<PAGE>
FILED PURSUANT TO RULE 424(b)(2)
REGISTRATION STATEMENT NUMBER 33-51963
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 1, 1994
8,000,000 PREFERRED SECURITIES
[LOGO OF TORCHMARK CORPORATION APPEARS HERE]
TORCHMARK CAPITAL L.L.C.
9.18% CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES ("MIPS"*), SERIES A
(LIQUIDATION PREFERENCE $25 PER SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
TORCHMARK CORPORATION
----------
The 9.18% Cumulative Monthly Income Preferred Securities, Series A (the
"Series A Preferred Securities"), representing the preferred limited liability
company interests offered hereby are being issued by Torchmark Capital L.L.C.,
a limited liability company organized under the laws of the State of Delaware
("Torchmark Capital"). All of the common limited liability company interests of
Torchmark Capital are beneficially owned by Torchmark Corporation, a Delaware
corporation ("Torchmark"). Torchmark Capital was formed solely for the purpose
of issuing securities and making loans (the "Loans") of the net proceeds
thereof to Torchmark or its subsidiaries.
The Series A Preferred Securities will entitle holders to receive cumulative
preferential distributions ("dividends") at an annual rate of 9.18% of the
liquidation preference of $25 per security, accruing from the date of original
issuance and payable monthly in arrears on the last day of each calendar month
of each year, commencing October 31, 1994. The payment of dividends, if and to
the extent declared out of moneys held by Torchmark Capital and legally
available therefor, and payments on liquidation or redemption with respect to
the Series A Preferred Securities are guaranteed by Torchmark to the extent
described herein (the "Guarantee"). If Torchmark fails to make interest
payments on the Loans, Torchmark Capital will have insufficient funds to
declare or pay dividends on the Series A Preferred Securities. The Guarantee
does not cover payment of such undeclared dividends. In such event, the remedy
of a holder of Series A Preferred Securities is to enforce the Loans. See
"Description of the Loans--Enforcement." For a discussion of the terms and
limitations of the Guarantee, see "Description of the Guarantee." The Guarantee
will rank junior to all liabilities of Torchmark. At June 30, 1994, Torchmark
had Senior Indebtedness of approximately $792.6 million and total liabilities
of approximately $5.4 billion. Neither the Guarantee nor the Loan Agreement
limit the amount of Senior Indebtedness that may be incurred in the future. No
portion of the dividends received by any holders of the Series A Preferred
Securities will be eligible for the dividends received deductions for U.S.
federal income tax purposes.
The Series A Preferred Securities are redeemable, at the option of Torchmark
Capital (with Torchmark's consent), in whole or in part from time to time, at
$25 per security on or after September 30, 1999, plus in each case accrued and
unpaid dividends to the date fixed for redemption (the "Redemption Price"), and
will be redeemed, under certain circumstances, from the proceeds of any
prepayment or repayment by Torchmark of the loan of the proceeds from the sale
of the Series A Preferred Securities. In addition, at the option of Torchmark
Capital (with Torchmark's consent), under certain circumstances following the
occurrence of a Special Event (as defined herein) arising from a change in law,
the Series A Preferred Securities are redeemable in whole, but not in part,
from time to time, at the Redemption Price. See "Description of Series A
Preferred Securities--Special Event Redemption." In the event of the
liquidation of Torchmark Capital, holders of Series A Preferred Securities will
be entitled to receive for each Series A Preferred Security the liquidation
preference of $25 plus accrued and unpaid dividends to the date of payment,
subject to certain limitations. See "Description of Series A Preferred
Securities--Liquidation Distribution."
For a description of the various contractual backup undertakings of Torchmark
relating to the Series A Preferred Securities, see "Torchmark Capital L.L.C.,"
"Description of Series A Preferred Securities--Mandatory Redemption,"
"Description of the Guarantee" and "Description of the Loans" herein.
SEE "CERTAIN INVESTMENT CONSIDERATIONS" FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE SERIES A PREFERRED SECURITIES, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENT OF DIVIDENDS ON THE SERIES A
PREFERRED SECURITIES MAY BE DEFERRED.
The Series A Preferred Securities have been approved for listing on the New
York Stock Exchange (the "NYSE") under the symbol TMK PRM, subject to official
notice of issuance.
----------
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 SUPPLEMENT OR THE
PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE COMMISSIONS(1) COMPANY(2)(3)
-------------- -------------- -------------
<S> <C> <C> <C>
Per Series A Preferred Security.... $25.00 (2) $25.00
Total.............................. $200,000,000 (2) $200,000,000
</TABLE>
- -----
(1) Torchmark Capital and Torchmark have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) In view of the fact that the proceeds of the sale of the Series A Preferred
Securities will be lent to Torchmark, Torchmark has agreed to pay the
Underwriters, as compensation ("Underwriters' Compensation") for their
services, $.7875 per Series A Preferred Security (or $6,300,000 in the
aggregate). See "Underwriting."
(3) In addition, expenses related to the offering, estimated at $475,000, will
be paid by Torchmark.
----------
The Series A Preferred Securities are offered severally by the Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
delivery of the Series A Preferred Securities will be made only in book-entry
form through the facilities of The Depository Trust Company on or about October
11, 1994.
- -----
* An application has been filed by Goldman, Sachs & Co. with the United States
Patent and Trademark Office for the registration of the MIPS servicemark.
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO. INCORPORATED
DEAN WITTER REYNOLDS INC.
A. G. EDWARDS & SONS, INC.
KIDDER PEABODY & CO. INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
THE ROBINSON-HUMPHREY COMPANY, INC.
SMITH BARNEY INC.
STEPHENS INC.
----------
The date of this Prospectus Supplement is September 30, 1994.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
FOR NORTH CAROLINA PURCHASERS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER OF INSURANCE RULED ON THE ACCURACY OR ADEQUACY OF
THIS DOCUMENT.
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements included elsewhere in this
Prospectus Supplement and in the Prospectus or incorporated herein or therein
by reference.
TORCHMARK AND TORCHMARK CAPITAL
Torchmark Capital L.L.C. ("Torchmark Capital"), a wholly owned special
purpose finance subsidiary of Torchmark Corporation ("Torchmark"), is a
Delaware limited liability company formed solely for the purpose of issuing
common and preferred limited liability company interests, including the Series
A Preferred Securities, and lending the proceeds thereof to Torchmark.
Torchmark, through its subsidiaries, offers a portfolio of life and health
insurance products, institutional investment management services and individual
financial planning services and products, and engages in energy related
services and operations. On September 15, 1994, Torchmark and American Income
Holding, Inc. ("American Income") signed a definitive Agreement and Plan of
Merger, pursuant to which Torchmark will acquire American Income for $35 in
cash per share of American Income common stock.
THE OFFERING
Securities Offered.............. 8,000,000 9.18% Cumulative Monthly Income
Preferred Securities, Series A.
Issuer.......................... Torchmark Capital L.L.C., a special purpose
finance subsidiary organized as a Delaware
limited liability company and wholly owned,
directly or indirectly, by Torchmark Corpora-
tion.
Guarantor....................... Torchmark Corporation.
Liquidation Preference.......... $25 per security, plus accrued and unpaid
dividends.
Dividends....................... Cumulative at the annual rate of 9.18% of the
stated liquidation preference per security,
payable monthly in arrears on the last day of
each calendar month, commencing October 31,
1994.
Redemption...................... Not redeemable prior to September 30, 1999
(except in limited circumstances described
herein under "Description of Series A Pre-
ferred Securities--Special Event Redemp-
tion"). Thereafter, redeemable at the option
of Torchmark Capital at any time, or
mandatorily (unless the funds are relent to
Torchmark) in the event of a prepayment by
Torchmark of the Loans under the Loan Agree-
ment (each as defined below), at $25 per se-
curity plus accrued and unpaid dividends.
Listing......................... The Series A Preferred Securities have been
approved for listing on the NYSE under the
symbol TMK PRM, subject to official notice of
issuance.
S-3
<PAGE>
Use of Proceeds................. All proceeds will be lent (the "Loans") by
Torchmark Capital to Torchmark under a Loan
Agreement (the "Loan Agreement") for use as
part of the financing for the proposed acqui-
sition of American Income (the "Acquisi-
tion"). In the event the Acquisition is not
consummated, the net proceeds will be used by
Torchmark for general corporate purposes,
which may include, without limitation, repay-
ment of bank debt, the repurchase of shares
of Torchmark's common stock, and possible ac-
quisitions.
BACKUP UNDERTAKINGS OF TORCHMARK:
Payment and Guarantee
Agreement Obligations...... Torchmark irrevocably and unconditionally
guarantees Torchmark Capital's payment of:
(i) all legally declared and unpaid dividends
to the extent of funds available therefor,
(ii) all redemption payments to the extent of
funds legally available therefor and (iii) in
the event of liquidation, the lesser of (a)
the liquidation preference plus accrued and
unpaid dividends or (b) the amount of assets
of Torchmark Capital legally available for
distribution to holders of Preferred Securi-
ties in such liquidation. The Guarantee is
directly enforceable by holders of Series A
Preferred Securities and is subordinate to
all liabilities of Torchmark. Taken together,
the LLC Agreement, the Loan Agreement, the
Guarantee and the terms of the Series A Pre-
ferred Securities provide the holders of the
Series A Preferred Securities with full and
unconditional recourse to the credit of
Torchmark to enforce payments legally due to
holders of Series A Preferred Securities.
Loan Agreement Obligations.. Under the Loan Agreement, Torchmark is obli-
gated to pay (i) interest at 9.18% per annum,
which will be in an amount and at times suf-
ficient to permit timely and full payment of
all dividends on Series A Preferred Securi-
ties (subject to certain rights of extension
described under "Description of the Loans--
Extended Interest Payment Period"), and (ii)
principal in amounts and at times sufficient
to permit timely and full payment of all
amounts payable by Torchmark Capital to hold-
ers of Series A Preferred Securities on ac-
count of mandatory or optional redemptions of
Series A Preferred Securities or dissolution,
wind-up or liquidation of Torchmark Capital.
The obligations of Torchmark under the Loan
Agreement are directly enforceable by or on
behalf of holders of Series A Preferred Secu-
rities, and are subordinate to the extent de-
scribed herein.
Related Guarantee and Loan
Agreement Covenants........ Under the Payment and Guarantee Agreement and
the Loan Agreement, Torchmark covenants,
among other
S-4
<PAGE>
things, so long as any Series A Preferred Se-
curities remain outstanding, (i) to maintain
direct or indirect 100% ownership of the se-
curities of Torchmark Capital other than the
Series A Preferred Securities and any addi-
tional preferred securities ranking pari
passu with the Series A Preferred Securities;
(ii) not to voluntarily dissolve, wind-up or
liquidate Torchmark Capital; and (iii) to re-
main the Managing Member of Torchmark Capital
and to timely perform all of its duties as
Managing Member of Torchmark Capital (includ-
ing the duty to declare and pay dividends on
the Series A Preferred Securities), provided
that any permitted successor of Torchmark un-
der the Loan Agreement may succeed to its du-
ties as Managing Member.
Certain Investment
Considerations................. Prospective purchasers of Series A Preferred
Securities should carefully review the infor-
mation contained elsewhere in this Prospectus
Supplement and the accompanying Prospectus
and should particularly consider the matters
set forth under "Certain Investment Consider-
ations."
S-5
<PAGE>
RECENT EVENTS
On September 15, 1994, Torchmark and American Income Holding, Inc.
("American Income") signed a definitive Agreement and Plan of Merger (the
"Merger Agreement"), pursuant to which Torchmark will acquire American Income
for $35 in cash per share of American Income common stock (the "Acquisition").
Pursuant to the Merger Agreement, Torchmark has commenced a cash tender offer
(the "Tender Offer") for all of the outstanding common stock of American
Income. Any shares of American Income common stock not tendered in the Tender
Offer will be acquired for cash at $35 per share pursuant to a statutory
merger (the "Merger"). American Income has approximately 16,100,000 shares
outstanding on a fully diluted basis.
American Income is an insurance holding company engaged, through its
subsidiary, American Income Life Insurance Company, in the marketing,
underwriting and issuing of supplemental life and fixed-benefit accident and
health insurance. American Income targets moderate-income wage earners through
marketing programs with labor union locals, credit unions and other employment
related associations.
The Tender Offer is subject to a condition that Torchmark acquire at least
51% of the outstanding shares of American Income common stock on a fully
diluted basis. The Tender Offer and Merger are also subject to approval by all
necessary insurance regulatory authorities and other customary conditions.
Holders of approximately 41% of the American Income shares, including Bernard
Rapoport, the Chairman of the Board of American Income, Charles B. Cooper, the
President of American Income, and Golder, Thoma, Cressey Fund III Limited
Partnership, have agreed to tender their shares to Torchmark and have granted
Torchmark an option to acquire their shares under certain conditions. The
proceeds of this offering may be used to provide a portion of the financing
for the Acquisition. See "Use of Proceeds."
The total amount of funds required by Torchmark to purchase all of the
outstanding shares of common stock of American Income and to pay fees and
expenses related to the Acquisition is estimated to be approximately $565
million. Torchmark intends to use funds generated from a combination of the
following sources: (i) up to $190 million from cash on hand at various of its
subsidiaries; (ii) up to $200 million from the sale of Series A Preferred
Securities and other series of preferred shares by Torchmark Capital; and
(iii) up to $375 million from bank financing (to be reduced to $175 million if
all $200 million of the Torchmark Capital preferred shares are issued). The
Tender Offer is not conditioned on obtaining financing. Torchmark has entered
into negotiations with its lead lender bank with respect to a credit facility,
subject to certain conditions, totalling up to $375 million.
CERTAIN INVESTMENT CONSIDERATIONS
Prospective purchasers of Series A Preferred Securities should carefully
review the information contained elsewhere in this Prospectus Supplement and
in the Prospectus and should particularly consider the following matters.
SUBORDINATION OF TORCHMARK OBLIGATIONS
Torchmark's obligations under the Guarantee (as defined herein) are
subordinate and junior in right of payment to all other liabilities of
Torchmark and the obligations of Torchmark under the Loan Agreement (as
defined herein) are subordinate and junior in right of payment to Senior
Indebtedness of Torchmark. See "Description of the Guarantee--Status of the
Guarantee" and "Description of the Loans--Subordination." At June 30, 1994 but
without giving effect to the Acquisition and the related financing, Torchmark
had approximately $792.6 million of outstanding Senior Indebtedness, as well
as approximately $5.4 billion of other liabilities reflected on its balance
sheet, all of which would rank
S-6
<PAGE>
senior to the Guarantee. There are no provisions in the Series A Preferred
Securities, the Loan Agreement or the Guarantee which limit Torchmark's
ability to incur additional indebtedness, including indebtedness that ranks
senior to the Guarantee and the Loan Agreement.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Torchmark has the right under the Loan Agreement to extend interest payment
periods for up to 60 months, and, as a consequence, monthly dividends on the
Series A Preferred Securities can be deferred (but will continue to
accumulate) by Torchmark Capital during any such extended interest payment
period. In the event that Torchmark exercises this right, Torchmark may not
declare dividends on any share of its capital stock (other than a declaration
of a dividend consisting of common or preferred stock purchase rights under a
stockholder rights plan). Torchmark Capital and Torchmark currently believe
that the extension of a payment period is remote. See "Description of the
Loans--Extended Interest Payment Period." See "Description of Series A
Preferred Securities--Voting Rights" and "Certain United States Income Tax
Consequences" for a description of certain voting rights and U.S. income tax
consequences of an extended interest payment period.
TAX CONSEQUENCES OF EXTENDED INTEREST PAYMENT PERIOD
Should an extended interest payment period occur, Torchmark Capital will
continue to accrue income for U.S. federal income tax purposes which will be
allocated, even though not distributed currently, to record holders of Series
A Preferred Securities. As a result, such a holder will include such interest
in gross income for U.S. federal income tax purposes in advance of the receipt
of cash from Torchmark Capital, and will not receive the cash related to such
income if such a holder disposes of the Series A Preferred Securities prior to
the record date for payment of dividends. See "Certain United States Income
Tax Consequences--Potential Extension of Interest Payment Period."
SPECIAL EVENT REDEMPTION
Torchmark is aware that the Department of the Treasury recently published a
notice concerning and may in the future review the federal income tax
treatment of the interest payable on obligations similar to the Loans. In
addition, the Department of the Treasury recently issued proposed regulations
with respect to abusive uses of partnership vehicles. While Torchmark does not
believe that the recent notices or the proposed regulations implicate this
transaction, Torchmark is unable to predict future governmental action.
Therefore, in the event that the Department of the Treasury further issues an
official interpretation of law or regulation to the effect that either (i)
Torchmark shall not be entitled to deduct interest for federal income tax
purposes with respect to the amounts being lent by Torchmark Capital to
Torchmark, (ii) Torchmark Capital is subject to federal income tax with
respect to the interest on the loans to Torchmark, or (iii) Torchmark Capital
is subject to more than a de minimis amount of other taxes, duties or other
governmental charges, the Series A Preferred Securities would be subject to
redemption at the option of Torchmark and/or Torchmark Capital, or,
alternatively, could be left outstanding, as described under "Description of
Series A Preferred Securities--Special Event Redemption."
TORCHMARK CAPITAL L.L.C.
Torchmark Capital L.L.C., a wholly owned special purpose finance subsidiary
of Torchmark, is a limited liability company organized under the Delaware
Limited Liability Company Act (the "Delaware Act"). The initial members of
Torchmark Capital are Torchmark and Maxwell's Energy Company, Inc., a wholly-
owned subsidiary of Torchmark ("Maxwell's"). Torchmark and Maxwell's entered
into a limited liability company agreement of Torchmark Capital dated as of
March 11, 1994. Such limited liability company agreement will be amended and
restated in its entirety (as so amended and restated, the "LLC Agreement"). A
copy of the form of the LLC Agreement is included as an exhibit to the
S-7
<PAGE>
Registration Statement on Form S-3 (File No. 33-51963) of which this
Prospectus Supplement forms a part (the "Registration Statement"). Torchmark
Capital exists solely for the purpose of issuing its common and preferred
shares, including the Series A Preferred Securities, and lending the net
proceeds thereof to Torchmark to finance Torchmark's and its subsidiaries'
business operations. Pursuant to the terms of the LLC Agreement, Torchmark
will continue to be a member of Torchmark Capital and Maxwell's will resign as
a member of Torchmark Capital effective as of the closing of the offering of
the Series A Preferred Securities. Torchmark will hold the common limited
liability company interests in Torchmark Capital (the "Common Securities").
