<PAGE>
REGISTRATION NO. 33-51963
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TORCHMARK CORPORATION TORCHMARK CAPITAL L.L.C.
(EXACT NAME OF REGISTRANT AS (EXACT NAME OF REGISTRANT AS
SPECIFIED IN ITS CHARTER) SPECIFIED IN ITS CHARTER)
DELAWARE 63-0780404 DELAWARE [APPLIED FOR]
(STATE OR OTHER (I.R.S. EMPLOYER (STATE OR OTHER (I.R.S. EMPLOYER
JURISDICTION OF IDENTIFICATION JURISDICTION OF IDENTIFICATION
INCORPORATION OR NUMBER) INCORPORATION OR NUMBER)
ORGANIZATION) ORGANIZATION)
2001 THIRD AVENUE SOUTH
BIRMINGHAM, ALABAMA 35233
(205) 325-4200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
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KEITH A. TUCKER
VICE CHAIRMAN
TORCHMARK CORPORATION
2001 THIRD AVENUE SOUTH
BIRMINGHAM, ALABAMA 35233
(205) 325-4248
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
ALAN J. BOGDANOW, ESQ. FRANCIS MORISON, ESQ.
HUGHES & LUCE, L.L.P. DAVIS POLK & WARDWELL
1717 MAIN ST., SUITE 2800 450 LEXINGTON AVENUE
DALLAS, TEXAS 75201 NEW YORK, NEW YORK 10017
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement, as determined
by market conditions.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
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<TABLE>
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES BEING OFFERING PRICE OFFERING REGISTRATION
BEING REGISTERED REGISTERED(3) PER UNIT(4) PRICE(5) FEE(6)
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<S> <C> <C> <C> <C>
Torchmark Preferred
Stock ................ +++
Torchmark Depositary +
Shares(1)............. +
Torchmark Capital +
Preferred Securities.. ++ $200,000,000 $200,000,000 $68,965.52
Torchmark Backup +
Undertakings with +
respect to Torchmark +
Capital Preferred +
Securities(2)......... +++
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</TABLE>
(1) The consideration for the Depositary Shares is included in that of the
Torchmark Preferred Stock, par value $1.00 per share.
(2) No separate consideration will be received for the Torchmark Corporation
Backup Undertakings with respect to the Torchmark Capital Preferred
Securities.
(3) Within the overall amount of securities being registered hereby, the
maximum number of shares of Torchmark Preferred Stock, Depositary Shares or
Torchmark Capital Preferred Securities being registered hereby is such number
as has a proposed maximum aggregate offering price of $200,000,000, in U.S.
dollars, or the equivalent thereof in foreign currencies, plus accrued
dividends, if any.
(4) The proposed maximum offering price per share or Depositary Share is
equal to the proposed maximum aggregate offering price for the shares or
Depositary Shares offered, divided by the number of shares or Depositary
Shares offered.
(5) Estimated solely for the purposes of calculating the registration fee.
(6) Previously paid.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE AS SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MAY , 1994
TORCHMARK CAPITAL L.L.C.
% PREFERRED SECURITIES, SERIES A
(LIQUIDATION PREFERENCE $ PER SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
TORCHMARK CORPORATION
---------------
The % 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 % of the
liquidation preference of $ 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 , 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 March 31, 1994, Torchmark had total liabilities of $ billion.
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
$ per security on or after , 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 $ plus accrued and unpaid dividends
to the date of payment, subject to certain limitations. See "Description of
Series A Preferred Securities--Liquidation Dividend."
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 CIRCUMSTANCES
UNDER WHICH PAYMENT OF DIVIDENDS ON THE SERIES A PREFERRED SECURITIES MAY BE
DEFERRED.
Application has been made to list the Series A Preferred Securities on the
New York Stock Exchange.
---------------
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.
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<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSIONS(2) COMPANY(3)(4)
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<S> <C> <C> <C>
Per Security.................... $ (3) $
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Total (4)....................... $ (3) $
</TABLE>
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(1) Plus accrued dividends, if any, from , 1994.
(2) 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 "Underwriters."
(3) 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, $ per Series A Preferred Security (or $ in the
aggregate). See "Underwriters."
(4) In addition, expenses related to the offering, estimated at $375,000, 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 ,
1994.
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[UNDERWRITERS]
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS , 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.
NO PERSON IS AUTHORIZED BY TORCHMARK OR TORCHMARK CAPITAL OR BY THE
UNDERWRITERS 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 INFORMATION 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
SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES 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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S-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Prospectus Suplement Summary.............................................
Certain Investment Considerations........................................
Torchmark Capital L.L.C..................................................
Torchmark Corporation....................................................
Use of Proceeds..........................................................
Description of Series A Preferred Securities.............................
Description of the Guarantee.............................................
Description of the Loans.................................................
Certain United States Income Tax Consequences............................
Underwriters.............................................................
Legal Opinions...........................................................
PROSPECTUS
Available Information....................................................
Incorporation of Certain Information by Reference........................
Torchmark................................................................
Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends...............................................................
Use of Proceeds..........................................................
Selected Consolidated Financial Information..............................
Description of Torchmark Stock...........................................
Description of Depositary Shares.........................................
Torchmark Capital L.L.C..................................................
Plan of Distribution.....................................................
Legal Opinions...........................................................
Experts..................................................................
</TABLE>
S-3
<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.
THE OFFERING
Securities Offered.............. million % 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.......... $ per security, plus accumulated and
unpaid dividends.
Dividends.................. Cumulative at the annual rate of % of the
stated liquidation preference per security,
payable monthly in arrears on the last day of
each calendar month, commencing ,
1994.
Redemption...................... Not redeemable prior to , 1999 (except in
limited circumstances described herein under
"Description of Series A Preferred Securi-
ties--Special Event Redemption"). 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 Agreement (each as defined below),
at $ per security plus accumulated and un-
paid dividends.
Listing......................... New York Stock Exchange (Symbol ["TMKPfA"]).
Use of Proceeds................. All proceeds will be lent (the "Loans") by
Torchmark Capital to Torchmark under a Loan
Agreement (the "Loan Agreement") for general
corporate purposes, which may include, with-
out limitation, repayment of bank debt, the
repurchase of shares of Torchmark's common
stock, and possible acquisitions.
S-4
<PAGE>
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 divi-
dends, (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
accumulated and unpaid dividends or (b) the
amount of assets of Torchmark Capital legally
available for distribution to holders of Pre-
ferred Securities in such liquidation. The
Guarantee is directly enforceable by holders
of Series A Preferred Securities and is sub-
ordinate to all liabilities of Torchmark.
Loan Agreement Obligations.. Under the Loan Agreement, Torchmark is obli-
gated to pay (i) interest at % 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 things, so long as any Series A
Preferred Securities remain outstanding, (i)
to maintain direct or indirect 100% ownership
of the Securities of Torchmark Capital other
than the Series A Preferred Securities and
any additional preferred securities ranking
pari passu with the Series A Preferred Secu-
rities; (ii) not to voluntarily dissolve,
wind-up or liquidate Torchmark Capital; and
(iii) to remain the Managing Member of
Torchmark Capital and to timely perform all
of its duties as Managing Member of Torchmark
Capital (including the duty to declare and
pay dividends on the Preferred Securities),
provided that any permitted successor of
Torchmark under the Loan Agreement may suc-
ceed to its duties as Managing Member.
S-5
<PAGE>
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-6
<PAGE>
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 March 31, 1994, Torchmark had
approximately $899.4 million of outstanding Senior Indebtedness, as well as
approximately $6.2 billion of other liabilities reflected on its balance sheet,
all of which would rank 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--Option
to Extend Interest Payment Period." See "Description of Series A Preferred
Securities--Voting" 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."
S-7
<PAGE>
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
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 securities,
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 Preferred Securities annually as soon as practicable after the end of
Torchmark Capital's fiscal year.
S-8
<PAGE>
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.
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 will be used for general corporate purposes, which may
include, without limitation, repayment of bank debt, the repurchase of
Torchmark's Common Stock, and possible acquisitions.
DESCRIPTION OF SERIES A PREFERRED SECURITIES
The following is a summary of certain 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 certain 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.
S-9
<PAGE>
GENERAL
Torchmark Capital is authorized to issue up to 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 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
, 1994 and are payable monthly in arrears on the last day of each
calendar month of each year, commencing , 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 % of the liquidation preference thereof ($ 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. It is
anticipated that Torchmark 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
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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 $ per Series A Preferred Security
plus accumulated and unpaid Preferred Security dividends to the date fixed
for redemption (the "Redemption Price");
until, in each case, such time as all accumulated 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.
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 amounts of repayment 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 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 Services, 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 , 1999, upon
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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 accumulated 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 (a Tax Event occurring solely by reason of this
clause (ii), a "Special Loan Tax Event"), 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 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 accumulated 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
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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
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 $ 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
Common Holder of Torchmark Capital except for a transfer to a permitted
successor of the Common Holder as set forth in the LLC Agreement, (iii) the
entry of decree of a judicial dissolution, or (iv) the written consent of all
members of Torchmark Capital, including the holders of the Series A Preferred
Securities.
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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 of Formation of
Torchmark Capital 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 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.
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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--Option to Extend 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--Option to Extend 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."
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 accumulated 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
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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 and the Resolutions.
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 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
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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 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
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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.
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) accumulated 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 accumulated 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)
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in the event of liquidation of Torchmark Capital, the lesser of (a) the
liquidation preference plus all accumulated 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 Agree-
ment, 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 security holders' 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 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
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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 securities 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 March
31, 1994, Torchmark had total liabilities of approximately $ 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.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
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 $ , such amount
being the aggregate Liquidation Preference of the Series A Preferred Securities
issued and sold by Torchmark Capital of $ and the aggregate Common Security
Payments of $ .
The entire principal amount of the Loans will become due and payable
(together with any accrued and unpaid interest thereon) on the earliest of
, 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 , 2024, and as determined in the judgment of Torchmark, as the
Managing Member, and Torchmark Capital's
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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 Services,
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 , 1999; and
(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 % 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 , 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, Torchmark shall not 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
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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 created, incurred or assumed, which is for
money borrowed, or evidenced by a note or similar instrument, (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 not superior 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.
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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 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 stockholders' equity determined
in accordance with
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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");
(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
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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."
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 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
("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.
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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 SECURITIES SHOULD CONSULT, AND SHOULD DEPEND ON, HIS OWN TAX
ADVISOR IN ANALYSING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE PURCHASE, OWNERSHIP OR DISPOSITION OF SERIES A PREFERRED SECURITIES.
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.
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
S-26
<PAGE>
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 Securities 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 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
S-27
<PAGE>
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.
UNDERWRITERS
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 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>
NAME SERIES A PREFERRED SECURITIES
---- -----------------------------
<S> <C>
-------
Total.......................................
=======
</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 securities
dealers at such price less a concession of $. per Series A Preferred Security.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $. 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 $. 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 under the Securities Act of 1933, as amended.
S-28
<PAGE>
LEGAL OPINIONS
The legal validity of the Series A Preferred Stock 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-29
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS IS SUBJECT TO COMPLETION +
+OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN +
+FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT +
+BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THAT A FINAL +
+PROSPECTUS SUPPLEMENT IS DELIVERED. THIS PRELIMINARY PROSPECTUS SHALL NOT +
+CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL +
+THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, +
+SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION +
+UNDER THE SECURITIES LAWS OF ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED MAY 24, 1994
PROSPECTUS
$200,000,000
TORCHMARK CORPORATION
LOGO
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 L.L.C.
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.
May 24, 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 and no independent operations and
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. 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 and (iv) Form 10-Q/A dated as of May 24, 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) 325-4243.
----------------
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 6.4 --
Including interest credited on
deposit products............. 4.0 3.8 3.6 3.8 3.8 --
</TABLE>
4
<PAGE>
For the purpose of computing the ratio of earnings to combined fixed charges
and preferred stock distributions, "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 distributions" represent
fixed charges (as described above) and the pre-tax income required to pay the
preferred stock distributions 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, MARCH 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.
8
<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.
9
<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 redeemed,
the Depositary Shares to be
10
<PAGE>
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.
11
<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 Preferred Shares of such class or series out of moneys legally
available therefor; (ii) the redemption price including all arrears and
accruals of unpaid dividends
12
<PAGE>
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 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.
13
<PAGE>
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.
14
<PAGE>
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR ANY PRO-
SPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THIS PROSPECTUS NOR
ANY PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
ANY PROSPECTUS SUPPLEMENT OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information... 2
Incorporation of Certain
Information by Refer-
ence................... 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 Deposi-
tary Shares............ 9
Torchmark Capital
L.L.C. ................ 12
Plan of Distribution.... 13
Legal Opinions.......... 14
Experts................. 14
</TABLE>
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[LOGO OF TORCHMARK CORPORATION APPEARS HERE]
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Filing fee--Securities and Exchange Commission................. $ 68,966
*Printing and engraving expenses................................ 40,000
*Legal fees and expenses........................................ 100,000
*Accounting fees and expenses................................... 5,000
*Blue Sky fees and expenses..................................... 20,000
*Rating agency fees............................................. 120,000
Transfer Agent and Registrar's fees and expenses............... 5,000
*Miscellaneous.................................................. 16,034
--------
*Total...................................................... $375,000
========
</TABLE>
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* Estimated for the purpose of this Registration Statement.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 1 of Article Ninth of the Restated Certificate of Incorporation of
Torchmark provides that a director will not be personally liable to Torchmark
or its stockholders for monetary damages for breach of fiduciary duty as a
director except for liability (a) for any breach of the duty of loyalty to the
Registrant or its stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) for
paying a distribution or approving a stock repurchase in violation of the
Delaware General Corporation Law (the "Act"), or (d) for any transaction from
which the director derived an improper personal benefit.
