration No. 33- ) on Form S-3 relating to the U.S. Firm Shares, including a preliminary prospectus and such amendments to such registration statement as may have been required to the date of this Agreement, has been prepared by the Company under the provisions of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations (collectively referred to as the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") thereunder, and has been filed with the Commission. The registration statement contains the forms of two preliminary prospectuses to be used in connection with the offering and sale of the Shares: a United - 4 - 5 States preliminary prospectus (the "U.S. Preliminary Prospectus") relating to the U.S. Firm Shares and an international preliminary prospectus relating to the International Shares (the "International Preliminary Prospectus"; the U.S. Preliminary Prospectus and the International Preliminary Prospectus are referred to collectively herein as the "preliminary prospectus"). The International Preliminary Prospectus is identical to the U.S. Preliminary Prospectus, except for differences in the outside front cover page, the back cover page and the text of the section headed "Underwriting" and except for the inclusion in the International Preliminary Prospectus of a section headed "United States Taxation of Foreign Shareholders." The term "preliminary prospectus" as used herein means a preliminary prospectus as contemplated by Rule 430 or Rule 430A of the Rules and Regulations included at any time as part of the registration statement. Copies of such registration statement and amendments, copies of each related U.S. Preliminary Prospectus have been delivered to each of the Representatives and copies of each related International Preliminary Prospectus have been delivered to the Managers. If such registration statement has not become effective, a further amendment to such registration statement, including a form of final prospectus, necessary to permit such registration statement to become effective will be filed promptly by the Company with the Commission. If such registration statement has become effective, a final prospectus containing information permitted to be omitted at the time of effectiveness by Rule 430A of the Rules and Regulations will be filed promptly by the Company with the Commission in accordance with Rule 424(b) of the Rules and Regulations. The term "Registration Statement" means the registration statement as amended at the time it becomes or became effective (the "Effective Date"), including financial statements and all exhibits and any information deemed to be included by Rule 430A. The term "Prospectus" means, collectively, (i) a prospectus relating to the U.S. Firm Shares (the "U.S. Prospectus") and (ii) a prospectus relating to the International Shares (the "International Prospectus"), in the respective forms they are first filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations or, if no such filing is required, the forms of final prospectus included in the Registration Statement at the Effective Date. Any reference herein to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on or before the Effective Date or the date of such preliminary prospectus or the Prospectus, as the case may be. (b) On the Effective Date, the date the Prospectus is first filed with the Commission pursuant to Rule 424(b) (if required), at all times subsequent thereto up to and including the Closing Date and, if later, the U.S. Option Closing Date and when any post-effective amendment to the Registration Statement becomes effective or any amendment or supplement to the Prospectus is filed with the Commission, the Registration Statement and the Prospectus (as amended or as supplemented if the Company shall have filed with the Commission any amendment or supplement thereto), including the financial statements included or incorporated by reference in the Prospectus, did or will comply with all applicable provisions of the Act, the Exchange Act, the rules and regulations thereunder (the "Exchange Act Rules and Regulations") and the Rules and Regulations and will contain all - 5 - 6 statements required to be stated therein in accordance with the Act, the Exchange Act, the Exchange Act Rules and Regulations and the Rules and Regulations. On the Effective Date and when any post-effective amendment to the Registration Statement becomes effective, no part of the Registration Statement, the Prospectus or any such amendment or supplement did or will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading. At the Effective Date, the date the Prospectus or any amendment or supplement to the Prospectus is filed with the Commission and at the Closing Date and, if later, the U.S. Option Closing Date, the Prospectus did not or will not contain any untrue statement of a material fact or omit to state a material fact necessary, to make the statements therein, in light of the circumstances under which they were made, not misleading. The foregoing representations and warranties in this Section 3(b) do not apply to any statements or omissions made in reliance on and in conformity with information relating to any U.S. Underwriter furnished in writing to the Company by or on behalf of any Representatives specifically for inclusion in the Registration Statement or Prospectus or any amendment or supplement thereto. The Company acknowledges that the amounts of the selling concession and reallowance set forth in the Prospectus constitute the only information relating to any U.S. Underwriter furnished in writing to the Company by the Representatives specifically for inclusion in the Registration Statement, the preliminary prospectus or the Prospectus. The Company has not distributed any offering material in connection with the offering or sale of the U.S. Firm Shares other than the Registration Statement, the preliminary prospectus, the Prospectus or any other materials, if any, permitted by the Act. (c) The documents which are incorporated by reference in the preliminary prospectus and the Prospectus or from which information is so incorporated by reference, when they become effective or were filed with the Commission, as the case may be, complied in all material respects with the requirements of the Act or the Exchange Act, as applicable, the Exchange Act Rules and Regulations and the Rules and Regulations, and any documents so filed and incorporated by reference subsequent to the Effective Date shall, when they are filed with the Commission, conform in all material respects with the requirements of the Act and the Exchange Act, as applicable, the Exchange Act Rules and Regulations and the Rules and Regulations. (d) The only subsidiaries (as defined in the Rules and Regulations) of the Company which are material to the operations, business or financial condition of the Company and its subsidiaries taken as a whole are the subsidiaries listed on Exhibit B hereto (the "subsidiaries"). The Company and each of its subsidiaries is, and at the Closing Date will be, a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. The Company and each of its subsidiaries has, and at the Closing Date will have, full power and authority to conduct all the activities conducted by it, to own or lease all the assets owned or leased by, it and to conduct its business as described in the Registration Statement and the Prospectus. The Company and each of its subsidiaries is, and at the Closing Date will be, duly licensed or qualified to do business and in good standing as a foreign corporation in all jurisdictions in which the nature of the activities - 6 - 7 conducted by it or the character of the assets owned or leased by it makes such licensing or qualification necessary and where the failure to so qualify would have a material adverse effect upon the Company. Except for the stock of the subsidiaries and as disclosed in the Registration Statement, the Company does not own, and at the Closing Date will not own, directly or indirectly, any shares of stock or any other equity or long-term debt securities of any corporation or have any equity interest in any firm, partnership, joint venture, association or other entity. Complete and correct copies of the charter or certificate of incorporation and of the by-laws of the Company and each of its subsidiaries and all amendments thereto have been delivered to the Representatives, and no changes therein will be made subsequent to the date hereof and prior to the Closing Date or, if later, the U.S. Option Closing Date. (e) The outstanding shares of Common