The members which hold Series A Preferred Securities will hold preferred
limited liability company interests in Torchmark Capital. The rights of the
Series A Preferred Security holders, including economic rights, rights to
information and voting rights, are set forth in the LLC Agreement and the
Delaware Act. See "Description of Series A Preferred Securities." Under the
LLC Agreement, holders of the Series A Preferred Securities are entitled to
true and full information regarding the state of the business and financial
condition of Torchmark Capital.
Torchmark Capital is a separate legal entity under the laws of the State of
Delaware and is distinct from its owners, who are known as "members." A
Delaware limited liability company is similar to a Delaware corporation in
providing limited liability to its members in a manner similar to that
provided to stockholders of a Delaware corporation. Therefore, unless
expressly provided in a limited liability company agreement or otherwise
agreed, under Delaware law no general liability exists for members or managers
of a Delaware limited liability company. The LLC Agreement provides that
Torchmark will have general liability for the debts and obligations of
Torchmark Capital in the same manner as a general partner of a Delaware
limited partnership. Under Delaware law, members who hold Series A Preferred
Securities (other than Torchmark) will not be liable for the debts,
obligations and liabilities of Torchmark Capital, whether arising in contract,
tort or otherwise, solely by reason of being a member of Torchmark Capital.
Financial statements of Torchmark Capital will be made available to holders
of Series A Preferred Securities annually as soon as practicable after the end
of Torchmark Capital's fiscal year.
TORCHMARK CORPORATION
Torchmark, an insurance and diversified financial services holding company,
was incorporated in Delaware on November 29, 1979 as Liberty National
Insurance Holding Company. Through a plan of reorganization, which became
effective on December 30, 1980, it became the parent company for the
businesses operated by Liberty National Life Insurance Company ("Liberty") and
Globe Life And Accident Insurance Company ("Globe"). United American Insurance
Company ("United American"), Waddell & Reed, Inc. ("W&R") and United Investors
Life Insurance Company ("UILIC"), along with their respective subsidiaries,
were acquired in 1981. The name Torchmark Corporation was adopted on July 1,
1982. Family Service Life Insurance Company ("Famlico") was purchased in July,
1990.
Through its life insurance subsidiaries, including Liberty, Globe, United
American, Famlico and American Life and Accident Insurance Company, Torchmark
offers a portfolio of life and health insurance products. Through United
Investors Management Company ("UIMCO"), a wholly-owned subsidiary which owns
W&R, UILIC and Torch Energy Advisors Incorporated, Torchmark offers
institutional investment management services and individual financial planning
and products, including life insurance, annuities and mutual funds; provides
management services with respect to oil and gas production and development;
and engages in energy property acquisitions and dispositions, oil and gas
product marketing and well operations. Torchmark maintains a 27% ownership
interest in Vesta Insurance Group, Inc. ("Vesta"), a property and casualty
insurance holding company, which owns Vesta Fire Insurance Corporation
(formerly Liberty National Fire Insurance Company), offering industrial fire
insurance, collateral protection insurance, personal and commercial property
and casualty insurance and domestic reinsurance.
The principal executive office of Torchmark is located at 2001 Third Avenue
South, Birmingham, Alabama 35233, and its telephone number is (205) 325-4200.
S-8
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Series A Preferred Securities by
Torchmark Capital will be lent to Torchmark pursuant to the Loan Agreement
described herein and are expected to be used to provide a portion of the
financing for the acquisition of American Income. See "Recent Events." Pending
use in connection with the Acquisition, it is anticipated that the net
proceeds of the offering will be invested in investment grade securities. If
the Acquisition is not consummated, the net proceeds will be used by Torchmark
for general corporate purposes, which may include, without limitation,
repayment of bank debt, the repurchase of Torchmark's Common Stock, and
possible acquisitions.
S-9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated financial information for five years
ended December 31, 1993 and for the six month periods ended June 30, 1993 and
1994 should be read in conjunction with the more detailed information and
financial statements available as described under "Available Information" and
"Incorporation of Certain Information by Reference." The information for the
six-month periods ended June 30, 1993 and 1994 was derived from unaudited
financial statements. In the opinion of management, however, all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation of such information have been included. Results of interim
periods are not necessarily indicative of results for an entire year.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------------ ----------------------
1989 1990 1991 1992 1993 1993 1994
----------- ----------- ----------- ----------- ----------- --------- ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Premium and Policy
Charges:
Life premium............ $ 432,235 $ 487,991 $ 524,052 $ 544,467 $ 555,859 $ 276,791 $ 288,382
Health premium.......... 682,680 738,431 769,821 797,855 799,835 407,348 391,616
Other premium........... 69,521 64,830 71,940 111,640 137,216 68,937 8,316
Total................... 1,184,436 1,291,252 1,365,813 1,453,962 1,492,910 753,076 688,314
Net investment income.... 308,019 348,412 364,318 382,735 372,470 198,110 164,893
Financial services reve-
nue..................... 108,255 108,561 114,326 133,462 137,422 68,825 72,116
Energy operations reve-
nue..................... 22,239 32,218 54,841 74,014 106,013 45,478 33,450
Realized investment gains
(losses)................ 547 4,081 4,195 (948) 8,009 1,486 3,291
Total revenue............ 1,629,326 1,787,148 1,907,441 2,045,810 2,176,835 1,068,559 963,110
Net income............... 211,308 229,177 246,489 265,477 297,979(5) 151,735(6) 140,475
Preferred stock distribu-
tion.................... 7,667 6,898 6,116 3,453 3,289 1,644 804
Net income available to
common shareholders..... 203,641 222,279 240,373 262,024 294,690(5) 150,091(6) 139,671
Net income per common
share................... 2.59 2.85 3.13 3.58 4.01(5) 2.04(6) 1.92
Life insurance sales..... 11,024,758 11,257,778 11,222,307 11,067,341 12,240,244 6,167,679 7,130,574
Increase in life insur-
ance in force........... 842,605 694,733(1) 1,280,412(2) 2,195,544 3,060,638 2,022,552 2,442,358
Annualized Life and
Health Premium Issued:
Life.................... 119,629 129,233 133,741 131,726 128,433 64,913 71,890
Health.................. 232,336 273,290 216,962 224,905 176,028 99,984 67,845
Total................... 351,965 402,523 350,703 356,631 304,461 164,897 139,735
Increase (Decrease) in
Annualized Life and
Health Premium in Force:
Life.................... 28,797 16,849(1) 16,098(2) 25,534 24,572 14,569 22,167
Health.................. 12,228 56,456 11,749 34,346 (9,106) 3,547 (21,261)
Total................... 41,025 73,305 27,847 59,880 15,466 18,116 906
Mutual Fund Collections.. 744,284 742,142 813,737 1,141,928 1,249,084 619,363 662,503
Per Preferred Share:
Cash dividends paid..... $ 7.80 $ 7.50 $ 7.66 $ 7.01 $ 7.00 $ 3.50 $ 2.88(7)
Per Common Share:
Cash dividends paid..... .83 .93 1.00 1.07 1.08 .53 .56
</TABLE>
S-10
<PAGE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
----------------------------------- ---------------------
1991 1992 1993 1993 1994
----------- ----------- ----------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Cash and invested
assets(3).............. $ 4,605,446 $ 4,994,828 $ 5,550,931 $5,324,187 $5,205,531
Total assets............ 6,160,742 6,770,115 7,646,242 7,230,525 7,453,615
Short-term debt......... 11,499 276,819 107,108 148,405 69,612
Long-term debt.......... 667,125 497,867 792,335 708,750 792,550
Shareholders' equity.... 1,079,251 1,115,660 1,417,255(8) 1,234,198 1,251,378(8)
Per common share(4).... 13.11 14.54 18.80 16.11 17.40
Life insurance in force. 56,110,751 58,306,295 61,366,933 60,328,847 63,809,291
Annualized life and
health premium in
force:
Life................... 562,550 588,084 612,656 602,653 634,823
Health................. 798,142 832,488 823,382 836,035 802,121
Total.................. 1,360,692 1,420,572 1,436,038 1,438,688 1,436,944
Assets under management
at W&R................. 10,692,000 12,144,000 14,455,000 13,085,000 14,165,000
</TABLE>
- --------
(1) The increase in life insurance in force is adjusted by $337 million, and
the increase in life annualized premium in force is adjusted by $28.1
million, representing the business acquired in the Famlico acquisition.
(2) The increase in life insurance in force is adjusted by $55 million, and
the increase in life annualized premium in force is adjusted by $2.7
million, representing the business acquired in the Sentinel American Life
Insurance Company acquisition.
(3) Includes accrued investment income.
(4) Computed after deduction of preferred shareholders' equity.
(5) Includes the effects of adoption of Financial Accounting Standards 106 and
109 and a one-time addition to a non-operating expense charge relating to
self-insurance for directors' and officers' liability, guaranty fund
assessments and litigation expenses. On an after-tax basis, adoption of
FAS 106 resulted in a charge of $7.5 million, adoption of FAS 109 resulted
in an addition to earnings of $25.9 million, and the addition to the non-
operating expense charge relating to self-insurance for directors' and
officers' liability, guaranty fund assessments and litigation expenses
resulted in a charge of $53.3 million. Also includes the effects of tax
legislation which increased the corporate tax rate from 34% to 35%
resulting in a charge to net earnings of $13.7 million, of which $9.4
million related to prior years. Also includes an after-tax gain of $37.2
million from the sale of 73% of Vesta.
(6) Includes the effects of adoption of Financial Accounting Standards 106 and
109 and a one-time addition to a non-operating expense charge relating to
self-insurance for directors' and officers' liability, guaranty fund
assessments and litigation expenses. On an after-tax basis, adoption of
FAS 106 resulted in a charge of $7.1 million, adoption of FAS 109 resulted
in an addition to earnings of $29.5 million, and the addition to the non-
operating expense charge relating to self-insurance for directors' and
officers' liability, guaranty fund assessments and litigation expenses
resulted in a charge of $22.8 million.
(7) Includes the $1.13 per share paid at redemption representing the period
February 1, 1994 through March 31, 1994 in addition to the regular
quarterly dividend payment.
(8) Includes the effect of adoption of Financial Accounting Standard 115 which
resulted in an increase in shareholders' equity at December 31, 1993 of
$110 million and a decrease of $87 million at June 30, 1994, net of
applicable taxes.
S-11
<PAGE>
TORCHMARK CORPORATION
AND
AMERICAN INCOME HOLDING, INC.
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma consolidated condensed balance sheet as of
June 30, 1994 and the unaudited pro forma consolidated condensed statements of
income for the year ended December 31, 1993 and the six month period ended
June 30, 1994 give effect to the acquisition of American Income by Torchmark
and to the related pro forma adjustments described in the notes to such pro
forma financial statements. This transaction will be accounted for as a
purchase by Torchmark and will be reported from the date of acquisition of
control of American Income in Torchmark's consolidated financial statements.
These pro forma financial statements do not purport to be indicative of the
results which would actually have been obtained if the acquisition had been
effected as of the beginning of the periods for which the statements are shown
or which may be obtained in the future.
These pro forma financial statements have been prepared based on estimates
and assumptions deemed appropriate at the present time. The final
determination of the effect of the purchase on Torchmark's earnings and
balance sheet will be based on a more exact calculation of the value of
American Income's net assets as of the actual purchase date, and other
relevant factors, including refinements of estimates resulting from further
analyses. These pro forma financial statements should be read in conjunction
with the historical financial statements of Torchmark and American Income
incorporated by reference or included elsewhere herein.
S-12
<PAGE>
TORCHMARK CORPORATION AND AMERICAN INCOME HOLDING, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET--(UNAUDITED)
AS OF JUNE 30, 1994
(AMOUNTS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
AMERICAN PRO FORMA
TORCHMARK INCOME PRO FORMA ADJUSTMENTS CONSOLIDATED
---------- -------- ---------------------- ------------
NOTES B & C
<S> <C> <C> <C> <C> <C>
Investments............. $5,141,285 $441,135 $ (196,775) $5,385,645
Investment in unconsoli-
dated subsidiaries..... 83,295 0 $ (565,000) 565,000 83,295
Deferred acquisition
costs.................. 943,683 98,558 (98,558) 943,683
Value of insurance pur-
chased................. 124,185 93,587 (93,587) 192,004 316,189
Goodwill................ 176,136 6,318 (6,318) 376,160 552,296
Other assets............ 985,031 54,348 1,039,379
---------- -------- ---------- ---------- ----------
Total assets........... $7,453,615 $693,946 $ (763,463) $ 936,389 $8,320,487
========== ======== ========== ========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C>
Policy liabilities...... $4,084,505 $362,325 $ (362,325) $ 375,385 $4,459,890
Income taxes payable.... 267,511 59,277 (4,620) 322,168
Long-term debt.......... 792,550 58,000 175,000 1,025,550
Other liabilities....... 1,057,671 10,605 1,068,276
---------- -------- ---------- ---------- ----------
Total liabilities...... 6,202,237 490,207 (366,945) 550,385 6,875,884
Series A Preferred Secu-
rities................. 0 0 193,225 193,225
Shareholders' equity.... 1,251,378 203,739 (203,739) 1,251,378
---------- -------- ---------- ---------- ----------
Total liabilities and
shareholders'
equity................ $7,453,615 $693,946 $ (570,684) $ 743,610 $8,320,487
========== ======== ========== ========== ==========
</TABLE>
See the Notes to Pro Forma Financial Statements.
S-13
<PAGE>
TORCHMARK CORPORATION AND AMERICAN INCOME HOLDING, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME--(UNAUDITED) FOR THE SIX
MONTHS ENDED JUNE 30, 1994 (AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AMERICAN PRO FORMA PRO FORMA
TORCHMARK INCOME ADJUSTMENTS CONSOLIDATED
--------- -------- ----------- ------------
NOTES B & D
<S> <C> <C> <C> <C>
Premium............................ $688,314 $82,928 $ 771,242
Net investment income.............. 164,893 17,258 $ (7,019) 175,132
Other income....................... 109,903 1,497 111,400
-------- ------- -------- ---------
Total revenue..................... 963,110 101,683 (7,019) 1,057,774
Policy benefits.................... 455,406 41,522 584 497,512
Acquisition expenses............... 89,928 12,612 102,540
Other expense...................... 176,572 12,754 189,326
Interest expense................... 36,156 1,494 4,813 42,463
Amortization of goodwill........... 2,508 213 4,427 7,148
-------- ------- -------- ---------
Total expense..................... 760,570 68,595 9,824 838,989
-------- ------- -------- ---------
Pretax income..................... 202,540 33,088 (16,843) 218,785
Income taxes....................... (66,212) (11,672) 4,346 (73,538)
Equity in earnings of
unconsolidated subsidiaries....... 4,147 0 4,147
-------- ------- -------- ---------
Earnings before effect of change
in accounting principle.......... 140,475 21,416 (12,497) 149,394
Effect of change in accounting
principle......................... 0 (1,519) (1,519)
-------- ------- -------- ---------
Net income........................ 140,475 19,897 (12,497) 147,875
Dividends to preferred
shareholders...................... (804) 0 (4,550) (5,354)
-------- ------- -------- ---------
Net income available to common
shareholders..................... $139,671 $19,897 $(17,047) $ 142,521
======== ======= ======== =========
Net income per share............... $1.92 $1.96
======== =========
Average shares outstanding......... 72,628 72,628
</TABLE>
See the Notes to Pro Forma Financial Statements.
S-14
<PAGE>
TORCHMARK CORPORATION AND AMERICAN INCOME HOLDING, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME--(UNAUDITED) FOR THE YEAR
ENDED DECEMBER 31, 1993 (AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AMERICAN PRO FORMA PRO FORMA
TORCHMARK INCOME ADJUSTMENTS CONSOLIDATED
---------- -------- ----------- ------------
NOTES B & D
<S> <C> <C> <C> <C>
Premium......................... $1,492,910 $151,612 $1,644,522
Net investment income........... 372,470 32,107 $(12,350) 392,227
Other income.................... 311,455 2,032 313,487
---------- -------- -------- ----------
Total revenue.................. 2,176,835 185,751 (12,350) 2,350,236
Policy benefits................. 971,556 74,959 957 1,047,472
Acquisition expenses............ 187,073 24,893 211,966
Other expense................... 506,622 25,383 532,005
Interest expense................ 67,261 4,189 9,625 81,075
Amortization of goodwill........ 2,917 426 8,854 12,197
---------- -------- -------- ----------
Total expense.................. 1,735,429 129,850 19,436 1,884,715
---------- -------- -------- ----------
Pretax income.................. 441,406 55,901 (31,786) 465,521
Income taxes.................... (153,086) (21,476) 8,026 (166,536)
Equity in earnings of
unconsolidated subsidiaries.... 1,952 1,952
Minority interest in
consolidated affiliates........ (10,696) (10,696)
---------- -------- -------- ----------
Earnings before extraordinary
charge and effect of change in
accounting principles......... 279,576 34,425 (23,760) 290,241
Extraordinary charge............ 0 (638) (638)
Effect of change in accounting
principles..................... 18,403 18,403
---------- -------- -------- ----------
Net income..................... 297,979 33,787 (23,760) 308,006
Dividends to preferred
shareholders................... (3,289) (9,100) (12,389)
---------- -------- -------- ----------
Net income available to common
shareholders.................. $ 294,690 $ 33,787 $(32,860) $ 295,617
========== ======== ======== ==========
Net income per share:
Earnings before extraordinary
charge and effect of change in
accounting principles.......... 3.76 3.78
Extraordinary charge............ (0.01)
Effect of change in accounting
principles..................... 0.25 0.25
---------- ----------
Net income per share............ $4.01 $4.02
========== ==========
Average shares outstanding...... 73,502 73,502
</TABLE>
See the Notes to Pro Forma Financial Statements.
S-15
<PAGE>
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
(a) The pro forma consolidated condensed balance sheet as of June 30, 1994
assumes that the acquisition of American Income has occurred as of June 30,
1994 and that as of such date American Income's assets and liabilities were
adjusted to fair value in accordance with generally accepted accounting
principles, and that such adjustments to fair value would have been equivalent
to the adjustments made as of the purchase date. The pro forma consolidated
condensed statements of income assume that the purchase of American Income and
the comparable adjustments were made as of the beginning of the pro forma
periods.
