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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
/XX/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-5846
THE LIBERTY CORPORATION
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(Exact name of Registrant as specified in its charter)
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South Carolina 57-0507055
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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Post Office Box 789, Wade Hampton Boulevard, Greenville, S. C. 29602
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (803) 268-8436
Securities registered pursuant to Section 12(b) of the Act:
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Name of Each Exchange
Title of Each Class on Which Registered
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Common Stock, no par value per share New York Stock Exchange
Rights to Purchase Series A
Participating Cumulative Preferred Stock New York Stock Exchange
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Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to the filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained herein and will
not be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. X
---
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of January 31, 1994:
Common Stock, No Par Value $385,685,000
The number of shares outstanding of each of Registrant's classes of common
stock as of March 15, 1994:
Common Stock, No Par Value 19,565,002
DOCUMENTS INCORPORATED BY REFERENCE
Portions of The Liberty Corporation Annual Report to Shareholders for the
year ended December 31, 1993 are incorporated into Part II, Items 5, 6, 7, and
8 by reference.
Portions of The Liberty Corporation Proxy Statement for the Annual Meeting
of Shareholders on May 3, 1994 are incorporated into Part III, Items 10, 11,
12, and 13 by reference.
This report is comprised of pages 1 through 237. The exhibit index is on page
34.
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PART I
ITEM 1. BUSINESS
GENERAL
The Registrant, The Liberty Corporation ("the Company") is a holding
company engaged through its subsidiaries primarily in the insurance and
broadcasting businesses. The Company's primary insurance subsidiaries are
Liberty Life Insurance Company ("Liberty Life"), Pierce National Life Insurance
Company ("Pierce National") and, as of late February 1994, North American
National Corporation ("North American") and American Funeral Assurance Company
("American Funeral"). North American's insurance subsidiaries are Pan Western
Life Insurance Company, Brookings International Life Insurance Company and
Howard Life Insurance Company. Together, these insurance subsidiaries offer a
diverse portfolio of individual life and health insurance products. In 1991,
the Company organized Liberty Insurance Services Corporation ("Liberty
Insurance Services") to provide home office support services for unaffiliated
life and health insurance companies, as well as for the Company's insurance
subsidiaries. Other subsidiaries of the Company provide investment advisory
services to the Company's insurance subsidiaries and unaffiliated insurance
companies, and property development and management services to the Company.
The Company's broadcasting subsidiary, Cosmos Broadcasting Corporation
("Cosmos"), currently owns and operates seven network affiliated television
stations, six of which were ranked No. 1 in their markets in the November 1993
Nielsen ratings for sign-on to sign-off.
STRATEGY; RECENT DEVELOPMENTS
The Company's principal strategy is to grow internally and through
insurance acquisitions, while maintaining its emphasis on cost controls.
Management believes that the continuing consolidation in the life insurance
industry presents attractive opportunities for the Company to acquire insurance
companies and blocks of business that complement or fit with the Company's
existing marketing divisions and product lines. As summarized in the table on
the following page, the Company completed two such acquisitions in 1991, two
acquisitions in 1992, one acquisition in 1993 and two acquisitions thus far in
1994, in addition to one pending acquisition which is subject to shareholder
approval and other conditions.
The Company's acquisition strategy has focused on both the home service
and pre-need businesses. Home service business represents the Company's
primary core business, whereas the pre-need business is a relatively new line
of business for the Company. The Company largely entered the pre-need business
with the acquisition of Pierce National in July 1992. Pierce National is a
major provider of pre-need life insurance, a product which pre-funds funeral
services. The Company believes that the pre-need business has favorable
demographics which can provide attractive future premium and earnings growth.
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Recent and Pending Insurance Acquisitions
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Annual Premiums
Acquired
or Proposed
Transaction Date to be Acquired
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Acquisition through reinsurance of a block July 1991 $16 million(1)(2)
of home service business from Kentucky
Central Life Insurance Company
Acquisition through reinsurance of a block December 1991 $21 million(1)
of mortgage protection insurance from
Integon Life Insurance Corporation
Acquisition of Pierce National Life July 1992 $31 million(1)
Insurance Company, a California based (includes $6 million of
provider of pre-need life insurance single pay premiums)
Acquisition of Magnolia Financial October 1992 $15 million(1)
Corporation and its subsidiary, Magnolia
Life Insurance Company, a Louisiana based
provider of primarily home service life
insurance
Acquisition of assets and block of April 1993 $7 million(3)
insurance business from Estate Assurance (includes $6 million of
Company, a Louisiana based provider of single pay premiums)
pre-need life insurance
Acquisition of North American National February 1994 $24 million(3)
Corporation and its subsidiaries, an Ohio (includes $5 million of
based holding company with insurance single pay premiums)
subsidiaries based in Ohio, Colorado and
North Dakota that provide primarily pre-
need and other ordinary life insurance and
accident and health insurance
Acquisition of American Funeral February $59 million(3)
Assurance Company, a Mississippi 1994 (includes $44 million
based provider of primarily pre-need life of single pay premiums)
insurance
Acquisition of State National Capital Pending $10 million(3)
Corporation and its subsidiaries, a
Louisiana based provider of primarily home
service insurance
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(1) Represents amount of annualized premiums acquired at the time of
acquisition.
(2) Net of annual premiums associated with western portion of Kentucky Central
block of business, which the Company sold in December 1991.
(3) Represents amount of annual premiums reported by the selling company in
its 1992 annual financial statements filed under applicable statutory
requirements. See "Additional Information Regarding Recent and Pending
Acquisitions" for information regarding the relative profitability and
other factors affecting the value of these annual premiums.
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ADDITIONAL INFORMATION REGARDING RECENT AND PENDING ACQUISITIONS. The
Company's very recent acquisitions of North American National Corporation and
American Funeral Assurance Company in addition to its 1993 acquisition of the
business of Estate Assurance Company, expand significantly the Company's
pre-need life insurance business that is presently conducted primarily through
Pierce National. The Company believes that its combined pre-need operation is
the second largest distributor of pre-need insurance in the U.S. The Company
is in the process of studying marketing territories and product lines of Pierce
National and the recent pre-need acquisitions with the objective of developing
an optimal strategy to grow its pre-need business. While no final plans are
formalized, it is anticipated that there will be a realignment of territories
and product lines and consolidation of corporate entities.