Stock have been, and the U.S. Firm Shares to be issued and sold by the Company upon such issuance will be, duly authorized, validly issued, fully, paid and nonassessable and will not be subject to any preemptive or similar right. The description of the Common Stock in the Registration Statement and the Prospectus is complete and accurate in all respects. Except as set forth in the Prospectus, the Company does not have outstanding any options to purchase, or any rights or warrants to subscribe for, or any securities or obligations convertible into, or any contracts or commitments to issue or sell, any shares of Common Stock, any shares of capital stock of any subsidiary or any such warrants, convertible securities or obligations. (f) The financial statements and schedules included or incorporated by reference in the Registration Statement or the Prospectus present fairly the financial condition of the Company as of the respective dates thereof and the results of operations and cash flows of the Company for the respective periods covered thereby, all in conformity with generally accepted accounting principles applied on a consistent basis throughout the entire period involved, except as otherwise disclosed in the Prospectus. No other financial statements or schedules of the Company are required by the Act, the Exchange Act or the Rules and Regulations to be included in the Registration Statement or the Prospectus. Arthur Andersen LLP (the "Accountants") who have reported on such financial statements and schedules, are independent accountants with respect to the Company as required by the Act and the Rules and Regulations. (g) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (h) Subsequent to the respective dates as of which information is - 7 - 8 given in the Registration Statement and the Prospectus and prior to the Closing Date, except as set forth in or contemplated by the Registration Statement and the Prospectus, (i) there has not been any material change in the capitalization of the Company, or in the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Company and its subsidiaries, arising for any reason whatsoever, (ii) neither the Company nor any of its subsidiaries has incurred any material liabilities or obligations, direct or contingent, nor has it entered into any material transactions not in the ordinary course of business other than pursuant to this Agreement and the transactions referred to herein and (iii) the Company has not and will not have paid or declared any dividends or other distributions of any kind on any class of its capital stock. (i) The Company is not an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. (j) Except as set forth in the Registration Statement and the Prospectus, there are no actions, suits or proceedings against or affecting the Company or any of its subsidiaries or any of their officers in their capacity as such, before or by any Federal or state court, commission, regulatory body, administrative agency or other governmental body, domestic or foreign which are pending, or to the knowledge of the Company threatened, wherein an unfavorable ruling, decision or finding might materially and adversely affect the Company or any of its subsidiaries or its business, properties, business prospects, condition (financial or otherwise) or results of operations. (k) The Company and each of its subsidiaries has (i) all material governmental licenses, permits, consents, orders, approvals and other authorizations necessary to carry on its business as contemplated in the Prospectus, (ii) complied in all material respects with all laws, regulations and orders applicable to it or its business and (iii) performed all its obligations required to be performed by it, and is not in default, under any material contract or other instrument to which it is a party or by which its property is bound or affected. To the best knowledge of the Company and each of its subsidiaries, no other party under any material contract or other material instrument to which it is a party is in default in any material respect thereunder. Neither the Company nor any of its subsidiaries is in violation of any provision of its charter or certificate of incorporation or by-laws. (l) No consent, approval, authorization or order of, or any filing or declaration with, any court or governmental agency or body is required for the consummation by the Company of the transactions on its part herein contemplated, except such as have been obtained under the Act or the Rules and Regulations and such as may be required under state securities or Blue Sky laws or the by-laws and rules of the National Association of Securities Dealers, Inc. (the "NASD") in connection with the purchase and distribution by the U.S. Underwriters of the U.S. Firm Shares. (m) The Company has full corporate power and authority to enter - 8 - 9 into this Agreement. This Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding agreement of the Company and is enforceable against the Company in accordance with the terms hereof except that no representation is being made with respect to the enforceability under the Act or the Rules and Regulations of any indemnification provisions contained in this Agreement. The performance of this Agreement and the consummation of the transactions contemplated hereby will not result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Company or any of its subsidiaries pursuant to the terms or provisions of, or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or give any other party a right to terminate any of its obligations under, or result in the acceleration of any obligation under, the charter or certificate of incorporation or by-laws of the Company or any of its subsidiaries, any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement or other evidence of indebtedness, lease, contract or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any of its properties is bound, or violate or conflict with any judgment, ruling, decree, order, statute, rule or regulation of any court or other governmental agency or body applicable to the business or properties of the Company or any of its subsidiaries. (n) The Company and each of its subsidiaries has good and marketable title to all properties and assets described in the Prospectus as owned by it, free and clear of all liens, charges, encumbrances or restrictions, except such as are described in the Prospectus or are not material to the business of the Company or its subsidiaries. The Company and each of its subsidiaries has valid, subsisting and enforceable leases for the properties described in the Prospectus as leased by it, with such exceptions as are not material and do not materially interfere with the use made and proposed to be made of such properties by the Company and such subsidiaries. (o) There is no document or contract of a character required to be described in or incorporated into the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement which is not described or filed as required. All such contracts to which the Company or any subsidiary is a party have been duly authorized, executed and delivered by the Company or such subsidiary, constitute valid and binding agreements of the Company or such subsidiary and are enforceable against the Company or such subsidiary in accordance with the terms thereof. (p) No statement, representation, warrant, or covenant made by the Company in this Agreement or made in any certificate or document required by this Agreement to be delivered to the Representatives was or will be, when made, inaccurate, untrue or incorrect in any material respect. (q) Neither the Company nor any of its directors, officers or controlling persons has taken, directly or indirectly, any action designed, or which might reasonably be expected, to cause or result, under the Act or otherwise, in, or which has - 9 - 10 constituted, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the U.S. Firm Shares. (r) No holder of securities of the Company has rights to the registration of any securities of the Company because of the filing of the Registration Statement. (s) The Company owns or possesses adequate licenses or other rights to use all of the trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and rights without which there would be a materially adverse impact on the business of the Company as described in, or contemplated by the Prospectus and without any known conflict with the rights of others. (t) Neither the Company nor any of its subsidiaries is involved in any material labor dispute nor, to the knowledge of the Company, is any such dispute threatened. (u) Neither the Company nor any of its subsidiaries nor, to the Company's knowledge, any employee or agent of the Company or any subsidiary has made any payment of funds of the Company or any subsidiary or received or retained any funds in violation of any law, rule or regulation or of a character required to be disclosed in the Prospectus. 