(b) The pro forma statements assume the issuance of $200 million of Series A
Preferred Securities, $175 million debt, and the sale of investments to
provide cash to purchase the stock.
(c) For purposes of determining the pro forma effect of the acquisition of
American Income on Torchmark's consolidated balance sheet, American Income's
net assets have been adjusted to fair value as follows:
(1) Investments were recorded at estimated market values.
(2) Policy reserves were adjusted based on actuarial estimates using
current assumptions (including provision for adverse deviation), as to
expected mortality, withdrawals, expenses and interest.
(3) The cost of insurance acquired, which represents the present value of
future profits or acquired insurance in force, was determined based on
assumptions consistent with those utilized in restating insurance reserves
as discussed in (2) above.
(4) Deferred acquisition costs were eliminated.
(5) Deferred income taxes were adjusted to reflect the revaluation of the
above items.
(6) The fair value of other assets and liabilities approximated book
value.
(7) Goodwill was recorded to represent the difference in the purchase
price and the fair value of net assets acquired.
(d) The principal adjustments in the pro forma statements of income
recognize the following items in adjusting American Income's historical
income:
(1) Additions to insurance reserves utilized assumptions described in
Note (c)(2) above.
(2) The cost of insurance acquired was amortized over the estimated
remaining premium-paying period of the insurance in force at the assumed
dates of the acquisition, which is substantially the same in amount as
historical policy acquisition costs.
(3) Additional interest expense, dividends, and reduced investment income
were recorded to give effect to the purchase. Torchmark anticipates
entering into interest rate swap agreements in the same amount as the
Series A Preferred Securities and interest has been assumed to be swapped
to a variable rate.
(4) Goodwill was amortized over a period of 40 years.
(5) Pro forma federal income tax adjustments were based on the above pro
forma adjustments.
S-16
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited summary capitalization of
Torchmark and its consolidated subsidiaries at June 30, 1994 and as adjusted
to give effect to the sale of the Series A Preferred Securities offered hereby
and the acquisition of American Income and related financing. The table should
be read in conjunction with Torchmark's and American Income's consolidated
financial statements and notes thereto and other financial data incorporated
by reference herein. See "Use of Proceeds."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1994
------------------------
ACTUAL PRO FORMA
----------- ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Short-term debt........................................ $ 69,612 $ 69,612
Long-term debt......................................... 792,550 1,025,550
Series A Preferred Securities.......................... 193,225
Shareholders' equity................................... 1,251,378 1,251,378
----------- -----------
Total capitalization................................... $2,113,540 $2,539,765
=========== ===========
</TABLE>
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of Torchmark's (consolidated)
earnings to combined fixed charges and preferred stock dividends and the pro
forma ratio of earnings to fixed charges and preferred stock dividends, for
the periods indicated and on a pro forma basis. The pro forma ratio reflects
adjustments to the historical ratio to give effect to the acquisition of
American Income, assuming that such acquisition was consummated January 1,
1993 and to give effect to the offering of the Series A Preferred Securities
and to the other financing contemplated to complete the Acquisition. See "Use
of Proceeds."
<TABLE>
<CAPTION>
SIX
MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------ JUNE 30,
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to combined fixed charges
and
preferred stock dividends:
Excluding interest credited on deposit
products................................... 6.1 6.3 6.2 7.1 6.8 6.1
Including interest credited on deposit
products................................... 4.0 3.8 3.6 3.8 3.9 3.6
Pro forma ratio of earnings to combined
fixed charges and preferred stock
dividends:
Excluding interest credited on deposit
products................................... -- -- -- -- 5.5 5.2
Including interest credited on deposit
products................................... -- -- -- -- 3.6 3.4
</TABLE>
For the purpose of computing the ratio of earnings to combined fixed charges
and preferred stock dividends, "earnings" consists of operating income before
income taxes and fixed charges. "Combined fixed charges and preferred stock
dividends" represent interest charges, the portion of rental expense deemed
representative of the interest factor and the pre-tax income required to pay
the preferred stock dividends of Torchmark.
S-17
<PAGE>
DESCRIPTION OF SERIES A PREFERRED SECURITIES
The following is a summary of the material terms and provisions of the
Series A Preferred Securities offered hereby. All of the limited liability
company interests of Torchmark Capital other than the Series A Preferred
Securities are beneficially owned directly or indirectly by Torchmark. The LLC
Agreement will authorize and create the Series A Preferred Securities. The
Series A Preferred Securities constitute a series of preferred limited
liability company interests ("Preferred Securities") of Torchmark Capital,
which Preferred Securities may be issued in one or more series from time to
time. The LLC Agreement and the Certificate of Formation of Torchmark Capital
(the "Certificate") establish, or authorize Torchmark as the Managing Member
of Torchmark Capital to establish, the designations, dividend rights,
liquidation value per security, redemption provisions, voting rights and other
rights, preferences, privileges, limitations and restrictions relating to
Preferred Securities of Torchmark Capital. The summary of the material terms
and provisions of the Series A Preferred Securities set forth below does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the LLC Agreement and the Certificate establishing the rights,
preferences, privileges, limitations and restrictions relating to the Series A
Preferred Securities. Copies of the LLC Agreement and the Certificate have
been filed as exhibits to the Registration Statement.
GENERAL
Torchmark Capital is authorized to issue an unlimited amount of its
preferred limited liability company interests in one or more series or
classes, with such dividend rights, liquidation preferences, redemption
provisions, voting rights and other rights, preferences, privileges,
limitations and restrictions as may be determined by the Managing Member, as
set forth in the LLC Agreement. The Managing Member has approved the issuance
of 8,000,000 Preferred Securities as Series A Preferred Securities. The LLC
Agreement will not permit the issuance of any Preferred Securities of
Torchmark Capital ranking, as to participation in profits or the assets of
Torchmark Capital, senior to the Series A Preferred Securities.
DIVIDENDS
Cumulative dividends on the Series A Preferred Securities will accrue from
the date of initial issue thereof and are payable monthly in arrears on the
last day of each calendar month of each year, commencing October 31, 1994,
when, as and if declared by Torchmark Capital, except as otherwise described
below.
The dividends payable on each Series A Preferred Security will be fixed at a
rate per annum of 9.18% of the liquidation preference thereof ($25 per
security). The amount of the dividends is computed on the basis of twelve 30-
day months and a 360-day year and, for any period shorter than a full monthly
period, will be computed on the basis of the actual number of days elapsed in
such period. Payment of dividends is limited in relation to the amount of
funds held by Torchmark Capital and legally available therefor.
Dividends on the Preferred Securities of any series will be cumulative
(whether or not declared and whether or not there are profits, surplus or
other funds legally available for the payment of dividends).
Dividends on the Series A Preferred Securities must be declared by Torchmark
Capital, by action of Torchmark, as Managing Member of Torchmark Capital, in
any calendar year or portion thereof to the extent that the Managing Member
reasonably determines that at the time of payment Torchmark Capital will have,
and must be paid by Torchmark Capital to the extent that at the time of
payment Torchmark Capital has, funds legally available for the payment of such
dividends and cash on hand sufficient to permit such dividends (excluding any
cash received as a payment or prepayment of, or of interest on, loans related
to other series, if any, of Preferred Securities). It is anticipated that
Torchmark
S-18
<PAGE>
Capital's earnings will result exclusively from payments under the Loans (as
defined herein) of the proceeds from the sale of the Series A Preferred
Securities and other Preferred Securities, if any, and the issuance of the
Common Securities (as described under "Description of the Loans").
Dividends declared on the Series A Preferred Securities are payable to the
record holders thereof as they appear on the register for the Series A
Preferred Securities on the record date, which will be one Business Day prior
to the relevant payment date. Subject to applicable laws and regulations, each
such payment will be made as described under "Book-Entry-Only Issuance--The
Depository Trust Company" below. In the event that any date on which dividends
are payable with respect to the Series A Preferred Securities is not a
Business Day, then payment of the dividend payable on such date will be made
on the next succeeding day which is a Business Day (and without any interest
or other payment in respect of any such delay) except that, if such Business
Day is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date. A "Business Day" shall mean any day other than
a day on which banking institutions in The City of New York are authorized or
required by law to close.
CERTAIN RESTRICTIONS ON TORCHMARK CAPITAL
If dividends have not been paid in full on the Series A Preferred
Securities, Torchmark Capital may not:
(i) pay, or declare and set aside for payment, any dividends on any other
Preferred Securities of Torchmark Capital ranking pari passu with the
Series A Preferred Securities as regards participation in profits of
Torchmark Capital ("Company Dividend Parity Securities"), unless the amount
of any dividends made with respect to any Company Dividend Parity
Securities is made with respect to Company Dividend Parity Securities and
the Series A Preferred Securities on a pro rata basis on the date such
dividends are paid with respect to such Company Dividend Parity Securities,
so that
(x) the ratio of (a) the aggregate amount of dividends paid with
respect to the Series A Preferred Securities divided by (b) the
aggregate amount of dividends paid with respect to such Company
Dividend Parity Securities, equals
(y) the ratio of (a) the aggregate of all accrued and unpaid
dividends in respect of the Series A Preferred Securities, divided by
(b) the aggregate of all accrued and unpaid dividends in respect of
such Company Dividend Parity Securities;
(ii) pay, or declare and set aside for payment, any dividends on the
Common Securities or any other securities of Torchmark Capital ranking
junior to the Series A Preferred Securities as to dividends ("Company
Dividend Junior Securities"); or
(iii) redeem, purchase or otherwise acquire any Company Dividend Parity
Securities or Company Dividend Junior Securities or any Series A Preferred
Securities other than the redemption of all outstanding Series A Preferred
Securities at the redemption price of $25 per Series A Preferred Security
plus accrued and unpaid Preferred Security dividends to the date fixed for
redemption (the "Redemption Price");
until, in each case, such time as all accrued arrears of unpaid dividends
(whether or not declared) on the Series A Preferred Securities shall have been
paid in full for all dividend periods terminating on or prior to, in the case
of clauses (i) and (ii), such payment, and in the case of clause (iii), the
date of such redemption, purchase or acquisition.
As of the date of this Prospectus Supplement, there are no Company Dividend
Parity Securities outstanding, and Torchmark Capital does not have any current
plans to issue Company Dividend Parity Securities.
S-19
<PAGE>
MANDATORY REDEMPTION
The proceeds from any prepayment or repayment of principal by Torchmark on
the Loans of the proceeds from the issuance and sale of the Series A Preferred
Securities and the Common Securities must be applied to redeem the Series A
Preferred Securities at the Redemption Price, upon not less than 30 nor more
than 60 days' notice; provided that such amounts may instead be lent to or
relent to Torchmark and not used for such redemption if at the time of such
new loan, and as determined in the judgment of Torchmark, as Managing Member,
and Torchmark Capital's independent financial advisor (selected by Torchmark,
as Managing Member), (a) Torchmark is not in bankruptcy, (b) Torchmark is not
in default on any loan pertaining to Preferred Securities of any series, (c)
Torchmark has made timely monthly payments on the repaid loan for the
immediately preceding 18 months, (d) Torchmark Capital is not in arrears on
payment of dividends on the Series A Preferred Securities, (e) Torchmark is
expected to be able to make timely payment of principal and interest on such
new loan, (f) such new loan is being made on terms, and under circumstances,
that are consistent with those which a lender would require for a loan to an
unrelated party, (g) such loan is being made at a rate sufficient to provide
payments equal to or greater than the amount of dividend payments that accrue
on the Series A Preferred Securities, (h) the senior unsecured long-term debt
of Torchmark is rated BBB- or better by Standard & Poor's Corporation or Baa3
or better by Moody's Investors Service, Inc. or the equivalent by any other
nationally recognized statistical rating organization, (i) such loan is being
made for a term that is consistent with market circumstances and Torchmark's
financial condition, and (j) such loan will have a final maturity no later
than the fiftieth anniversary of the issuance of the Series A Preferred
Securities.
OPTIONAL REDEMPTION
The Series A Preferred Securities are redeemable, at the option of Torchmark
Capital (subject to the prior consent of Torchmark), in whole or in part from
time to time, on or after September 30, 1999, upon not less than 30 nor more
than 60 days' notice, at the Redemption Price. In the event that fewer than
all the outstanding Series A Preferred Securities are to be redeemed (other
than in a case where such partial redemption would result in delisting as
described below, if the Series A Preferred Securities are listed on a
securities exchange), the Series A Preferred Securities to be redeemed will be
selected as described under "Book-Entry-Only Issuance--The Depository Trust
Company" below. Torchmark Capital will not redeem fewer than all the
outstanding Series A Preferred Securities unless all accrued arrears of unpaid
dividends have been paid on all Series A Preferred Securities for all monthly
dividend periods terminating on or prior to the date of redemption.
SPECIAL EVENT REDEMPTION
If a Tax Event or an Investment Company Act Event (as defined below)
(collectively, a "Special Event") shall occur and be continuing, Torchmark
and/or Torchmark Capital may elect to redeem the Series A Preferred Securities
in whole (and not in part), upon not less than 30 or more than 60 days' notice
at the Redemption Price within 90 days following the occurrence of such
Special Event.
"Tax Event" means that Torchmark or Torchmark Capital shall have obtained an
opinion of independent counsel experienced in such matters to the effect that,
as a result of any amendment to, or change in, the laws (or any regulations
thereunder) of the United States or any political subdivision or governmental
authority thereof or therein, or any amendment to or change in an official or
judicial interpretation or application of such laws or regulations, which
amendment or change is effective on or after April 30, 1994, there is more
than an insubstantial risk that (i) Torchmark Capital is subject to federal
income tax with respect to interest received on the Loans to Torchmark, (ii)
Torchmark shall not be entitled to deduct interest for Federal income tax
purposes with respect to the amounts being lent by Torchmark Capital to
members of Torchmark's consolidated group, or (iii) Torchmark Capital is
subject to more than a de minimis amount of other taxes, duties or other
governmental charges.
"Investment Company Act Event" means the occurrence of a change in law or
regulation or a written change in official interpretation of law or regulation
by any legislative body, court, governmental
S-20
<PAGE>
agency or regulatory authority (a "Change in 1940 Act Law"), to the effect
that Torchmark Capital is or will be considered an "Investment Company"
required to be registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), which Change in 1940 Act Law becomes effective on or after
April 30, 1994; provided that no Investment Company Act Event shall be deemed
to have occurred if Torchmark and/or Torchmark Capital delivers a written
opinion of independent counsel to Torchmark Capital experienced in practice
under the 1940 Act, to the effect that Torchmark and/or Torchmark Capital has
successfully taken either of the steps set forth in (i) or (ii) below to avoid
such Change in 1940 Act Law so that in the opinion of such counsel,
notwithstanding such Change in 1940 Act Law, Torchmark Capital is not required
to be registered as an "investment company" within the meaning of the 1940
Act. Such steps shall be either (i) issuing an additional or supplemental
irrevocable and unconditional guarantee (x) of accrued and unpaid dividends
(whether or not declared out of moneys legally available therefor) on the
Series A Preferred Securities and (y) upon a liquidation of Torchmark Capital,
of the full amount of the Liquidation Distribution (as hereinafter defined) on
the Series A Preferred Securities (regardless of the amount of assets of
Torchmark Capital otherwise available for distribution in such liquidation),
or (ii) the use of any other reasonable measures that do not adversely affect
holders of Series A Preferred Securities.
REDEMPTION PROCEDURES
If Torchmark Capital gives a notice of redemption in respect of Series A
Preferred Securities, then, by 12:00 noon, New York time, on the redemption
date, Torchmark Capital will irrevocably deposit with The Depository Trust
Company funds sufficient to pay the applicable Redemption Price, and will give
The Depository Trust Company irrevocable instructions and authority to pay the
Redemption Price to the holders thereof. See "Book-Entry-Only Issuance--The
Depository Trust Company." If notice of redemption shall have been given and
funds deposited as required, then upon the date of such deposit, all rights of
holders of Series A Preferred Securities so called for redemption will cease,
except the right of the holders of such securities to receive the Redemption
Price, but without interest, and such securities will cease to be outstanding.
In the event that any date on which any payment in respect of the redemption
of Series A Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day. In the event that payment of the Redemption Price in respect of Series A
Preferred Securities is improperly withheld or refused and not distributed
either by Torchmark Capital or by Torchmark pursuant to the Guarantee,
dividends on such securities will continue to accrue, at the then applicable
rate, from the original redemption date to the date of payment, in which case
the actual payment date will be considered the date fixed for redemption for
purposes of calculating the Redemption Price.
Subject to the foregoing and applicable law (including, without limitation,
applicable United States federal and state securities laws), Torchmark or its
subsidiaries may at any time and from time to time purchase outstanding Series
A Preferred Securities by tender, in the open market or by private agreement;
provided, that neither Torchmark nor its susidiaries may purchase outstanding
Series A Preferred Securities if the purchase would result in a termination of
Torchmark Capital for federal income tax purposes.
LIQUIDATION DISTRIBUTION
In the event of any voluntary or involuntary liquidation, dissolution,
termination or winding up of Torchmark Capital, the holders of Series A
Preferred Securities at the time outstanding will be entitled to receive out
of the assets of Torchmark Capital legally available for distribution to
securityholders, before any distribution of assets is made to holders of
Common Securities or any other class of securities of Torchmark Capital
ranking junior to the Series A Preferred Securities as regards participation
in assets of Torchmark Capital, but together with the holders of every other
series of
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preferred or preference limited liability company interests of Torchmark
Capital outstanding, if any, ranking pari passu with the Series A Preferred
Securities as regards participation in the assets of Torchmark Capital
("Company Liquidation Parity Securities"), an amount equal, in the case of the
holders of the Series A Preferred Securities, to the aggregate of the
liquidation preference of $25 per Series A Preferred Security and all accrued
and unpaid dividends (whether or not declared) to the date of payment (the
"Liquidation Distribution"). If, upon any such liquidation, the Liquidation
Distribution can be made only in part because Torchmark Capital has
insufficient assets available to make in full the aggregate Liquidation
Distribution and the aggregate maximum liquidation distributions on Company
Liquidation Parity Securities, then the amounts payable directly by Torchmark
Capital on the Series A Preferred Securities and on such Company Liquidation
Parity Security shall be distributed on a pro rata basis, so that
(i) the ratio of (x) the aggregate amount distributed in respect of the
Liquidation Distribution, divided by (y) the aggregate amount distributed
as liquidation distributions on Company Liquidation Parity Securities,
equals
(ii) the ratio of (x) the aggregate Liquidation Distribution, divided by
(y) the aggregate maximum liquidation distribution on Company Liquidation
Parity Securities.