NORTH AMERICAN. North American was acquired by the Company on
February 23, 1994. A wholly owned subsidiary of the Company merged into North
American, and the shareholders of North American received $14.75 in cash for
each outstanding share of North American, which resulted in approximately $51.9
million in cash being paid by the Company in this transaction. Prior to its
acquisition by the Company, North American was a publicly held holding company
with three principal insurance subsidiaries --- Pan-Western Life Insurance
Company ("Pan-Western"), Brookings International Life Insurance Company
("Brookings") and Howard Life Insurance Company ("Howard Life"). North
American, through its subsidiaries, provides several types of individual
insurance, the most significant of which are ordinary life insurance and
accident and health insurance. Pan-Western is licensed to transact most types
of insurance customarily written by life insurers, but principally writes
ordinary whole life insurance. Insurance providing funding for pre-arranged
funeral contracts and pre-funded funeral benefits presently constitutes 21% of
the total insurance in force of Pan-Western and, in fiscal year 1993,
contributed approximately 71% of its premium revenues. Pan-Western actively
writes insurance in Illinois, Indiana, Iowa, Maryland, Ohio and Pennsylvania,
and is licensed in twelve additional states. However, Ohio accounted for
approximately 50% of Pan-Western's premium volume (gross) during 1993.
Pan-Western has under contract approximately 500 independent agents, who may
represent more than one insurer. Brookings, a wholly-owned subsidiary of
Pan-Western, is licensed to transact all types of insurance normally written by
life insurers, but a significant, although decreasing, amount of Brookings'
insurance in force consists of Student Modified Life Insurance Policies written
on the lives of students, which are modified whole-life policies providing for
lower premium rates until the insured obtains a specific age and providing for
normal whole-life rates thereafter. In addition to student life insurance,
Brookings writes ordinary whole life insurance on the lives of adults and other
term life insurance and accident and health insurance. Brookings also markets
in Nebraska, North Dakota and South Dakota certain ordinary whole life
insurance products that provide pre-funded funeral benefits and funding for
pre-arranged funeral contracts. Such policies presently constitute 19% of the
total insurance in force of Brookings and, in fiscal year 1993, constituted
approximately 85% of its premium revenues. Brookings is licensed to transact
insurance in 12 states, although most insurance written by Brookings is
produced in South Dakota, the state of its domicile. Brookings is affiliated
with approximately 100 independent agents and brokers who may represent more
than one insurer. Howard Life is a Colorado life insurer that was acquired by
Pan-Western in February 1993. Howard Life, which primarily writes pre-need
life insurance, is licensed to transact insurance in 21 states. Howard Life is
in the process of being consolidated with one of the Company's other pre-need
insurance subsidiaries.
AMERICAN FUNERAL. On February 24, 1994, the Company acquired American
Funeral Assurance Company ("American") in a transaction in which a newly
created, wholly owned subsidiary of the Company merged into American. The
merger consideration was paid with a combination of cash and Preferred Stock
1994-B Series of the Company, having an aggregate value of approximately $28.1
million. American will further expand the Company's pre-need life insurance
business. American Funeral is headquartered in Amory, Mississippi, and offers
a portfolio of whole life, term, limited pay life, single premium and
industrial life insurance plans, primarily to provide funding for funeral
expenses. American also writes a small amount of accident and health
insurance. In the past three years, American has increased its focus on
writing ordinary life insurance and has reduced the amount of industrial life
insurance written. During the three year period prior to 1993, American
experienced significant increases in the sale of single premium, three and five
year excess interest and annuity products used to fund the expenses of specific
pre-arranged funerals, in contrast to insurance which is available to apply
against expenses of funerals that are not pre-arranged. American is licensed
in 26 states, but approximately 71% of premiums written in 1993 were derived
from Mississippi, Illinois, Indiana, Kentucky and Tennessee. American markets
its insurance products through a field force of approximately 2,700 agents, who
work for or in connection with approximately 2,250
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funeral homes.
STATE NATIONAL. On June 24, 1993, the Company announced the execution
of a letter of intent to acquire State National Capital Corporation and its
subsidiaries ("State National") in a transaction in which State National will
be merged into the Company. On February 25, 1994, the Company signed a merger
agreement with State National which provided a merger consideration consisting
of a combination of cash, Preferred Stock 1994-A Series of the Company and
Common Stock of the Company, having an aggregate value of approximately $27.5
million. The State National transaction is subject to approval by the
shareholders of State National, regulatory approval and certain other
conditions. State National will further expand the Company's home service
business in Louisiana and will complement the similar business being conducted
by the Company through Magnolia Life, which was acquired in October 1992.
State National is the parent company of State National Life Insurance Company
("State National Life"), Delta National Life Insurance Company, State National
Title Guaranty Company, State National Fire Insurance Company, State National
Mortgage Company and several small subsidiaries. State National's principal
insurance subsidiary is State National Life. State National Life' business is
concentrated primarily in the industrial and ordinary life markets -- primarily
home service insurance which is sold by agents who periodically visit the homes
and businesses of policyholders to collect premiums on a monthly basis.
Individual life insurance comprised 78% of State National Life's total premium
income in 1993. Individual annuities, group life and accident and health
insurance premiums accounted for the remainder of its premium income. State
National Life had $409,286,169 of life insurance in force net of reinsurance at
December 31, 1993. State National Life is licensed in Louisiana and
Mississippi, but derived 100% of its premium income in 1993 from Louisiana.
STRATEGY FOR COST SAVINGS AND GROWTH. The Company's strategy is to
realize cost savings as result of (i) the economies of scale inherent in
increased volumes, (ii) productivity increases through continued implementation
of appropriate technology, and (iii) continued consolidation and streamlining
of the administrative functions for both existing operations and acquired
businesses. There can be no assurance that significant cost savings will be
achieved.
Key elements of the Company's strategy for internal growth include (i)
coinsuring its General Agency universal life business and redeploying the
related capital to higher margin lines, in particular, the home service
business that accounts for a predominant portion of the Company's business,
(ii) applying the Company's expertise in marketing to the pre-need life
insurance market, (iii) utilizing the Company's expertise in home office
support and its related investments in technology by offering a full range of
home office support services to unaffiliated life and health insurance
companies through Liberty Insurance Services, and (iv) using the continued cash
flow from Cosmos to support the growth of the Insurance Group. See "Business -
Insurance Operations -- Liberty Insurance Services."
Although the Company believes that the insurance segment currently
provides more attractive opportunities for acquisitions and achievement of
economies of scale, the Company remains committed to its broadcasting business.