4. Agreements of the Company. The Company agrees with the several U.S. Underwriters as follows: (a) The Company will not, either prior to the Effective Date or thereafter during such period as the Prospectus is required by law to be delivered in connection with sales of the U.S. Firm Shares by an U.S. Underwriter or dealer, file any amendment or supplement to the Registration Statement or the Prospectus, unless a copy thereof shall first have been submitted to the Representatives within a reasonable period of time prior to the filing thereof and the U.S. Underwriters shall not have objected thereto in good faith. (b) The Company will use its best efforts to cause the Registration Statement to become effective. The Company will notify the Representatives promptly, and will confirm such advice in writing, (1) when the Registration Statement has become effective and when any post-effective amendment thereto becomes effective, (2) of any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus or for additional information, (3) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose or the threat thereof, (4) of the happening of any event during the period mentioned in the second sentence of Section 4(e) that in the judgment of the - 10 - 11 Company makes any statement made in the Registration Statement or the Prospectus untrue or that requires the making of any changes in the Registration Statement or the Prospectus in order to make the statements therein, in light of the circumstances in which they are made, not misleading and (5) of receipt by the Company or any representative or attorney of the Company of any other communication from the Commission relating to the Company, the Registration Statement, any preliminary prospectus or the Prospectus. If at any time the Commission shall issue any order suspending the effectiveness of the Registration Statement, the Company will make every reasonable effort to obtain the withdrawal of such order at the earliest possible moment. If the Company has omitted any information from the Registration Statement pursuant to Rule 430A of the Rules and Regulations, the Company will use its best efforts to comply with the provisions of and make all requisite filings with the Commission pursuant to said Rule 430A and to notify the Representatives promptly of all such filings. (c) The Company will furnish to each of the Representatives without charge, two signed copies of the Registration Statement and of any post-effective amendment thereto, including financial statements and schedules, and all exhibits thereto (including any document filed under the Exchange Act and deemed to be incorporated by reference into the Prospectus). (d) The Company will comply with all the provisions of any undertakings contained in the Registration Statement. (e) On the Effective Date, and thereafter from time to time, the Company will deliver to each of the U.S. Underwriters, without charge, as many copies of the Prospectus or any amendment or supplement thereto as the Representatives may reasonably request. The Company consents to the use of the Prospectus or any amendment or supplement thereto by the U.S. Underwriters and by all dealers to whom the U.S. Firm Shares may be sold, both in connection with the offering or sale of the U.S. Firm Shares and for any period of time thereafter during which the Prospectus is required by law to be delivered in connection therewith. If during such period of time any event shall occur which in the judgment of the Company or counsel to the U.S. Underwriters should be set forth in the Prospectus in order to make any statement therein, in the light of the circumstances under which it was made, not misleading, or if it is necessary to supplement or amend the Prospectus to comply with law, the Company will forthwith prepare and duly file with the Commission an appropriate supplement or amendment thereto, and will deliver to each of the U.S. Underwriters, without charge, such number of copies thereof as they may reasonably request. The Company shall not file any document under the Exchange Act before the termination of the offering of the U.S. Firm Shares by the U.S. Underwriters if such document would be deemed to be incorporated by reference into the Prospectus which is not approved by the Representatives after reasonable notice thereof. (f) Prior to any public offering of the U.S. Firm Shares by the U.S. Underwriters, the Company will cooperate with the Representatives and their counsel in connection with the registration or qualification of the U.S. Firm Shares for offer and sale - 11 - 12 under the securities or Blue Sky laws of such jurisdictions as the Representatives may request; provided, that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject it to general service of process in any jurisdiction where it is not now so subject. (g) During the period of five years commencing on the Effective Date, the Company will furnish to each of the Representatives copies of such financial statements and other periodic and special reports as the Company may from time to time distribute generally to the holders of any class of its capital stock, and will furnish to the Representatives and each other U.S. Underwriter who may so request a copy of each annual or other report it shall be required to file with the Commission. (h) The Company will make generally available to holders of its securities as soon as may be practicable but in no event later than the last day of the fifteenth full calendar month following the calendar quarter in which the Effective Date falls, an earnings statement (which need not be audited but shall be in reasonable detail) for a period of 12 months ended commencing after the Effective Date, and satisfying the provisions of Section 11(a) of the Act (including Rule 158 of the Rules and Regulations). (i) Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, the Company will pay, or reimburse if paid by the Representatives, all costs and expenses (excluding fees and expenses of the U.S. Underwriters counsel, except as specifically or provided herein) incident to the performance of the obligations of the Company under this Agreement, including but not limited to costs and expenses of or relating to (1) the preparation, printing and filing of the Registration Statement and exhibits to it, each preliminary prospectus, the Prospectus and any amendment or supplement to the Registration Statement or the Prospectus, (2) the preparation and delivery of certificates representing the U.S. Firm Shares, (3) the printing of this Agreement, any Agreement Among U.S. Underwriters, any Dealer Agreements and any U.S. Underwriters' Questionnaire, (4) furnishing (including costs of shipping and mailing) such copies of the Registration Statement, the Prospectus and any preliminary prospectus, and all amendments and supplements thereto, as may be requested for use in connection with the offering and sale of the U.S. Firm Shares by the U.S. Underwriters or by dealers to whom U.S. Firm Shares may be sold, (5) the listing of the U.S. Firm Shares on the New York Stock Exchange (6) any filings required to be made by the U.S. Underwriters with the NASD, and the fees, disbursements and other charges of counsel for the U.S. Underwriters in connection therewith, (7) the registration or qualification of the U.S. Firm Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions designated pursuant to Section 4(f), including the fees, disbursements and other charges of counsel to the U.S. Underwriters in connection therewith, and the preparation and printing of preliminary, supplemental and final Blue Sky memoranda, (8) counsel to the Company and (9) the transfer agent for the U.S. Firm Shares, it being understood, however, that except as provided in Section 2, Section 4(j), Section 6 and this Section 4(i), the U.S. Underwriters shall pay all of their own costs and expenses, including the fees of their counsel and stock transfer taxes on - 12 - 13 resale of any of the shares by them. (j) If this Agreement shall be terminated by the Company pursuant to any of the provisions hereof (otherwise than pursuant to Section 8) or if for any reason