Section 2(a) of Article Ninth provides that each person who was or is made a
party or is threatened to be made a party to, or is involved in, specific
actions, suits or proceedings by reason of the fact that he or she is or was a
director or officer of Torchmark (or is or was serving at the request of
Torchmark as a director, officer, employee or agent for another entity) while
serving in such capacity will be indemnified and held harmless by Torchmark, to
the full extent authorized by the Act, as in effect (or, to the extent
indemnification is broadened, as it may be amended) against all expense,
liability or loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred by such person in connection therewith. With respect to derivative
actions, indemnification only extends to expenses (including attorneys' fees)
incurred in connection with defense or settlement of such an action and the Act
requires court approval before there can be any indemnification where the
person seeking indemnification has been found liable to Torchmark. Rights
conferred hereby are contract rights and include the right to be paid by
Torchmark the expenses incurred in defending the proceedings specified above,
in advance of their final disposition; provided that, if the Act so requires,
such payment will only be made upon delivery to Torchmark by the indemnified
party of an undertaking to repay all amounts advanced if it is ultimately
determined that the person receiving such payments is not entitled to be
indemnified under such Section 2(a) or otherwise. Torchmark may, by action of
its Board of Directors, provide indemnification to its employees and agents
with the same scope and effect as the foregoing indemnification of directors
and officers.
Section 2(b) of Article Ninth provides that persons indemnified under Section
2(a) may bring suit against Torchmark to recover unpaid amounts claimed
thereunder, and that if such suit is successful, the expense of bringing such
suit will be reimbursed by Torchmark. While it is a defense to such a suit that
the person claiming indemnification has not met the applicable standards of
conduct making indemnification permissible under the Act, the burden of proving
the defense is on Torchmark and neither the failure of Torchmark's Board of
Directors, independent legal counsel or the shareholders to have made a
determination that
II-1
<PAGE>
indemnification is proper, nor an actual determination that the claimant has
not met the applicable standard of conduct, is a defense to the action or
creates a presumption that the claimant has not met the applicable standard of
conduct.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in
paragraphs 2(a) and 2(b) of Article Ninth is not exclusive of any other right
which any person may have or acquire under any statute, provision of the
Certificate of Incorporation or By-Laws, or otherwise. Torchmark may maintain
insurance, at its expense, to protect itself and any directors, officers,
employees or agents of Torchmark or other entity against any expense, liability
or loss, whether or not Torchmark would have the power to indemnify such
persons against such expense, liability or loss under the Act.
ITEM 16. EXHIBITS.
1.1* --Form of proposed Underwriting Agreement Standard Provisions
(Preferred Stock)
3.1* --Limited Liability Agreement of Torchmark Capital
3.2* --Certificate of Formation of Torchmark Capital
3.3 --Form of Amended and Restated Limited Liability Company
Agreement of Torchmark Capital
5.1* --Opinion of Hughes & Luce, L.L.P. as to legality of
securities being registered
5.2 --Opinion of Hughes & Luce, L.L.P. with respect to tax matters
12 --Statement re computation of ratio of earnings to combined
fixed charges and preferred stock dividends
24.1* --Consent of Hughes & Luce, L.L.P. (contained in Exhibit 5.1
hereto)
24.2 --Consent of KPMG Peat Marwick
25* --Powers of Attorney
99.1 --Form of Payment and Guarantee Agreement by Torchmark for the
benefit of the holders of preferred securities of Torchmark
Capital
99.2 --Form of Loan Agreement between Torchmark and Torchmark
Capital
- --------
* Previously filed.
Exhibits not referred to have been omitted as inapplicable or not required.
ITEM 17. UNDERTAKINGS.
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement, and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered hereby which remain unsold at the
termination of the offering.
The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act, each filing of the
Torchmark's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification by the Registrants for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrants pursuant to the provisions described under Item 15
above or otherwise, the Registrants have been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a director, officer or controlling
person of the Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrants will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, TORCHMARK
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY
OF BIRMINGHAM, STATE OF ALABAMA, ON MAY 25, 1994.
Torchmark Corporation
By /s/ R. K. RICHEY
__________________________________
R. K. RICHEY
CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, TORCHMARK CAPITAL
L.L.C. CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF
THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED, IN THE
CITY OF BIRMINGHAM, STATE OF ALABAMA, ON MAY 25, 1994.
Torchmark Capital L.L.C.
By: Torchmark Corporation, as
Authorized Person
By: /s/ KEITH A. TUCKER
________________________________
KEITH A. TUCKER
VICE CHAIRMAN
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED FOR
TORCHMARK AND THE AUTHORIZED PERSON ON MAY 25, 1994.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
Chairman, Chief
/s/ R. K. RICHEY Executive Officer
- ------------------------------------- and Director
(R. K. RICHEY)
Vice Chairman and
/s/ KEITH A. TUCKER Director (Principal
- ------------------------------------- Financial Officer
(KEITH A. TUCKER)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ Spencer H. Stone Controller
- -------------------------------------
(SPENCER H. STONE)
/s/ J. P. Bryan Director
- -------------------------------------
(J. P. BRYAN)
* Director
- -------------------------------------
(ROBERT P. DAVISON)
* Director
- -------------------------------------
(JOSEPH M. FARLEY)
* Director
- -------------------------------------
(LOUIS T. HAGOPIAN)
* Director
- -------------------------------------
(C. B. HUDSON)
* Director
- -------------------------------------
(JOSEPH L. LANIER, JR.)
* Director
- -------------------------------------
(HAROLD T. MCCORMICK)
* Director
- -------------------------------------
(JOSEPH W. MORRIS)
* Director
- -------------------------------------
(GEORGE J. RECORDS)
* Director
- -------------------------------------
(YETTA G. SAMFORD, JR.)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
*By: /s/ Keith A. Tucker
-------------------------------
(KEITH A. TUCKER)
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
EXHIBIT 3.3
FORM OF AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT OF
TORCHMARK CAPITAL L.L.C.
This Amended and Restated Limited Liability Company Agreement of Torchmark
Capital L.L.C. (the "Company") is made as of , 1994, among Torchmark
Corporation ("Torchmark") and Maxwell's Energy Company, Inc. ("Maxwell's"), as
initial members of the Company, and the Persons who become members of the
Company in accordance with the provisions hereof.
Whereas, Torchmark and Maxwell's have heretofore formed a limited liability
company pursuant to the Delaware Limited Liability Company Act, 6 Del. C. (S)
18-101, et seq., as amended from time to time (the "Delaware Act"), by filing a
Certificate of Formation of the Company with the office of the Secretary of
State of the State of Delaware on March 11, 1994, and entering into a Limited
Liability Company Agreement of the Company, dated as of March 11, 1994 (the
"Original Limited Liability Company Agreement"); and
Whereas, the Members (as hereinafter defined) desire to continue the Company
as a limited liability company under the Delaware Act and to amend and restate
the Original Limited Liability Company Agreement in its entirety.
Now, Therefore, in consideration of the agreements and obligations set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Members hereby agree as
follows:
ARTICLE I
Defined Terms
Section 1.1 Definitions. Unless the context otherwise requires, the terms
defined in this Article I shall, for the purposes of this Agreement, have the
meanings herein specified.
"Affiliate" means with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by, or is under common control
with, the specified Person. As used in this definition, the term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through
ownership of voting securities, by contract or otherwise.
"Agreement" means this Amended and Restated Limited Liability Company
Agreement, as amended, modified, supplemented or restated from time to time.
"Book Entry Interests" shall mean a beneficial interest in the LLC
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 14.4.
"Certificate" means the Certificate of Formation and any and all amendments
thereto and restatements thereof filed on behalf of the Company with the office
of the Secretary of State of the State of Delaware pursuant to the Delaware
Act.
"Class A Common Securities" shall mean the Interests held by the Class A
Member.
"Class A Member" means Torchmark and any permitted successor pursuant to
Section 14.1 who holds one or more Class A Common Securities.
"Class B Common Securities" shall mean the Interests held by the Class B
Member, if any.
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<PAGE>
"Class B Member" means Maxwell's and any permitted successor pursuant to
Section 14.1 or new Class B Member who holds one or more Class B Common
Securities.
"Class C Member" or "Preferred Security Holder" shall mean a Member who holds
one or more Preferred Securities.
"Clearing Agency" shall mean an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book entry transfers and pledges of securities deposited with
the Clearing Agency.
"Code" means the Internal Revenue Code of 1986, as amended from time to time,
or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section ((S)) of the Code refers not only
to such specific section, but also to any corresponding provision of any
federal tax statute enacted after the date of this Agreement, as such specific
section or corresponding provision is in effect on the date of application of
the provisions of this Agreement containing such reference.
"Common Securities" means the Class A Common Securities and the Class B
Common Securities.
"Company" means Torchmark Capital L.L.C., the limited liability company
heretofore formed and continued under and pursuant to the Delaware Act and this
Agreement.
"Covered Person" means any Member, any Affiliate of a Member or any officers,
directors, shareholders, partners, employees, representatives or agents of a
Member or their respective Affiliates, or any employee or agent of the Company
or its Affiliates.
"Delaware Act" means the Delaware Limited Liability Company Act, 6 Del. C.
(S) 18-101, et seq., as amended from time to time.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fiscal Year" means (i) the period commencing upon the formation of the
Company and ending on December 31, 1994, and (ii) any subsequent twelve (12)
month period commencing on January 1 and ending on December 31.
"Guarantee" means the Payment and Guarantee Agreement dated as of , 1994
of Torchmark.
"Guarantor" shall have the meaning set forth in the Guarantee.
"Indemnified Person" means the Class A Member, any Affiliate of the Class A
Member or any officers, directors, shareholders, partners, employees,
representatives or agents of the Class A Member, or any employee or agent of
the Company or its Affiliates.
"Interest" shall mean the entire limited liability company interest of a
Member in the Company at any particular time whether in Common Securities or
Preferred Securities, including the right of such Member to any and all
benefits to which a Member may be entitled as provided in this Agreement,
together with the obligations of such Member to comply with all of the terms
and provisions of this Agreement.
"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 agency or regulatory authority (a
"Change in 40 Act Law") to the effect that the Company is or will be considered
an
2
<PAGE>
"investment company" required to be registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), which Change in 40 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 the Company delivers
a written opinion of independent counsel to the Company experienced in practice
under the 1940 Act, to the effect that Torchmark and/or the Company has
successfully taken either of the steps set forth in (a) or (b) below to avoid
such Change in 40 Act Law so that in the opinion of such counsel, notwith-
standing such Change in 40 Act Law, the Company is not required to be registered
as an "investment company" within the meaning of the 1940 Act. Such steps shall
be either (a) issuing an additional or supplemental irrevocable and
unconditional guarantee (i) of accrued and unpaid distributions (whether or not
declared out of moneys legally available therefor) on the Series A Preferred
Securities and (ii) upon a liquidation of the Company, of the full amount of the
Liquidation Distribution (as herein defined) on the Series A Preferred
Securities (regardless of the amount of assets of the Company otherwise
available for distribution in such liquidation), or (b) the use of any other
reasonable measures that do not adversely affect holders of Series A Preferred
Securities.
"LLC Certificate" shall mean a certificate substantially in the form attached
hereto as Exhibit A, evidencing the Preferred Securities held by a Class C
Member.
"Loan Agreement" means the Loan Agreement dated as of , 1994 between
the Company and Torchmark.
"Loans" means the Loans as defined in the Loan Agreement.
"LP Act" means the Delaware Revised Uniform Limited Partnership Act, 6 Del.
C. (S) 17-101, et seq., as amended from time to time.
"Member" means any Person which is the Class A Member, the Class B Member (if
any) or a Class C Member pursuant to the provisions of this Agreement in its
capacity as a member of the Company, and "Members" means two (2) or more of such
Persons when acting in their capacities as members of the Company. For purposes
of the Delaware Act, each of the Class A Member, the Class B Member and the
Class C Members shall constitute a separate class or group of members.
"Person" includes any individual, corporation, association, partnership
(general or limited), joint venture. trust, estate, limited liability company,
or other legal entity or organization.
"Preferred Securities" means the Interests described in Article X.
"Preferred Security Owner" shall mean, with respect to a Book Entry Interest,
a Person who is the beneficial owner of such Book Entry Interest, as reflected
on the books of the Clearing Agency, or on the books of a Person maintaining an
account with such Clearing Agency (directly as a Clearing Agency Participant or
as an indirect participant, in each case in accordance with the rules of such
Clearing Agency).
"Purchase Price" shall mean the amount paid for each Preferred Security.
"Special Event" means a Tax Event or an Investment Company Act Event.
"Special Loan Tax Event" has the meaning specified in the definition of Tax
Event.
"Tax Event" means that Torchmark or the Company 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) the Company is subject to federal income tax
with
3
<PAGE>
respect to interest received on the Loans, (ii) interest payable on the
Loans to Torchmark under the Loan Agreement will not be deductible for Federal
income tax purposes (a Tax Event occurring solely by reason of this clause
(ii), a "Special Loan Tax Event"), or (iii) the Company is subject to more than
a de minimis amount of other taxes, duties or other governmental charges.
"Tax Matters Partner" means the Class A Member designated as such in Section
12.1 hereof.
"Treasury Regulations" means the income tax regulations, including temporary
regulations, promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of succeeding
regulations).
"Underwriting Agreement" means the Underwriting Agreement, dated as of ,
1994, among the Company, Torchmark and the underwriters named therein.
Section 1.2 Headings. The headings and subheadings in this Agreement are
included for convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
ARTICLE II
Continuation and Term
Section 2.1 Continuation.
(i) The Members hereby agree to continue the Company as a limited liability
company under and pursuant to the provisions of the Delaware Act and agree that
the rights, duties and liabilities of the Members shall be as provided in the
Delaware Act, except as otherwise provided herein.
(ii) Upon the execution of this Agreement, Torchmark shall continue to be a
member of the Company and shall be the Class A Member. Upon the consummation
of the offering of the Preferred Securities, Maxwell's shall resign as a Class
B Member.
(iii) Without execution of this Agreement, upon receipt by a Person of an LLC
Certificate and payment by such Person for the Preferred Security being
acquired by such Person, which payment shall be deemed to constitute a request
by such Person that the books and records of the Company reflect its admission
as a Class C Member, such Person shall be admitted to the Company as a Class C
Member and shall become bound by this Agreement.
(iv) The name and mailing address of each Member and the amount contributed
by such Member to the capital of the Company shall be listed on the books and
records of the Company. The Class A Member shall be required to update the
books and records from time to time as necessary to accurately reflect the
information therein.