INSURANCE OPERATIONS
LIBERTY LIFE. Liberty Life is a stock life insurance company engaged
in the business of writing a broad range of individual life insurance policies
and accident and health insurance policies. Liberty Life is ranked 112th,
based on ordinary life insurance in force among approximately 1,100 United
States life insurance companies, according to the rankings provided by A.M.
Best Company in their "Best's Insurance Management Reports" (Release No. 25,
June 21, 1993). Although Liberty Life is licensed in forty-nine states, and
the District of Columbia, its focus has been the Southeast and Midwest. It
derived the largest percentages of its premium income in 1993 from South
Carolina (31%), North Carolina (22%), Louisiana (6%) and Ohio (4%). The
Company believes that Liberty Life is the largest provider of home service
business in the Carolinas. In October 1992, the Company acquired Magnolia
Life, headquartered in Lake Charles, Louisiana, which expanded the Company's
home service business by generating additional premiums and extending the
territory. Because the acquisition of Magnolia Life was not considered
significant for financial reporting purposes and because the integration of the
business of Magnolia Life into Liberty Life is almost completed, the operations
and business of Magnolia Life are not discussed separately but have been
integrated into the discussion of Liberty Life.
Life insurance and annuity premiums contributed 79% of Liberty Life's
total premiums
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in 1993, 78% in 1992 and 79% in 1991; accident and health insurance premiums
contributed the remainder.
Liberty Life markets its insurance products through three divisions,
Home Service, Mortgage Protection and General Agency Marketing, each of which
represents a different distribution channel.
HOME SERVICE DIVISION. The Home Service Division is Liberty Life's
largest division, contributing 69% of Liberty Life's premiums in 1993. Home
Service agents of Liberty Life sell primarily individual life, including
universal life and interest-sensitive whole life products, as well as health
insurance. As of December 1993 the Company had approximately 1,605 agents and
managers in this division, which is almost double the number in 1986, operating
out of 62 district offices. These agents periodically visit the insureds'
homes and businesses to collect premiums. Although the Company has broadened
this division's area of concentration beyond the Carolinas, principally through
strategic acquisitions, the Company has maintained a regional focus for its
home service business on the Southeast and Midwest.
MORTGAGE PROTECTION DIVISION. The Mortgage Protection Division is the
second largest of Liberty Life's divisions, contributing 27% of Liberty Life's
premiums in 1993. The Mortgage Protection Division primarily sells decreasing
term life insurance designed to extinguish the unpaid portion of a residential
mortgage upon the death of the insured. This division also sells accidental
death, disability income and credit life insurance. A staff of full-time
representatives and independent brokers offer these products through more than
1,000 financial institutions located throughout the United States. The Company
supports the marketing of these products through direct mail and phone
solicitations.
GENERAL AGENCY MARKETING DIVISION. The General Agency Marketing
Division sells individual universal life, as well as term life and
interest-sensitive life insurance through independent agents. At December 31,
1993, the General Agency Marketing Division had 1000 agents contracted to sell
products. It is the smallest of Liberty Life's marketing divisions,
contributing 3% of Liberty Life's premiums in 1993.
At December 31, 1993, Liberty Life had 582 employees in its home
office who perform administrative and clerical duties.
PIERCE NATIONAL. In July 1992, the Company acquired Pierce National,
a major provider of pre-need life insurance, a product which pre-funds funeral
services. Pierce National, a stock life insurance company, is domiciled in
California, but its principal executive offices are in Greenville, South
Carolina. Pierce National's policies consist primarily of ordinary life
insurance policies for which the premiums are paid in a single payment at the
outset or primarily over a three, five or ten-year period. In April 1993,
Pierce National acquired through reinsurance all of the ordinary life
insurance, representing pre-need life insurance, of Estate Assurance Company,
effective as of January 1, 1993.
Pierce National is currently licensed in 37 states, the District of
Columbia, and ten Canadian provinces. Pierce National also has licensing
applications pending in 4 additional states and one Canadian province. Pierce
National plans to seek licensure in the majority of the remaining states by the
end of 1994. Pierce National derived the largest percentages of its premium
income for 1993 from Canada (30%) and California (33%).
At December 31, 1993, Pierce National had 20 employees in its home
office who perform administrative and clerical duties. Policy administration
is carried out by Liberty Insurance Services who employs approximately 60
people in this area.
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PREMIUM BREAKDOWN. The following table sets forth the insurance
premiums and policy charges of each of Liberty Life's marketing and
distribution divisions for the indicated periods and of Pierce National since
its acquisition by the Company in July 1992.
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YEAR ENDED
DECEMBER 31,
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1993 1992 1991
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(000'S)
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Liberty Life
Home Service $ 137,919 $122,457 $110,276
Mortgage Protection 54,058 60,639 45,508
General Agency Marketing 5,906 4,425(1) 18,684
Other 1,670 1,744 6,049
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199,553 189,265 180,517
Pierce National (Pre-Need) 51,369(3) 19,868(2) --
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Total $250,922 $209,133 $180,517
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(1) Decline reflects the ceding through reinsurance of 80% of this
division's net premiums at December 31, 1991.
(2) Represents premiums from date of acquisition on July 1, 1992.
(3) Increase reflects, in part, the acquisition of Estate Assurance
Company's insurance in force in April 1993.
UNDERWRITING PRACTICES. Liberty Life's underwriting practices for
ordinary life insurance require medical examinations for applicants over age 60
or for policies in excess of certain prescribed face amounts. Approximately 83%
of non-home service life insurance policies issued in 1993 were issued without
medical examinations. In accordance with the general practice in the life
insurance industry, Liberty Life writes life insurance on substandard risks at
increased premium rates. Generally, home service life insurance for
non-universal life products is written for amounts under $5,000 and typically
no medical examination is required. Mortgage protection life insurance is
usually written without medical examination. Substantially all of Pierce
National's policies are written for amounts under $5,000, and no medical
examination is required unless the applicant requests a preferred rate.
REINSURANCE. The Company's insurance subsidiaries use reinsurance in
two distinct ways: first, as a risk management tool in the normal course of
business and second, in isolated strategic transactions to effectively buy or
sell blocks of in force business. The Company's insurance subsidiaries remain
contingently liable with respect to reinsurance ceded should any reinsurer be
unable to meet the obligations assumed by it. As a result of its reinsurance
transactions, the Company's insurance subsidiaries remain contingently liable
on $4.8 billion (24%) of its total $20.2 billion life insurance in force at
December 31, 1993.