the Company shall be unable to perform its obligations hereunder, the Company will reimburse the several U.S. Underwriters for all out-of-pocket expenses (including the fees, disbursements and other charges of counsel to the U.S. Underwriters) reasonably incurred by them in connection herewith. (k) The Company will not at any time, directly or indirectly, take any action designed, or which might reasonably be expected, to cause or result in, or which will constitute, stabilization of the price of the shares of Common Stock or Class B Common Stock, par value $1.00 per share (the "Class B Common Stock") of the Company, to facilitate the sale or resale of any of the U.S. Firm Shares. (l) The Company will apply the net proceeds from the offering and sale of the U.S. Firm Shares to be sold by the Company in the manner set forth in the Prospectus under "Use of Proceeds". (m) The Company will not, and will cause its directors and its executive officers to enter into agreements with the Representatives to the effect that they will not, for a period of 90 days after the commencement of the public offering of the U.S. Firm Shares without the prior written consent of the U.S. Underwriters, sell, contract to sell or otherwise dispose of any shares of Common Stock, Class B Common Stock or rights to acquire such shares (other than pursuant to employee stock option plans or in connection with other employee incentive compensation arrangements). 5. Conditions of the Obligations of the U.S. Underwriters. In addition to the execution and delivery of the Price Determination Agreement, the obligations of each U.S. Underwriter hereunder are subject to the following conditions: (a) Notification that the Registration Statement has become effective shall be received by the Representatives not later than 5:00 p.m., New York City time, on the date of this Agreement or at such later date and time as shall be consented to in writing by the Representatives and all filings required by Rule 424 and Rule 430A of the Rules and Regulations shall have been made. (b) (i) No stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall be pending or to the knowledge of the U.S. Underwriters or of the Company threatened by the Commission, (ii) no order suspending the effectiveness of the Registration Statement or the qualification or registration of the U.S. Firm Shares under the securities or Blue Sky laws of - 13 - 14 any jurisdiction shall be in effect and no proceeding for such purpose shall be pending before or to the knowledge of the U.S. Underwriters or of the Company threatened or contemplated by the Commission of the authorities of any such jurisdiction which in the good faith judgment of the U.S. Underwriters would make it impracticable to market the U.S. Firm Shares, (iii) any request for additional information on the part of the staff of the Commission or any such authorities shall have been complied with to the satisfaction of the staff of the Commission or such authorities and (iv) after the date hereof no amendment or supplement to the Registration Statement or the Prospectus shall have been filed unless a copy thereof was first submitted to the Representatives and the Representatives did not object thereto in good faith, and the Representatives shall have received certificates, dated the Closing Date and the U.S. Option Closing Date and signed by the Chief Executive Officer or the Chairman of the Board of Directors of the Company and the Chief Financial Officer of the Company (who may, as to proceedings threatened, rely upon the best of their information and belief), to the effect of clauses (i), (ii) and (iii). (c) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, (i) there shall not have been a material adverse change in the general affairs, business, business prospects, properties, management, condition (financial or otherwise) or results of operations of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, in each case other than as set forth in or contemplated by the Registration Statement and the Prospectus and (ii) neither the Company nor any of its subsidiaries shall have sustained any material loss or interference with its business or properties from fire, explosion, flood or other casualty, whether or not covered by insurance, or from any labor dispute or any court or legislative or other governmental action, order or decree which is not set forth in the Registration Statement and the Prospectus if in the good faith judgment of the Representatives any such development makes it impracticable or inadvisable to consummate the sale and delivery of the U.S. Firm Shares by the U.S. Underwriters at the public offering price. (d) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, there shall have been no litigation or other proceeding instituted against the Company or any of its subsidiaries or any of their respective officers or directors in their capacities as such before or by any Federal, state or local court, commission, regulatory body, administrative agency or other governmental body, domestic or foreign, in which an unfavorable ruling, decision or finding in such litigation or proceeding would materially and adversely affect the business, properties, business prospects, condition (financial or otherwise) or results of operations. (e) Each of the representations and warranties of the Company contained herein shall be true and correct in all respects at the Closing Date and, with respect to the U.S. Option Shares, at the U.S. Option Closing Date, as if made at the Closing Date and, with respect to the U.S. Option Shares, at the U.S. Option Closing Date, and all covenants and agreements herein contained to be performed on the part of the - 14 - 15 Company and all conditions herein contained to be fulfilled or complied with by the Company at or prior to the Closing Date and, with respect to the U.S. Option Shares, at or prior to the U.S. Option Closing Date, shall have been duly performed, fulfilled or complied with. (f) The Representatives shall have received an opinion, dated the Closing Date and with respect to the U.S. Option Shares, the U.S. Option Closing Date, and satisfactory in form and substance to counsel for the U.S. Underwriters, from Bass, Berry & Sims, counsel to the Company, to the effect set forth in Exhibit C. (g) The Representatives shall have received an opinion, dated the Closing Date and with respect to the U.S. Option Shares, dated the U.S. Option Closing Date, from Shereff, Friedman, Hoffman & Goodman, LLP, counsel to the U.S. Underwriters, with respect to the Registration Statement, the Prospectus and this Agreement, which opinion shall be satisfactory in all respects to the Representatives. (h) Concurrently with the execution and delivery of this Agreement, or, if the Company elects to rely on Rule 430A, on the date of the Prospectus, the Representatives shall have received from the Accountants a signed letter, dated the date of its delivery, addressed to the Representatives and in form and substance satisfactory to the Representatives, to the effect that they are independent public accountants with respect to the Company as required by the Act and the Rules and Regulations and their opinion that the financial statements and schedules examined by them and included or incorporated by reference in the Registration Statement comply to form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and will set forth certain agreed upon procedures and the results thereof with respect to certain financial and other statistical and numerical information contained in the Registration Statement or incorporated by reference therein as the Representatives may reasonably request. At the Closing Date and, as to the U.S. Option Shares, the U.S. Option Closing Date, the Accountants shall have furnished to the Representatives a letter, dated the date of its delivery, which shall confirm, on the basis of a review in accordance with the procedures set forth in the letter from the Accountants, that nothing has come to their attention during the period from the date of the letter referred to in the prior sentence to a date (specified in the letter) not more than three days prior to the Closing Date and the U.S. Option Closing Date which would require any change in their letter dated the date hereof if it were required to be dated and delivered at the Closing Date and the U.S. Option Closing Date. (i) Concurrently with the execution and delivery of this Agreement or, if the Company elects to rely on Rule 430A, on the date of the Prospectus, and at the Closing Date and, as