Pursuant to the LLC Agreement, Torchmark Capital shall be dissolved and its
affairs shall be wound up: (i) upon the expiration of the term of Torchmark
Capital; (ii) upon the retirement, resignation, expulsion, bankruptcy or
dissolution of Torchmark, or the occurrence of any other event under the
Delaware Act that terminates the continued membership of Torchmark as the
holder of the Common Securities of Torchmark Capital except for a transfer to
a permitted successor of the holder of the Common Securities as set forth in
the LLC Agreement, (iii) upon the entry of decree of a judicial dissolution;
or (iv) upon the written consent of all members of Torchmark Capital,
including the holders of the Series A Preferred Securities.
PERSONAL LIABILITY OF HOLDERS OF COMMON SECURITIES
Torchmark, in its capacity as holder of the Common Securities, will be
liable for, and will pay (as an additional capital contribution to Torchmark
Capital) the debts of and claims against Torchmark Capital (other than the
obligations to holders of Series A Preferred Securities or other equity
securities of Torchmark Capital).
MERGER, CONSOLIDATION, AMALGAMATION, ETC. OF TORCHMARK CAPITAL
Torchmark, as the managing member of Torchmark Capital (the "Managing
Member"), is authorized to conduct its affairs and to operate Torchmark
Capital in such a way that Torchmark Capital would not be deemed to be an
"investment company" required to be registered under the 1940 Act or taxed as
a corporation for federal income tax purposes and so that any loans made by
Torchmark Capital to Torchmark will be treated as indebtedness for federal
income tax purposes. In this connection, the Managing Member is authorized to
take any action that (i) is not inconsistent with applicable law, the
Certificate or the LLC Agreement, (ii) does not materially adversely affect
the holders of Series A Preferred Securities and (iii) the Managing Member
determines in its sole discretion to be necessary or desirable for such
purposes.
Torchmark Capital may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described below. Torchmark Capital may, for purposes of changing its state of
domicile or avoiding federal income tax or 1940 Act consequences adverse to
Torchmark or Torchmark Capital or holders of Series A Preferred Securities,
without the consent of the holders of the Series A Preferred Securities,
consolidate, amalgamate, merge with or into, or be replaced by a limited
liability company or limited partnership or trust organized as such under the
laws of any state of the United States of America, provided that (i) such
successor entity either (x) expressly assumes all of the
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obligations of Torchmark Capital under the Series A Preferred Securities or
(y) substitutes for the Series A Preferred Securities other securities having
substantially the same terms as the Series A Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank, with respect
to participation in the profits or assets of the successor entity, at least as
high as the Series A Preferred Securities rank with respect to participation
in the profits or assets of Torchmark Capital, (ii) Torchmark expressly
acknowledges such successor entity as the holder of the Loans to it relating
to the Series A Preferred Securities, (iii) such merger, consolidation,
amalgamation or replacement does not cause the Series A Preferred Securities
to be delisted by any national securities exchange or other organization on
which the Series A Preferred Securities are then listed, if any, (iv) such
merger, consolidation, amalgamation or replacement does not cause the Series A
Preferred Securities to be downgraded by any "nationally recognized
statistical rating organization," as that term is defined by the Commission
for purposes of Rule 436(g)(2) under the Securities Act of 1933, as amended,
(v) such merger, consolidation, amalgamation or replacement does not adversely
affect the powers, preferences and other special rights of holders of Series A
Preferred Securities in any material respect, (vi) prior to such merger or
consolidation Torchmark has received an opinion of independent counsel to
Torchmark Capital experienced in such matters to the effect that (w) holders
of outstanding Series A Preferred Securities will not recognize any gain or
loss for federal income tax purposes as a result of the merger, consolidation,
amalgamation or replacement, (x) such successor entity will be treated as a
partnership for federal income tax purposes, (y) following such merger,
consolidation, amalgamation or replacement, Torchmark and such successor
entity will be in compliance with the 1940 Act without registering thereunder
as an investment company, and (z) such merger, consolidation, amalgamation or
replacement will not adversely affect the limited liability of holders of
Series A Preferred Securities.
VOTING RIGHTS
Except as provided below and under "Description of the Guarantee--Amendments
and Assignments" and "Description of the Loans--Miscellaneous," the holders of
the Series A Preferred Securities will have no voting rights.
If (i) Torchmark Capital fails to pay dividends in full on the Series A
Preferred Securities (whether or not there are funds legally available
therefor) for 18 consecutive monthly dividend periods, (ii) an Event of
Default (as defined in the Loan Agreement relating to the Loans) occurs and is
continuing on the Loans (as described in "Description of the Loans") or (iii)
Torchmark is in default under any of its payment or other obligations under
the Guarantee (as described under "Description of the Guarantee"), then the
holders of outstanding Series A Preferred Securities, together with the
holders of any other preferred or preference securities of Torchmark Capital
having the right to vote for the appointment of a trustee in such event,
acting as a single class, will be entitled, by resolution passed by the
holders of a majority in liquidation preference (plus all accrued and unpaid
dividends) of such securities present in person or by proxy at a meeting of
such holders convened for such purpose (or by written consent), to appoint and
authorize a trustee to enforce Torchmark Capital's rights as a creditor under
the Loans against Torchmark (including the acceleration of principal and
accrued interest on the Loans), enforce the obligations undertaken by
Torchmark under the Guarantee and declare and pay dividends on the Series A
Preferred Securities; provided, that in the event such holders are entitled to
appoint a trustee pursuant solely to section (i) above and Torchmark has
elected to extend the interest payment period as provided under "Description
of the Loans--Extended Interest Payment Period," the trustee shall not be
entitled to exercise such powers until the expiration of the extended interest
payment period or until the occurrence of another event of default under
section (ii) or (iii) above. Notwithstanding the appointment of any such
trustee, Torchmark retains all rights under the Loan Agreements, including the
right to extend the interest payment period for up to 60 months as provided
under "Description of the Loans--Extended Interest Payment Period." During any
such extension, dividends on Series A Preferred Securities will be deferred,
but holders will be required to include interest from the Loans in income for
federal tax purposes. See "Certain United States Income Tax Consequences."
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In furtherance of the foregoing, and without limiting the powers of any
trustee so appointed and for the avoidance of any doubt concerning the powers
of the trustee, any trustee, in its own name and as trustee of an express
trust, may institute a proceeding, including, without limitation, any suit in
equity, an action in law or other judicial or administrative proceeding, to
enforce Torchmark Capital's creditor rights directly against Torchmark or any
other obligor in connection with such obligations to the same extent as
Torchmark Capital and on behalf of Torchmark Capital, and may prosecute such
proceeding to judgment or final decree, and enforce the same against Torchmark
or any other obligor in connection with such obligations and collect, out of
the property, wherever situated, of Torchmark or any such other obligor upon
such obligations, the monies adjudged or decreed to be payable in the manner
provided by law.
For purposes of determining whether Torchmark Capital has failed to pay
dividends in full for 18 consecutive monthly dividend periods, dividends shall
be deemed to remain in arrears, notwithstanding any payments in respect
thereof, until full cumulative dividends have been or contemporaneously are
declared and paid with respect to all monthly dividend periods terminating on
or prior to the date of payment of such full cumulative dividends. Not later
than 30 days after such entitlement arises, the Managing Member will convene a
meeting for the above purpose. If the Managing Member fails to convene such
meeting within such 30-day period, the holders of 10% in liquidation
preference (plus all accrued arrears and accruals of unpaid dividends) of the
outstanding Series A Preferred Securities and such other preferred or
preference securities will be entitled to convene such meeting. The provisions
of the LLC Agreement relating to the convening and conduct of the meetings of
securityholders will apply with respect to any such meeting. Any trustee so
appointed shall vacate office immediately, subject to the terms of such other
preferred or preference securities, if Torchmark Capital (or Torchmark
pursuant to the Guarantee) shall have paid in full all accrued and unpaid
dividends on the Series A Preferred Securities or such default or breach by
Torchmark, as the case may be, shall have been cured.
If any resolution is proposed for adoption by the securityholders of
Torchmark Capital providing for, or the Managing Member proposes to effect (it
being understood that the automatic dissolution and liquidation events
described in (iii) and (iv) under "Liquidation Distribution" above will not be
deemed to be a proposal by the Managing Member), (x) any action which would
adversely affect the powers, preferences or special rights of the Series A
Preferred Securities by way of amendment of Torchmark Capital's LLC Agreement
or otherwise (including, without limitation, the authorization or issuance of
any securities of Torchmark Capital ranking, as to participation in the
profits or assets of Torchmark Capital, senior to the Series A Preferred
Securities), or (y) the liquidation, dissolution or winding up of Torchmark
Capital, then the holders of outstanding Preferred Securities of all series
(and, in the case of a resolution described in clause (x) above which would
equally adversely affect the rights, preferences or privileges of any Company
Dividend Parity Securities or any Company Liquidation Parity Securities, such
Company Dividend Parity Securities or such Company Liquidation Parity
Securities, as the case may be, or, in the case of any resolution described in
clause (y) above, all Company Liquidation Parity Securities) will be entitled
to vote together as a class on such resolution or action of the Managing
Member (but not on any other resolution or action), and such resolution or
action shall not be effective except with the approval of the holders of 66
2/3% in liquidation preference (plus all accrued and unpaid dividends) of such
outstanding securities; provided, however, that no such approval or
ratification shall be required if the liquidation, dissolution and winding up
of Torchmark Capital is proposed or initiated upon the initiation of
proceedings, or after proceedings have been initiated, for the liquidation,
dissolution, or winding up of Torchmark.
No vote or consent of the holders of the Series A Preferred Securities will
be required for Torchmark Capital to redeem or cancel Series A Preferred
Securities in accordance with the LLC Agreement.
The rights attached to the Series A Preferred Securities will be deemed not
to be varied by the creation or issue of, and no vote will be required for the
creation of, any further series of preferred or
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preference securities or any further securities of Torchmark Capital ranking
as regards participation in the profits or assets of Torchmark Capital pari
passu with or junior to the Series A Preferred Securities.
Any required approval of holders of Series A Preferred Securities may be
given at a meeting of such holders convened for such purpose, at a general
meeting of securityholders of Torchmark Capital or pursuant to written
consent. Torchmark Capital will cause a notice of any meeting at which holders
of the Series A Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of the Series A Preferred Securities. Each
such notice will include a statement setting forth (i) the date of such
meeting or the date by which such action is to be taken, (ii) a description of
any resolution proposed for adoption at such meeting on which such holders are
entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or written consents.
Notwithstanding that holders of Series A Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Series A Preferred Securities and such other preferred or preference
securities entitled to vote or consent with such Series A Preferred Securities
as a single class outstanding at such time, that are owned by Torchmark or any
entity owned 50% or more by Torchmark, either directly or indirectly, shall
not be entitled to vote or consent and shall, for the purposes of such vote or
consent, be treated as if they were not outstanding.
BOOK-ENTRY-ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC"), New York, New York, will act as
securities depository for the Series A Preferred Securities. The Series A
Preferred Securities will be issued as fully registered securities registered
in the name of Cede & Co. (DTC's partnership nominee). One or more fully
registered global Series A Preferred Security certificates will be issued,
representing in the aggregate the total number of Series A Preferred
Securities, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The Rules applicable to DTC and its Participants
are on file with the Securities and Exchange Commission.
Purchases of Series A Preferred Securities under the DTC system must be made
by or through Direct Participants, which will receive a credit for the Series
A Preferred Securities on DTC's records. The ownership interest of each actual
purchaser of each Series A Preferred Security ("Beneficial Owner") is in turn
to be recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which the Beneficial Owner
purchased Series A Preferred Securities. Transfers of ownership interests in
the Series A Preferred Securities are to be accomplished by entries made on
the books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in
Series A
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Preferred Securities, except in the event that use of the book-entry system
for the Series A Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Series A
Preferred Securities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Series A Preferred Securities are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. If less than all of the Series
A Preferred Securities are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each Direct Participant in such series to be
redeemed.
Although voting with respect to the Series A Preferred Securities is
limited, in those cases where a vote is required, neither DTC nor Cede & Co.
will consent or vote with respect to Series A Preferred Securities. Under its
usual procedures, DTC mails an Omnibus Proxy to Torchmark Capital as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Series A Preferred Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Dividend payments on the Series A Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payable date in accordance with their respective holdings shown on DTC's
records, unless DTC has reason to believe that it will not receive payments on
such date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices and will be the responsibility
of such Participant and not of DTC, Torchmark Capital or Torchmark, subject to
any statutory or regulatory requirements as may be in effect from time to
time. Payment of dividends to DTC is the responsibility of Torchmark Capital,
disbursement of such payments to Direct Participants will be the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Series A Preferred Securities at any time by giving reasonable
notice to Torchmark Capital. Under such circumstances, in the event that a
successor securities depository is not obtained, Series A Preferred Security
certificates are required to be printed and delivered. In addition, Torchmark
Capital (with the consent of Torchmark) may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor Depository). In
that event, certificates for the Series A Preferred Securities will be printed
and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Torchmark Capital and Torchmark believe to
be reliable, but neither Torchmark Capital nor Torchmark has independently
verified such information.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
The First Chicago Trust Company of New York will act as registrar, transfer
agent and paying agent for the Series A Preferred Securities (the "Paying
Agent").
Registration of transfers of Series A Preferred Securities will be effected
without charge by or on behalf of Torchmark Capital, but upon payment (with
the giving of such indemnity as Torchmark Capital or Torchmark may require) in
respect of any tax or other governmental charges which may be imposed in
relation to it.
Torchmark Capital will not be required to register or cause to be registered
the transfer of Series A Preferred Securities after such Securities have been
called for redemption.
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MISCELLANEOUS
Torchmark Capital is not subject to any mandatory sinking fund provisions
with respect to the Series A Preferred Securities. Holders of Series A
Preferred Securities have no preemptive rights.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Payment and
Guarantee Agreement (the "Guarantee") which will be executed and delivered by
Torchmark for the benefit of the holders from time to time of Series A
Preferred Securities. References to the provisions of the Guarantee are
qualified in their entirety by reference to the full text of the Guarantee,
the form of which is included as an exhibit to the Registration Statement.
GENERAL
Torchmark will irrevocably and unconditionally agree, to the extent set
forth herein, to pay in full, to the holders of the Preferred Securities of
any series which may be issued by Torchmark Capital, including the Series A
Preferred Securities, the Guarantee Payments (as defined below) (except to the
extent paid by Torchmark Capital), as and when due, regardless of any defense,
right of set-off or counterclaim which Torchmark Capital may have or assert.
The following payments to the extent not paid by Torchmark Capital
constitute the Guarantee Payments for the Series A Preferred Securities
(without duplication): (i) accrued and unpaid dividends which have been
declared on the Series A Preferred Securities out of moneys legally available
therefor, (ii) the Redemption Price (including all accrued and unpaid
dividends) payable out of moneys legally available therefor with respect to
Series A Preferred Securities called for redemption by Torchmark Capital, and
(iii) in the event of liquidation of Torchmark Capital, the lesser of (a) the
liquidation preference plus all accrued and unpaid dividends (whether or not
declared) to the date of payment and (b) the amount of assets of Torchmark
Capital legally available to holders of Series A Preferred Securities.
Torchmark's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by Torchmark to the holders of Preferred
Securities of any series or by causing Torchmark Capital to pay such amounts
to such holders.
If Torchmark fails to make interest payments required under the Loan
Agreement, Torchmark Capital will not have sufficient funds to declare or pay
dividends on the Series A Preferred Securities. The Guarantee does not cover
payment of such undeclared and unpaid dividends. In such event, the remedies
of a holder of Series A Preferred Securities are described under "Description
of the Loan Agreement--Enforcement."
CERTAIN COVENANTS OF TORCHMARK
In the Guarantee, Torchmark will covenant that, so long as any Preferred
Securities of any series remain outstanding, neither Torchmark nor any
majority owned subsidiary of Torchmark shall declare or pay any dividend on,
or redeem, purchase, acquire or make a liquidation payment with respect to,
any of Torchmark's capital stock or make any guarantee payments with respect
to the foregoing (other than payments under the Guarantee or dividends or
guarantee payments to Torchmark or another majority-owned subsidiary by a
majority-owned subsidiary of Torchmark or a declaration of a dividend
consisting of common or preferred stock purchase rights under a stockholder
rights plan), if at such time Torchmark shall be in default with respect to
its payment or other obligations under the Guarantee, or there shall have
occurred any event that, with the giving of notice or the lapse of time or
both, would constitute an Event of Default under the Loans.
In the Guarantee, Torchmark will also covenant that, so long as any
Preferred Securities of any series remain outstanding, Torchmark will (i)
maintain direct or indirect 100% ownership of the Common Securities and any
other securities of Torchmark Capital other than the Preferred Securities,
(ii) cause at least 21% of the total value (initially measured by
securityholders' equity determined in accordance with generally accepted
accounting principles) of Torchmark Capital and at least 21% of
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all interests in the capital, income, gain, loss, deduction and credit of
Torchmark Capital to be represented by Common Securities, unless the Internal
Revenue Code of 1986, as amended (the "Code") or the regulations or
interpretations thereunder permit a lower percentage, (iii) not voluntarily
dissolve, wind-up or liquidate Torchmark Capital, (iv) remain the Managing
Member of Torchmark Capital and timely perform all of its duties as Managing
Member of Torchmark Capital (including the duty to cause Torchmark Capital to
declare and pay dividends on the Preferred Securities) provided that any
permitted successor of Torchmark under the Loan Agreement may succeed to
Torchmark's duties as Managing Member, and (v) use reasonable efforts to cause
Torchmark Capital to remain a limited liability company and otherwise continue
to be treated as a partnership for United States federal income tax purposes.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders (in which case no vote will be required), the Guarantee may be
changed only with the prior approval of the holders of not less than 66 2/3%
in liquidation preference of all Preferred Securities of each series then
outstanding. The manner of obtaining any such approval of holders of Preferred
Securities will be as set forth under "Description of Series A Preferred
Securities--Voting Rights." All guarantees and agreements contained in the
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of Torchmark and shall inure to the benefit of the holders of
all Preferred Securities then outstanding.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect as to a
series of Preferred Securities upon full payment of the Redemption Price of
all outstanding Preferred Securities of that series, and shall terminate
completely upon full payment of the amounts payable upon liquidation of
Torchmark Capital. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Preferred
Securities of any such series must restore payment of any sums paid under the
Preferred Securities of such series or the Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of Torchmark and will
rank (i) subordinate and junior in right of payment to all other liabilities
of Torchmark, (ii) pari passu with the most senior preferred or preference
stock of any series now or hereafter issued by Torchmark and any guarantee
entered into by Torchmark in respect of any preferred or preference shares of
any affiliate of Torchmark (unless such guarantee provides that it is
subordinate to the Guarantee) and (iii) senior to the common stock of
Torchmark. At June 30, 1994 but without giving effect to the Acquisition and
the related financing, Torchmark had total liabilities of approximately $5.4
billion, all of which are senior to the Guarantee. The Guarantee provides that
each holder of Series A Preferred Securities by acceptance thereof agrees to
the subordination provisions and other terms of the Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection.