For the years ended December 31, 1993, 1992 and 1991, the Insurance
Group had ceded life insurance premiums of $26.1 million, $28.3 million and
$5.5 million, respectively. Accident and Health premiums ceded for the
Insurance Group made up the remainder of ceded premiums which were $3.5
million, $3.0 million, and $2.6 million for the years ended December 31, 1993,
1992, and 1991, respectively.
RISK MANAGEMENT REINSURANCE TRANSACTIONS. Liberty Life reinsures with
other insurance companies portions of the life insurance it writes in order to
limit its exposure on large or substandard risks. The maximum amount of life
insurance that Liberty Life will retain on any life is $300,000, plus an
additional $50,000 in the event of accidental death. This maximum is reduced
for higher ages and for special classes of risks. The maximum amount of life
insurance that Pierce National will retain on any life is $50,000. Insurance
in excess of the retention limit is either automatically ceded under
reinsurance agreements or is reinsured on an individually agreed basis with
other insurance companies. Liberty Life has ceded a significant portion of its
risks on accidental death and disability coverage to other insurance companies.
Liberty Life and Pierce National also have coverage for catastrophic accidents.
At December 31, 1993, Liberty Life and Pierce National had ceded in the normal
course of business portions of their risks to a number of other insurance
companies.
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STRATEGIC REINSURANCE TRANSACTIONS. At December 31, 1991, 80% or $3.2
billion face amount of Liberty Life's General Agency Marketing Division net
insurance in force was coinsured with Life Reassurance Corporation ("Life Re").
The agreement with Life Re also provides for the coinsurance of 50% of this
division's new insurance issued after 1991. The total face value of amounts
ceded to Life Re at December 31, 1993 was $3 billion. In connection with this
transaction, Liberty Life transferred into trust accounts assets supporting the
statutory reserves with respect to the ceded policies. The Company's
investment advisory subsidiary manages the trust portfolio, and the trust
agreements impose asset quality requirements on investments. The Company
believes that the overall credit quality of the assets held in each asset trust
account is as high as that in the asset portfolio owned directly by the
Company. Liberty Life's interest in the Life Reassurance trust accounts is
shown as other invested assets in the consolidated balance sheet. The transfer
of the reserves and the related assets and the receipt of a ceding commission
from this transaction provided the Company with additional statutory capital
which was redeployed to expand higher margin lines.
In order to facilitate the 1991 acquisition through reinsurance of the
Kentucky Central block of business, Liberty Life coinsured 50% of its home
service traditional life insurance business with Lincoln National Life
Reinsurance Insurance Company. The Lincoln National reinsurance has been
accounted for under generally accepted accounting principles as financial
reinsurance, and no reserve reduction has been taken for the business ceded nor
have the related assets been removed from the consolidated balance sheet. The
reinsurance contract contains an escrow agreement that requires assets equal to
the reserves reinsured, as determined under statutory accounting principles, be
held in escrow for the benefit of this block of business.
The Company uses assumption reinsurance to effectively acquire blocks
of in force business by acting as the "reinsurer" for other insurance
companies. For instance, the Company acquired the Kentucky Central, Integon
and Estate Assurance blocks in this manner.
OPERATIONS. The administrative functions of underwriting and issuing
new policies, and the ongoing servicing and claims settlement of in force
policies, are centralized at the home office of Liberty Life and Pierce
National in Greenville, South Carolina. In acquiring additional blocks of
insurance business, the Company's strategy is to integrate the administrative
functions into its existing operations, either directly or through Liberty
Services, as soon as practical after the effective date of the acquisition.
The Company believes that this centralization permits economies of scale and
promotes greater cost efficiencies. The administrative operations of both
Pierce National and Magnolia were moved to Greenville during the first three
months of ownership. The Magnolia business has been fully integrated into
Liberty Life's policy administration system for its home service business. In
contrast, Pierce National's pre-need business is serviced by Liberty Insurance
Services and is in the process of being converted onto a new system. As
indicated earlier, however, the Company plans to evaluate appropriate ways to
consolidate the pre-need business presently conducted through Pierce National
with the pre-need business acquired through the Company's recent acquisitions
of North American and American Funeral. See "the Company Business - Strategy;
Recent Developments."
The Company's Insurance Group services approximately 2.7 million
policies representing $23.4 billion of life insurance in force, including
policies representing approximately $15.4 billion of insurance in force for
which Liberty Life and Pierce National are primarily liable and $8.0 billion of
insurance for which others are primarily liable, either because of reinsurance
or because Liberty Services contracted to service the policies of others
without any assumption of the underlying liability. Approximately 166,405
policies representing $3.4 million of life insurance in force were issued
during 1993. The Company intends to continue its focus on reducing the unit
costs of administrative services by increasing the volume of business through
acquisitions of blocks of business similar in nature to its existing business,
by internal growth in those businesses, and by investing in up-to-date
technology to further improve efficiency in its operations.
During the past five years the Company has made $20.0 million of
capital expenditures net of amortization for new technology designed to handle
increasing volumes of the insurance business, while controlling operating costs
associated with the Company's insurance operations. In addition to the
Company's internal efforts, since March 1989 the Company has worked closely
with Policy Management Systems Corporation ("PMSC") in developing a new fully
integrated policy administration system. The first stage has been completed
and will be integrated into operations in 1994. During the third quarter of
1993, PMSC completed a significant acquisition of a full line of life insurance
software. The Company's contractual agreement with PMSC
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provides a long term relationship including access to all life insurance
related software available from PMSC, both existing products and those enhanced
and/or acquired in the future. The Company plans to utilize PMSC's recently
acquired software in completing its new policy administration system. The
Company expects to benefit from this new system not only by increasing the
productivity of its own insurance subsidiaries, but also by using this system
when offering home office services to non-affiliated life insurance companies
on a fee basis through Liberty Services.
LIBERTY INSURANCE SERVICES. Consistent with the Company's strategy of
leveraging its existing capital and technical expertise, the Company organized
Liberty Insurance Services in 1991 to provide a wide range of home office
support services to unaffiliated life and health insurance companies on a fee
basis, as well as to the Company's insurance subsidiaries. These services
include underwriting, preparation of policies, accounting, customer service and
claims processing and adjudication and can be tailored to support the special
features of insurance products offered by other companies that desire these
services. The Company's strategy is to target (i) insurance companies that
have closed blocks of business that are expensive to administer, (ii) insurance
companies that have start-up or new product lines requiring new support levels,
(iii) small to midsize insurance companies that cannot justify large
investments in home office technology, and (iv) insurance companies acquired by
financial investors lacking experience in providing home office support.