to the U.S. Option Shares, the U.S. Option Closing Date, there shall be furnished to the Representatives a certificate, dated the date of its delivery, signed by each of the Chief Executive Officer and the Chief Financial Officer of the Company, in form and substance satisfactory to the U.S. Underwriters, to the effect that: - 15 - 16 (i) Each signer of such certificate has carefully, examined the Registration Statement and the Prospectus (including any documents filed under the Exchange Act and deemed to be incorporated by reference into the Prospectus) and (A) as of the date of such certificate, such documents are true and correct in all material respects and do not omit to state a material fact required to be stated therein or necessary, in order to make the statements therein not untrue or misleading and (B) in the case of the certificate delivered at the Closing Date and the U.S. Option Closing Date, since the Effective Date no event has occurred as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein not untrue or misleading in any material respect and as to which an appropriate amendment or supplement to the Prospectus has not been filed, and there has been no document required to be filed under the Exchange Act and the Exchange Act Rules and Regulations that upon such filing would be deemed to be incorporated by reference into the Prospectus that has not been so filed. (ii) Each of the representations and warranties of the Company, contained in this Agreement were, when originally made, and are, at the time such certificate is delivered, true and correct in all material respects. (iii) Each of the covenants required herein to be performed by the Company on or prior to the delivery of such certificate has been duly, timely and fully performed in all material respects and each condition herein required to be complied with by the Company on or prior to the date of such certificate has been duly, timely and fully complied within all material respects. (j) The U.S. Firm Shares shall be qualified for sale in such states as the Representatives may reasonably request, each such qualification shall be in effect and not subject to any stop order or other proceeding on the Closing Date and the U.S. Option Closing Date. (k) The Company shall have furnished to the Representatives such certificates, in addition to those specifically mentioned herein, as the Representatives may have reasonably requested as to the accuracy and completeness at the Closing Date and the U.S. Option Closing Date of any statement in the Registration Statement or the Prospectus or any documents filed under the Exchange Act and deemed to be incorporated by reference into the Prospectus, as to the accuracy at the Closing Date and the U.S. Option Closing Date of the representations and warranties of the Company herein, as to the performance by the Company of its obligations hereunder, or as to the fulfillment of the conditions concurrent and precedent to the obligations hereunder of the U.S. Underwriters. (l) The closing of the purchase and sale of the International Shares pursuant to the International Underwriting Agreement shall occur concurrently with the closing of the purchase and sale of the U.S. Firm Shares hereunder; provided however, that this condition shall not apply if the failure of such closing is due to defaulting Underwriters referred to in Section 8 of this Agreement and Section 8 of the International Underwriting - 16 - 17 Agreement and the number of U.S. Firm Shares and International Firm Shares such defaulting Underwriters agreed but failed or refused to purchase is less than one-tenth of the aggregate amount of U.S. Firm Shares and International Firm Shares. 6. Indemnification. (a) The Company will indemnify, and hold harmless each U.S. Underwriter, the directors, officers, employees and agents of each U.S. Underwriter and each person, if any, who controls each U.S. Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and against any and all losses, claims, liabilities, expenses and damages (including any and all investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted), to which they, or any of them, may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, the Registration Statement or the Prospectus or any amendment or supplement to the Registration Statement or the Prospectus or in any documents filed under the Exchange Act and deemed to be incorporated by reference into the Prospectus, or the omission or alleged omission to state in such document a material fact required to be stated in it or necessary to make the statements in it not misleading, provided that the Company will not be liable to the extent that such loss, claim, liability, expense or damage arises from the sale of the U.S. Firm Shares in the public offering to any person by any U.S. Underwriter and is based on an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information relating to any U.S. Underwriter furnished in writing to the Company by any of the Representatives on behalf of the U.S. Underwriters expressly for inclusion in the Registration Statement, any preliminary prospectus or the Prospectus. This indemnity agreement will be in addition to any liability that the Company might otherwise have. The foregoing indemnification with respect to any preliminary prospectus shall not inure to the benefit of any U.S. Underwriter from whom the person asserting any such losses, claims, damages or liabilities purchased U.S. Firm Shares (or any person controlling such U.S. Underwriter) if a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such U.S. Underwriter to such person, if such is required by law, at or prior to the written confirmation of the sale of such U.S. Firm Shares to such person and if delivery of the Prospectus (as so amended or supplemented) to such person, would have cured the defect giving rise to such loss, claim, damage or liability. (b) Each U.S. Underwriter will indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, each director of the Company and each officer of the Company who signs the Registration Statement to the same extent as the foregoing indemnity from the Company to each U.S. Underwriter, but only insofar as losses, - 17 - 18 claims, liabilities, expenses or damages arise out of or are based on any untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information relating to any U.S. Underwriter furnished in writing to the Company by the Representatives on behalf of such U.S. Underwriter expressly for use in the Registration Statement, any preliminary prospectus or the Prospectus. This indemnity, will be in addition to any liability that each U.S. Underwriter might otherwise have. (c) Any party that proposes to assert the right to be indemnified under this Section 6 will, promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under this Section 6, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers served, but the omission so to notify such indemnifying party will not relieve it from any liability that it may have to any indemnified party under the foregoing provisions of this Section 6 unless, and only to the extent that, such omission results in the forfeiture of substantive rights or defenses by the indemnifying party. If any such action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel reasonably satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party for any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred by the indemnified party in connection with the defense. The indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time for all such indemnified party or parties. All such fees, disbursements and other charges will be reimbursed by the indemnifying party promptly as they are incurred. An indemnifying party will not be liable for any settlement of any action or claim effected - 18 - 19 without its written consent (which consent will not be unreasonably withheld). (d) In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing paragraphs of this Section 6 is applicable in accordance with its terms but for any reason is held to be unavailable from the Company or the U.S. Underwriters, the Company and the U.S. Underwriters will contribute to the total losses, claims, liabilities, expenses and damages (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, but after deducting any contribution received by the Company from persons other than the U.S. Underwriters, such as persons who control the Company within the meaning of the Act, officers of the Company who signed the Registration Statement and directors of the Company, who also may be liable for contribution) to which the Company and any one or more of the U.S. Underwriters may be subject in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the U.S. Underwriters on the other. The relative benefits received by the Company on the one hand and the U.S. Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the U.S. Underwriters, in each case as set forth in the table on the cover page of the Prospectus. If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault of the Company, on the one hand, and the U.S. Underwriters, on the other, with respect to the statements or omissions which resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering. Such relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Representatives on behalf of the U.S. Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the U.S. Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 6(d) were to be determined by pro rata allocation (even if the U.S. Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense or damage, or action in respect thereof, referred to above in this Section 6(d) shall be deemed to include, for purpose of this Section 6(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6(d), no U.S. Underwriter shall be required to contribute any amount in excess of the underwriting discounts received by it, and no person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The U.S. Underwriters' obligations to - 19 - 20 contribute as provided in this Section 6(d) are several in proportion to their respective underwriting obligations and not joint. For purposes of this Section 6(d), any person who controls a party to this Agreement within the meaning of the Act will have the same rights to contribution as that party, and each officer of the Company who signed the Registration Statement will have the same rights to contribution as the Company, subject in each case to the provisions hereof. Any party entitled to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under this Section 6(d), will notify any such party or parties from whom contribution may be sought, but the omission so to notify will not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 6(d). No party will be liable for contribution with respect to any action or claim settled without its written consent (which consent will not be unreasonably withheld). (e) The indemnity and contribution agreements contained in this Section 6 and the representations and warranties of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of the U.S. Underwriters, (ii) acceptance of any of the U.S. Firm Shares and payment therefor or (iii) any termination of this Agreement. 7. Termination. The obligations of the several U.S. Underwriters under this Agreement may be terminated at any time on or prior to the Closing Date (or, with respect to the U.S. Option Shares, on or prior to the U.S. Option Closing Date), by notice to the Company from the Representatives, without liability on the part of any U.S. Underwriter to the Company, if, prior to delivery and payment for the U.S. Firm Shares (or the U.S. Option Shares, as the case may be) in the sole judgment of the Representatives, (i) trading in any of the equity securities of the Company shall have been suspended by the Commission or by the New York Stock Exchange, (ii) trading in securities generally on the New York Stock Exchange shall have been suspended or limited or minimum or maximum prices shall have been generally established on such exchange, or additional material governmental restrictions, not in force on the date of this Agreement, shall have been imposed upon trading in securities generally by such exchange or by order of the Commission or any court or other governmental authority, (iii) a general banking moratorium shall have been declared by either Federal or New York State authorities or (iv) any material adverse change in the financial or securities markets in the United States or in political, financial or economic conditions in the United States or any outbreak or material escalation of hostilities or declaration by the United States of a national emergency or war or other calamity or crisis shall have occurred the effect of any of which is such as to make it, in the sole judgment of the Representatives, impracticable or inadvisable to market the U.S. Firm Shares on the terms and in the manner contemplated by the Prospectus. - 20 - 21 8. Substitution of U.S. Underwriters. If any one or more of the U.S. Underwriters shall fail or refuse to purchase any of the Firm U.S. Firm Shares which it or they have agreed to purchase hereunder, and the aggregate number of Firm U.S. Firm Shares which such defaulting U.S. Underwriter or U.S. Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of Firm U.S. Firm Shares, the other U.S. Underwriters shall be obligated, severally, to purchase the Firm U.S. Firm Shares which such defaulting U.S. Underwriter agreed but failed or refused to purchase in the proportions which the number of Firm U.S. Firm Shares which they have respectively agreed to purchase pursuant to Section 1 bears to the aggregate number of Firm U.S. Firm Shares which all such nondefaulting U.S. Underwriters have so agreed to purchase, or in such other proportions as the Representatives shall specify; provided that in no event shall the maximum number of Firm U.S. Firm Shares which any U.S. Underwriter has become obligated to purchase pursuant to Section 1 be increased pursuant to this Section 8 by more than one-ninth of the number of Firm U.S. Firm Shares agreed to be purchased by such U.S. Underwriter without the prior written consent of such U.S. Underwriter. If any U.S. Underwriter shall fail or refuse to purchase any Firm U.S. Firm Shares and the aggregate number of Firm U.S. Firm Shares which such defaulting U.S. Underwriter agreed but failed or refused to purchase exceeds one-tenth of the aggregate number of the Firm U.S. Firm Shares and arrangements satisfactory to the Representatives and the Company for the purchase of such Firm U.S. Firm Shares are not made within 48 hours after such default, this Agreement will terminate without liability on the part of the nondefaulting U.S. Underwriters or the Company for the purchase or sale of any U.S. Firm Shares under this Agreement. In any such case either the Representatives or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. Any action taken pursuant to this Section 8 shall not relieve any defaulting U.S. Underwriter from liability in respect of any default of such U.S. Underwriter under this Agreement. 9. U.S. and Canadian Distribution. Each U.S. Underwriter represents and agrees that except for (x) sales between the U.S. Underwriters and the International Underwriters pursuant to Section 1 of the Agreement Between U.S. and International Underwriters and (y) stabilization transactions contemplated in Section 3 thereof conducted as part of the distribution of the Shares, (i) it is not purchasing any of the U.S. Firm Shares for the account of anyone other than a United States or Canadian Person and (ii) it has not offered or sold, and will not offer or sell, directly or indirectly, any of the U.S. Firm Shares or distribute any prospectus relating to the U.S. Firm Shares outside the United States or Canada to anyone other than a United States or Canadian Person and will agree that it will not offer or resell such U.S. Firm Shares directly or indirectly outside the United States or Canada or to anyone other than a United States or Canadian Person or to any other dealer who does not so represent and agree. - 21 - 22 The U.S. Underwriters further confirm that in determining their net commitment for short account pursuant to Section 7 of the Amended and Restated Master Agreement Among Underwriters dated as of June 11, 1984, there shall be subtracted any Shares purchased for such U.S. Underwriter's account pursuant to Section 1 of the Agreement Between U.S. and International Underwriters. 