A holder of Preferred Securities may enforce the Guarantee directly against
Torchmark, and Torchmark will waive any right or remedy to require that any
action be brought against Torchmark Capital or any other person or entity
before proceeding against Torchmark. The Guarantee will not be discharged
except by payment of the Guarantee Payments in full to the extent not paid by
Torchmark Capital and by complete performance of all obligations under the
Guarantee. Taken together, the LLC Agreement, the Loan Agreement, the
Guarantee and the terms of the Series A Preferred Securities provide the
holders of the Series A Preferred Securities with full and unconditional
recourse to the credit of Torchmark to enforce payments legally due to holders
of Series A Preferred Securities.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
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DESCRIPTION OF THE LOANS
Set forth below is a summary of the loans (the "Loans") from Torchmark
Capital to Torchmark of the proceeds from the issuance of (i) the Series A
Preferred Securities and (ii) the Common Securities and related capital
contributions ("Common Security Payments"). References to provisions of the
loan agreement (the "Loan Agreement") pertaining to the Loans are qualified in
their entirety by reference to the full text of the Loan Agreement, the form
of which is included as an exhibit to the Registration Statement. Torchmark's
obligations under the Loan Agreement will also be for the benefit of the
holders from time to time of the Series A Preferred Securities, and such
holders will be entitled to enforce the Loan Agreement directly against
Torchmark.
GENERAL
Pursuant to the Loan Agreement, Torchmark Capital has agreed to make the
Loans to Torchmark in an aggregate principal amount equal to approximately
$253,164,557, such amount being the aggregate Liquidation Preference of the
Series A Preferred Securities issued and sold by Torchmark Capital of
$200,000,000 and the aggregate Common Security Payments of approximately
$53,164,557.
The entire principal amount of the Loans will become due and payable
(together with any accrued and unpaid interest thereon) on the earliest of
September 30, 2024 (subject to renewal at Torchmark Capital's option for up to
an additional 20 year term if the terms and conditions set forth in the next
paragraph are satisfied) or the date upon which Torchmark shall be dissolved,
wound up or liquidated or the date upon which Torchmark Capital shall be
dissolved, wound up or liquidated.
The Loans may be renewed and extended for an additional 20 year term if, as
of September 30, 2024, and as determined in the judgment of Torchmark, as the
Managing Member, and Torchmark Capital's independent financial advisor
(selected by Torchmark, as the Managing Member), (a) Torchmark is not in
bankruptcy, (b) Torchmark is not in default on any loan pertaining to
Preferred Securities of any series, (c) Torchmark has made timely monthly
payments on the repaid loan for the immediately preceding 18 months, (d)
Torchmark Capital is not in arrears on payment of dividends on the Series A
Preferred Securities, (e) Torchmark is expected to be able to make timely
payment of principal and interest on such new loan, (f) such new loan is being
made on terms, and under circumstances, that are consistent with those which a
lender would require for a loan to an unrelated party, (g) such loan is being
made at a rate sufficient to provide payments equal to or greater than the
amount of dividend payments that accrue on the Series A Preferred Securities,
(h) the senior unsecured long-term debt of Torchmark is rated BBB- or better
by Standard & Poor's Corporation or Baa3 or better by Moody's Investors
Service, Inc. or the equivalent by any other nationally recognized statistical
rating organization, (i) such loan is being made for a term that is consistent
with market circumstances and Torchmark's financial condition and (j) such
loan will have a final maturity no later than the fiftieth anniversary of the
issuance of the Series A Preferred Securities.
MANDATORY PREPAYMENT
If Torchmark Capital redeems Series A Preferred Securities in accordance
with the terms thereof, the Loans will become due and payable in a principal
amount equal to the aggregate liquidation preference of the Series A Preferred
Securities so redeemed, together with any and all interest accrued thereon.
Any payment pursuant to this provision shall be made prior to 12:00 noon, New
York time, on the date of such redemption or at such other time on such
earlier date as Torchmark Capital and Torchmark shall agree.
OPTIONAL PREPAYMENT
Torchmark will have the right to prepay the Loans, without premium or
penalty,
(i) in whole or in part (together with any accrued but unpaid interest on
the portion being prepaid) at any time on or after September 30, 1999; and
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(ii) in whole (together with all accrued and unpaid interest) at any time
upon the occurrence of a Special Event. See "Description of Series A
Preferred Securities--Optional Redemption," and "Description of Series A
Preferred Securities--Special Event Redemption."
INTEREST
The Loans will bear interest at an annual rate equal to 9.18% from the date
they are made until maturity. Such interest shall be payable on the last day
of each calendar month of each year, commencing October 31, 1994. In the event
that any date on which interest is payable on the Loans is not a Business Day,
then payment of the interest payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date, subject to certain rights of extension
described below.
EXTENDED INTEREST PAYMENT PERIOD
Torchmark shall have the right at any time or times during the term of the
Loans, so long as Torchmark is not in default in the payment of interest on
the Loans, to extend the interest payment period to up to 60 months; provided
that at the end of such period Torchmark shall pay all interest then accrued
and unpaid; and provided further that, during any such extended interest
payment period, or at any time during which there is an uncured Event of
Default under the Loans, neither Torchmark nor any majority owned subsidiary
shall declare or pay any dividends on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its shares of common or preferred
stock or make any guarantee payments with respect to the foregoing (other than
payments under the Guarantee or a declaration of a dividend consisting of
common or preferred stock purchase rights under a stockholder rights plan).
Prior to the termination of any such extended interest payment period,
Torchmark may further extend the interest payment period, provided that such
extended interest payment period together with all such further extensions
thereof may not exceed 60 months. Torchmark shall give Torchmark Capital
notice of its selection of such extended interest payment period one Business
Day prior to the earlier of (i) the date Torchmark Capital declares the
related dividend or (ii) the date Torchmark Capital is required to give notice
of the record or payment date of such related dividend to the New York Stock
Exchange or other applicable self-regulatory organization or to holders of the
Series A Preferred Securities, but in any event not less than two Business
Days prior to such record date. Torchmark shall cause Torchmark Capital to
give such notice of Torchmark's selection of such extended interest payment
period to the holders of the Series A Preferred Securities.
METHOD AND DATE OF PAYMENT
Each payment by Torchmark of principal and interest on the Loans shall be
made to Torchmark Capital in lawful money of the United States, at such place
and to such accounts as may be designated by Torchmark Capital.
SET-OFF
Notwithstanding anything to the contrary in the Loan Agreement, Torchmark
shall have the right to set-off any payment it is otherwise required to make
thereunder with and to the extent Torchmark has theretofore made, or is
concurrently on the date of such payment making, a payment under the
Guarantee.
SUBORDINATION
Torchmark and Torchmark Capital covenant and agree (and each holder of the
Series A Preferred Securities (and any trustee appointed by such holders) by
acceptance thereof agrees) that each of the Loans is subordinate and junior in
right of payment to all Senior Indebtedness as provided in the Loan Agreement.
The term "Senior Indebtedness" means the principal, premium, if any, and
interest on (i) all indebtedness of Torchmark, whether outstanding on the date
of the Loan Agreement or thereafter
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<PAGE>
created, incurred or assumed, which is for money borrowed, or evidenced by a
note or similar instrument (other than indebtedness which specifically
provides that it ranks pari passu or subordinated to the Loans), (ii) any
indebtedness secured by a lien upon property owned by Torchmark and upon which
indebtedness Torchmark customarily pays or accrues interest, even though
Torchmark has not assumed or become liable for the payment of such
indebtedness, (iii) any indebtedness of others of the kinds described in the
preceding clause (i) or (ii) for which Torchmark is responsible or liable
(directly or indirectly, contingently or otherwise) as guarantor or otherwise,
and (iv) amendments, renewals, extensions and refundings of any such
indebtedness, unless in any instrument or instruments evidencing or securing
such indebtedness or pursuant to which the same is outstanding, or in any such
amendment, renewal, extension or refunding, it is expressly provided that such
indebtedness is pari passu or subordinated in right of payment to the Loans.
The Senior Indebtedness shall continue to be Senior Indebtedness and entitled
to the benefits of the subordination provisions irrespective of (i) any
amendment, modification or waiver of any term of the Senior Indebtedness or
extension or renewal of the Senior Indebtedness, (ii) any exchange or release
of, or nonperfection of any lien on or security interest in, any collateral,
or any release from, amendment or waiver of or consent to departure from any
guaranty, for all or any of the Senior Indebtedness, (iii) any other
circumstance which might otherwise constitute a defense available to or
discharge of Torchmark Capital to the holders of the Preferred Securities (or
any trustee appointed by such holders) in respect of the provisions of the
Loan Agreement, or (iv) any act or failure to act on the part of Torchmark or
by any act or failure to act, in good faith, by any holder of Senior
Indebtedness, or by any noncompliance by Torchmark with the terms of the Loan
Agreement, regardless of any knowledge thereof which any person may have or be
otherwise charged with.
Upon the maturity of any Senior Indebtedness of Torchmark by lapse of time,
acceleration of maturity or otherwise, all Senior Indebtedness of Torchmark
then due and owing shall first be paid in full, or such payment duly provided
for in cash (or in securities or other property satisfactory to all of the
holders of such Senior Indebtedness), before any payment is made on account of
the Loans.
In the event that (i) Torchmark shall default in the payment of any
principal, or premium, if any, or interest on any Senior Indebtedness when the
same becomes due and payable, whether at maturity or at a date fixed for
prepayment or otherwise or (ii) an event of default occurs with respect to any
Senior Indebtedness permitting the holders thereof to accelerate the maturity
thereof and written notice of such event of default is given to Torchmark by
the holders of Senior Indebtedness, then unless and until such default in
payment or event of default shall have been cured or waived or shall have
ceased to exist, no direct or indirect payment (in cash, property, securities,
by set-off or otherwise) may be made or agreed to be made on account of the
Loans or interest thereon or in respect of any repayment, redemption,
retirement, purchase or other acquisition of the Loans.
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to Torchmark, its creditors or its property, (ii) any proceeding for the
liquidation, dissolution or other winding up of Torchmark, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by Torchmark for the benefit of creditors, or (iv) any
other marshaling of the assets of Torchmark, all Senior Indebtedness
(including, without limitation, interest accruing thereon after the
commencement of any such proceeding, assignment or marshalling of assets)
shall first be paid in full before any payment or distribution, whether in
cash, securities or other property, may be made by Torchmark on account of the
Loans. In any such event, any payment or distribution, whether in cash,
securities or other property (other than securities of Torchmark or any other
corporation provided for by a plan of reorganization or a readjustment, the
payment of which is subordinate, at least to the extent provided in the
subordination provisions of the Loan Agreement with respect to the
indebtedness evidenced by the Loans, to the payment of all Senior Indebtedness
at the time outstanding and to any securities issued in respect thereof under
any such plan of reorganization or readjustment), which would otherwise (but
for the subordination provision) be payable or deliverable in respect to the
Loans shall be paid or
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delivered directly to the holders of Senior Indebtedness (or their
representative or trustee) in accordance with the priorities then existing
among such holders until all Senior Indebtedness shall have been paid in full.
No present or future holder of any Senior Indebtedness may be prejudiced in
the right to enforce subordination of the indebtedness constituting the Loans
by any act or failure to act on the part of Torchmark.
Senior Indebtedness shall not be deemed to have been paid in full unless the
holders thereof shall have received cash, securities or other property equal
to the amount of such Senior Indebtedness then outstanding. Upon the payment
in full of all Senior Indebtedness, Torchmark Capital shall be subrogated to
all the rights of any holders of Senior Indebtedness to receive any further
payments or distribution applicable to the Senior Indebtedness until the Loans
shall have been paid in full, and such payments or distribution of cash,
securities or other property received by Torchmark Capital, by reason of such
subrogation, which otherwise would be paid or distributed to the holders of
Senior Indebtedness, shall, as between Torchmark and its creditors other than
the holders of Senior Indebtedness, on the one hand, and Torchmark Capital, on
the other, be deemed to be a payment by Torchmark on account of Senior
Indebtedness, and not on account of the Loans.
COVENANTS
Torchmark will covenant that neither Torchmark nor any majority-owned
subsidiary of Torchmark will declare or pay any dividend on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of
Torchmark's capital stock, or make any guarantee payments with respect to the
foregoing (other than payments under the Guarantee, dividends or guarantee
payments to Torchmark or another majority-owned subsidiary by a majority-owned
subsidiary of Torchmark or a dividend consisting of common or preferred stock
purchase rights under a stockholder rights plan), if at such time there shall
have occurred any event that, with the giving of notice or the lapse of time
or both, would constitute an Event of Default under the Loan Agreement, or
Torchmark shall be in default with respect to its payment or other obligations
under the Guarantee. Torchmark will also covenant (i) to maintain direct or
indirect 100% ownership of the Common Securities and any other securities of
Torchmark Capital other than the Preferred Securities; (ii) to cause at least
21% of the total value (initially measured by securityholders' equity
determined in accordance with generally accepted accounting principles) of
Torchmark Capital and at least 21% of all interests in the capital, income,
gain, loss, deduction and credit of Torchmark Capital to be represented by
Common Securities, unless the Code or the regulations or interpretations
thereunder permit a lower percentage; (iii) not to voluntarily dissolve, wind
up or liquidate Torchmark Capital; (iv) to remain the Managing Member of
Torchmark Capital and to timely perform all of its duties as Managing Member
(including the duty to declare and pay dividends on the Series A Preferred
Securities as described in "Description of Series A Preferred Securities--
Dividends"); provided, that any permitted successor of Torchmark under the
Loan Agreement may succeed to Torchmark's duties as Managing Member; and (v)
to use its reasonable efforts to cause Torchmark Capital to remain a limited
liability company and otherwise continue to be treated as a partnership for
United States federal income tax purposes.
Torchmark Capital may not waive compliance or waive any default in
compliance by Torchmark of any covenant or other term in the Loan Agreement
without the approval of the same percentage of Series A Preferred
Securityholders, obtained in the same manner, as would be required for an
amendment of the Loan Agreement to the same effect, as set forth below under
"Miscellaneous."
EVENTS OF DEFAULT
If one or more of the following events (each an "Event of Default") shall
occur and be continuing:
(a) default in the payment of interest on the Loans when due for 10 days
(whether by virtue of the provisions described above under "--
Subordination" or otherwise); provided that a valid extension of the
interest payment period by Torchmark shall not constitute a default in the
payment of interest for this purpose (see "--Interest");
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(b) default in the payment of principal on the Loans when due (whether by
virtue of the provisions described above under "--Subordination" or
otherwise);
(c) the dissolution or winding up or liquidation of Torchmark Capital;
(d) the bankruptcy, insolvency or liquidation of Torchmark; or
(e) breach by Torchmark of any of its covenants under the Loan Agreement
continued for 30 days after notice to Torchmark from the holders of 25% of
the outstanding Series A Preferred Securities;
then Torchmark Capital will have the right to declare the principal of and the
interest on the Loans (including any interest subject to an extension
election) and all other amounts payable under the Loan Agreement to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the Loans. Under the terms of the Series A Preferred Securities,
the holders of outstanding Series A Preferred Securities will have the rights
referred to under "Description of Series A Preferred Securities--Voting
Rights", including the right to appoint a trustee, which trustee will be
authorized to exercise Torchmark Capital's right to accelerate the principal
amount of the Loans and to enforce Torchmark Capital's other creditor rights
under the Loans, and Torchmark agrees to cooperate with such trustee;
provided, that no holder of Series A Preferred Securities shall be entitled to
institute any proceeding, judicial or otherwise, under the Loan Agreements
unless such proceeding has been brought by or with the consent of the holders
of at least 25% of the outstanding Series A Preferred Securities; and
provided, further, that notwithstanding the immediately preceding proviso, the
holder of any Series A Preferred Securities shall have the right to institute
suit for the enforcement of any payment of principal or interest on the Loans.
ENFORCEMENT
Torchmark agrees in the Loan Agreement that its obligations under the Loan
Agreement are for the benefit of the holders of Series A Preferred Securities.
The holders, or a trustee appointed by and acting on behalf of the holders,
may enforce Torchmark's obligations under the Loan Agreements directly against
Torchmark as a third party beneficiary of Torchmark's obligations thereunder
without first proceeding against Torchmark Capital. However, except in the
event of a payment default as described in the next sentence, no holder of
Series A Preferred Securities is entitled to institute any proceedings under
the Loan Agreements to enforce the covenants therein unless such proceeding
has been brought by or with the consent of the holders of at least 25% of the
outstanding Series A Preferred Securities. Notwithstanding the immediately
preceding sentence, the holder of any Series A Preferred Securities shall have
the right to institute suit for the enforcement of any payment of principal or
interest on the Loans.
The holder's claims under the Loan Agreement will rank subordinate and
junior in right of payment to all Senior Indebtedness of Torchmark as
described under "Subordination." Upon payment of such claims, any trustee
appointed as described above would be authorized to declare and cause
Torchmark Capital to pay dividends on the Series A Preferred Securities as
described above under "Description of the Series A Preferred Securities--
Voting Rights."
MISCELLANEOUS
Torchmark will have the right at all times to assign any of its rights or
obligations under the Loan Agreement to a direct or indirect wholly owned
subsidiary of Torchmark; provided that, in the event of any such assignment,
Torchmark will remain jointly and severally liable for all such obligations.