Liberty Insurance Services believes that its economies of scale will permit its
customers to reduce their home office support costs and focus resources on
marketing their insurance products. Although Liberty Insurance Services is
still in the development stage and the revenues generated to date have not been
material, the Company believes that Liberty Insurance Services has significant
growth potential. Liberty Insurance Services has 271 employees who provide
services to the Company's insurance subsidiaries as well as to its outside
clients.
INSURANCE COMPETITION. The Company's Insurance Group competes with
approximately 2,300 United States and Canadian insurance companies, some of
which have greater financial resources, broader product lines and larger
staffs. In addition, banks and savings and loan associations in some
jurisdictions compete with the Company's Insurance Group for sales of life
insurance products, and the Insurance Group competes with banks, investment
advisors, mutual funds and other financial entities to attract investment funds
generally.
Competition in the home service business is largely regional or local,
largely dependent on the quality of the local management, and is less price
competitive than other insurance markets. The home service business involves
frequent contacts by agents with their customers. Liberty emphasizes to its
agents the importance of taking advantage of these contacts to establish
personal relationships which the Company believes add stability to its home
service business.
The Company believes that competition in the pre-need market is
national and intends to expand the market of its pre-need business. The
Company intends to capitalize on its affinity marketing expertise gained in the
mortgage protection insurance business by targeting national chains of funeral
homes and by supplementing this effort with direct marketing and telemarketing
campaigns.
The Company currently believes that it ranks second nationally in
mortgage protection insurance with an estimated 15% market share. Slightly
over 70% of the mortgage protection market share is believed to be held by four
companies and 33% of the market is held by the market leader. For both the
Company and the mortgage protection industry generally, falling interest rates
which have fueled mortgage refinancing have adversely affected persistency of
existing business, as well as new sales.
The Company has a very small presence in the general agency universal
life business. This is an extremely competitive line of business where
economies of scale are key to success.
INSURANCE REGULATION. Like other insurance companies, the Company's
insurance subsidiaries are subject to regulation and supervision by the state
or other insurance department of each jurisdiction in which they are licensed
to do business. These supervisory agencies have broad administrative powers
relating to the granting and revocation of licenses to transact business, the
licensing of agents, the approval of policy forms, reserve requirements and the
form and content of required financial statements. As to its investments, each
of the Company's insurance subsidiaries must meet the standards and tests
established by NAIC and, in particular, the investment laws and regulations of
the states in which each subsidiary is domiciled. The
9
<PAGE> 10
insurance companies are also subject to laws in most states that require
solvent life insurance companies to pay guaranty fund assessments to protect
the interests of policyholders of insolvent life insurance companies.
In December 1991, the NAIC adopted two new reserve requirements (the
Asset Valuation Reserve or "AVR" and the Interest Maintenance Reserve or "IMR")
to replace the former Mandatory Securities Valuation Reserve or "MSVR." These
reserves are generally required by state insurance regulatory authorities to be
established as a liability on a life insurer's statutory financial statements
beginning with the 1992 annual statement, but do not affect financial
statements of the Company prepared in accordance with generally accepted
accounting principles. AVR establishes a statutory reserve for mortgage loans,
equity real estate and joint ventures, as well as for the types of investments
(fixed maturities and common and preferred stock) that have been subject to the
MSVR. AVR generally captures all realized and unrealized gains and losses on
such assets, other than those resulting from changes in interest rates. IMR
captures the net gains or losses that are realized upon the sale of fixed
income securities (bonds, preferred stocks, mortgage-backed securities and
mortgage loans) and that result from changes in the overall level of interest
rates, and amortizes these net realized gains or losses into income over the
remaining life of each investment sold, thus limiting the ability of an insurer
to enhance statutory surplus by taking gains on fixed income securities. The
implementation of the IMR and AVR has not had a material impact on the
Company's insurance subsidiaries' surplus nor Liberty Life's ability to pay
dividends to the Company.
In recent years the NAIC has approved and recommended to the states
for adoption and implementation several regulatory initiatives designed to
decrease the risk of insolvency of insurance companies in general. These
initiatives include the implementation of a risk-based capital formula for
determining adequate levels of capital and surplus and further restrictions on
an insurance company's payment of dividends to its shareholders. To date,
South Carolina has not adopted the NAIC risk-based capital model act; however,
effective October 1, 1993, it does require prior notice to the South Carolina
Commissioner of dividend distributions to shareholders, and permits the
Commissioner to disapprove or limit the dividend within 30 days of notice if
the dividend or distribution is deemed an unreasonable strain on surplus. The
NAIC risk-based capital model act or similar initiatives may be adopted by
South Carolina or the various states in which Liberty Life and the Company's
other insurance subsidiaries are licensed, but the ultimate content and timing
of any statutes and regulations adopted by the states cannot be determined at
this time.
Under the NAIC's risk-based capital initiatives, insurance companies
must calculate and report information under a risk-based capital formula,
beginning with their year-end 1993 statutory financial statement. This
information is intended to permit insurance regulators to identify and require
remedial action for inadequately capitalized insurance companies, but is not
designed to rank adequately capitalized companies. The NAIC initiatives
provide for four levels of potential involvement by state regulators for
inadequately capitalized insurance companies, ranging from regulatory control
of the insurance company to a requirement for the insurance company to submit a
plan to improve its capital. Implementation of the substantive regulatory
authority contemplated by this NAIC initiative depends on adoption by the
states of the NAIC Model Act on risk-based capital requirements. The NAIC has
determined to deny accreditation to state insurance regulatory authorities in
states failing to adopt this risk-based capital Model Act by January 1, 1996.
Based on statutory financial statements at December 31, 1993, Liberty Life and
Pierce National are more than adequately capitalized under the formula.
Another NAIC Model Act limits dividends that may be paid in any
calendar year without regulatory approval to the lesser of (i) 10% of the
insurer's statutory surplus at the prior year-end, or (ii) the statutory net
gain from operations of the insurer (excluding realized capital gains and
losses) for the prior calendar year. The NAIC has determined that it will not
grant accreditation to any state insurance regulatory authority in a state that
has not enacted statutes "substantially similar" to the NAIC Model Act
regulating the payment of dividends by insurers. The South Carolina statutes
applicable to Liberty Life do not conform to the NAIC Model Act (South Carolina
limits dividends to the greater of 10% of statutory surplus or gain from
operations) and the legislature of South Carolina may consider legislation to
bring South Carolina laws into substantial compliance with the NAIC Model Act.