(v) The Class A Member, as an authorized person, within the meaning of the
Delaware Act, shall execute, deliver and file any and all amendments to and
restatements of the Certificate.
Section 2.2 Name. The name of the Company heretofore formed and continued
hereby is Torchmark Capital L.L.C. The business of the Company may be conducted
upon compliance with all applicable laws under any other name designated by the
Class A Member.
Section 2.3 Term. The term of the Company commenced on the date the
Certificate was filed in the office of the Secretary of State of the State of
Delaware and shall continue until , 2046, unless dissolved before such
date in accordance with the provisions of this Agreement.
Section 2.4 Registered Agent and Office. The Company's registered agent and
office in Delaware shall be The Corporation Trust Company, Corporation Trust
Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. At
any time and from time to time, the Class A Member may designate another
registered agent and/or registered office.
4
<PAGE>
Section 2.5 Principal Place of Business. The principal place of business of
the Company shall be at 2001 Third Avenue South, Birmingham, Alabama 35233. The
Class A Member may change the location of the Company's principal place of
business, provided that such change has no material adverse effect upon any
Member.
Section 2.6 Qualification in Other Jurisdictions. The Class A Member shall
cause the Company to be qualified, formed or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Company transacts business. The Class A Member, as an authorized person within
the meaning of the Delaware Act, shall execute, deliver and file any
certificates (and any amendments and/or restatements thereof) necessary for the
Company to qualify to do business in any jurisdiction in which the Company may
wish to conduct business.
ARTICLE III
Purpose and Powers of the Company
Section 3.1 Purpose. The sole purpose of the Company is to issue limited
liability company interests in the Company, including, without limitation,
Common Securities and Preferred Securities, and to loan the proceeds thereof to
Torchmark or its subsidiaries pursuant to the Loan Agreement and other similar
arrangements permitted by this Agreement, and to engage in any and all
activities necessary, advisable or incidental thereto.
Section 3.2 Powers of the Company.
(i) The Company shall have the power and authority to take any and all
actions necessary, appropriate, proper, advisable, incidental or convenient to
or for the furtherance of the purpose set forth in Section 3.1.
(ii) The Company, and the Class A Member on behalf of the Company, may enter
into and perform the Loan Agreement and the Underwriting Agreement without any
further act, vote or approval of any member, notwithstanding any other
provision of this Agreement, the Delaware Act or other applicable law. The
Class A Member is hereby authorized to enter into and perform on behalf of the
Company the Loan Agreement and the Underwriting Agreement, but such
authorization shall not be deemed a restriction on the power of the Class A
Member to enter into other documents on behalf of the Company to the extent
specifically provided for in this Agreement.
Section 3.3 Limitations on Company Powers. Notwithstanding the foregoing
provisions of Section 3.2, the Company shall have no power or authority to
borrow money or to become liable for the borrowings of any third party or to
engage in any financial or other trade or business. The Company shall not do
business in any jurisdiction other than Delaware or Alabama unless such
activities would not jeopardize the limited liability of the Class C Members
under the Delaware Act or this Agreement.
ARTICLE IV
Capital Contributions, Securities and Capital Accounts
Section 4.1 Capital Contributions.
(i) Each Class A Member has contributed the amount of $10 to the capital of
the Company and shall make further contributions to satisfy its obligations
under Section 13.1.
(ii) Each Class B Member has contributed the amount of $10 to the capital of
the Company and shall not be required to make any additional capital
contributions to the Company in respect of the Class B Common Securities held
by it.
5
<PAGE>
(iii) Each Class C Member has contributed to the capital of the Company the
amount of the Purchase Price for the Preferred Securities held by it. No Class
C Member shall be required to make any additional capital contribution to the
Company in respect of the Preferred Securities held by it.
Section 4.2 Securities.
(i) A Preferred Security holder's interest in the Company shall be
represented by the Preferred Securities held by such Preferred Security holder.
Each Preferred Security holder's respective Preferred Securities shall be set
forth on the books and records of the Company. Each Preferred Security holder
hereby agrees that its interest in the Company and in its Preferred Securities
shall for all purposes be personal property. A Preferred Security holder shall
have no interest in specific Company property.
(ii) The Class A Member's interest in the Company shall be represented by the
Class A Common Securities held by the Class A Member. The Class A Member's
Class A Common Securities shall be set forth on the books and records of the
Company. The Class A Member hereby agrees that its interest in the Company and
in its Class A Common Securities shall for all purposes be personal property.
The Class A Member shall have no interest in specific Company property.
(iii) The Class B Member's interest in the Company shall be represented by
the Class B Common Securities held by the Class B Member (if any). The Class B
Member's Class B Common Securities shall be set forth on the books and records
of the Company. The Class B Member hereby agrees that its interest in the
Company and in its Class B Common Securities shall for all purposes be personal
property. The Class B Member shall have no interest in specific Company
property.
Section 4.3 Capital Accounts. In its sole discretion, the Class A Member may
establish and maintain an individual Capital Account for each Class A Member or
Class B Member (if any) and for the Class C Members as a class which shall be
credited with the capital contributions made and the profits allocated to the
Member (or predecessor in interest) and debited by the distributions made and
losses allocated to the Member (or predecessor thereof) or the Class C Members
as a class.
ARTICLE V
Members
Section 5.1 Powers of Members. The Members shall have the power to exercise
any and all rights or powers granted to the Members pursuant to the express
terms of this Agreement.
Section 5.2 Partition. Each Member waives any and all rights that it may have
to maintain an action for partition of the Company's property.
Section 5.3 Resignation. Except as set forth below, a Member may not resign
from the Company prior to the dissolution and winding up of the Company except
upon the assignment of its Interests (including any redemption, repurchase or
other acquisition by the Company or Torchmark), as the case may be, in
accordance with the provisions of this Agreement. The Class B Member shall
resign as a Member effective upon the consummation of the offering of the
Preferred Securities. A resigning Member shall not be entitled to receive any
distribution and shall not otherwise be entitled to receive the fair value of
its Interest except as otherwise expressly provided in this Agreement.
6
<PAGE>
ARTICLE VI
Management
Section 6.1 Management of the Company. The Class A Member shall have full,
exclusive and complete discretion to manage and control the business and
affairs of the Company, to make all decisions affecting the business and
affairs of the Company and to take all such actions as it deems necessary or
appropriate to accomplish the purpose of the Company as set forth herein. The
Class A Member shall be the managing member of the Company. The actions of the
Class A Member taken in accordance with this Agreement shall bind the Company.
Section 6.2 Powers of the Class A Member. The Class A Member shall have the
right, power and authority, in the management of the business and affairs of
the Company, to do or cause to be done any and all acts, at the expense of the
Company, deemed by the Class A Member to be necessary or appropriate to
effectuate the business, purposes and objectives of the Company. Without
limiting the generality of the foregoing, the Class A Member shall have the
power and authority to:
(a) issue Interests, including Common Securities, Preferred Securities
and classes and series thereof, in accordance with this Agreement;
(b) appoint a Person to act as, or act as, registrar and transfer agent
for the Preferred Securities;
(c) establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including with respect
to allocations, distributions (hereinafter sometimes referred to as
"distributions") and voting rights, and declare distributions and make all
other required payments on Common Securities and Preferred Securities as
the Company's paying agent (or appoint a Person to so act);
(d) bring and defend on behalf of the Company actions and proceedings at
law or in equity before any court or governmental, administrative or other
regulatory agency, body or commission or otherwise; and
(e) execute all documents or instruments, perform all duties and powers
and do all things for and on behalf of the Company in all matters necessary
or desirable or incidental to the foregoing.
The expression of any power or authority of the Class A Member in this
Agreement shall not in any way limit or exclude any other power or authority
which is not specifically or expressly set forth in this Agreement, and the
Class A Member may delegate any such power or authority.
Section 6.3 Ownership by the Class A Member and Class B Member. At least
twenty-one percent (21%) of the total value (initially measured by security-
holders' equity determined in accordance with generally accepted accounting
principles) of the Company and at least twenty-one percent (21%) of all
interests in the capital, income, gain, loss, deduction and credit of the
Company shall be represented by Common Securities owned by the Class A Member
and the Class A Member and Class B Member (if any) will at all times own all
of the Common Securities, unless the Code or the regulations or interpretations
thereunder permit a lower percentage.
Section 6.4 No Management by Class B Member or Class C Member. Except as
otherwise expressly provided herein, neither the Class B Member (if any) nor
any Class C Member shall take part in the day-to-day management, operation or
control of the business and affairs of the Company. The Class B Member (if any)
and the Class C Members shall not be agents of the Company and shall not have
any right, power or authority to transact any business in the name of the
Company or to act for or on behalf of or to bind the Company.
7
<PAGE>
ARTICLE VII
Amendments and Meetings
Section 7.1 Amendments. Except as otherwise provided in this Agreement or by
any applicable terms of any Action (as hereinafter defined in Section
10.1(c)(1)) establishing a series of Preferred Securities, this Agreement may
be amended by, and only by, a written instrument executed by the Class A
Member; provided, however, that (i) no amendment shall be made, and any such
purported amendment shall be void and ineffective, to the extent the result
thereof would be to cause the Company to be treated as anything other than a
partnership for purposes of United States income taxation and (ii) any
amendment which would adversely affect the powers, preferences or special
rights of any series of Preferred Securities may be effected only as permitted
by the terms of such series of Preferred Securities.
Section 7.2 Meetings of the Members.
(i) Meetings of the Members of any class or series or of all classes or
series of the Company's Interests may be called at any time by the Class A
Member or as provided in any Action establishing a series of Preferred
Securities. Except to the extent otherwise provided in any such Action, the
following provisions shall apply to meetings of Members.
(ii) Notice of any such meeting shall be given to all Members not less than
ten (10) days nor more than sixty (60) days prior to the date of such meeting.
Members may vote in person or by proxy at such meeting. Whenever a vote,
consent or approval of Members is permitted or required under this Agreement,
such vote, consent or approval may be given at a meeting of Members or by
written consent.
(iii) Each Member may authorize any Person to act for it by proxy on all
matters in which a Member is entitled to participate, including waiving notice
of any meeting, or voting or participating at a meeting. Every proxy must be
signed by the Member or its attorney-in-fact. No proxy shall be valid after the
expiration of eleven (11) months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure of the
Member executing it.
(iv) Each meeting of Members shall be conducted by the Class A Member or by
such other Person that the Class A Member may designate.
(v) The Class A Member, in its sole discretion, shall establish all other
provisions relating to meetings of Members, including notice of the time, place
or purpose of any meeting at which any matter is to be voted on by any Members,
waiver of any such notice, action by consent without a meeting, the
establishment of a record date, quorum requirements, voting in person or by
proxy or any other matter with respect to the exercise of any such right to
vote; provided however, that unless the Class A Member has established a lower
percentage, a majority of the Members entitled to vote thereat shall constitute
a quorum at all meetings of the Members.
ARTICLE VIII
Allocations
Section 8.1 Profits and Losses. Each fiscal period, the profits of the
Company will be allocated (i) first, to the Class C Members, pro rata to the
number of Preferred Securities held by each Class C Member in an amount equal
to the excess of (a) the distributions accrued on the Preferred Securities
since their date of issuance through and including the close of the current
fiscal period (whether or not paid) over (b) the amount of profits allocated to
the Class C Members pursuant to this section 8.1(i) in all prior fiscal
periods; and (ii) second, to the Class A Member and Class B Member (if any),
pro rata in proportion to their capital contributions to the Company. The losses
of the Company shall be allocated each year to the Class A Member and the Class
B Member (if any) until such time as their capital accounts are reduced to $0,
at which time all losses
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shall be allocated to the Class C Members until their capital accounts are
reduced to $0, then pro rata to the Class A and Class B Members, in proportion
to their capital contributions to the Company.
Section 8.2 Allocation Rules.
(i) For purposes of determining the profits, losses or any other items
allocable to any period, profits, losses and any such other items shall be
determined on a daily, monthly or other basis, as determined by the Class A
Member using any method that is permissible under (S)706 of the Code and the
Treasury Regulations thereunder.
(ii) The Members are aware of the income tax consequences of the allocations
made by this Article VIII and hereby agree to be bound by the provisions of
this Article VIII in reporting their shares of Company income and loss for
income tax purposes.
ARTICLE IX
Distributions
Section 9.1 Distributions. Class C Members shall receive periodic
distributions, if any, in accordance with the applicable terms of the Preferred
Securities, as and when declared by the Class A Member. Subject to the rights
of the Preferred Securities, the Common Securities shall receive such
distributions if any as may be declared from time to time by the Class A
Member.
Section 9.2 Limitations on Distributions. Notwithstanding any provision to
the contrary contained in this Agreement, the Company shall not make a
distribution to any Member on account of its interest in the Company if such
distribution would violate Section 18-607 of the Delaware Act or other
applicable law.
ARTICLE X
The Common Securities and Preferred Securities
Section 10.1 Common Securities and Preferred Securities.
(a) The aggregate number of Class A Common Securities which the Company shall
have authority to issue is 1000 and the aggregate number of Class B Common
Securities which the Company shall have authority to issue is 1000.
(b) The aggregate number of Preferred Securities which the Company shall have
authority to issue is unlimited.
(c) The powers, preferences, special rights and limitations of the Common
Securities and Preferred Securities shall be as follows.