10. Miscellaneous. Notice given pursuant to any of the provisions of this Agreement shall be in writing and, unless otherwise specified, shall be mailed or delivered (a) if to the Company, at the office of the Company, Nelson Place at Elm Hill Pike, P.O. Box 141000, Nashville, Tennessee 37214-1000, Attention: Mr. Joe L. Powers, Vice President, Secretary and Treasurer or (b) if to the U.S. Underwriters, at the offices of PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York 10019, Attention: Corporate Finance Department. Any such notice shall be effective only upon receipt. Any notice under Section 7 or 8 may be made by telex or telephone, but if so made shall be subsequently confirmed in writing. This Agreement has been and is made solely for the benefit of the U.S. Underwriters and the Company and of the controlling persons, directors and officers referred to in Section 6, and their respective successors and assigns, and except as set forth in the International Underwriting Agreement, no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" as used in this Agreement shall not include a purchaser, as such purchaser, of U.S. Firm Shares from any of the several U.S. Underwriters. Any action required or permitted to be taken by the Representatives under this Agreement may be taken by them jointly or by PaineWebber Incorporated. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. This Agreement may be signed in two or more counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. - 22 - 23 The Company and the U.S. Underwriters each hereby irrevocably waive any right they may have to a trial by jury in respect of any claim based upon or arising out of this Agreement or the transactions contemplated hereby. - 23 - 24 Please confirm that the foregoing correctly sets forth the agreement among the Company and the several U.S. Underwriters. Very truly yours, THOMAS NELSON, INC. By: __________________________________ Name: Title: Confirmed as of the date first above mentioned: PAINEWEBBER INCORPORATED MERRILL LYNCH & CO. J.C. BRADFORD & CO. By: PAINEWEBBER INCORPORATED By: _____________________________________ Name: Title: By: MERRILL LYNCH & CO. By: _____________________________________ Name: Title: By: J.C. BRADFORD & CO. By: _____________________________________ Name: Title: - 24 - 25 SCHEDULE I U.S. Underwriters
Principal Amount of Firm U.S. Firm Name Shares ---- To Be Purchased ----------------- PaineWebber Incorporated . . . . . . . . . . . . . . . . . Merrill Lynch & Co. . . . . . . . . . . . . . . . . . . . . J.C. Bradford & Co. . . . . . . . . . . . . . . . . . . . . --------- Total . . . . . . . . . . . . . . . . . . . . . . 2,000,000 =========
26 EXHIBIT A THOMAS NELSON, INC. ___________________ U.S. PRICE DETERMINATION AGREEMENT July __, 1995 PAINEWEBBER INCORPORATED MERRILL LYNCH & CO. J.C. BRADFORD & CO. As Representatives of the several U.S. Underwriters c/o PaineWebber Incorporated 1285 Avenue of the Americas New York, New York 10019 Dear Sirs: Reference is made to the U.S. Underwriting Agreement, dated July __, 1995 (the "U.S. Underwriting Agreement"), among Thomas Nelson, Inc., a Tennessee corporation (the "Company") and the several U.S. Underwriters named in Schedule I thereto or hereto (the "U.S. Underwriters"), for whom PaineWebber Incorporated, Merrill Lynch & Co. and J.C. Bradford & Co. are acting as representatives (the "Representatives"). The U.S. Underwriting Agreement provides for the purchase by the U.S. Underwriters from the Company, subject to the terms and conditions set forth therein, of an aggregate of 2,000,000 shares (the "Firm U.S. Firm Shares") of the Company's common stock, par value $1.00 per share. This Agreement is the Price Determination Agreement referred to in the U.S. Underwriting Agreement. Pursuant to Section 1 of the U.S. Underwriting Agreement, the Company agrees with the Representatives as follows: 1. The initial public offering price per share for the Firm U.S. Firm Shares shall be $_________. 2. The purchase price per share for the Firm U.S. Firm Shares to be paid by the several U.S. Underwriters shall be $_________ representing an amount equal to the initial public offering price set forth above, less $_________ per share. The Company represents and warrants to each of the U.S. Underwriters that the representations and warranties of the Company set forth in Section 3 of the U.S. Underwriting Agreement are accurate as though expressly made at and as of the date hereof. As contemplated by the U.S. Underwriting Agreement, attached as Schedule I is a complete list of the several U.S. Underwriters, which shall be a part of this Agreement and the U.S. Underwriting Agreement. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. B-1 27 If the foregoing is in accordance with your understanding of the agreement among the U.S. Underwriters and the Company, please sign and return to the Company a counterpart hereof, whereupon this instrument along with all counterparts and together with the U.S. Underwriting Agreement shall be a binding agreement among the U.S. Underwriters and the Company in accordance with its terms and the terms of the U.S. Underwriting Agreement. Very truly yours, THOMAS NELSON, INC. By: _______________________________ Name: Title: Confirmed as of the date first above mentioned: PAINEWEBBER INCORPORATED MERRILL LYNCH & CO. J.C. BRADFORD & CO. Acting on behalf of themselves and as the Representatives of the other several U.S. Underwriters named in Schedule I hereof. By: PAINEWEBBER INCORPORATED By: _____________________________________ Name: Title: By: MERRILL LYNCH & CO. By: _____________________________________ Name: Title: By: J.C. BRADFORD & CO. By: _____________________________________ Name: Title: B-2 28 EXHIBIT B SUBSIDIARIES
Name % Owned - ---- ------- Word Incorporated 100 Nelson/Word, Ltd. (U.K.) 100 Word DMS Partners, LP 100 Word Communications, Ltd. 100 TNI Cassette Corp. 100 Editorial Caribe, Inc. 100 PPC, Inc. 100 American Bible Company, Inc. 100 Morningstar Radio Network, Inc. 80
B-3 29 Form of opinion of counsel to the Company EXHIBIT C 1. The Company and each of the subsidiaries listed on Exhibit B to the Agreement is a corporation duly organized, validly, existing and in good standing under the laws of the jurisdiction of its incorporation, is duly licensed or qualified to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of the activities conducted by it or the character of the assets owned or leased by it makes such license or qualification necessary and where the failure to so qualify would have a material adverse effect on the Company, has full corporate power and authority to conduct all the activities conducted by it and known to us, to own or lease all the material assets owned or leased by it and to conduct its business as described in the Registration Statement and the Prospectus and to the best of our knowledge has all governmental licenses, permits, consents, orders, approvals and other authorizations which are material to the ability of the Company to carry on its business as contemplated in the Prospectus. All references to the Company's subsidiaries in this opinion shall be limited to the subsidiaries of the Company listed on Exhibit B to the Agreement. The Company is the sole record and beneficial owner of all of the capital stock of each of its subsidiaries. 2. The outstanding shares of Common Stock have been, and the Shares will be, when they are issued or sold to and paid for by the Underwriters in accordance with the terms of the Agreement, duly authorized, validly issued, fully paid and nonassessable and will not be subject to any preemptive or similar right arising by law or to the best of our knowledge, any other preemptive or similar right. 3. No consent, approval, authorization or order of, or any filing or declaration with, any court or governmental agency or body is required (a) in connection with the authorization, issuance, transfer, sale or delivery of the Shares by the Company, (b) in connection with the execution, delivery and performance of the Agreement by the Company or (c) in connection with the taking by the Company of any action contemplated thereby [or, if so required, all such consents, approvals, authorizations and orders, [specifying the same] have been obtained and are in full force and effect], except such as have been obtained under the Act and the Rules and Regulations and such as may be required by the bylaws and rules of the NASD in connection with the purchase and distribution by the Underwriters of the Shares and except such as will not, if not obtained, have a material adverse effect on the transactions contemplated by the Agreement. 4. The authorized and outstanding capital stock of the Company is as set forth in the Registration Statement and the Prospectus. The description of the Common Stock contained in the Prospectus conforms to the terms thereof contained in the Company's charter. C-1 30 5. The Registration Statement and the Prospectus (including any documents incorporated by reference into the Prospectus, at the time they were filed) comply or complied in all material respects as to form with the requirements of the Act, the Exchange Act, the Exchange Act Rules and Regulations and the Rules and Regulations (except that we express no opinion as to financial statements, schedules and other financial and statistical data contained in the Registration Statement or the Prospectus or incorporated by reference therein). 