Under current South Carolina law, without prior approval from the
South Carolina Commissioner of Insurance, dividend payments from Liberty Life
to the Company are limited to the greater of the prior year's statutory gain
from operations or 10% of the prior year's statutory surplus. This resulted in
a maximum allowable dividend in
10
<PAGE> 11
1993 of $23.2 million without approval from the South Carolina Insurance
Commissioner. Actual dividends paid by Liberty Life were $12.8 million in
1993, $8.4 million in 1992 and $22.7 million in 1991. If South Carolina were
to adopt the NAIC Model Act, there can be no assurance the Company can obtain
approval to pay dividends in excess of the statutory maximum, but the Company
has been successful in the past in obtaining such approvals.
In accordance with the rules and practices of the NAIC and in
accordance with state law, every insurance company is examined generally once
each three years by examiners from its state of domicile and from several of
the other states where it is licensed to do business. Liberty Life and Pierce
National's most recent examinations were for the period ending December 31,
1990. All states and jurisdictions (including the Canadian provinces where
Pierce National is also licensed) have their own statutes and regulations,
which vary in certain respects. However, the NAIC Model Act and regulations
have tended to make the various states' regulation more uniform. Pierce
National has agreed with several states to not pay dividends until after 1995.
The Office of the Superintendent of Financial Institutions - Canada,
and the Canadian provinces regulate and supervise the Canadian operations of
Pierce National in the same manner as the NAIC and the states. Separate
financial statements are required to meet the Canadian regulatory requirements
and a separate examination is conducted by the Canadian regulatory agencies.
The Company's insurance subsidiaries are also subject to regulation as
an insurance holding company system under statutes which have been enacted in
their states of domicile and other states in which they are licensed to do
business. Pursuant to these statutes, Liberty Life and Pierce National are
required to file an annual registration statement with the Office of the
Commissioner of Insurance and to report all material changes or transactions.
In addition, these statutes restrict the ability of any person to acquire
control (generally presumed at 10% or more) of the outstanding voting
securities of the Company without prior regulatory approval.
BROADCASTING OPERATIONS
Cosmos currently owns and operates the following television stations,
six of which were ranked No. 1 in their market by the November 1993 Nielsen
ratings for sign-on to sign-off:
<TABLE>
<CAPTION>
Station Primary Market Affiliation VHF/UHF
------- -------------- ----------- ---------
<S> <C> <C> <C>
WAVE-TV Louisville, Kentucky NBC VHF
WIS-TV Columbia, South Carolina NBC VHF
WSFA-TV Montgomery, Alabama NBC VHF
KLPC-TV Lake Charles, Louisiana NBC VHF
WTOL-TV Toledo, Ohio CBS VHF
KAIT-TV Jonesboro, Arkansas ABC VHF
WFIE-TV Evansville, Indiana NBC UHF
</TABLE>
Cosmos has approximately 617 full-time employees and 80 part-time
employees.
NETWORK AFFILIATES. All of Cosmos' stations are affiliated with one
of the major networks - NBC, ABC, CBS. The affiliation contracts provide that
the network will offer to the affiliated station a variety of network programs,
both sponsored and unsponsored, for which the station has the right of first
refusal against any other television station located in its community. The
station has the right to reject or accept the programs offered by the network
and also has the right to broadcast programs either produced by the station or
acquired from other sources. The major networks provide their affiliated
stations with programming and sell the programs, or commercial time during the
programs, to national advertisers. Each affiliate is compensated by its
network for carrying the network's programs. That compensation is based on the
local market rating strength of the affiliate and the audience it helps bring
to the network programs. The major networks typically provide programming for
approximately 90 hours of the approximately 135 hours per week broadcast by
their affiliated stations.
The NBC affiliation contracts with each of Cosmos' NBC affiliated
stations have been continuously in effect for over thirty-eight years. Cosmos'
CBS affiliation contract and ABC affiliation contract have each been
continuously in effect for approximately thirty years.
11
<PAGE> 12
SOURCES OF COSMOS' TELEVISION OPERATING REVENUES. The following table
shows the approximate percentage of Cosmos' gross television operating revenues
by source excluding other income for the three years ended December 31, 1993:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Local and Regional Advertising 60% 57% 56%
National Spot Advertising 32 31 32
Network Compensation 7 8 9
Political Advertising 1 4 3
</TABLE>
Local and regional advertising is sold by station's own sales
representatives to local and other non-national advertisers or agencies.
Generally these contracts are short-term, although occasionally longer-term
packages will be sold. National spot advertising (generally a series of spot
announcements between programs or within the station's own programs) is sold by
the station or its sales representatives directly to agencies representing
national advertisers. Most of these national sales contracts are also
short-term, often covering spot campaigns running for thirteen weeks or less.
Network compensation is paid by the network to its affiliated stations for
broadcasting network programs that include advertising sold by the network to
agencies representing national advertisers. Political advertising is generated
by national and local elections, which is by definition very cyclical.
A television station's rates are primarily determined by the estimated
number of television homes it can provide for an advertiser's message. The
estimates of the total number of television homes in the market and of the
station's share of those homes is based on the AC Nielsen industry wide
television rating service. The demographic make-up of the viewing audience is
equally important to advertisers. Twenty-five to fifty-four year old and
eighteen to forty-nine year old adults are the demographics most desired by
advertisers. A station's rate card for national and local advertisers takes
into account, in addition to audience delivered, such variables as the length
of the commercial announcements and the quantity purchased. The payments by a
network to an affiliated station are largely determined by the total homes
delivered, the relative preference of the station among the viewers in the
market area and other factors related to management and ownership.
TELEVISION BROADCASTING COMPETITION. The television broadcasting
industry competes with other leisure time activities for the time of viewers
and with all other advertising media for advertising dollars. Within its
coverage area a television station competes with other stations and with other
advertising media serving the same area. The outcome of the competition among
stations for advertising dollars in a market depends principally on share of
audience, advertising rates and the effectiveness of the sales effort.
Cosmos believes that each of its stations has a strong competitive
position in its local market, enabling it to deliver a high percentage of the
local television audience to local advertisers. Cosmos' commitment to local
news programming, combined with syndicated programming, are important elements
in maintaining Cosmos' current market positions.