1. The Preferred Securities may be issued from time to time by the Class A
Member as Preferred Securities of one or more series and the Class A Member is
expressly authorized, prior to issuance, in a written action or actions (each
an "Action") providing for the issue of Preferred Securities of each particular
series, to fix the following:
(a) The distinctive designation of such series which shall distinguish it
from other series;
(b) The number of Preferred Securities included in such series, which
number may be increased or decreased from time to time unless otherwise
provided by the Class A Member in creating the series;
(c) The annual distribution rate (or method of determining such rate) for
Preferred Securities of such series and the date or dates upon which such
distributions shall be payable;
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(d) Whether distributions on the Preferred Securities of such series
shall be cumulative, and, in the case of Preferred Securities of any series
having cumulative distribution rights, the date or dates or method of
determining the date or dates from which distributions on the Preferred
Securities of such series shall be cumulative;
(e) The amount or amounts which shall be paid out of the assets of the
Company to the holders of the Preferred Securities of such series upon
voluntary or involuntary dissolution, winding up or termination of the
Company;
(f) The price or prices at which, the period or periods within which, and
the terms and conditions upon which the Preferred Securities of such series
may be redeemed or purchased, in whole or in part, at the option of the
Company;
(g) The obligation, if any, of the Company to purchase or redeem
Preferred Securities of such series pursuant to a sinking fund or otherwise
and the price or prices at which, the period or periods within which, and
the terms and conditions upon which the Preferred Securities of such series
shall be redeemed, in whole or in part, pursuant to such obligation;
(h) The period or periods within which, and the terms and conditions, if
any, including the price or prices or the rate or rates of conversion or
exchange and the terms and conditions of any adjustments thereof, upon
which the Preferred Securities of such series shall be convertible or
exchangeable at the option of the holder or the Company or Torchmark into
any other Interests or securities (including debt securities) or other
property or cash or into any other series of Preferred Securities;
(i) The voting rights, if any, of the Preferred Securities of such series
in addition to those required by law, including the number of votes per
Preferred Security and any requirement for the approval by the holders of
Preferred Securities, or of the Preferred Securities of one or more series,
or of both, as a condition to specified action or amendments to this
Agreement;
(j) The ranking of the Preferred Securities of the series as compared
with Preferred Securities of other series in respect of the right to
receive distributions and the right to receive payments out of the assets
of the Company upon voluntary or involuntary dissolution, winding up or
termination of the Company;
(k) the nature and terms of any backup undertakings of Torchmark and/or
another subsidiary of Torchmark to be provided to holders of the Preferred
Securities of such series; and
(l) Any other relative rights, powers, preferences or limitations of the
Preferred Securities of the series not inconsistent with this Agreement or
with applicable law.
In connection with the foregoing and without limiting the generality thereof,
the Class A Member is hereby expressly authorized, without the vote or approval
of any Member, to take any Action to create under the provisions of this
Agreement a series of Preferred Securities that was not previously outstanding.
Without the vote or approval of any Member, the Class A Member may execute,
swear to, acknowledge, deliver, file and record whatever documents may be
required in connection with the issue from time to time of Preferred Securities
in one or more series as shall be necessary, convenient or desirable to reflect
the issue of such series. The Class A Member shall do all things it deems to be
appropriate or necessary to comply with the Delaware Act and is authorized and
directed to do all things it deems to be necessary or permissible in connection
with any future issuance, including compliance with any statute, rule,
regulation or guideline of any federal, state or other governmental agency or
any securities exchange.
Any Action or Actions taken by the Class A Member pursuant to the provisions
of this paragraph (1) shall be deemed an amendment and supplement to and part
of this Agreement and shall be binding upon all Members.
2. All Preferred Securities shall rank senior to the Common Securities in
respect of the right to receive distributions and the right to receive payments
out of the assets of the Company upon voluntary or involuntary dissolution,
winding up or termination of the Company. All Preferred Securities redeemed,
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purchased or otherwise acquired by the Company (including Preferred Securities
surrendered for conversion or exchange) shall be cancelled and thereupon
restored to the status of authorized but unissued Preferred Securities
undesignated as to series.
3. No holder of Common Securities or of Preferred Securities shall be
entitled as a matter of right to subscribe for or purchase, or have any
preemptive right with respect to, any part of any new or additional issue of
Common Securities or Preferred Securities of any class or series whatsoever, or
of securities convertible into any Common Securities or Preferred Securities of
any class or series whatsoever, whether now or hereafter authorized and whether
issued for cash or other consideration or by way of distribution.
4. Except as otherwise provided in this Agreement or by the Class A Member in
accordance with paragraph 1 above in respect of any series of the Preferred
Securities and as otherwise required by law, all voting rights of the Company
shall be vested exclusively in the holders of the Common Securities who shall
be entitled to one vote per Common Security.
5. Any Person acquiring Preferred Securities shall be admitted to the Company
as a Class C Member upon compliance with Section 2.1.
Section 10.2 Series A Preferred Securities. There is hereby authorized the
issuance of an initial series of Preferred Securities of the Company and there
is hereby established the number, voting powers, designation, preferences,
participating, optional or other special rights and the qualifications,
limitations or restrictions of, and other matters relating to, said Preferred
Securities as set forth below in this Section 10.2. This Section 10.2 shall
constitute an Action for purposes of Section 10.1.
1. DESIGNATION. million Interests with an aggregate liquidation
preference of $ million ($ ,000,000) of the Preferred Securities of the
Company, liquidation preference $ per Preferred Security, are hereby
designated as " % Preferred Securities, Series A" (hereinafter called the
"Series A Preferred Securities").
2. RANKING. So long as any Series A Preferred Securities are outstanding, the
Company will not issue any Interests ranking, as to participation in the
profits or assets of the Company, senior to the Series A Preferred Securities
other than in accordance with this Agreement. The issuance of any Interest
ranking senior to the Series A Preferred Securities shall be deemed to
adversely affect the rights of the Series A Preferred Securities under this
Agreement.
3. DISTRIBUTIONS. (a) The Class C Members who hold the Series A Preferred
Securities shall be entitled to receive, when, as and if declared by the Class
A Member out of funds held by the Company and legally available therefor,
cumulative cash distributions at the annual rate of % of the stated
liquidation preference of $ per Preferred Security per annum, calculated on
the basis of a 360-day year consisting of 12 months of 30 days each, and for
any period shorter than a full monthly distribution period, distributions will
be computed on the basis of the actual number of days elapsed in such period,
and payable in United States dollars monthly in arrears on the last day of each
calendar month of each year, commencing , 1994. Such distributions will
accrue and be cumulative whether or not they have been declared and whether or
not there are profits, surplus or other funds of the Company legally available
for the payment of distributions. Distributions on the Series A Preferred
Securities shall be cumulative from the date of original issue, and the
cumulative portion from such date to , 1994 shall be payable on ,
1994. In the event that any date on which distributions are payable on the
Series A Preferred Securities is not a Business Day, then payment of the
distribution 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.
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(b) Distributions on the Series A Preferred Securities must be declared by
the Class A Member in any calendar year or portion thereof to the extent that
the Class A Member reasonably anticipates that at the time of payment the
Company will have, and must be paid by the Company to the extent that at the
time of proposed payment it has, (x) funds legally available for the payment of
such distributions and (y) cash on hand sufficient to permit such payments.
Distributions declared on the Series A Preferred Securities will be payable to
the Preferred Security holders as they appear on the books and records of the
Company on the relevant record dates, which will be one Business Day prior to
the relevant payment dates.
(c) If distributions have not been paid in full on the Series A Preferred
Securities, the Company may not:
(i) pay, or declare and set aside for payment, any distributions on any
other Preferred Securities ranking pari passu with the Series A Preferred
Securities as regards participation in profits of the Company ("Company
Distribution Parity Securities"), unless the amount of any distributions
made with respect to any Company Distribution Parity Securities is made
with respect to Company Distribution Parity Securities and the Series A
Preferred Securities on a pro rata basis on the date such distributions are
paid with respect to such Company Distribution Parity Securities, so that
(x) the ratio of (a) the aggregate amount of distributions paid with
respect to the Series A Preferred Securities divided by (b) the
aggregate amount of distributions paid with respect to such Company
Distribution Parity Securities, equals
(y) the ratio of (a) the aggregate of all accrued and unpaid
distributions in respect of the Series A Preferred Securities, divided
by (b) the aggregate of all accrued and unpaid distributions in respect
of such Company Distribution Parity Securities;
(ii) pay, or declare and set aside for payment, any distributions on any
of the Company Securities ranking junior to the Series A Preferred
Securities as to distributions ("Company Distribution Junior Securities");
or
(iii) redeem, purchase or otherwise acquire any Company Distribution
Parity Securities or Company Distribution Junior Securities or any Series A
Preferred Securities other than the redemption of all outstanding Series A
Preferred Securities at the redemption price of $ per Series A Preferred
Security plus accrued and unpaid Preferred Security distributions to the
date fixed for redemption;
until, in each case, such time as all accrued arrears of unpaid distributions
(whether or not declared) on the Series A Preferred Securities shall have been
paid in full for all distribution 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.
4. REDEMPTION. (a) The Series A Preferred Securities are redeemable, at the
option of the Company and subject to the prior consent of the Class A Member,
in whole or in part from time to time, on or after , 1999, upon not less
than 30 nor more than 60 days' notice, at the Redemption Price (as defined
below). If a partial redemption would result in a delisting of the Series A
Preferred Securities by any national securities exchange or other organization
on which the Series A Preferred Securities are then listed, if any, the Company
may only redeem the Series A Preferred Securities in whole.
(b) Upon any repayment or prepayment of principal on the Loans to Torchmark
of the proceeds from the issuance and sale of the Series A Preferred Securities
and the Common Securities, the proceeds from such repayment or prepayment of
principal on such Loans shall be applied to redeem the Series A Preferred
Securities at the redemption price of $ per Preferred Security plus accrued
and unpaid distributions (whether or not declared) to the date fixed for
redemption (the "Redemption Price"); provided that any such amounts may be
relent to Torchmark, and not used for redemption, if at the time of each such
loan, and as determined in the judgment of the Class A Member, and its
independent financial advisor, (a) Torchmark is not in bankruptcy, (b)
Torchmark is not in default on any loan pertaining to Preferred Securities of
any
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series, (c) Torchmark has made timely monthly payments on the repaid loan for
the immediately preceding 18 months, (d) the Company is not in arrears on
payment of distributions 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 distribution 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.
(c) If a Tax Event or an Investment Company Act Event (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.
5. REDEMPTION PROCEDURE. (a) Notice of any redemption (a "Notice of
Redemption") of the Series A Preferred Securities will be given by the Company
by mail to each record holder to be redeemed not fewer than 30 nor more than 60
days prior to the date fixed for redemption thereof. For purposes of the
calculation of the date of redemption and the dates on which notices are given
pursuant to this paragraph 5(a), a Notice of Redemption shall be deemed to be
given on the day such notice is first mailed by first-class mail, postage
prepaid, to Preferred Security holders who hold Series A Preferred Securities.
Each Notice of Redemption shall be addressed to the Preferred Security holders
who hold Series A Preferred Securities at the address of the holder appearing
in the books and records of the Company. No defect in the Notice of Redemption
or in the mailing thereof or publication of its contents shall affect the
validity of the redemption proceedings.
(b) In the event that fewer than all the outstanding Series A Preferred
Securities are to be redeemed, the Series A Preferred Securities to be redeemed
in the case of a redemption pursuant to paragraph 4(a), will be selected in
accordance with paragraph (d) hereof. The Company may not redeem fewer than all
the outstanding Series A Preferred Securities unless all accrued and unpaid
distributions have been paid on all Series A Preferred Securities for all
monthly distribution periods terminating on or prior to the date of redemption.
(c) If the Company gives a Notice of Redemption in respect of Series A
Preferred Securities, then by 12:00 noon, New York time, on the redemption
date, the Company 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. If Notice of Redemption shall have
been given and funds deposited as required, then upon the date of such deposit,
all rights of the Preferred Security holders who hold such 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 fixed
for 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 paid either by the Company or by Torchmark pursuant to the Guarantee,
distributions on such Series A Preferred 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.
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(d) Notices of Redemption shall be sent to Cede & Co. If less than all of the
Series A Preferred Securities are being redeemed, interests to be redeemed
shall be determined in accordance with The Depository Trust Company's practice,
which at the date hereof is to determine by lot the amount of the interest of
each direct participant in such series to be redeemed.
6. LIQUIDATION DISTRIBUTION. In the event of any voluntary or involuntary
dissolution, winding up or termination of the Company, Preferred Security
holders who hold the Series A Preferred Securities at the time outstanding will
be entitled to receive out of the assets of the Company available for
distribution to Members after satisfaction of liabilities of creditors as
required by the Delaware Act, before any distribution of assets is made to the
Class A or Class B Members or any other class of securities of the Company
ranking junior to the Preferred Securities with respect to the participation in
the assets of the Company, but together with the holders of every other series
of Preferred Securities outstanding, if any, ranking pari passu with the Series
A Preferred Securities as regards participation in the assets of the Company
("Company Liquidation Parity Securities"), an amount equal to, in the case of
holders of Series A Preferred Securities, the aggregate of the stated
liquidation preference of $ per Preferred Security and all accrued and unpaid
distributions (whether or not declared) to the date of payment (the
"Liquidation Distribution"). If, upon any such liquidation, the Liquidation
Distribution can be paid only in part because the Company has insufficient
assets available to pay in full the aggregate Liquidation Distribution and the
aggregate maximum liquidation distributions on the Company Liquidation Parity
Securities, then the amounts payable directly by the Company on the Series A
Preferred Securities and on such Company Liquidation Parity Securities shall be
paid 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 distributions on Company Liquidation
Parity Securities.
7. VOTING RIGHTS. If (i) the Company fails to pay distributions in full on
the Series A Preferred Securities (whether or not there are funds legally
available therefor) for 18 consecutive monthly distribution periods, (ii) an
Event of Default (as defined in the Loan Agreement relating to the Loans)
occurs and is continuing on the Loans or (iii) Torchmark is in default under
any of its payment or other obligations under the Guarantee, then the holders
of outstanding Series A Preferred Securities, together with the holders of any
other preferred or preference securities of the Company 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 distributions) 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 the Company's rights as a creditor under the Loans against Torchmark
(including the acceleration of principal and accrued interest on the Loan),
enforce the obligations undertaken by Torchmark under the Guarantee and declare
and pay distributions on the Series A Preferred Securities; provided, however,
that if the holders are entitled to appoint a trustee solely pursuant to
Section (i) above during an extended interest payment period under the Loan
Agreement, the trustee shall not be entitled to exercise such powers until the
expiration of the extended interest payment period or the occurrence of an
event of default under Section (ii) or (iii) above. Notwithstanding the
appointment of any such trustee, Torchmark shall retain all rights under the
Loan Agreement, including the right to extend the interest payment period for
up to 60 months.