Torchmark Capital may not assign any of its rights under the Loan Agreement
without the prior written consent of Torchmark. Subject to the foregoing, the
Loan Agreement will be binding upon and inure to the benefit of Torchmark and
Torchmark Capital and their respective successors and assigns. The Loan
Agreement provides that it may not otherwise be assigned by Torchmark or
Torchmark Capital.
The Loan Agreement will provide that Torchmark may merge with or into
another entity, or permit another entity to merge with or into it, and may
sell, transfer or lease all or substantially all of its assets
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to another entity if (i) at such time no Event of Default under the Loan
Agreement has occurred and is continuing, or would occur as a result of such
merger, sale, transfer or lease, and (ii) Torchmark is the survivor of such
merger, or the survivor of such merger or entity to which Torchmark's assets
are sold, transferred or leased is an entity organized under the laws of the
United States or any state thereof, assumes all of Torchmark's obligations
under the Loan Agreement and becomes the Managing Member.
The Loan Agreement will be governed by and construed in accordance with the
laws of the State of New York.
The Loan Agreement may be amended by mutual consent of the parties in the
manner the parties shall agree; provided that, so long as any of the Series A
Preferred Securities remain outstanding, no such amendment shall be made that
adversely affects the holders of Series A Preferred Securities, no termination
of the Loan Agreement shall occur, and no Event of Default or compliance with
any covenant under the Loan Agreement may be waived by Torchmark Capital,
without the prior consent of at least 66 2/3% of the holders of the Series A
Preferred Securities, in writing or at a duly constituted meeting of such
holders.
CERTAIN UNITED STATES INCOME TAX CONSEQUENCES
This section is a summary of certain United States federal income tax
considerations that may be relevant to initial purchasers of Series A
Preferred Securities and represents the opinion of Hughes & Luce, L.L.P.,
counsel to Torchmark and Torchmark Capital, insofar as it relates to matters
of United States federal income tax law. This discussion deals only with the
federal income tax considerations to initial purchasers who acquire the Series
A Preferred Securities at the original offering price. This discussion is
based upon current provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), existing and proposed regulations thereunder and current
administrative and court decisions, all of which are subject to change
(possibly on a retroactive basis). Subsequent changes may cause the tax
consequences to vary substantially from the consequences described below.
No attempt has been made in the following discussion to comment on all
federal income tax matters affecting purchasers of Series A Preferred
Securities. Moreover, the discussion focuses on holders of Series A Preferred
Securities who are individual citizens or residents of the United States and
has only limited application to foreign or domestic corporations (including,
particularly, regulated investment companies and insurance companies),
estates, trusts or non-resident aliens. ACCORDINGLY, EACH PROSPECTIVE
PURCHASER OF SERIES A PREFERRED SHARES SHOULD CONSULT HIS OWN TAX ADVISOR IN
ANALYSING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP OR DISPOSITION OF SERIES A PREFERRED SHARES.
INCOME FROM SERIES A PREFERRED SECURITIES
In the opinion of Hughes & Luce, L.L.P., Torchmark Capital will be treated
as a partnership for federal income tax purposes. Accordingly, each
Securityholder will be required to include in gross income his distributive
share of Torchmark Capital's income. Such income generally will not exceed
dividends received on the Series A Preferred Securities, except in limited
circumstances as described below under "Potential Extension of Interest
Payment Period." No portion of such income will be eligible for the dividends
received deduction.
DISPOSITION OF SERIES A PREFERRED SECURITIES
Gain or loss will be recognized on the redemption, sale or other disposition
of Series A Preferred Securities equal to the difference between the amount
realized and the Securityholder's adjusted tax basis for the Series A
Preferred Securities sold. Gain or loss recognized by a Securityholder on the
sale or exchange of a Series A Preferred Security held for more than one year
will generally be taxable as long-term capital gain or loss.
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TORCHMARK CAPITAL INFORMATION RETURNS AND AUDIT PROCEDURES
Torchmark, as the Managing Member of Torchmark Capital, will furnish each
Securityholder with a Schedule K-1 each year setting forth such
Securityholder's allocable share of income for the prior calendar year.
Torchmark is required to furnish such K-1's as soon as practicable following
the end of the year, but in any event on or prior to March 31.
Any person who holds Series A Preferred Securities as a nominee for another
person is required to furnish to Torchmark Capital (a) the name, address, and
taxpayer identification number of the beneficial owner and the nominee; (b)
information as to whether the beneficial owner is (i) a person that is not a
United States person; (ii) a foreign government, an international
organization, or any wholly owned agency or instrumentality of either of the
foregoing; or (iii) a tax-exempt entity; (c) the amount and description of
Series A Preferred Securities held, acquired or transferred for the beneficial
owner; and (d) certain information including the dates of acquisitions and
transfers, methods of acquisitions and transfers and the costs thereof, as
well as the amount of net proceeds from sales. Brokers and financial
institutions are required to furnish additional information, including whether
they are United States persons and certain information on Series A Preferred
Securities they acquire, hold or transfer for their own accounts. A penalty of
$50 per failure is imposed by the Code for failure to report such information
to Torchmark Capital, up to a maximum of $100,000 per calendar year for all
failures.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD
Under the terms of the Loans, Torchmark will be permitted to extend the
interest payment period up to 60 months. In the event Torchmark exercises this
right, Torchmark may not (among other things) declare dividends on its capital
stock (other than a declaration of a dividend consisting of common or
preferred stock purchase rights under a stockholder rights plan). Therefore,
the extension of an interest payment is, in the view of Torchmark, remote. In
the event that the interest payment period is extended, Torchmark Capital will
continue to accrue income, equal to the amount of the interest payment due at
the end of the extended interest payment period, over the length of the
extended interest payment period.
Accrued income will be allocated, but not distributed, to holders of record
on the Business Day preceding the last day of each calendar month. As a
result, holders of record during an extended interest payment period will
include interest in taxable gross income in advance of the receipt of cash,
and any such holders who dispose of Series A Preferred Securities prior to the
record date for the payment of dividends following such extended interest
payment period will include interest in gross income but will not receive any
cash related thereto. The tax basis of a Series A Preferred Security will be
increased by the amount of any interest that is included in income without a
receipt of cash, and will be decreased again when and if such cash is
subsequently received from Torchmark Capital.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder who or which is (i) a nonresident alien individual or (ii) a foreign
corporation, partnership, or estate or trust, in either case not subject to
United States federal income tax on a net income basis in respect of a Series
A Preferred Security.
Under present United States federal income tax law, subject to the
discussion below with respect to backup withholding:
(i) payments by Torchmark Capital or any of its paying agents to any
holder of a Series A Preferred Security who or which is a United States
Alien Holder will not be subject to United States federal income tax
withholding tax; provided that (a) the beneficial owner of a Series A
Preferred Security does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of Torchmark
entitled to vote; (b) the beneficial owner of the Series A Preferred
Security is not a controlled foreign corporation that is related to
Torchmark through stock ownership; and (c) either (A) the beneficial owner
of the Series A Preferred Security
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certifies to Torchmark Capital or its agent, under penalties of perjury,
that it is a United States Alien Holder and provides its name and address,
or (B) the holder of the Series A Preferred Security is a securities
clearing organization, bank, or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution"), and such holder certifies to Torchmark Capital or
its agent under penalties of perjury that such statement has been received
from the beneficial owner by it or by a financial institution between it
and the beneficial owner and furnishes the payor with a copy thereof; and
(ii) a United States Alien Holder of a Series A Preferred Security will
not be subject to United States federal withholding tax on any gain
realized on the sale or exchange of a Series A Preferred Security unless
such holder is present in the United States for 183 days or more in the
taxable year of sale and either has a "tax home" in the United States or
certain other requirements are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments of the
proceeds of the sale of the Series A Preferred Securities within the United
States to noncorporate United States holders, and "backup withholding" at a
rate of 31% will apply to such payments if the United States holder fails to
provide an accurate taxpayer identification number.
Payments of the proceeds from the sale by a United States Alien Holder of
Series A Preferred Securities made to or through a foreign office of a broker
will not be subject to information reporting or backup withholding, except
that, if the broker is a United States person, a controlled foreign
corporation for United States tax purposes, or a foreign person 50% or more of
whose gross income is effectively connected with a United States trade or
business for a specified three-year period, information reporting may apply to
such payments. Payments of the proceeds from the sale of Series A Preferred
Securities to or through the United States office of a broker is subject to
information reporting and backup withholding unless the holder or beneficial
owner certifies as to its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, Torchmark
Capital has agreed to sell to each of the Underwriters named below, and each
of the Underwriters, for whom Goldman, Sachs & Co., Morgan Stanley & Co.
Incorporated, Dean Witter Reynolds Inc., A.G. Edwards & Sons, Inc., Kidder,
Peabody & Co. Incorporated, PaineWebber Incorporated, Prudential Securities
Incorporated, The Robinson-Humphrey Company, Inc., Smith Barney Inc. and
Stephens Inc. are acting as Representatives, has severally agreed to purchase
from Torchmark Capital the respective number of Series A Preferred Securities
set forth opposite its name below:
<TABLE>
<CAPTION>
SERIES A
PREFERRED
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Goldman, Sachs & Co. .......................................... 553,500
Morgan Stanley & Co. Incorporated.............................. 553,500
Dean Witter Reynolds Inc. ..................................... 553,500
A.G. Edwards & Sons, Inc. ..................................... 553,500
Kidder, Peabody & Co. Incorporated............................. 553,500
PaineWebber Incorporated ...................................... 553,500
Prudential Securities Incorporated ............................ 553,500
The Robinson-Humphrey Company, Inc. ........................... 553,500
Smith Barney Inc. ............................................. 553,500
Stephens Inc. ................................................. 553,500
Advest, Inc. .................................................. 35,000
Bear, Stearns & Co. Inc. ...................................... 155,000
J.C. Bradford & Co. ........................................... 35,000
Alex. Brown & Sons Incorporated................................ 155,000
CS First Boston Corporation.................................... 155,000
JW Charles Securities, Inc. ................................... 35,000
Commerzbank Capital Markets Corporation........................ 35,000
Cowen & Company................................................ 35,000
Credit Lyonnais Securities (USA) Inc. ......................... 35,000
Crowell, Weedon & Co. ......................................... 35,000
Dain Bosworth Incorporated..................................... 35,000
Davenport & Co. of Virginia, Inc. ............................. 35,000
Dillon, Read & Co. Inc. ....................................... 155,000
Doft & Co., Inc. .............................................. 35,000
Donaldson, Lufkin & Jenrette Securities Corporation............ 155,000
Fahnestock & Co. Inc. ......................................... 35,000
Furman Selz Incorporated....................................... 35,000
Gruntal & Co., Incorporated.................................... 35,000
J.J.B. Hilliard, W.L. Lyons, Inc. ............................. 35,000
Interstate/Johnson Lane Corporation............................ 35,000
Janney Montgomery Scott Inc. .................................. 35,000
Josephthal Lyon & Ross Incorporated............................ 35,000
Kemper Securities, Inc. ....................................... 155,000
Kennedy, Cabot & Co. .......................................... 35,000
Legg Mason Wood Walker Incorporated............................ 35,000
McDonald & Company Securities, Inc. ........................... 35,000
McGinn, Smith & Co., Inc. ..................................... 35,000
Morgan, Keegan & Company, Inc. ................................ 35,000
The Ohio Company............................................... 35,000
</TABLE>
S-37
<PAGE>
<TABLE>
<CAPTION>
SERIES A
PREFERRED
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Olde Discount Corporation...................................... 35,000
Oppenheimer & Co., Inc. ....................................... 155,000
Piper, Jaffray Inc. ........................................... 35,000
Principal Financial Securities, Inc. .......................... 35,000
Pryor, McClendon, Counts & Co., Inc. .......................... 35,000
Rauscher Pierce Refsnes, Inc. ................................. 35,000
Raymond James & Associates, Inc. .............................. 35,000
Rodman & Renshaw, Inc. ........................................ 35,000
Salomon Brothers Inc........................................... 155,000
Sterne, Agee & Leach, Inc. .................................... 35,000
Stifel, Nicolaus & Company, Incorporated....................... 35,000
Sutro & Co. Incorporated....................................... 35,000
Tucker Anthony Incorporated.................................... 35,000
Wheat, First Securities, Inc. ................................. 35,000
---------
Total........................................................ 8,000,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all such Series A Preferred
Securities offered hereby, if any are taken.
The Underwriters propose to offer the Series A Preferred Securities in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and in part to certain shares dealers
at such price less a concession of $.50 per Series A Preferred Security. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $.25 per Series A Preferred Security to certain brokers and dealers.
After the Series A Preferred Securities are released for sale to the public,
the offering price and other selling terms may from time to time be varied by
the Representatives.
In view of the fact that the proceeds of the sale of the Series A Preferred
Securities will be lent to Torchmark, under the Underwriting Agreement
Torchmark has agreed to pay as compensation ("Underwriters' Compensation") for
the Underwriters' services, an amount in New York Clearing House (next day)
funds of $.7875 per Series A Preferred Security for the accounts of the several
Underwriters.
Certain of the Underwriters are customers of, engage in transactions with, or
have from time to time performed services for Torchmark and its subsidiaries
and associated companies in the ordinary course of business.
Prior to this offering, there has been no public market for the Series A
Preferred Securities. In order to meet one of the requirements for listing on
the New York Stock Exchange, the Underwriters will undertake to sell lots of
100 or more Series A Preferred Securities to a minimum of 400 beneficial
holders.
Torchmark Capital and Torchmark have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
EXPERTS
The financial statements and schedules of Torchmark Corporation as of
December 31, 1993 and 1992 and for each of the years in the three-year period
ended December 31, 1993, included in the 1993 Form 10-K incorporated by
reference herein have been incorporated by reference in reliance
S-38
<PAGE>
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The report of KPMG Peat Marwick
LLP covering the December 31, 1993 financial statements refers to changes in
accounting principles to adopt the provisions of Statement on Financial
Accounting Standards (SFAS) No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions," SFAS No. 109 "Accounting for Income Taxes" and
SFAS No. 115 "Accounting for Certain Investments in Debt and Equity
Securities."
The financial statements of American Income Holding, Inc. as of December 31,
1993 and 1992 and for each of the three years in the three-year period ended
December 31, 1993 incorporated by reference herein to Torchmark's Current
Report on Form 8-K filed with the Commission on September 29, 1994 have been
incorporated by reference in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
LEGAL OPINIONS
The legal validity of the Series A Preferred Securities and the Backup
Undertakings, including the Guarantee and the Loan Agreement, will be passed
upon for Torchmark and Torchmark Capital by Hughes & Luce, L.L.P., Dallas,
Texas. Hughes & Luce, L.L.P. will also pass upon the United States federal
income tax matters as described under "Certain United States Income Tax
Consequences." Certain legal matters will be passed upon for the Underwriters
by Davis Polk & Wardwell, New York, New York. Hughes & Luce, L.L.P. may rely
on the opinion of Davis Polk & Wardwell as to matters of New York law.
S-39
<PAGE>
PROSPECTUS
$200,000,000
TORCHMARK
CORPORATION
[LOGO OF TORCHMARK CORPORATION APPEARS HERE]
PREFERRED STOCK
TORCHMARK CAPITAL L.L.C. PREFERRED SECURITIES
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
TORCHMARK CORPORATION
-----------
Torchmark Corporation ("Torchmark") may offer at any time, or from time to
time, shares of preferred stock, par value $1.00 per share ("Preferred Stock"),
in one or more series, which may be represented by depositary shares evidenced
by depositary receipts ("Depositary Shares" and, together with the LLC
Preferred Securities (as defined below) and the Backup Undertakings (as defined
below), the "Securities") or any combination of Securities, with an aggregate
initial public offering price not to exceed $200,000,000.
As part of the Securities, Torchmark Capital L.L.C. ("Torchmark Capital"), a
special purpose finance subsidiary of Torchmark, may also offer from time to
time its preferred limited liability company interests ("LLC Preferred
Securities"), in one or more series, at an aggregate initial public offering
price not to exceed $200,000,000 at the time of sale. In connection therewith,
Torchmark may offer backup undertakings ("Backup Undertakings") with respect to
the LLC Preferred Securities, as described herein under "Torchmark Capital
L.L.C." Any issue of LLC Preferred Securities and related Backup Undertakings
shall correspondingly reduce the amount of other Securities available for offer
and sale hereunder.
Torchmark and/or Torchmark Capital will offer the Securities to the public at
prices and on terms to be determined at or prior to the time of sale. Specific
terms of the Securities in respect of which this Prospectus is being delivered
will be set forth in an accompanying Prospectus Supplement ("Prospectus
Supplement"), together with the terms of the offering of the Securities, the
initial price thereof and the net proceeds from the sale thereof. The
Securities may be offered separately or together, in separate series, in
amounts, at prices and on terms to be determined at the time of sale and to be
set forth in Prospectus Supplements. The Securities may be sold for U.S.
dollars or one or more foreign or composite currencies and the distributions on
the Securities may likewise be payable in U.S. dollars or one or more foreign
or composite currencies.
The Prospectus Supplement will set forth the terms of the Securities,
including the designation, number of shares or fractional interests therein (or
if Depositary Shares are issued, the fraction of a share of Preferred Stock
represented by one Depositary Share), liquidation preference per share, initial
public offering price, distribution rate or method of calculation thereof,
dates on which distributions will be payable and dates from which distributions
will accrue, any redemption or sinking fund provisions, any terms of redemption
at the option of Torchmark or the holder, as well as any terms of the Backup
Undertakings and any listing on a national securities exchange and any other
terms in connection with the offering and sale of the Securities in respect of
which this Prospectus is being delivered.
Because Torchmark is a holding company, the rights of Torchmark to
participate in any distribution of assets of any subsidiary (and thus the
ability of holders of Securities to benefit from such distribution) are subject
to the prior claims of creditors of that subsidiary. Such claims would include
subsidiary indebtedness of approximately $13.6 million at March 31, 1994. See
"Description of Securities--General."
The Securities may be sold by Torchmark or Torchmark Capital to underwriters,
to or through dealers, acting as principals for their own account or acting as
agents, or directly to other purchasers. The Prospectus Supplement will set
forth the names of any underwriters or agents, the principal amounts or shares,
if any, to be purchased by underwriters, and the compensation, if any, of such
underwriters or agents. Torchmark may indemnify such underwriters, dealers and
agents against certain liabilities, including liabilities under the Securities
Act of 1933. See "Plan of Distribution."