Another source of competition is cable television, which brings
additional television programming, including pay cable (HBO, Showtime, Movie
Channel, etc.), into subscribers' homes in a television station's service area.
Cable television competes for the station's viewing audience and, on a more
modest scale, its advertising.
Federal law now requires that cable operators negotiate with
television operators for the right to carry a station's signal (programs) on
cable systems. Cosmos recently used this "retransmission consent" negotiation
to forge long term partnerships with cable operators with the purpose of
developing secondary revenue streams from programs and services specifically
produced for cable. Cosmos also recently formed CableVantage Inc., a marketing
company designed to assist local cable operators in the sale of commercial time
available in cable network programs.
Subscription Television, an over-the-air pay television service, and
Multipoint Distribution Service, a microwave-distributed pay television
service, also compete for television audiences. In addition, licenses are now
being granted for Multichannel Multipoint Distribution Service. None of these
services has significantly fractionalized the audiences of commercial
television stations.
12
<PAGE> 13
The use of home video recording and playback (VCR) equipment is
growing and provides another element of competition for television audiences.
Two television broadcast services are still in the developmental
stage. Low power television, sometimes referred to as "neighborhood TV," is
authorized to operate in a limited coverage area. Authorizations are being
granted by the FCC on a lottery basis. A second developmental service is
direct broadcast satellite which transmits television signals from satellite
transponders to parabolic antennae. Neither of these new services has shown
the potential for significant effects on commercial television broadcasting.
FEDERAL REGULATION OF BROADCASTING. Cosmos' broadcasting operations
are subject to the jurisdiction of the FCC under the Communications Act. The
Communications Act empowers the FCC, among other things, to issue, revoke or
modify broadcasting licenses; to assign frequency bands; to determine the
location of stations; to regulate the apparatus used by stations; to establish
areas to be served; to adopt such regulations as may be necessary to carry out
the provisions of the Communications Act and to impose certain penalties for
violation of such regulations.
Television broadcasting licenses may be granted for a maximum term of
five years and, upon application, and in the absence of a conflicting
application or a petition to deny which raises a substantial and material issue
of relevant fact (which would require the FCC to hold a hearing) or adverse
findings as to the licensee's qualifications, are usually renewed without
hearing by the FCC for additional five year terms. Cosmos' renewal
applications have always been granted without hearing for the full term. The
Communications Act prohibits the transfer of a license or the transfer of
control or other change in control of a licensee without prior approval of the
FCC. The Hipp family is considered to have de facto control over Cosmos, and
any action that would change such control would require prior approval of the
FCC.
Under FCC regulations governing multiple ownership, a license to
operate a television station generally will not be granted to any person (or
persons under common control) if such person directly or indirectly holds a
significant interest in (i) another radio or television station, with an
overlapping service area, (ii) more than 12 television stations or (iii) less
than 12 television stations if their audience coverage exceeds 25% of total
United States households. FCC regulations also limit ownership of television
stations by those having interests in cable television systems and daily
newspapers serving the same service area as the television stations. The rules
provide that each case will be considered on the basis of its particular facts.
During 1994, legislation is expected which will remove many of the ownership
restrictions now encumbering broadcasters. Congress has publicly stated that
broadcasters need regulatory relief in order to effectively compete in the
multi-channel environment of the future commonly referred to as the "electronic
information superhighway".
There are additional FCC Regulations and Policies, and regulations and
policies of other federal agencies, principally the Federal Trade Commission,
regulating network/affiliate relations, political broadcasts, children's
programming, advertising practices, equal employment opportunity, carriage of
television signals by CATV systems, application and reporting procedures and
other areas affecting the business and operations of television stations.
INVESTMENTS AND INVESTMENT POLICY
The Company derives a substantial portion of its total revenues from
investment income. Invested assets are held primarily through Liberty Life and
Pierce National, although the parent company and its real estate subsidiary
held $49.8 million (59%) of the $84.5 million of the consolidated investment
real estate portfolio at December 31, 1993. The Company's investment advisory
subsidiary manages securities and non-real estate related assets for the
Company and its subsidiaries, while the Company's property development and
management subsidiary manages all investment real estate assets and the
mortgage loan portfolio for the Company and its subsidiaries.
All investments made for the Company are governed by the general
requirements and guidelines established and approved by the Company's
Investment Committee and by qualitative and quantitative limits prescribed by
applicable insurance laws and regulations. The Committee, comprised of seven
senior officers of the Company and appropriate subsidiaries, meets monthly to
set and review investment policy and to approve current investment plans.
13
<PAGE> 14
The Company follows a value-oriented investment philosophy in which
purchases are generally made with the intention of holding securities to
maturity. Investment philosophy is focused on the intermediate to longer-term
horizon and is not oriented towards trading. As market relationships change
and individual securities become increasingly over or undervalued, securities
may be sold prior to maturity and replaced with similar securities. In
addition, the Company attempts to minimize liquidity risk by using an
integrated asset/liability matching process. As an additional risk control
measure, the Company's investment strategy focuses on diversity through a
relatively large number of smaller investments in contrast to larger, more
concentrated investments. As of December 31, 1993, the Company's invested
assets had an aggregate book value of $1.4 billion.
BONDS. As of December 31, 1993, bonds comprised 59% ($797.4 million)
of the Company's invested assets and had a weighted average credit rating of
AA. As of December 31, 1993, publicly traded bonds comprised 93% of the total
bond portfolio. The Company's emphasis on call protection as part of its
investment strategy makes its portfolio less vulnerable to prepayments which
reduce portfolio yield during low interest rate environments. However, due to
historically low interest rates, the Company experienced a significant amount
of prepayments during 1993, which have accordingly been reinvested at lower
interest rates causing downward pressure on investment income. A continuation
of low interest rates can be expected to result in a continued high level of
prepayments in the future.
EQUITY SECURITIES. As of December 31, 1993, approximately 1.5% ($20.3
million) of the Company's invested assets were common stocks and 8% ($108.4
million) were preferred stocks. Common stocks and nonredeemable preferred
stocks are carried on the Company's balance sheet at market if owned by the
Company's insurance subsidiaries and at the lower of cost or market if owned by
the parent company or one of its non-insurance subsidiaries. As of December
31, 1993, all of the Company's common stock and nonredeemable preferred stock
were held by Liberty Life and Pierce National. Redeemable preferred stocks are
carried at amortized cost which includes write-downs for impaired value where
appropriate. At December 31, 1993, redeemable preferred stock represented 4.4%
($60.3 million) of the Company's investment portfolio.