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 at law or other judicial or administrative proceeding, to
enforce the Company's creditor rights directly against Torchmark or any other
obligor in connection with such obligations to the same extent as the Company
and on behalf of the Company, and may prosecute such proceeding to judgment or
final decree, and enforce the
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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 the Company has failed to pay
distributions in full for 18 monthly distribution periods, distributions shall
be deemed to remain in arrears, notwithstanding any payments in respect
thereof, until full cumulative distributions have been or contemporaneously are
declared and paid with respect to all monthly distribution periods terminating
on or prior to the date of payment of such full cumulative distributions. Not
later than 30 days after such right to appoint a trustee arises, the Class A
Member will convene a general meeting for the above purpose. If the Class A
Member fails to convene such meeting within such 30-day period, the Class C
Members who hold 10% in liquidation preference of the outstanding Series A
Preferred Securities will be entitled to convene such meeting. The provisions
of Section 7 relating to the convening and conduct of meetings of Members will
apply with respect to any such meeting. Any trustee so appointed shall vacate
office immediately if the Company (or Torchmark pursuant to the Guarantee)
shall have paid in full all accrued and unpaid distributions on the Series A
Preferred Securities or such default or breach by Torchmark, as the case may
be, shall have been cured.
If any proposed amendment of this Agreement provides for, or the Class A
Member otherwise proposes to effect (pursuant to an Action or otherwise), (x)
any action which would adversely affect the powers, preferences or special
rights of the Series A Preferred Securities, whether by way of amendment of
this Agreement or otherwise (including, without limitation, the authorization
or issuance of any Interests ranking, as to participation in the profits or
assets of the Company, senior to the Series A Preferred Securities), or (y) the
dissolution, winding up or termination of the Company, then Class C Members who
hold the outstanding Series A Preferred Securities will be entitled to vote on
such amendment or action of the Class A Member (but not on any other amendment
or action) and, in the case of an amendment described in clause (x) above which
would equally adversely affect the powers, preferences or special rights of any
Company Distribution Parity Securities or any Company Liquidation Parity
Securities, such Company Distribution Parity Securities or such Company
Liquidation Parity Securities, as the case may be, or, in the case of any
amendment described in clause (y) above, all Company Liquidation Parity
Securities, will be entitled to vote together as a class on such amendment or
action of the Class A Member (but not on any other amendment or action), and
such amendment or action shall not be effective except with the approval of 66
2/3% in liquidation preference of such outstanding Preferred Securities;
provided, however, that no such approval shall be required if the dissolution,
winding up or termination of the Company is proposed or initiated upon the
initiation of proceedings, or after proceedings have been initiated, for the
dissolution, winding up or termination of Torchmark.
The rights attached to the Series A Preferred Securities will be deemed not
to be adversely affected by the creation or issue of, and no vote will be
required for the creation of, any further Interests ranking junior to, or pari
passu with, the Series A Preferred Securities with regard to participation in
the profits or assets of the Company.
Any required approval of Class C Members holding Series A Preferred
Securities may be given at a separate meeting of such holders convened for such
purpose, at a meeting of Preferred Security holders or pursuant to written
consent. The Company will cause a notice of any meeting at which Class C
Members holding 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 Class C Member holding 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
matter on which such holders are entitled to vote or upon which written consent
is sought and (iii) instructions for the delivery of proxies or consents.
No vote or consent of the Class C Members holding Series A Preferred
Securities will be required for the Company to redeem and cancel Series A
Preferred Securities in accordance with this Agreement.
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Notwithstanding that Class C Members holding 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 any other series of Preferred
Securities that are entitled to vote or consent with such Series A Preferred
Securities as a single class at such time, that are owned by Torchmark or any
entity owned more than 50% 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.
8. MERGERS. The Class A Member is authorized and directed to conduct its
affairs and to operate the Company in such a way that the Company would not be
deemed to be an "investment company" required to be registered under the
Investment Company Act of 1940 (the "1940 Act") or taxed as a corporation for
federal income tax purposes and so that the Loans will be treated as
indebtedness of Torchmark for federal income tax purposes. In this connection,
the Class A Member is authorized to take any action not inconsistent with
applicable law, the Certificate of Formation or the Limited Liability Company
Agreement, and that does not adversely affect the interests of holders of
Series A Preferred Securities, that the Class A Member determines in its sole
discretion to be necessary or desirable for such purposes.
The Company 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. The Company may, for purposes of changing its state of
domicile or avoiding federal income tax or 1940 Act consequences adverse to
Torchmark or the Company 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,
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 obligations of the Company 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 the Company, (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,
(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, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the
powers, preferences and 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 the Company
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 shall 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.
ARTICLE XI
Books and Records
Section 11.1 Books, Records and Financial Statements.
(i) At all times during the continuance of the Company, the Company shall
maintain, at its principal place of business, separate books of account for the
Company that shall show a true and accurate record of
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<PAGE>
all costs and expenses incurred, all charges made, all credits made and
received and all income derived in connection with the operation of the
Company's business in accordance with generally accepted accounting principles
consistently applied, and, to the extent inconsistent therewith, in accordance
with this Agreement. Such books of account, together with a certified copy of
this Agreement and of the Certificate, shall at all times be maintained at the
principal place of business of the Company and shall be open to inspection and
examination at reasonable times by each Member and its duly authorized
representative for any purpose reasonably related to such Member's interest in
the Company. The books of account and the records of the Company shall be
examined by and reported upon as of the end of each Fiscal Year by a firm of
independent certified public accountants selected by the Class A Member.
(ii) Notwithstanding any other provision of this Agreement, the Class A
Member may, to the maximum extent permitted by applicable law, keep
confidential from the Members any information the disclosure of which the Class
A Member reasonably believes is not in the best interests of the Company or is
adverse to the interests of the Company or which the Company or the Class A
Member is required by law or by agreement with any Person to keep confidential.
(iii) The Class A member shall prepare and maintain, or cause to be prepared
and maintained, the books of account of the Company and within three (3) months
after the close of each Fiscal Year the Class A Member shall transmit to each
Member, a statement indicating such Member's share of each item of Company
income, gain, loss, deduction or credit for such Fiscal Year for income tax
purposes.
Section 11.2 Accounting Method. For both financial and tax reporting purposes
and for purposes of determining profits and losses, the books and records or
the Company shall be kept on the accrual method of accounting applied in a
consistent manner and shall reflect all Company transactions and be appropriate
and adequate for the Company's business.
Section 11.3 Annual Statements. As soon as practical after the end of each
Fiscal Year, but not later than ninety (90) days after such end, the financial
statements of the Company shall be examined by and reported upon by the
independent certified public accountants referred to in Section 11.1(i) hereof.
The cost of such statements will be an expense of the Company.
ARTICLE XII
Tax Matters
Section 12.1 Tax Matters Partner
(i) Torchmark, as the Class A Member, is hereby designated as "Tax Matters
Partner" of the Company for purposes of (S)6231(a)(7) of the Code and shall
have the power to manage and control, on behalf of the Company, any
administrative proceeding at the Company level with the Internal Revenue
Service relating to the determination of any item of Company income, gain,
loss, deduction or credit for federal income tax purposes.
(ii) The Tax Matters Partner shall always be the Class A Member.
Section 12.2 Section 754 Election. The Class A Member may, in its sole
discretion, make an election in accordance with (S)754 of the Code.
Section 12.3 Taxation as Partnership. The Company shall be treated as a
partnership for U.S. federal income tax purposes.
17
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ARTICLE XIII
Liability, Exculpation and Identification
Section 13.1 Liability of Class A Member to Third Party Creditors. The Class
A Member, by acquiring its Interest and being admitted to the Company as a
Class A Member, is liable to creditors of the Company (other than the other
Members in their capacities as Members) (hereinafter referred to each as a
"Third Party Creditor", and collectively as the "Third Party Creditors") to the
same extent that a general partner of a limited partnership formed under the LP
Act is liable under Section 17-403(b) of the LP Act to creditors of the limited
partnership (other than the other partners in their capacities as partners), as
if the Company was a limited partnership formed under the LP Act and the Class
A Member was a general partner of the limited partnership. In furtherance but
not in limitation of the generality of the foregoing, the Class A Member, (a)
is liable for any and all debts, obligations and other liabilities of the
Company, whether arising under contract or by tort, statute, operation of law
or otherwise, enforceable directly and absolutely against the Class A Member by
each Third Party Creditor, and (b) is deemed to and does assume, as a surety
and not as a guarantor, each debt, obligation or other liability of the Company
to all Third Party Creditors.
Section 13.2 Liability.
(i) Except as otherwise provided in Section 13.1 or by the Delaware Act, (a)
the debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and (b) no Covered Person shall be obligated
personally for any such debt, obligation or liability of the Company solely by
reason of being a Covered Person.
(ii) Except as otherwise expressly provided in Section 13.1 or required by
law, a Member, in its capacity as such, shall have no liability in excess of
(a) the amount of its capital contributions, (b) its share of any assets and
undistributed profits of the Company, and (c) the amount of any distributions
wrongfully distributed to it.
Section 13.3 Exculpation.
(i) No Indemnified Person shall be liable to the Company or any other Covered
Person for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
Company and in a manner reasonably believed to be within the scope of authority
conferred on such Indemnified Person by this Agreement, except that an
Indemnified Person shall be liable for any such loss, damage or claim incurred
by reason of such Indemnified Person's bad faith, recklessness or willful
misconduct.
(ii) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Company and upon such information, opinions, reports or
statements presented to the Company by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or
expert competence and who has been selected with reasonable care by or on
behalf of the Company, including information, opinions, reports or statements
as to the value and amount of the assets, liabilities, profits, losses, or any
other facts pertinent to the existence and amount of assets from which
distributions to members might properly be paid.
Section 13.4 Fiduciary Duty.
(i) To the extent that, at law or in equity, an Indemnified Person has duties
(including fiduciary duties) and liabilities relating thereto to the Company or
to any other Covered Person, an Indemnified Person acting under this Agreement
shall not be liable to the Company or to any other Covered Person for its good
faith reliance on the provisions of this Agreement. The provisions of this
Agreement, to the extent that they restrict the duties and liabilities of an
Indemnified Person otherwise existing at law or in equity, are agreed by the
parties hereto to replace such other duties and liabilities of such Indemnified
Person.
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(ii) Unless otherwise expressly provided herein, (a) whenever a conflict of
interest exists or arises between Covered Persons, or (b) whenever this
Agreement or any other agreement contemplated herein provides that an
Indemnified Person shall act in a manner that is, or provides terms that are,
fair and reasonable to the Company or any Member, the Indemnified Person shall
resolve such conflict of interest, taking such action or providing such terms,
considering in each case the relative interest of each party (including its own
interest) to such conflict, agreement, transaction or situation and the
benefits and burdens relating to such interests, any customary or accepted
industry practices, and any applicable generally accepted accounting practices
or principles. In the absence of bad faith by the Indemnified Person, the
resolution, action or term so made, taken or provided by the Indemnified Person
shall not constitute a breach of this Agreement or any other agreement
contemplated herein or of any duty or obligation of the Indemnified Person at
law or in equity or otherwise.
(iii) Whenever in this Agreement an Indemnified Person is permitted or
required to make a decision (a) in its "discretion" or under a grant of similar
authority or latitude, the Indemnified Person shall be entitled to consider
only such interests and factors as it desires, including its own interests, and
shall have no duty or obligation to give any consideration to any interest of
or factors affecting the Company or any other Person, or (b) in its "good
faith" or under another express standard, the Indemnified Person shall act
under such express standard and shall not be subject to any other or different
standard imposed by this Agreement or other applicable law.
Section 13.5 Indemnification. To the fullest extent permitted by applicable
law, an Indemnified Person shall be entitled to indemnification from the
Company for any loss, damage or claim incurred by such Indemnified Person by
reason of any act or omission performed or omitted by such Indemnified Person
in good faith on behalf of the Company and in a manner reasonably believed to
be within the scope of authority conferred on such Indemnified Person by this
Agreement, except that no Indemnified Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such
Indemnified Person by reason of gross negligence or willful misconduct with
respect to such acts or omissions; provided, however, that any indemnity under
this Section 13.5 shall be provided out of and to the extent of Company assets
only, and no Covered Person shall have any personal liability on account
thereof.
Section 13.6 Expenses. To the fullest extent permitted by applicable law,
expenses (including legal fees) incurred by an Indemnified Person in defending
any claim, demand, action, suit or proceeding shall, from time to time, be
advanced by the Company prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Company of an undertaking by or
on behalf of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be indemnified as
authorized in Section 13.5 hereof.
Section 13.7 Outside Businesses. Any Member or Affiliate thereof may engage
in or possess an interest in other business ventures of any nature or
description, independently or with others, similar or dissimilar to the
business of the Company, and the Company and the Members shall have no rights
by virtue of this Agreement in and to such independent ventures or the income
or profits derived therefrom, and the pursuit of any such venture, even if
competitive with the business of the Company, shall not be deemed wrongful or
improper. No Member or Affiliate thereof shall be obligated to present any
particular investment opportunity to the Company even if such opportunity is of
a character that, if presented to the Company, could be taken by the Company,
and any Member or Affiliate thereof shall have the right to take for its own
account (individually or as a partner or fiduciary) or to recommend to others
any such particular investment opportunity.
19
<PAGE>
ARTICLE XIV
TRANSFERS
Section 14.1 Transfer of Securities.
(a) Preferred Securities shall be freely transferable by a Preferred Security
holder (subject to applicable securities laws).
(b) Common Securities shall not be transferred in whole or in part under any
circumstances except to a permitted successor of Torchmark under the Loan
Agreement.
(c) No Interest shall be transferred, in whole or in part, except in
accordance with the terms and conditions set forth in this Agreement. Any
transfer or purported transfer of any Interest not made in accordance with this
Agreement shall be null and void.
Section 14.2 Transfer of LLC Certificates. The Class A Member shall provide
for the registration of LLC Certificates and of transfers of LLC Certificates.