-----------
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 NOR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
July 1, 1994
<PAGE>
AVAILABLE INFORMATION
Torchmark is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, therefore, files
reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549; at its New York Regional Office, 7 World Trade Center, New York,
New York 10048; and at its Chicago Regional Office, Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such material can be obtained at prescribed rates, by writing to the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549. Such material can also be inspected at the New York Stock Exchange, 20
Broad Street, New York, New York 10005 and The Stock Exchange, London EC2N
1HP, England.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments, supplements and exhibits thereto, the
"Registration Statement") filed jointly by Torchmark and Torchmark Capital
with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus omits certain of the information set forth
in the Registration Statement (in accordance with the rules and regulations of
the Commission), and reference is hereby made to the Registration Statement
and related exhibits for further information with respect to Torchmark,
Torchmark Capital and the Securities.
No separate financial statements of Torchmark Capital have been included
herein. Torchmark and Torchmark Capital do not consider that such financial
statements would be material to holders of any LLC Preferred Securities which
may be offered hereby because Torchmark Capital is a newly organized special
purpose subsidiary, has no operating history or independent operations, is not
engaged in and does not propose to engage in, any activity other than the
issuance of its shares and the lending of the proceeds thereof to Torchmark
and because Torchmark will issue a full and unconditional, joint and several
guarantee of any LLC Preferred Securities, as described in the accompanying
Prospectus Supplement. See "Torchmark Capital L.L.C." Torchmark Capital is a
limited liability company organized under the laws of the State of Delaware
and will be managed by Torchmark, which directly or indirectly beneficially
owns all of Torchmark Capital's common limited liability company interests,
which are non-transferable. Financial statements of Torchmark Capital will be
made available to the holders of LLC Preferred Securities annually as soon as
practicable after the end of Torchmark Capital's fiscal year.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by Torchmark (file no. 1-8052) with the
Commission are incorporated herein by reference: (i) Annual Report on Form 10-
K for the fiscal year ended December 31, 1993 ("Form 10-K"), (ii) Quarterly
Report on Form 10-Q for the quarter ended March 31, 1994, (iii) Form 8-K dated
March 25, 1994, (iv) Form 10-Q/A dated as of May 24, 1994 and (v) Form 8-K
dated June 6, 1994.
All reports and other documents subsequently filed by Torchmark and
Torchmark Capital pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Prospectus and prior to the termination of
this offering shall be deemed to be incorporated by reference herein and to be
a part hereof from the date of filing of such reports and documents. Any
statement set forth herein or in a document, all or a portion of which is
incorporated or deemed to be incorporated by reference herein, will be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement set forth herein or in a subsequently filed document deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus. To the extent
that any proxy statement is incorporated by reference herein, such
incorporation shall not include any information contained in such proxy
statement that is not, pursuant to the Commission's rules, deemed to be
"filed" with the Commission or subject to the liabilities of Section 18 of the
Exchange Act.
2
<PAGE>
Torchmark will furnish, without charge, to each person to whom a Prospectus
and Prospectus Supplement are delivered, upon written or oral request, a copy
of any or all of the foregoing documents incorporated herein by reference
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference therein). Requests for such documents should be
submitted in writing to the Investor Relations Department, Torchmark
Corporation, 2001 Third Avenue South, 16th Floor, Birmingham, Alabama 35233 or
by telephone at (205) 325-4200.
----------------
Unless otherwise indicated, currency amounts in this Prospectus and the
Prospectus Supplement are stated in United States dollars ("$" or "U.S.$").
3
<PAGE>
TORCHMARK
Torchmark, an insurance and diversified financial services holding company,
was incorporated in Delaware on November 29, 1979 as Liberty National
Insurance Holding Company. Through a plan of reorganization, which became
effective on December 30, 1980, it became the parent company for the
businesses operated by Liberty National Life Insurance Company ("Liberty") and
Globe Life And Accident Insurance Company ("Globe"). United American Insurance
Company ("United American"), Waddell & Reed, Inc. ("W&R") and United Investors
Life Insurance Company ("UILIC"), along with their respective subsidiaries,
were acquired in 1981. The name Torchmark Corporation was adopted on July 1,
1982. Family Service Life Insurance Company ("Famlico") was purchased in July,
1990.
Through its life insurance subsidiaries, including Liberty, Globe, United
American, Famlico and American Life and Accident Insurance Company, Torchmark
offers a portfolio of life and health insurance products. Through United
Investors Management Company ("UIMCO"), a wholly-owned subsidiary which owns
W&R, UILIC and Torch Energy Advisors Incorporated, Torchmark offers
institutional investment management services and individual financial planning
and products, including life insurance, annuities and mutual funds; provides
management services with respect to oil and gas production and development;
and engages in energy property acquisitions and dispositions, oil and gas
product marketing and well operations. Torchmark maintains a 27% ownership
interest in Vesta Insurance Group, Inc. ("Vesta"), a property and casualty
insurance holding company, which owns Vesta Fire Insurance Corporation
(formerly Liberty National Fire Insurance Company), offering industrial fire
insurance, collateral protection insurance, personal and commercial property
and casualty insurance and domestic reinsurance.
The principal executive office of Torchmark is located at 2001 Third Avenue
South, Birmingham, Alabama 35233, and its telephone number is (205) 325-4200.
Torchmark Capital is a special purpose finance subsidiary of Torchmark
organized as a limited liability company under the laws of the State of
Delaware. All of Torchmark Capital's common limited liability company
interests are directly or indirectly beneficially owned by Torchmark and are
non-transferable. Torchmark Capital has no board of directors or officers, and
all of its business and affairs are conducted by Torchmark, as the manager
(the "Manager") appointed in Torchmark Capital's Limited Liability Company
Agreement, as amended. Torchmark Capital exists solely for the purpose of
issuing its common and preferred limited liability company interests and
lending the proceeds thereof to Torchmark to finance Torchmark's or its
subsidiaries' business operations. The principal office of Torchmark Capital
is c/o Torchmark Corporation, 2001 Third Avenue South, Birmingham, Alabama
35233.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of Torchmark's (consolidated)
earnings to combined fixed charges and preferred stock dividends, for the
periods indicated:
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------- ----
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to combined fixed
charges and preferred stock dividends:
Excluding interest credited on
deposit products........................ 6.1 6.3 6.2 7.1 6.8 6.4
Including interest credited on deposit
products................................ 4.0 3.8 3.6 3.8 3.9 3.8
</TABLE>
4
<PAGE>
For the purpose of computing the ratio of earnings to combined fixed charges
and preferred stock dividends, "earnings" consists of operating income before
income taxes and fixed charges. "Fixed charges" consists of interest charges
and the portion of rental expense deemed representative of the interest
factor. "Combined fixed charges and preferred stock dividends" represent fixed
charges (as described above) and the pre-tax income required to pay the
preferred stock dividends of Torchmark.
USE OF PROCEEDS
The net proceeds from the sale of Securities offered by Torchmark Capital
hereby will be lent to Torchmark. The net proceeds from the sale of the
Securities offered hereby by Torchmark, and the net proceeds of any loans from
Torchmark Capital, will be used by Torchmark for general corporate purposes,
which may include, without limitation, repayment of bank debt, the repurchase
of shares of Torchmark's Common Stock, and possible acquisitions, unless a
specific determination as to the use of the proceeds is otherwise described in
an accompanying Prospectus Supplement.
5
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated financial information for five years
ended December 31, 1993 and for the three-month periods ended March 31, 1993
and 1994 should be read in conjunction with the more detailed information and
financial statements available as described under "Available Information" and
"Incorporation of Certain Information by Reference." The information for the
three-month periods ended March 31, 1993 and 1994 was derived from unaudited
financial statements. In the opinion of management, however, all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation of such information have been included. Results of interim
periods are not necessarily indicative of results for an entire year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MACH 31,
------------------------------------------------------------------ -----------------------
1989 1990 1991 1992 1993 1993 1994
----------- ----------- ----------- ----------- ----------- ---------- ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Premium and Policy
Charges:
Life premium............ $ 432,235 $ 487,991 $ 524,052 $ 544,467 $ 555,859 $ 137,426 $ 143,964
Health premium.......... 682,680 738,431 769,821 797,855 799,835 205,499 200,434
Other premium........... 69,521 64,830 71,940 111,640 137,216 28,515 3,750
Total................... 1,184,436 1,291,252 1,365,813 1,453,962 1,492,910 371,440 348,148
Net investment income.... 308,019 348,412 364,318 382,735 372,470 96,643 83,801
Financial services
revenue................. 108,255 108,561 114,326 133,462 137,422 34,008 36,544
Energy operations
revenue................. 22,239 32,218 54,841 74,014 106,013 21,414 17,303
Realized investment gains
(losses)................ 547 4,081 4,195 (948) 8,009 1,070 12,595
Total revenue............ 1,629,326 1,787,148 1,907,441 2,045,810 2,176,835 525,271 498,681
Net income............... 211,308 229,177 246,489 265,477 297,979/5/ 73,489/6/ 75,572
Preferred stock
distributions........... 7,667 6,898 6,116 3,453 3,289 823 804
Net income available to
common shareholders..... 203,641 222,279 240,373 262,024 294,690/5/ 72,666/6/ 74,768
Net income per common
share................... 2.59 2.85 3.13 3.58 4.01/5/ 0.99/6/ 1.03
Life insurance sales..... 11,024,758 11,257,778 11,222,307 11,067,341 12,240,244 3,025,314 3,459,981
Increase in life
insurance in force...... 842,605 694,733/1/ 1,280,412/2/ 2,195,544 3,060,638 934,430 1,155,665
Annualized life and
health premium issued:
Life.................... 119,629 129,233 133,741 131,726 128,433 31,551 34,423
Health.................. 232,336 273,290 216,962 224,905 176,028 53,807 35,373
Total................... 351,965 402,523 350,703 356,631 304,461 85,358 69,796
Increase (Decrease) in
annualized life and
health premium in force:
Life.................... 28,797 16,849/1/ 16,098/2/ 25,534 24,572 5,535 9,073
Health.................. 12,228 56,456 11,749 34,346 (9,106) 5,130 (10,799)
Total................... 41,025 73,305 27,847 59,880 15,466 10,665 (1,726)
Mutual fund collections.. 744,284 742,142 813,737 1,141,928 1,249,084 296,009 344,776
Per preferred share:
Cash dividends paid..... $ 7.80 $ 7.50 $ 7.66 $ 7.01 $ 7.00 $ 1.75 $ 2.88/7/
Per common share:
Cash dividends paid..... .83 .93 1.00 1.07 1.08 .27 .28
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
AT DECEMBER 31, MARCH 31,
----------------------------------- ---------------------
1991 1992 1993 1993 1994
----------- ----------- ----------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Cash and invested
assets/3/ ............. $ 4,605,446 $ 4,994,828 $ 5,550,931 $5,043,331 $5,381,509
Total assets............ 6,160,742 6,770,115 7,646,242 6,873,874 7,586,686
Short-term debt......... 11,499 276,819 107,108 160,105 136,900
Long-term debt.......... 667,125 497,867 792,335 512,920 797,276
Shareholders' equity.... 1,079,251 1,115,660 1,417,255 1,177,080 1,303,481
Per common share/4/.... 13.11 14.54 18.80 15.34 17.89
Life insurance in force. 56,110,751 58,306,295 61,366,933 59,240,725 62,522,598
Annualized life and
health premium in
force:
Life................... 562,550 588,084 612,656 593,619 621,729
Health................. 798,142 832,488 823,382 837,618 812,583
Total.................. 1,360,692 1,420,572 1,436,038 1,431,237 1,434,312
Assets under management
at
W&R.................... 10,692,000 12,144,000 14,455,000 12,592,000 14,285,000
</TABLE>
- --------
/1/ The increase in life insurance in force is adjusted by $337 million, and
the increase in life annualized premium in force is adjusted by $28.1
million, representing the business acquired in the Famlico acquisition.
/2/ The increase in life insurance in force is adjusted by $55 million, and
the increase in life annualized premium in force is adjusted by $2.7
million, representing the business acquired in the Sentinel American Life
Insurance Company acquisition.
/3/ Includes accrued investment income.
/4/ Computed after deduction of preferred shareholders' equity.
/5/ Includes the effects of adoption of Financial Accounting Standards 106 and
109 and a one-time addition to a non-operating expense charge relating to
self-insurance for directors' and officers' liability, guaranty fund
assessments and litigation expenses. On an after-tax basis, adoption of FAS
106 resulted in a charge of $7.5 million, adoption of FAS 109 resulted in an
addition to earnings of $25.9 million, and the addition to the non-operating
expense charge relating to self-insurance for directors' and officers'
liability, guaranty fund assessments and litigation expenses resulted in a
charge of $53.3 million. Also includes the effects of tax legislation which
increased the corporate tax rate from 34% to 35% resulting in a charge to
net earnings of $13.7 million, of which $9.4 million related to prior years.
Also includes an after-tax gain of $37.2 million from the sale of 73% of
Vesta.
/6/ Includes the effects of adoption of Financial Accounting Standards 106 and
109 and a one-time addition to a non-operating expense charge relating to
self-insurance for directors' and officers' liability, guaranty fund
assessments and litigation expenses. On an after-tax basis, adoption of FAS
106 resulted in a charge of $7.1 million, adoption of FAS 109 resulted in an
addition to earnings of $29.5 million, and the addition to the non-operating
expense charge relating to self-insurance for directors' and officers'
liability, guaranty fund assessments and litigation expenses resulted in a
charge of $22.8 million.
/7/ Includes the $1.13 per share paid at redemption representing the period
February 1, 1994 through March 31, 1994 in addition to the regular quarterly
dividend payment.
7
<PAGE>
DESCRIPTION OF TORCHMARK STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
At March 31, 1994, the authorized capital stock of Torchmark was 165,000,000
shares, consisting of:
(a) 5,000,000 shares of Preferred Stock, par value $1.00 per share
("Preferred Stock"), of which no shares were outstanding; and
(b) 160,000,000 shares of Common Stock, par value $1.00 per share ("Common
Stock"), of which 72,869,130 shares were outstanding, and 68,145,410
shares were held in treasury.
Torchmark Corporation redeemed on March 31, 1994 the outstanding shares of
its Series A Preferred Stock at a redemption price of $100 per share plus
accrued and unpaid dividends to the redemption date, in the aggregate amount
of $1.13 per share. First Chicago Trust Company of New York served as
redemption agent and mailed redemption materials to holders of Series A
Preferred Shares. The $1.13 dividend was paid on March 31, 1994 to holders of
record as of March 17, 1994.
In general, the classes of authorized capital stock are afforded preferences
with respect to dividends and liquidation rights in the order listed above.
The Board of Directors of Torchmark (or a duly authorized committee thereof)
is empowered, without approval of the stockholders, to cause the Preferred
Stock to be issued in one or more series, with the numbers of shares of each
series and the rights, preferences and limitations of each series to be
determined by the Board of Directors of Torchmark (or a duly authorized
committee thereof). Among the specific matters that may be determined by the
Board of Directors of Torchmark (or a duly authorized committee thereof) are:
the annual rate of dividends; the redemption price, if any; the terms of a
sinking or purchase fund, if any; the amount payable in the event of any
voluntary liquidation, dissolution or winding up of the affairs of Torchmark;
conversion rights, if any; and voting powers, if any, in addition to those
described below. The descriptions set forth below do not purport to be
complete and are qualified in their entirety by reference to the Restated
Certificate of Incorporation of Torchmark, as amended (the "Restated
Certificate of Incorporation"). No holders of any class of Torchmark's capital
stock are entitled to preemptive rights.
GENERAL
Since Torchmark is a holding company, the rights of Torchmark to participate
in any distribution of assets of any subsidiary upon its liquidation or
reorganization or otherwise (and thus the ability of holders
of the Securities to benefit from such distribution) are subject to the prior
claims of creditors of that subsidiary, except to the extent that Torchmark
may itself be a creditor with recognized claims against that subsidiary.
Claims on Torchmark's subsidiaries by creditors may include claims of
policyholders, holders of indebtedness and claims of creditors in the ordinary
course of business. Such claims may increase or decrease, and additional
claims may be incurred in the future.
Statutes regulating insurance holding company systems impose various
limitations on investments in affiliates and may require prior approval of the
payment of certain dividends and other distributions by the regulated
insurance company to Torchmark or various of its affiliates. Since Torchmark's
primary source of income is the income of its insurance company subsidiaries
and its primary source of internally generated cash flow is the dividends from
such subsidiaries, Torchmark's ability to meet its obligations and pay the
dividends, redemption price, or liquidation payments on the Securities may be
affected by any such required approval.
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<PAGE>
PREFERRED STOCK
The following is a general description of the terms of the Preferred Stock
of Torchmark. The particular terms of any series of Torchmark Preferred Stock
offered hereby ("Offered Preferred Stock") will be set forth in the Prospectus
Supplement relating thereto. The rights, preferences, privileges and
restrictions, including dividend rights, voting rights, terms of redemption
and liquidation preferences, of the Offered Preferred Stock of each series
will be fixed or designated pursuant to a certificate of designations adopted
by the Board of Directors of Torchmark or a duly authorized committee thereof.
The description of Preferred Stock set forth below and the description of the
terms of a particular series of Offered Second Preferred Stock that will be
set forth in a Prospectus Supplement do not purport to be complete and are
qualified in their entirety by reference to the certificate of designations
relating to such series.
In all respects, regardless of series, the Offered Preferred Stock shall
rank in preference to the Common Stock as to payment of dividends and as to
distribution of assets of Torchmark upon the liquidation, dissolution or
winding up of Torchmark. Upon issuance against full payment of the purchase
price therefor, shares of Offered Preferred Stock will be fully paid and
nonassessable.
Dividends. Holders of Offered Preferred Stock will be entitled to receive,
when, as and if declared by the Board of Directors of Torchmark out of any
funds legally available for that purpose, dividends in cash at such respective
rates, payable on such dates in each year and in respect of such dividend
periods, as stated in Torchmark's Restated Certificate of Incorporation or the
certificate of designations for such series of Offered Preferred Stock, before
any dividends may be declared or paid or set apart for payment upon the Common
Stock or any other class of stock ranking junior to such series of Offered
Preferred Stock. No dividend may be declared or paid on any series of Offered
Preferred Stock unless at the same time a dividend in like proportion to the
respectively designated dividend amounts shall be declared or paid on each
other series of Preferred Stock then issued and outstanding ranking prior to
or on a parity with such particular series with respect to the payment of
dividends. Dividends on Offered Preferred Stock may be either cumulative or
noncumulative.