6. We have participated in the preparation of the Registration Statement and the Prospectus and nothing has come to our attention which has caused us to believe that, both as of the Effective Date and as of the Closing Date and the U.S. Option Closing Date, either the Registration Statement or the Prospectus, or any amendment or supplement thereto including any documents incorporated by reference into the Prospectus, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made (except that we express no opinion as to financial statements, schedules and other financial or statistical data contained in the Registration Statement or the Prospectus or incorporated by reference therein). 7. The Registration Statement has become effective under the Act and to the best of our knowledge, no order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose has been instituted or is threatened, pending or contemplated. 8. We have reviewed all contracts or other documents referred to in the Registration Statement and the Prospectus and such contracts or other documents are fairly summarized or disclosed therein and filed as exhibits thereto as required, and, after due inquiry, we do not know of any contracts or other documents required to be so summarized or disclosed or filed or required to be filed under the Exchange Act if upon such filing they would be incorporated, in whole or in part, by reference therein which have not been so summarized or disclosed or filed. 9. All descriptions in the Prospectus of statutes, regulations or legal or governmental proceedings are accurate and fairly present the information required to be shown. 10. The Company has full corporate power and authority to enter into the Agreement, and the Agreement has been duly authorized, executed and delivered by the Company, is a valid and binding agreement of the Company and, except for the indemnification and contribution provisions thereof, as to which we express no opinion, and subject to applicable bankruptcy laws and general equitable principles is enforceable against the Company in accordance with the terms thereof. C-2 31 11. The execution and delivery of the Agreement by the Company, the consummation by the Company of the transactions therein contemplated and the compliance by the Company with the terms of the Agreement do not and will not result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Company or any of its subsidiaries pursuant to the terms or provisions of, or result in a breach or violation of any of the terms or provisions of, or constitute a default or result in the acceleration of any obligation under, the charter or by-laws of the Company or any of its subsidiaries, any material indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement or other evidence of indebtedness, lease, contract or other material agreement or instrument known to us to which the Company or any of its subsidiaries is a party or by which it or any of its properties is bound or any judgment, ruling, decree or order known to us of any court or other governmental agency or body or statute, rule or regulation applicable to the business or properties of the Company or any of its subsidiaries (except that we express no opinion as to the securities or Blue Sky laws of any jurisdiction other than the United States). 12. Upon payment for and delivery of the Shares with all necessary endorsements in accordance with the terms of the Agreement, and assuming the Underwriters are acquiring the Shares in good faith without notice of any adverse claim, the Underwriters will be the owners of the Shares, free and clear of any adverse claim. 13. To the best of our knowledge there are no actions, suits or proceedings pending or threatened against or affecting the Company or any of its subsidiaries or their respective properties or any of its subsidiaries, or any of their respective officers in their capacities as such, before or by any Federal or state or foreign court, commission, regulatory body, administrative agency or other governmental body, wherein an unfavorable ruling, decision or finding might materially and adversely affect the Company or any of its subsidiaries or its business, properties, business prospects, condition (financial or otherwise) or results of operations, except as set forth in or contemplated by the Registration Statement and the Prospectus. 14. To the best of our knowledge, neither the Company nor any of its subsidiaries is in violation of its charter or certificate of incorporation, by-laws or other charter documents or in default (nor has an event occurred which with notice or lapse of time or both would constitute a default or acceleration) in the performance of any material obligation, agreement or condition contained in any material indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement or other evidence of indebtedness, lease, contract or other material agreement or instrument known to us to which the Company or any of its subsidiaries is a party or by which it or its properties is bound and neither the Company nor any of its subsidiaries is in violation of any judgment, ruling, decree, order, franchise, license or permit known to us or any statute, rule or regulation of any court or other governmental agency or body applicable to the business or properties of the Company or any of its subsidiaries, where such violation or default might C-3 32 have a material adverse effect on the business, properties, business prospects, condition (financial or otherwise) or results of operations of the Company or any of its subsidiaries. 15. The Company is not an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. In rendering the foregoing opinion, counsel may rely, to the extent they deem such reliance proper, as to matters of fact, upon certificates of officers of the Company and of government officials. C-4 EX-5 3 OPINION OF BASS BERRY & SIMS 1 EXHIBIT 5 BASS, BERRY & SIMS ATTORNEYS AT LAW 2700 FIRST AMERICAN CENTER NASHVILLE, TENNESSEE 37238-2700 TELEPHONE (615) 742-6200 TELECOPIER (615) 742-6293 June 27, 1995 Thomas Nelson, Inc. Nelson Place at Elm Hill Pike Nashville, TN 37214-1000 Re: Registration Statement on Form S-3 Ladies and Gentlemen: We have acted as your counsel in connection with your preparation of a Registration Statement on Form S-3 (the "Registration Statement") to be filed by you with the Securities and Exchange Commission on June 27, 1995, covering 2,875,000 shares of Common Stock, par value $1.00 per share (the "Common Stock"), of Thomas Nelson, Inc. (the "Company") to be sold by the Company to (i) certain United States underwriters represented by PaineWebber Incorporated, Merrill Lynch & Co. and J.C. Bradford & Co. and (ii) certain international underwriters represented by PaineWebber International (U.K.) Ltd., Merrill Lynch International Limited and J.C. Bradford & Co. (collectively, the "Underwriters") for public distribution pursuant to the U.S and International Underwriting Agreements between the Company and the Underwriters to be filed as an exhibit to the Registration Statement. In connection with this opinion, we have examined and relied upon such records, documents, certificates, and other instruments as in our judgment are necessary or appropriate in order to express the opinions hereinafter set forth and have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to original documents of all documents submitted to us as certified or photostatic copies. Based on the foregoing and such other matters as we have deemed relevant, we are of the opinion that the shares of Common Stock to be sold by the Company, when issued and delivered in the manner and on the terms described in the Registration Statement (after the same is declared effective), will be validly issued, fully paid, and nonassessable. We hereby consent to the reference to our law firm in the Registration Statement under the caption "Legal Matters" and to the use of this opinion as an exhibit to the Registration Statement. Very truly yours, /s/ Bass, Berry & Sims EX-23.1 4 AUDITORS' CONSENT 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports and to all references to our firm included in or made a part of this S-3 registration statement. ARTHUR ANDERSEN LLP Nashville, Tennessee June 23, 1995 -----END PRIVACY-ENHANCED MESSAGE-----