Upon surrender for registration of transfer of any LLC Certificate, the Class A
Member shall cause one or more new LLC Certificates to be issued in the name of
the designated transferee or transferees. Every LLC Certificate surrendered for
registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Class A Member duly executed by the
Preferred Security holder or his or her attorney duly authorized in writing.
Each LLC Certificate surrendered for registration of transfer shall be
cancelled by the Class A Member. A transferee of an LLC Certificate shall be
admitted to the Company as a Class C Member and shall be entitled to the rights
and subject to the obligations of a Preferred Security holder hereunder upon
the receipt by a transferee of an LLC Certificate.
Section 14.3 Persons Deemed Preferred Security Holders. The Company may treat
the Person in whose name any LLC Certificate shall be registered on the books
and records of the Company as the Preferred Security holder and the sole holder
of such LLC Certificate for purposes of receiving distributions and for all
other purposes whatsoever and, accordingly shall not be bound to recognize any
equitable or other claim to or interest in such LLC Certificate on the part of
any other Person, whether or not the Company shall have actual or other notice
thereof.
Section 14.4 Book Entry Interests. The LLC Certificates, on original
issuance, will be issued in the form of a global LLC Certificate or LLC
Certificates representing the Book Entry Interests, to be delivered to The
Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the
Company. Such LLC Certificate or LLC Certificates shall initially be registered
on the books and records of the Company in the name of Cede & Co., the nominee
of the initial Clearing Agency, and no Preferred Security Owner will receive a
definitive LLC Certificate representing such Preferred Security Owner's
interests in such LLC Certificate, except as provided in Section 14.6. Unless
and until definitive, fully registered LLC Certificates (the "Definitive LLC
Certificates") have been issued to the Preferred Security Owners pursuant to
Section 14.6:
(i) The provisions of this Section shall be in full force and effect;
(ii) The Company and the Class A Member shall be entitled to deal with
the Clearing Agency for all purposes of this Agreement (including the
payment of distributions on the LLC Certificates and receiving approvals,
votes or consents hereunder) as the Preferred Security holder and the sole
holder of the LLC Certificates and shall have no obligation to the
Preferred Security Owners;
(iii) To the extent that the provisions of this Section conflict with any
other provisions of this Agreement, the provisions of this Section shall
control: and
(iv) The rights of the Preferred Security Owners shall be exercised only
through the Clearing Agency and shall be limited to those established by
law and agreements between such Preferred Security Owners and the Clearing
Agency and/or the Clearing Agency Participants. Unless and until the
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<PAGE>
Definitive LLC Certificates are issued pursuant to Section 14.6, the
initial Clearing Agency will make book entry transfers among the Clearing
Agency Participants and receive and transmit payments of distributions on
the LLC Certificates to such Clearing Agency Participants.
Section 14.5 Notices to Clearing Agency. Whenever a notice or other
communication to the Preferred Security holders is required under this
Agreement, unless and until Definitive LLC Certificates shall have been issued
to the Preferred Security holders pursuant to Section 14.6, the Class A Member
shall give all such notices and communications specified herein to be given to
the Preferred Security holders to the Clearing Agency, and shall have no
obligations to the Preferred Security Owners.
Section 14.6 Definitive LLC Certificates. If (i) the Clearing Agency elects
to discontinue its services as securities depository and gives reasonable
notice to the Company, or (ii) the Company elects to terminate the book entry
system through the Clearing Agency, then Definitive LLC Certificates shall be
prepared by the Company. Upon surrender of the global LLC Certificate or LLC
Certificates representing the Book Entry Interests by the Clearing Agency,
accompanied by registration instructions, the Class A Member shall cause
Definitive LLC Certificates to be delivered to Preferred Security Owners in
accordance with the instructions of the Clearing Agency. Neither the Class A
Member nor the Company shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying
on, such instructions. Any Person receiving a Definitive LLC Certificate in
accordance with this Article XIV shall be admitted to the Company as a Class C
Member upon receipt of such Definitive LLC Certificate. The Definitive LLC
Certificates shall be printed, lithographed or engraved or may be produced in
any other manner as is reasonably acceptable to the Class A Member, as
evidenced by its execution thereof.
ARTICLE XV
Dissolution, Liquidation and Termination
Section 15.1 No Dissolution. The Company shall not be dissolved by the
admission of Members in accordance with the terms of this Agreement. Except as
provided in Section 15.2(ii), the death, retirement, resignation, expulsion,
bankruptcy or dissolution of a Member, or the occurrence of any other event
which terminates the continued membership of a Member in the Company, shall not
cause the Company to be dissolved and its affairs wound up so long as the
Company at all times has at least two Members. Upon the occurrence of any such
event, the business of the Company shall be continued without dissolution.
Section 15.2 Events Causing Dissolution. The Company shall be dissolved and
its affairs shall be wound up upon the occurrence of any of the following
events:
(i) The expiration of the term of the Company, as provided in Section 2.3
hereof;
(ii) Upon the retirement, resignation, expulsion, bankruptcy or
dissolution of the Class A Member, or the occurrence of any other event
under the Delaware Act that terminates the continued membership of the
Class A Member in the Company except for a transfer to a permitted
successor of the Class A Member pursuant to Section 14.1;
(iii) the entry of a decree of judicial dissolution under Section 18-802
of the Delaware Act; or
(iv) the written consent of all Members.
Section 15.3 Notice of Dissolution. Upon the dissolution of the Company, the
Class A Member, as liquidating trustee, shall promptly notify the members of
such dissolution.
Section 15.4 Liquidation. Upon dissolution of the Company, the Class A
Member, as liquidating trustee, shall immediately commence to wind up the
Company's affairs; provided, however, that a reasonable time shall be allowed
for the orderly liquidation of the assets of the Company and the satisfaction
of liabilities to creditors so as to enable the Members to minimize the normal
losses attendant upon a liquidation; and
21
<PAGE>
provided, further, that if the dissolution of the Company results from the
bankruptcy or dissolution of the Class A Member, the holder of a majority of
the outstanding Securities of the Company shall be entitled to elect a
substitute liquidator. The Preferred Security holders shall continue to share
profits and losses during liquidation in the same proportions as specified in
Article VIII hereof, as before liquidation. The proceeds of liquidation shall
be distributed, as realized, in the following order and priority:
(i) to creditors of the Company, including Preferred Security holders who
are creditors, to the extent otherwise permitted by law, in satisfaction of
the liabilities of the Company (whether by payment or the making of
reasonable provision for payment thereof), other than liabilities for
distributions (including distributions) to Members;
(ii) to the Preferred Security holders of each series then outstanding in
the amount of their respective Liquidation Distributions; and
(iii) to distribute to the Class A Member and the Class B Member the
remaining proceeds of liquidation in proportion to their capital accounts,
after giving effect to all contributions, distributions and allocations for
all periods.
Section 15.5 Termination. The Company shall terminate when all of the assets
of the Company shall have been distributed in the manner provided for in this
Article XV, and the Certificate shall have been canceled in the manner required
by the Delaware Act.
ARTICLE XVI
Miscellaneous
Section 16.1 Notices. All notices provided for in this Agreement shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as follows:
(i) if given to the Company, in care of the Class A Member at the
Company's mailing address set forth below;
Torchmark Capital L.L.C.
2001 Third Avenue
South Birmingham, Alabama 35233
Attention: Corporate Secretary
(ii) if given to the Class A Member, at its mailing address set forth
below;
Torchmark Corporation
2001 Third Avenue
South Birmingham, Alabama 35233
Attention: Corporate Secretary
(iii) if given to any other Member at the address set forth on the books
and records of the Company.
All such notices shall be deemed to have been given when received.
Section 16.2 Failure to Pursue Remedies. The failure of any party to seek
redress for violation of, or to insist upon the strict performance of, any
provision of this Agreement shall not prevent a subsequent act, which would
have originally constituted a violation, from having the effect of an original
violation.
Section 16.3 Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other rights the parties may
have by law, statute, ordinance or otherwise.
22
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Section 16.4 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of all of the parties and, to the extent permitted by this
Agreement, their successors, legal representatives and assigns.
Section 16.5 Interpretation. Throughout this Agreement, nouns, pronouns and
verbs shall be construed as masculine, feminine, neuter, singular or plural,
whichever shall be applicable. All references herein to "Articles," "Sections"
and paragraphs shall refer to corresponding provisions of this Agreement unless
the context requires otherwise.
Section 16.6 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted.
Section 16.7 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all parties hereto had signed the same
document. All counterparts shall be construed together and shall constitute one
instrument.
Section 16.8 Integration. This Agreement constitutes the entire agreement
among the parties hereto pertaining to the subject matter hereof and supersedes
all prior agreements and understandings pertaining thereto.
Section 16.9 Governing Law. This Agreement and the rights of the parties
hereunder shall be interpreted in accordance with the laws of the State of
Delaware, and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
In Witness Whereof the parties hereto have executed this Agreement as of the
date first above stated.
Class A Member:
Torchmark Corporation
By:
----------------------------------
Name:
Title:
Class B Member:
Maxwell's Energy Company, Inc.
By:
----------------------------------
Name:
Title:
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Exhibit A
Certificate Number Number of Preferred Securities
- ------------------ ------------------------------
E-1
CUSIP NO.
Certificate Evidencing Preferred Securities
of
TORCHMARK CAPITAL L.L.C.
__% Preferred Securities, Series A
(liquidation preference $__ per Preferred Security)
Torchmark Capital L.L.C., a limited liability company formed under the
laws of the State of Delaware (the "Company"), hereby certifies that Cede &
Co. (the "Holder") is the registered owner of _______________ (__________)
preferred securities of the Company representing preferred limited liability
company interests in the Company of a series designated the "___% Preferred
Securities, Series A" (the "Series A Preferred Securities"). The Series A
Preferred Securities are fully paid and nonassessable limited liability
company interests in the Company, as to which the members of the Company who
hold the Series A Preferred Securities (the "Preferred Security Holders"), in
their capacities as members of the Company, will have no liability solely by
reason of being Preferred Security Holders in excess of their share of the
Company's assets and undistributed profits (subject to the obligation of a
Preferred Security Holder to repay any funds wrongfully distributed to it) and
are transferable on the books and records of the Company, in person or by a
duly authorized attorney, upon surrender of this certificate duly endorsed and
in proper form for transfer. The powers, preferences and special rights and
limitations of the Series A Preferred Securities are set forth in, and this
Certificate and the Series A Preferred Securities represented hereby are
issued and shall in all respects be subject to the terms and provisions of,
the Amended and Restated Limited Liability Company Agreement of the Company
dated as of ____________, 1994, as the same may, from time to time, be amended
(the "LLC Agreement") authorizing the issuance of the Series A Preferred
Securities and determining the powers, preferences, and other special rights
and limitations, regarding distributions, voting, return of capital and
otherwise, and other matters relating to the Series A Preferred Securities.
Capitalized terms used herein but not defined shall have the meaning given
them in the LLC Agreement. The Holder is entitled to the benefits of the
Payment and Guarantee Agreement of Torchmark Corporation ("Torchmark"), dated
as of ____________, 1994 (the "Guarantee") and is entitled to enforce the
rights or the Company under the Loan Agreement dated as of ____________, 1994
(the "Loan Agreement") between the Company and Torchmark to the extent
provided therein and in the LLC Agreement. The Company will furnish a copy of
the LLC Agreement, the Guarantee and the Loan Agreement to the Holder without
charge upon written request to the Company at its principal place of business
or registered office.
The Holder, by accepting this Certificate, is deemed to have agreed that
(i) the Loan under the Loan Agreement is subordinate and junior in right of
payment to all Senior Indebtedness of Torchmark as and to the extent provided
in the Loan Agreement, and (ii) the Guarantee is subordinate and junior in
right of payment to all liabilities of Torchmark as and to the extent provided
in the Guarantee. Upon receipt of this Certificate, the Holder is admitted to
the Company as a Class C Member, is bound by the LLC Agreement and is entitled
to the benefits thereunder.
IN WITNESS WHEREOF, the Company has executed this certificate this _____
day ____________, 1994.
TORCHMARK CAPITAL L.L.C.
By: Torchmark Corporation,
its Managing Member
By: _______________________
Name: ______________________
Title: ____________________
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<PAGE>
Exhibit 5.2
May 24, 1994
Torchmark Corporation
2001 Third Avenue, South
Birmingham, Alabama 35233
Ladies and Gentlemen:
We have acted as special United States tax counsel for Torchmark
Corporation, a corporation organized under the laws of the State of Delaware
("Torchmark"), and Torchmark Capital L.L.C., a limited liability company
organized under the laws of Delaware (the "Company"), in connection with the
Registration Statement of Form S-3 relating to the proposed issuance by the
Company of its Preferred Securities (the "Preferred Securities") as described
in the preliminary Prospectus Supplement relating thereto (the "Prospectus
Supplement") filed with the Registration Statement.
We hereby confirm our opinion as set forth under the caption "Certain
United States Income Tax Consequences" in the Prospectus Supplement. Our
opinion assumes that the Company's Certificate of Formation and Amended and
Restated Limited Liability Company Agreement are enforceable in accordance
with their terms.
Very truly yours,
Hughes & Luce, L.L.P.