Liquidation Preference. In the event of any liquidation, dissolution or
winding up of Torchmark, whether voluntary or involuntary, holders of Offered
Preferred Stock of each series (if any shares thereof are then issued and
outstanding) will be entitled to payment of the applicable liquidation price
or prices plus accrued dividends, out of the available assets of Torchmark, in
preference to the holders of Common Stock or any other class of stock ranking
junior to such series of Offered Preferred Stock upon liquidation, dissolution
or winding up.
Redemption and Conversion. Each series of Offered Preferred Stock will be
subject to redemption, if applicable, on such terms, at such prices and on
such dates as may be set forth in the applicable certificates of designations.
The Offered Preferred Stock will not be convertible.
Voting Rights. The holders of the Preferred Stock (including the Offered
Preferred Stock) have no voting rights except as specifically required by
statute and except for certain voting rights specifically provided in
Torchmark's Restated Certificate of Incorporation or the certificates of
designations creating the various series of such stock.
Voting rights of the Offered Preferred Stock will be noncumulative.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
Torchmark may, at its option, elect to offer fractional interests in the
Offered Preferred Stock, in which event Torchmark will offer depositary shares
("Depositary Shares"), each of which will represent a fraction (to be set
forth in the Prospectus Supplement relating to a particular series of Offered
Preferred Stock) of a share of a particular series of Offered Preferred Stock
as described below.
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<PAGE>
The Offered Preferred Stock of any series represented by Depositary Shares
will be deposited under a deposit agreement (the "Deposit Agreement") between
Torchmark and a bank or trust company selected by Torchmark having its
principal office in the United States and having, alone or together with its
affiliates, a combined capital and surplus of at least $50,000,000 (the
"Depositary"). Subject to the terms of the Deposit Agreement, each registered
holder of a Depositary Share will be entitled, in proportion to the applicable
fraction of a share of Offered Preferred Stock represented by such Depositary
Share, to all the rights and preferences of the Offered Preferred Stock
represented thereby (including dividend, voting, redemption and liquidation
rights).
The Depositary Shares will be evidenced by depositary receipts ("Depositary
Receipts") issued pursuant to the Deposit Agreement. Depositary Receipts will
be distributed to those persons purchasing the fractional interests in Offered
Preferred Stock in accordance with the terms of the offering set forth in the
applicable Prospectus Supplement. A copy of the form of Deposit Agreement is
filed as an exhibit to the Registration Statement of which this Prospectus is
a part, and the following summary is qualified in it entirety by reference to
such exhibit.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all dividends or other cash distributions
received in respect of the Offered Preferred Stock to the record holders of
Depositary Shares relating to such Offered Preferred Stock in proportion to
the number of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto in proportion to the number of such Depositary Shares owned
by such holders, unless the Depositary determines that such distribution
cannot be made proportionately among such holders or that it is not feasible
to make such distribution, in which case the Depositary may, with the approval
of Torchmark, sell such securities or property and distribute the net proceeds
from such sale to such holders or adopt such other method as it deems
equitable and practicable for effecting such distribution.
WITHDRAWAL OF THE OFFERED PREFERRED STOCK
Upon surrender of the Depositary Receipts at the corporate trust office of
the Depositary (unless the related Offered Preferred Stock or Depositary
Shares have previously been called for redemption), and upon payment of the
charges provided in the Deposit Agreement and subject to the terms hereof, the
holder of the Depositary Shares evidenced thereby is entitled to delivery to
such office to or upon his order, of the number of whole shares of Offered
Preferred Stock and any money or other property represented by such Depositary
Shares. If the Depositary Receipts delivered by the holder evidence a number
of Depositary Shares in excess of the number of Depositary Shares representing
the number of whole shares of Offered Preferred Stock to be withdrawn, the
Depositary will deliver to such holder at the same time a new Depositary
Receipt evidencing such excess number of Depositary Shares. Holders of Offered
Preferred Stock thus withdrawn, and any subsequent holders of those shares,
will not thereafter be entitled to deposit such shares under the Deposit
Agreement or to receive Depositary Shares therefor.
REDEMPTION OF DEPOSITARY SHARES
Upon redemption of Offered Preferred Stock represented by Depositary Shares,
the Depositary will redeem, as of the same redemption date, the number of
Depositary Shares representing Offered Preferred Stock so redeemed, provided
Torchmark shall have paid in full to the Depositary the redemption price of
the Offered Preferred Stock to be redeemed plus an amount equal to any accrued
and unpaid dividends thereon to the date fixed for redemption. The redemption
price per Depositary Share will be equal to the applicable fraction of the
redemption price and any other amounts per share payable with respect to the
Offered Preferred Stock. If fewer than all the Depositary Shares are to be
10
<PAGE>
redeemed, the Depositary Shares to be redeemed will be selected by the
Depositary by lot or pro rata or by any other equitable method, in each case
as may be determined by Torchmark.
VOTING OF THE OFFERED PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Offered
Preferred Stock are entitled to vote, the Depositary will mail the information
contained in such notice of meeting to the record holders of the Depositary
Shares. Each record holder of such Depositary Shares on the record date (which
will be the same date as the record date for the Offered Preferred Stock) will
be entitled to instruct the Depositary as to the exercise of the voting rights
pertaining to the amount of Offered Preferred Stock represented by such
holder's Depositary Shares. The Depositary will endeavor, insofar as
practicable, to vote the number of shares of Offered Preferred Stock
represented by such Depositary Shares in accordance with such instructions,
and Torchmark will agree to take all reasonable action which may be deemed
necessary by the Depositary in order to enable the Depositary to do so. The
Depositary will abstain from voting Offered Preferred Stock (but, at its
discretion, not from appearing at any meeting with respect to such Offered
Preferred Stock) to the extent it does not receive specific instructions from
the holders of Depositary Shares representing Offered Preferred Stock.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between Torchmark and the Depositary. However, any amendment which materially
and adversely alters the rights of the holders of Depositary Shares will not
be effective unless such amendment has been approved by the holders of at
least a majority of the Depositary Shares then outstanding.
The Deposit Agreement may be terminated by Torchmark upon not less than 60
days' notice, whereupon the Depositary shall deliver or make available to each
holder of Depositary Receipts, upon surrender of the Depositary Receipts held
by such holder, such number of whole or fractional shares of Offered Preferred
Stock represented by such Depositary Receipts. The Deposit Agreement will
automatically terminate if (i) all outstanding Depositary Shares have been
redeemed, or (ii) there has been a final distribution in respect of the
Offered Preferred Stock in connection with any liquidation, dissolution or
winding up of Torchmark and such distribution has been made to the holders of
Depositary Receipts.
CHARGES OF DEPOSITARY
Torchmark will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. Torchmark
will pay the fees and expenses of the Depositary in connection with the
performance of its duties under the Deposit Agreement, to the extent specified
in the Deposit Agreement. Holders of Depositary Receipts will pay transfer and
other taxes and governmental charges.
MISCELLANEOUS
Torchmark will forward to holders of Depositary Shares any reports and
communications that it sends to holders of Offered Preferred Stock. Neither
the Depositary nor Torchmark will be liable if it is prevented from or delayed
in, by law or any circumstances beyond its control, performing its obligations
under the Deposit Agreement. The obligations of Torchmark and the Depositary
under the Deposit Agreement will be limited to performing their duties
thereunder without negligence or willful misconduct, and Torchmark and the
Depositary will not be obligated to prosecute or defend any legal proceeding
in respect of any Depositary Shares or any Offered Preferred Stock unless
satisfactory indemnity is furnished. Torchmark and the Depositary may rely on
advice of counsel or accountants, on information provided by holders of
Depositary Shares or other persons believed to be authorized or competent and
on documents believed to be genuine.
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<PAGE>
In the event the Depositary shall receive conflicting claims, requests or
instructions from any holders of Depositary Receipts, on the one hand, and
Torchmark, on the other hand, the Depositary shall be entitled to act on such
claims, requests or instructions received from Torchmark.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to Torchmark notice of
its election to do so, and Torchmark may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its
principal office in the United States and having, alone or together with its
affiliates, a combined capital and surplus of at least $50,000,000.
TORCHMARK CAPITAL L.L.C.
GENERAL
Torchmark Capital, a subsidiary of Torchmark, is a limited liability company
organized under the laws of the State of Delaware. All of its common limited
liability company interests are beneficially owned by Torchmark or its
affiliates and are non-transferable. Torchmark Capital's principal offices are
located c/o the Manager at the address set forth under "Torchmark." Torchmark
Capital has no board of directors, and all of its business and affairs are
conducted by Torchmark, as the Manager appointed in Torchmark Capital's
Limited Liability Company Agreement, as amended. The location of the principal
executive offices of the Manager is set forth above under "Torchmark."
Torchmark Capital exists solely for the purpose of issuing its common and
preferred limited liability company interests and lending the net proceeds
thereof to Torchmark.
LLC PREFERRED SECURITIES
Torchmark Capital may from time to time issue LLC Preferred Securities, in
one or more series, having terms described in the Prospectus Supplement
relating thereto, including any terms relating to the redemption of the LLC
Preferred Securities upon the occurrence of certain events described in the
Prospectus Supplement. Under Torchmark Capital's Limited Liability Company
Agreement, as amended, the Manager may establish one or more classes or series
of LLC Preferred Securities, having such terms, including dividends,
redemption, voting, liquidation rights and such other preferred or other
special rights or such restrictions, as the Manager may determine, to be set
forth in a Prospectus Supplement. All LLC Preferred Securities of Torchmark
Capital offered by any Prospectus Supplement will be guaranteed by Torchmark
to the limited extent set forth below under "Guarantee" and in the Prospectus
Supplement and may also be entitled to the benefits of certain undertakings of
Torchmark as described below under "Backup Undertakings" and in the Prospectus
Supplement. Any special federal income tax, accounting and other
considerations applicable to any offering of LLC Preferred Securities and
related Backup Undertakings will be described in the Prospectus Supplement
relating thereto.
GUARANTEE
Torchmark will irrevocably and unconditionally agree (the "Guarantee"), to
the extent set forth in a Payment and Guarantee Agreement, to pay in full, to
the holders of LLC Preferred Securities of any class or series, the Guarantee
Payments (as defined below), as and when due, regardless of any defense, right
of setoff or counterclaim which Torchmark Capital may have or assert. The
Guarantee will constitute a guarantee of payment and not of collection, and
may be enforced by holders of LLC Preferred Securities directly against
Torchmark. The following payments to the extent not paid by Torchmark Capital
(the "Guarantee Payments") will be subject to the Guarantee (without
duplication): (i) any arrears and accruals of unpaid dividends which have
theretofore been declared on the LLC
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<PAGE>
Preferred Securities of such class or series out of moneys legally available
therefor; (ii) the redemption price including all arrears and accruals of
unpaid dividends payable, out of moneys legally available therefor with
respect to any LLC Preferred Securities of such class or series called for
redemption; and (iii) upon a liquidation of Torchmark Capital, the lesser of
(a) the liquidation preference and all arrears and accruals of unpaid
dividends (whether or not declared) on the LLC Preferred Securities of such
class or series to the date of payment or (b) the amount of assets of
Torchmark Capital legally available for distribution in such liquidation. In
addition, the Prospectus Supplement relating to a class or series of LLC
Preferred Securities will describe the rank of the Guarantee and any
additional covenants or other terms of the Guarantee of Torchmark with respect
to such class or series.
BACKUP UNDERTAKINGS
In connection with any class or series of LLC Preferred Securities,
Torchmark may enter into additional arrangements with Torchmark Capital,
including intercompany loan agreements and amendments to Torchmark Capital's
Limited Liability Company Agreement and Certificate of Formation, that operate
directly or indirectly for the benefit of holders of the LLC Preferred
Securities. The Guarantee described above under "Guarantee," the agreement
described in the previous paragraph and any such other arrangements are herein
collectively referred to as "Backup Undertakings" of Torchmark and will be
described in the Prospectus Supplement relating to any class or series of LLC
Preferred Securities to which they apply.
PLAN OF DISTRIBUTION
GENERAL
Torchmark or Torchmark Capital may sell the Securities to or through
underwriters or a group of underwriters, directly to other purchasers, or
through dealers or agents. The distribution of the Securities may be effected
from time to time in one or more transactions at a fixed price or prices,
which may be changed, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. Each
Prospectus Supplement will describe the method of distribution, and time and
place of delivery, of the offered Securities. Torchmark or Torchmark Capital
also may, from time to time, authorize dealers, acting as Torchmark's or
Torchmark Capital's agents, to solicit offers to purchase the offered
Securities upon the terms and conditions set forth in any Prospectus
Supplement.
In connection with the sale of Securities, underwriters, dealers or agents
may receive compensation from Torchmark or Torchmark Capital or from
purchasers of Securities for whom they may act as agents, in the form of
discounts, concessions or commissions. Underwriters, dealers and agents that
participate in the distribution of Securities may be deemed to be
"underwriters," and any discounts or commissions received by them and any
profit on the resale of Securities by them may be deemed to be underwriting
discounts and commissions, under the Securities Act. Any such underwriter,
dealer or agent will be identified, and any such compensation will be
described, in the Prospectus Supplement relating to the offered Securities.
Under agreements which may be entered into by Torchmark and/or Torchmark
Capital, underwriters, dealers and agents that participate in the distribution
of Securities may be entitled to indemnification by Torchmark and/or Torchmark
Capital against certain liabilities, including liabilities under the
Securities Act, or to contribution with respect to payments which such
underwriters, dealers and agents may be required to make in connection
therewith. Underwriters, dealers and agents may be customers of, engage in
transactions with, or perform services for Torchmark and/or Torchmark Capital
in the ordinary course of business.
Unless otherwise indicated in a Prospectus Supplement, each issuance of
Securities will constitute a new issue of securities with no established
trading market. The Securities may or may not be listed
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<PAGE>
on a national securities exchange. In the event that Securities offered
hereunder are not listed on a national securities exchange, certain broker-
dealers may make a market in the Securities, but will not be obligated to do
so and may discontinue any market making at any time without notice. No
assurance can be given that any broker-dealer will make a market in the
Securities or as to the liquidity of the trading market for such Securities.
DELAYED DELIVERY ARRANGEMENTS
If so indicated in the Prospectus Supplement relating to offered Securities,
Torchmark and/or Torchmark Capital will authorize dealers or other persons
acting as Torchmark's or Torchmark Capital's agents to solicit offers by
certain institutions to purchase Securities from Torchmark and/or Torchmark
Capital pursuant to contracts providing for payment and delivery on a future
date. Institutions with which such contracts may be made include commercial
and savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by Torchmark and/or Torchmark Capital. The
obligations of any purchaser under any such contract will be subject to the
condition that the purchase of Securities shall not at the time of delivery be
prohibited under the laws of the jurisdiction to which such purchaser is
subject. The dealers and such other agents will not have any responsibility in
respect of the validity or performance of such contracts.
LEGAL OPINIONS
The legal validity of the Securities will be passed upon for Torchmark and
Torchmark Capital by Hughes & Luce, L.L.P., Dallas, Texas. Hughes & Luce
L.L.P. will also pass upon United States Federal income tax matters, as
described in a Prospectus Supplement relating to the Securities to be offered.
Certain legal matters will be passed upon for the Underwriters by Davis Polk &
Wardwell, New York, New York. In connection with its opinions, Hughes & Luce,
L.L.P. will rely on the opinion of Davis Polk & Wardwell as to matters of New
York law.
EXPERTS
The financial statements and schedules of Torchmark Corporation as of
December 31, 1993 and 1992 and for each of the years in the three-year period
ended December 31, 1993, incorporated by reference herein have been
incorporated by reference in reliance upon the report of KPMG Peat Marwick,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
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NO PERSON IS AUTHORIZED BY TORCHMARK OR TORCHMARK CAPITAL OR BY THE UNDER-
WRITERS OR ANY DEALER TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMA-
TION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN SO AUTHORIZED.
NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SHARES OTHER THAN
THE SHARES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SHARES IN ANY JURISDICTION TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. THE DELIVERY
OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR ANY SALE MADE
HEREUNDER DOES NOT IMPLY THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE ON WHICH SUCH INFORMATION IS
GIVEN.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Prospectus Supplement
Summary................ S-3
Recent Events........... S-6
Certain Investment
Considerations......... S-6
Torchmark Capital
L.L.C.................. S-7
Torchmark Corporation... S-8
Use of Proceeds......... S-9
Selected Consolidated
Financial Information.. S-10
Pro Forma Financial
Information............ S-12
Capitalization.......... S-17
Ratio of Earnings to
Combined Fixed Charges
and Preferred Stock
Dividends.............. S-17
Description of Series A
Preferred Securities... S-18
Description of the
Guarantee.............. S-27
Description of the
Loans.................. S-29
Certain United States
Income Tax
Consequences........... S-34
Underwriting............ S-37
Experts................. S-38
Legal Opinions.......... S-39
PROSPECTUS
Available Information... 2
Incorporation of Certain
Information by
Reference.............. 2
Torchmark............... 4
Ratio of Earnings to
Combined Fixed Charges
and Preferred Stock
Dividends.............. 4
Use of Proceeds......... 5
Selected Consolidated
Financial Information.. 6
Description of Torchmark
Stock.................. 8
Description of
Depositary Shares...... 9
Torchmark Capital
L.L.C.................. 12
Plan of Distribution.... 13
Legal Opinions.......... 14
Experts................. 14
</TABLE>
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8,000,000 PREFERRED SECURITIES
TORCHMARK CAPITAL L.L.C.
GUARANTEED TO THE EXTENT SET
FORTH HEREIN BY
TORCHMARK CORPORATION
9.18% CUMULATIVE MONTHLY INCOME
PREFERRED SECURITIES, SERIES A
---------------
[LOGO APPEARS HERE]
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GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
KIDDER, PEABODY & CO. INC.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
THE ROBINSON-HUMPHREY COMPANY, INC.
SMITH BARNEY INC.
STEPHENS INC.
REPRESENTATIVES OF THE UNDERWRITERS
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