<PAGE>
EXHIBIT 12
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
1ST QTR
1988 1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Pre-tax earnings....... 277,869 324,082 352,510 380,757 417,870 441,406 109,930
Fixed charges and pre-
ferred stock divi-
dends................. 57,895 62,896 65,053 70,895 67,808 75,819 20,141
Less: interest capital-
ized included above... (2,341) (667) (5,919) (9,065) (4,323) (1,011) (276)
------- ------- ------- ------- ------- ------- -------
Earnings before fixed
charges............... 333,423 386,311 411,644 442,587 481,355 516,214 129,795
======= ======= ======= ======= ======= ======= =======
Fixed charges and pre-
ferred stock dividends:
Interest expense....... 40,820 48,149 46,249 50,212 55,661 67,261 17,997
Capitalized interest... 2,341 667 9,657 16,799 20,373 10,480 276
Less: imputed
capitalized interest*. 0 0 3,738 7,734 16,050 9,469 0
------- ------- ------- ------- ------- ------- -------
Adjusted capitalized
interest.............. 2,341 667 5,919 9,065 4,323 1,011 276
Adjusted preferred div-
idends................ 11,966 11,353 10,405 9,121 5,113 5,035 1,199
Estimated interest fac-
tor of rental expense. 2,768 2,727 2,480 2,497 2,711 2,512 669
------- ------- ------- ------- ------- ------- -------
Total fixed charges... 57,895 62,896 65,053 70,895 67,808 75,819 20,141
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to
fixed charges and pre-
ferred stock dividends. 5.8 6.1 6.3 6.2 7.1 6.8 6.4
Earnings before fixed
charges................ 333,423 386,311 411,644 442,587 481,355 516,214 129,795
Interest credited for
deposit products...... 35,403 44,362 57,937 74,613 77,673 76,249 18,890
------- ------- ------- ------- ------- ------- -------
Adjusted earnings before
fixed charges.......... 368,826 430,673 469,581 517,200 559,028 592,463 148,685
======= ======= ======= ======= ======= ======= =======
Fixed charges........... 57,895 62,896 65,053 70,895 67,808 75,819 20,141
Interest credited for
deposit products...... 35,403 44,362 57,937 74,613 77,673 76,249 18,890
------- ------- ------- ------- ------- ------- -------
Adjusted fixed charges.. 93,298 107,258 122,990 145,508 145,481 152,068 39,031
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to
fixed charges and pre-
ferred stock dividends
including interest
credited on deposit
products as a fixed
charge................. 4.0 4.0 3.8 3.6 3.8 3.9 3.8
======= ======= ======= ======= ======= ======= =======
Rental expense.......... 8,388 8,264 7,516 7,567 8,216 7,611 2,028
Estimated interest fac-
tor of rental expense
(33%).................. 2,768 2,727 2,480 2,497 2,711 2,512 669
Interest credited on
deposit products....... 35,403 44,362 57,937 74,613 77,673 76,249 18,890
Preferred dividends..... 8,000 7,667 6,898 6,116 3,453 3,289 804
Tax rate**.............. 33.1% 32.5% 33.7% 32.9% 32.5% 34.7% 33.0%
Adjusted (pretax)
preferred dividends.... 11,966 11,353 10,405 9,121 5,113 5,035 1,199
</TABLE>
- --------
*Capitalized interest in accordance with SFAS 34 which did not reduce interest
expense
**Percentage computed from tax provision as a percentage of pretax earnings
<PAGE>
EXHIBIT 24.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Torchmark Corporation:
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick
Birmingham, Alabama
May 24, 1994
<PAGE>
EXHIBIT 99.1
FORM OF PAYMENT AND GUARANTEE AGREEMENT
This Payment and Guarantee Agreement (the "Guarantee Agreement"), dated as of
, 1994, is executed and delivered by Torchmark Corporation, a Delaware
corporation (the "Guarantor"), for the benefit of the Holders (as defined
below) from time to time of the Preferred Securities (as defined below) of
Torchmark Capital L.L.C., a limited liability company organized under the laws
of the State of Delaware (the "Issuer").
RECITALS
1. The Issuer is issuing on the date hereof of its preferred limited
liability company interests designated " % Preferred Securities, Series A" (the
"Preferred Securities"), and the Guarantor desires to issue this Guarantee
Agreement for the benefit of the Holders, as provided herein.
2. The Issuer pursuant to the Loan Agreement (as defined below) will loan the
proceeds from the issuance and sale of the Preferred Securities and its common
limited liability company interests (the "Common Securities") to the Guarantor.
3. The Guarantor desires hereby irrevocably and unconditionally to agree to
the extent set forth herein to pay to the Holders the Guarantee Payments (as
defined below) and to make certain other payments on the terms and conditions
set forth herein.
Now, Therefore, in consideration of the purchase by each Holder of the
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for
the benefit of the Holders.
ARTICLE I
Section 1.01. As used in this Guarantee, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
terms used but not otherwise defined herein shall have the meanings assigned to
such terms in the Amended and Restated Limited Liability Company Agreement of
the Issuer, adopted on , 1994.
(a) "Guarantee Payments" shall mean the following payments, without
duplication, to the extent not paid by the Issuer: (i) any accrued and
unpaid distributions which have been theretofore declared on the Preferred
Securities out of moneys legally available therefor, (ii) the Redemption
Price payable with respect to any Preferred Securities called for
redemption by the Issuer out of funds legally available therefor, and (iii)
upon a liquidation of the Issuer, the Liquidation Distribution.
(b) "Holder" shall mean any holder from time to time of any Preferred
Securities of the Issuer; provided, however, that in determining whether
the Holders of the requisite percentage of Preferred Securities have given
any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor or any entity owned 50% or more by the Guarantor,
either directly or indirectly.
(c) "Liquidation Distribution" shall mean, upon the liquidation of the
Issuer, the lesser of (a) the aggregate of the liquidation preference of
$[ ] per Preferred Share and all accrued and unpaid distributions (whether
or not declared) to the date of payment or (b) the amount of assets of
Torchmark Capital legally available for distribution to holders of
Preferred Securities in such liquidation.
(d) "Loan Agreement" shall mean the agreement, dated the date hereof,
pursuant to which the Issuer will loan to the Guarantor the proceeds
received by the Issuer from the issuance and sale of the Preferred
Securities and the Common Securities.
(e) "Loans" shall mean the loans from the Issuer to the Guarantor
pursuant to the Loan Agreement.
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(f) "Paying Agent" shall mean [ ], as registrar, transfer agent and
paying agent, if any.
(g) "Redemption Price" shall mean $[ ] per Preferred Share plus accrued
and unpaid distributions (whether or not declared) to the date fixed for
redemption.
ARTICLE II
Section 2.01. The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments, as and when due (except to the
extent paid by the Issuer), regardless of any defense, right of set-off or
counterclaim which the Issuer may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Issuer to pay such
amounts to the Holders.
Section 2.02. The Guarantor hereby waives notice of acceptance of this
Guarantee Agreement and of any liability to which it applies or may apply,
presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
Section 2.03. The obligations, covenants, agreements and duties of the
Guarantor under this Guarantee Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Preferred Securities
to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the distributions, Redemption Price, Liquidation Distribution or
any other sums payable under the terms of the Preferred Securities or the
extension of time for the performance of any other obligation under,
arising out of, or in connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt, of, or other similar proceedings affecting, the
Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, any of the Preferred
Securities; or
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred.
There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the
foregoing.
Section 2.04. This is a guarantee of payment and not of collection. A Holder
may enforce this Guarantee Agreement directly against the Guarantor, and the
Guarantor will waive any right or remedy to require that any action be brought
against the Issuer or any other person or entity before proceeding against the
Guarantor. Subject to Section 2.05, all waivers herein contained shall be
without prejudice to the Holders' right at the Holders' option to proceed
against the Issuer, whether by separate action or by joinder. The Guarantor
agrees that this Guarantee Agreement shall not be discharged except by payment
of the Guarantee Payments in full (to the extent not paid by the Issuer) and by
complete performance of all obligations of the Guarantor contained in this
Guarantee Agreement.
Section 2.05. The Guarantor shall be subrogated to all (if any) rights of the
Holders against the Issuer in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement and shall
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<PAGE>
have the right to waive payment of any amount of distributions in respect of
which payment has been made to the Holders by the Guarantor pursuant to Section
2.01; provided, however, that the Guarantor shall not (except to the extent
required by mandatory provisions of law) exercise any rights which it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if, at the time of any such payment, any amounts are due and unpaid under this
Guarantee Agreement. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to pay over such amount to the
Holders.
Section 2.06. The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities and that the Guarantor shall be liable as principal and sole debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in
subsections (a) through (f), inclusive, of Section 2.03 hereof.
ARTICLE III
Section 3.01. So long as any Preferred Securities of any series remain
outstanding, neither the Guarantor nor any majority-owned subsidiary of the
Guarantor shall declare or pay any distribution on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital stock
or make any guarantee payments with respect to the foregoing (other than
payments under this Guarantee Agreement or distributions or guarantee payments
to the Guarantor or another majority-owned subsidiary by a majority-owned
subsidiary or a dividend consisting of common or preferred stock purchase
rights under a stockholder rights plan) if at such time the Guarantor shall be
in default with respect to its payment or other obligations hereunder 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 Loan Agreement.
The Guarantor shall take all actions necessary to ensure the compliance of its
subsidiaries with this Section 3.01.
Section 3.02. The Guarantor covenants, so long as any Preferred Securities
remain outstanding: (i) to maintain direct or indirect 100% ownership of the
Common Securities and any other Securities of the Issuer other than the
preferred securities of any series; (ii) to cause at least 21% of the total
value (initially measured by securityholders' equity, determined in accordance
with generally accepted accounting principles) of the Issuer and at least 21%
of all interests in the capital, income, gain, loss, deduction and credit of
the Issuer to be represented by Common Securities unless the Internal Revenue
Code of 1986, as amended, or the regulations or interpretations thereunder
permit a lower percentage; (iii) not to voluntarily dissolve, wind-up or
liquidate the Issuer; (iv) to remain the Managing Member of the Issuer and to
timely perform all of its duties as Managing Member of the Issuer (including
the duty to declare and pay distributions on the Preferred Securities),
provided that any permitted successor of the Guarantor under the Loan
Agreement may succeed to the Guarantor's duties as Managing Member; and (v) to
use its reasonable efforts to cause the Issuer to remain a limited liability
company and otherwise continue to be treated as a partnership for United
States federal income tax purposes.
Section 3.03. This Guarantee Agreement will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right
of payment to all liabilities of the Guarantor, (ii) pari passu with the most
senior preferred or preference stock now or hereafter issued by the Guarantor
and with any guarantee now or hereafter entered into by the Guarantor (unless
such guarantee provides that it is subordinate to the Guarantee) in respect of
any preferred or preference securities of any affiliate of the Guarantor and
(iii) senior to the Guarantor's common stock. For purposes of clause (ii)
herein, pari passu means that any payments to which beneficiaries of this
Guarantee Agreement are entitled must be shared with holders of any preferred
or preference stock to which the Guarantee Agreement is stated to be pari
passu ("Pari Passu Stock") to the same extent as would be required under
applicable law if instead this Guarantee Agreement constituted a class of
preferred or preference stock of the Guarantor ranking pari passu with such
Pari Passu Stock as to such payments. However, beneficiaries of this Guarantee
Agreement are not conversely entitled to share in payments (to the extent that
such payments are permitted by Section 3.01 hereof), to which the holders of
such Pari Passu Stock are entitled.
3
<PAGE>
ARTICLE IV
This Guarantee Agreement shall terminate and be of no further force and
effect upon full payment of the Redemption Price of all Preferred Securities or
upon full payment of the amounts payable to the Holders upon liquidation of the
Issuer; provided, however, that this Guarantee Agreement shall continue to be
effective or shall be reinstated, as the case may be, if at any time any Holder
of Preferred Securities must restore payment of any sums paid under the
Preferred Securities or under this Guarantee Agreement for any reason
whatsoever.
ARTICLE V
Section 5.01. All guarantees and agreements contained in this Guarantee
Agreements shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders.
The Guarantor shall not assign its obligations hereunder without the prior
approval of the Holders of not less than 66 2/3% in liquidation preference of
all Preferred Securities then outstanding.
Section 5.02. Except with respect to any changes which do not adversely
affect the rights of holders of Preferred Securities (in which case no vote
will be required), this Guarantee Agreement may only be amended by instrument
in writing signed by the Guarantor with the prior approval of the Holders of
not less than 66 2/3% in liquidation preference of the Preferred Securities
then outstanding.
Section 5.03. Any notice, request or other communication required or
permitted to be given hereunder to the Guarantor shall be given in writing by
delivering the same against receipt therefor by facsimile transmission
(confirmed by mail) or telex, addressed to the Guarantor, as follows (and if so
given, shall be deemed given when mailed or upon receipt of an answer-back, if
sent by telex), to it:
Torchmark Corporation
2001 Third Avenue South
Birmingham, Alabama 35233
Facsimile No.: (205) 325-4198
Attention: Corporate Secretary
4
<PAGE>
Any notice, request or other communication required or permitted to be given
hereunder to the Holders shall be given by the Guarantor in the same manner as
notices sent by the Issuer to the Holders.
Section 5.04. The masculine and neuter genders used herein shall include the
masculine, feminine and neuter genders.
Section 5.05. This Guarantee Agreement is solely for the benefit of the
Holders and is not separately transferable from the Preferred Securities.
Section 5.06. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
This Guarantee Agreement is executed as of the day and year first above
written.
Torchmark Corporation
By: _________________________________
Name: _____________________________
Title: ____________________________
5
<PAGE>
EXHIBIT 99.2
FORM OF LOAN AGREEMENT
Loan Agreement, dated as of , 1994, between Torchmark Corporation, a
Delaware corporation ("Torchmark"), and Torchmark Capital L.L.C., a limited
liability company organized under the laws of the State of Delaware
("Capital").
RECITALS
1. Capital intends to issue its Class A common limited liability company
interests (the "Common Securities") to Torchmark, and receive related capital
contributions, in an aggregate amount of $ (the "Common Payments") and to
issue and sell of its preferred limited liability company interests
designated " % Preferred Securities, Series A" (the "Preferred Securities"),
with a liquidation preference equal to $ per Preferred Security (the
"Liquidation Preference").
2. Torchmark is guaranteeing the payment of distributions on the Preferred
Securities if and when declared to the extent that there are sufficient funds
legally available therefor, the Redemption Price (as defined in the Guarantee
Agreement) and the Liquidation Distribution (as defined in the Guarantee
Agreement) on the Preferred Securities, all to the extent set forth in the
Payment and Guarantee Agreement, dated as of , 1994 (the "Guarantee
Agreement").
3. Torchmark has asked Capital to make a loan to Torchmark in an aggregate
principal amount equal to the sum of the aggregate Common Payments and the
aggregate Liquidation Preference of the Preferred Securities issued and sold by
Capital.
4. Capital is willing to make the loans to Torchmark, on the terms and
conditions stated in this Loan Agreement.
Now, Therefore, Torchmark and Capital agree as follows:
ARTICLE I
The Loans
Section 1.01. The Loans. Subject to the terms and conditions stated in this
Loan Agreement, Capital agrees to make loans to Torchmark on the date hereof in
an aggregate principal amount of $ in next day funds. Such loans shall be
referred to herein as the "Loans."
Section 1.02. Term of the Loans; Mandatory Prepayment. (a) If Capital redeems
Preferred Securities in accordance with the terms thereof, the Loans shall
become due and payable in a principal amount equal to the aggregate stated
Liquidation Preference of the Preferred Securities so redeemed, together with
any and all accrued interest thereon. Any payment pursuant to this Section
1.02(a) shall be made in next-day funds prior to 12:00 noon, New York time, on
the date fixed for such redemption or at such other time on such earlier date
as Capital and Torchmark shall agree.
(b) The entire principal amount of the Loans shall become due and payable,
together with any accrued and unpaid interest thereon, if any, on the earliest
of , 2024 (or , 2044 if Torchmark exercises its option to renew the
Loans for up to an additional 20 year period on the terms and conditions set
forth below) or the date upon which Capital is dissolved, wound-up or
liquidated.
(c) Upon any repayment or prepayment, the Loans may be renewed and extended
for an additional 20 year term if, as of , 2024, and as determined in the
judgment of Torchmark and Capital's independent financial advisor (selected by
Torchmark), (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)
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<PAGE>
Capital is not in arrears on payment of distributions 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
distribution 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 Services,
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.
Section 1.03 Optional Prepayment. Torchmark shall have the right to prepay
the Loans, without premium or penalty, (a) in whole or in part (together with
accrued but unpaid interest, if any, on the portion being prepaid) at any time
on or after , 1999; and (b) in whole (together with all accrued and
unpaid interest, if any, thereon) at any time upon the occurrence of a Tax
Event or an Investment Company Act Event.
"Tax Event" means that Torchmark or 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) 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 loaned by Torchmark Capital to members of
Torchmark's consolidated group (a Tax Event occurring solely by reason of this
clause (ii), a "Special Loan Tax Event") or (iii) 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 agency or regulatory authority (a
"Change in 1940 Act Law"), to the effect that 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 Capital delivers a
written opinion of independent counsel to Capital experienced in practice
under the 1940 Act, to the effect that Torchmark and/or 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, Capital is not required to be
registered as an "investment company" within the meaning of the 1940 Act. Such
steps may be either (i) issuing an additional or supplemental irrevocable and
unconditional guarantee (x) of accrued and unpaid distributions (whether or
not declared out of moneys legally available therefor) on the Series A
Preferred Securities and (y) upon a liquidation of 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 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.
ARTICLE II
Interest
Section 2.01. Interest on the Loans. The Loans shall bear interest at an
annual rate equal to % 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 , 1994. In the event that any date on which interest is
payable
2
<PAGE>
on the Loan 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. 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.
Section 2.02. Extension of Interest Payment Period. Notwithstanding the
provisions of Section 2.01, Torchmark shall have the right at any time 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, at the end of which period Torchmark shall pay all interest then
accrued and unpaid; and provided that, during any such extended interest
payment period, neither Torchmark, nor any majority-owned subsidiary of
Torchmark, shall declare or pay any distribution on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital stock
or make any guarantee payments with respect to the foregoing (other than
payments under the Guarantee Agreement or distributions or guarantee payments
to Torchmark by a direct or indirect majority-owned subsidiary 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 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
Capital notice of its selection of such extended interest payment period one
Business Day prior to the earlier of (i) the date Capital declares the related
distribution or (ii) the date Capital is required to give notice of the record
or payment date of such related distribution to the New York Stock Exchange or
other applicable self-regulatory organization or to holders of the Preferred
Securities, but in any event not less than two Business Days prior to such
record date. Torchmark shall cause Capital to give such notice of Torchmark's
selection of such extended interest payment period to the holders of the
Preferred Securities.
ARTICLE III
Payments
Section 3.01. Method and Date of Payment. Each payment by Torchmark of
principal and interest on the Loans shall be made to Capital in lawful money of
the United States, in next-day funds for principal payments and in same day
funds for interest payments, at such place and to such account as may be
designated by Capital.
Section 3.02. Set Off. Notwithstanding anything to the contrary herein,
Torchmark shall have the right to set-off any payment it is otherwise required
to make hereunder with and to the extent Torchmark has theretofore made, or is
concurrently on the date of such payment making, a payment under the Guarantee
Agreement.
ARTICLE IV
Subordination
Section 4.01. Subordination. Torchmark and Capital covenant and agree, and
the holders of the Preferred Securities (and any trustee appointed by such
holders) by their acceptance of such Preferred Securities likewise agree, that
the Loans are subordinate and junior in right of payment to all Senior
Indebtedness as provided herein. The term "Senior Indebtedness" means the
principal, premium, if any, and interest on (i) all indebtedness of Torchmark,
whether outstanding on the date hereof or hereafter created, incurred or
assumed, which is for money borrowed, or evidenced by a note or similar
instrument, (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
3
<PAGE>
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, or for which Torchmark is customarily responsible or
liable, even though Torchmark has not assumed responsibility or liability, 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 not superior in right of payment to the Loans. Senior
Indebtedness shall continue to be Senior Indebtedness and entitled to the
benefits of these 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 Capital to
the holders of the Preferred Securities (or any trustee appointed by such
holders) in respect of the provisions of this Section 4.01, 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 this Agreement, regardless of any knowledge thereof
which any person may have or be otherwise charged with.
Upon the maturity of any Senior Indebtedness by lapse of time, acceleration
(unless waived) or otherwise (including all installments of principal and
interest), all Senior Indebtedness 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 the 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 declaration or otherwise or (ii) an event of default occurs with
respect to any 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) shall 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. Torchmark will give
prompt written notice to Capital of any default in the payment of any Senior
Indebtedness and of any dissolution, winding up or reorganization of Torchmark.
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, composition or other similar proceeding relating to Torchmark
or its property or for the benefit of its creditors, (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 marshalling of the assets of Torchmark, all Senior Indebtedness
(including, without limitation, interest accruing 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, shall be made on the Loans. Any payment or distribution, whether in
cash, securities or other property, which would otherwise (but for these
subordination provisions) be payable or deliverable in respect of the Loans
(including any such payment or distribution which may be payable or deliverable
by reason of the payment of any other indebtedness of Torchmark being
subordinated to the payment of the Loans) shall be paid or delivered directly
to the holders of Senior Indebtedness or to their representative, or to the
trustee under the indenture or agreement (if any) pursuant to which such Senior
Indebtedness may have been issued, 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 shall be
prejudiced in the right to enforce subordination of the indebtedness
constituting the Loans by an 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 (or securities or other property
satisfactory to such holders) in full payment of such Senior
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Indebtedness then outstanding. Upon payment in full of all Senior Indebtedness,
Capital shall be subrogated to all the rights of any holders of Senior
Indebtedness to receive any further payments or distributions applicable to the
Senior Indebtedness until the Loans shall have been paid in full, and such
payments or distributions of cash, securities or other property received by
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 Capital, on the other, be deemed to be a payment by Torchmark on
account of Senior Indebtedness, and not on account of the Loans.
In the event that notwithstanding the provisions of this Section 4.01
Torchmark shall make any payment on the Loans to Capital or Capital receives
any payment or distribution of assets of Torchmark (other than securities of
Torchmark or any other corporation provided for by a plan of reorganization,
the payment of which is subordinate, at least to the extent provided in these
subordination provisions 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), at any time before all Senior Indebtedness is paid in full,
then such payment shall be held by Capital, in trust for the benefit of, and
shall be paid forthwith over and delivered to, the holders of Senior
Indebtedness or their representative or the trustee under the indenture or
other agreement (if any) pursuant to which Senior Indebtedness may have been
issued, in accordance with the priorities then existing among such holders, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay all Senior Indebtedness in full accordance with its
terms, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
ARTICLE V
Representations and Warranties
Section 5.01. Representations and Warranties. Torchmark represents and
warrants to Capital that:
(a) GOOD STANDING. Torchmark is a corporation duly incorporated and
validly existing under the laws of the State of Delaware, with power and
authority (corporate and other) to own its properties and conduct its
business as now being conducted.
(b) POWER AND AUTHORITY. Torchmark has full power and authority to enter
into this Agreement and to incur and perform the obligations provided for
herein, all of which have been duly authorized by all proper and necessary
action.
(c) NO CONFLICT. The execution and delivery of this Agreement and the
performance by Torchmark of all its obligations hereunder will not conflict
with or result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which Torchmark is a
party or by which Torchmark is bound or subject, nor will this Agreement
result in a violation of the provisions of Torchmark's Restated Certificate
of Incorporation or by-laws.
(d) BINDING AGREEMENT. This Agreement constitutes the valid and legally
binding obligation of Torchmark enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
ARTICLE VI
Covenants
Section 6.01. Covenants. (a) Torchmark agrees:
(i) that neither it, nor any of its majority-owned subsidiaries, shall
declare or pay any distribution on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock,
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or make any guarantee payments with respect to the foregoing (other than
payments under the Guarantee Agreement or distributions or guarantee
payments to Torchmark or another majority-owned subsidiary by a majority-
owned subsidiary or a dividend consisting of common or preferred stock
purchase rights under a stockholder rights plan) if at such time (A) 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 hereunder or (B)
Torchmark shall be in default with respect to its payment or other
obligations under the Guarantee Agreement;
(ii) to maintain direct or indirect 100% ownership of the Common
Securities and any other Securities of Capital other than the Preferred
Securities;
(iii) to cause at least 21% of the total value (initially measured by
stockholders' equity determined in accordance with generally accepted
accounting principles) of Capital and at least 21% of all interests in the
capital, income, gain, loss, deduction and credit of Capital to be
represented by Common Securities, unless the Internal Revenue Code of 1986,
as amended, or the regulations or interpretations thereunder permit a lower
percentage;
(iv) not to voluntarily dissolve, wind-up or liquidate Capital;
(v) to remain the Managing Member of Capital and to timely perform all of
its duties as Managing Member of Capital (including the duty to declare and
pay distributions on the Preferred Securities); provided, that any
permitted successor of Torchmark under this Agreement may succeed to
Torchmark's duties as Managing Member of Torchmark Capital; and
(vi) to use its reasonable efforts to cause Capital to remain a limited
liability company and otherwise continue to be treated as a partnership for
United States federal income tax purposes.
(b) Torchmark agrees that its obligations under this Agreement will also be
for the benefit of the holders from time to time of Preferred Securities, and
Torchmark acknowledges and agrees that such holders will be entitled to
enforce this Agreement directly against Torchmark.
(c) Torchmark agrees not to merge with or into another entity, or permit
another entity to merge with or into it, and agrees not to sell, transfer or
lease all or substantially all of its assets to another entity unless: (i) at
such time no Event of Default hereunder 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 this Agreement and becomes the
Managing Member of Torchmark Capital.
ARTICLE VII
Events of Default
Section 7.01. 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 under Article IV hereof or
otherwise); provided that a valid extension of the interest payment period
by Torchmark pursuant to Section 2.03 hereof shall not constitute a default
in the payment of interest for this purpose; or
(b) default in the payment of principal on the Loans when due (whether by
virtue of the provisions described under Article IV hereof or otherwise);
or
(c) the dissolution, winding up or liquidation of Capital; or
(d) the bankruptcy, insolvency or liquidation or Torchmark; or
(e) breach of any covenants contained herein continued for 30 days after
notice to Torchmark from the holders of 25% of the outstanding Preferred
Securities;
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then, in every such event, and at any time thereafter during the continuance
of such event, Capital will have the right to declare the principal of and the
interest on the Loans (including any interest subject to an extension of the
interest payment period) and any other amounts payable on the Loans to be
forthwith due and payable, whereupon the same shall become and be forthwith
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived, anything in this Agreement to
the contrary notwithstanding. Torchmark expressly acknowledges that under the
terms of the Preferred Securities, the holders of the outstanding Preferred
Securities shall have the right to appoint a trustee, which trustee shall be
authorized to exercise Capital's creditor rights under this Agreement, and
Torchmark agrees to cooperate with such trustee.
Torchmark agrees that its obligations under this 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 this Loan Agreement directly against Torchmark
as a third party beneficiary of Torchmark's obligations hereunder 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 this Loan
Agreement to enforce the covenants herein 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.
ARTICLE VIII
Miscellaneous
Section 8.01. Notices. All notices hereunder shall be deemed given by a
party hereto if in writing and delivered personally or by telegram requested)
to the other party at the following address for such party (or at such other
address as shall be specified by like notice):
If to Capital, to:
Torchmark Capital L.L.C.
c/o Torchmark Corporation
2001 Third Avenue South
Birmingham, Alabama 35233
Fax No.: (205) 325-4198
Attention: Corporate Secretary
If to Torchmark, to:
Torchmark Corporation
2001 Third Avenue South
Birmingham, Alabama 35233
Fax No.: (205) 325-4198
Attention: Corporate Secretary
Any notice given by mail or telegram or facsimile transmission shall be
effective when received.
Section 8.02. Binding Effect. Torchmark shall have the right at all times to
assign any of its rights or obligations under this Agreement to a direct or
indirect wholly-owned subsidiary of Torchmark; provided that, in the event of
any such assignment, Torchmark shall remain jointly and severally liable for
all such obligations. Capital may not assign any of its rights hereunder
without the prior written consent of Torchmark. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of Torchmark and
Capital and their respective successors and assigns. This Agreement may not
otherwise be assigned by Torchmark or Capital.
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Section 8.03. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 8.04. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
Section 8.05. Amendments. This 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 Preferred Securities remain outstanding, no such amendment shall be
made that adversely affects the holders of the Preferred Securities, and no
termination of this Agreement shall occur, and no Event of Default or
compliance with any covenant under this Agreement may be waived by Capital,
without the prior approval of the holders of at least 66 2/3% of the
outstanding Preferred Securities, unless and until the Loans and all accrued
and unpaid interest thereon shall have been paid in full.
In Witness Whereof, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
Torchmark Corporation
By:
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Name:
Title:
Torchmark Capital L.L.C.
By: Torchmark Corporation, as
Managing Member
By:
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Name:
Title:
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