MORTGAGES. As of December 31, 1993, mortgage loans comprised 12.2%
($165.8 million) of the Company's invested assets. Mortgage loans on real
estate are carried at amortized cost which include valuation adjustments for
impaired value where appropriate. As of December 31, 1993, 1.59% of the
Company's mortgage loan portfolio was more than 60 days delinquent, compared to
the industry average of 4.54% at December 31, 1993 (as reported in the American
Council of Life Insurance's "Investment Bulletin" dated March 1, 1994). It is
the Company's policy to stop accruing mortgage loan interest income for
financial statement purposes once a loan is more than 90 days past due. At
that time the accrued interest on the loan is deducted from income.
REAL ESTATE. As of December 31, 1993, 6.2% ($84.5 million) of the
Company's invested assets were real estate. Liberty Life holds 41% ($34.7
million) of the real estate portfolio and the remainder is held by the parent
company and its real estate subsidiary. The Company's real estate assets are
comprised primarily of residential land development, business parks, business
property rentals and shopping centers. Residential land development is
partially developed and undeveloped properties zoned residential that are sold
to home builders. Business parks are partially developed and undeveloped
properties zoned for business use that are primarily sold to various
industrial, manufacturing, and office users. The Company records gains
(losses) on the sale of residential land development and business parks as
operating income. Business property rentals and shopping centers are leased to
commercial and rental tenants, respectively, and gains (losses) from sales of
such properties are recorded as investment gains (losses). The Company's real
estate investment properties are carried at cost less accumulated depreciation
and valuation adjustments for impaired value where appropriate.
The Company's methodology for determining impairment of a
property begins with an annual review of estimated value for each property in
the portfolio. This process uses a discounted cash flow method to value
partially developed land for resale, a combination of comparable tract sales
and discounted cash flow to value undeveloped land and capitalization rates
relative to net operating cash flow for developed properties. As of December
31, 1993, the Company does not believe that the values of these properties have
been impaired from their carrying values.
14
<PAGE> 15
EXECUTIVE OFFICERS
The following is a list of the Executive Officers of the Registrant
indicating their age and certain biographical data.
FRANCIS M. HIPP, Age 83 (1)
Chairman of the Board of Liberty since 1967
W. HAYNE HIPP, Age 54 (1)
Chairman of the Board of Liberty Life from January 1, 1979 - February 9, 1988;
September 18, 1989 - present
Chairman of the Board of Cosmos - May 1, 1989 - February 18, 1992
President and Chief Executive Officer of Liberty since September, 1981
MARTHA G. WILLIAMS, Age 51
Vice President, General Counsel & Secretary of Liberty since January, 1982
Vice President, General Counsel & Secretary of Liberty Life since
January, 1982
Secretary and Counsel of Cosmos since February 11, 1982
BARRY L. EDWARDS, Age 46
Vice President and Treasurer of Liberty since January 1, 1979
Treasurer of Cosmos since January 22, 1979
M. PORTER B. ROSE, Age 52
President, Liberty Investment Group, Inc. since March 24, 1992
Chairman, Liberty Capital Advisors, Inc. since January 1, 1987
Chairman, Liberty Properties Group, Inc. since January 1, 1987
JENNIE M. JOHNSON, Age 47
Vice President, Planning, of Liberty since February 1, 1986
WILLIAM S. KLECKLEY, Age 50
Vice President & Controller of Liberty since July 26, 1993
RALPH L. OGDEN, Age 52
President of Liberty Life since February 9, 1988
Executive Vice President of Liberty Life November 28, 1983 - February 9, 1988
JAMES M. KEELOR, Age 51
President of Cosmos since February 18, 1992
Vice President, Operations, of Cosmos from December, 1989 to February 18, 1992
Vice President & General Manager of WDSU-TV from January, 1987 to
December, 1989
(1) W. Hayne Hipp is the son of Francis M. Hipp.
OTHER BUSINESS
In addition to the operating subsidiaries, the Company has other minor
organizations. These include the Company's administrative staff, an investment
advisory company, a property development & management company and
transportation operations. There are approximately 102 full-time employees in
these areas.
RESEARCH ACTIVITIES
The Company and its subsidiaries do not have a formal program of
research on new or improved products. As a part of its operation, each company
continues to seek improved methods and products. No material amounts were
spent in this area during 1993.
INDUSTRY SEGMENT DATA
Information concerning the Company's industry segments is contained in
Selected Financial Data on page 37 of The Liberty Corporation Annual Report to
Shareholders and is filed as Exhibit 13 on page 183 of this report and is
incorporated in this Item 1 by reference.
15
<PAGE> 16
ITEM 2. PROPERTIES
MAIN OFFICES. The main office of the Company, Liberty Life and Cosmos
is located on a 30-acre tract in Greenville, S. C. and consists of three
buildings totalling approximately 360,000 square feet plus parking. The main
office facilities are owned by the Company and Liberty Life, a wholly owned
subsidiary of the Company. Liberty Life also owns three branch office
buildings located in various cities in South Carolina and Kentucky and leases
branch office space in various cities. Leases are normally made for terms of
one to ten years.
Cosmos owns its television broadcast studios, office buildings and
transmitter sites in Columbia, SC; Montgomery, AL; Toledo, OH; Louisville, KY;
Evansville, IN; Jonesboro, AR; and Lake Charles, LA.
The following properties are owned by the Company or a wholly owned
subsidiary.
INDUSTRIAL PROPERTY
<TABLE>
<CAPTION>
Name Description/Size Location
- --------------------------- --------------------------- ----------------------
<S> <C> <C>
Liberty Life
Woodland Corporate Center 133 acres, being developed Tampa, FL
Northpoint 349 acres, being developed Columbia, SC
SouthChase 229 acres, developed Greenville, SC
The Exchange 2 acres, developed Greenville, SC
Ridgeview Center 17 acres, developed Spartanburg, SC
LPC of SC, Inc.
Fairview Road/I-385 298 acres, to be developed Fountain Inn, SC
</TABLE>
OFFICE & OTHER BUILDINGS
<TABLE>
<CAPTION>
Name Description/Size Location
- --------------------------- --------------------------- ----------------------
<S> <C> <C>
LIBCO of Florida, Inc.
Woodland Business Center I 88,800 sq. ft. on 8 acres Tampa, FL
Woodland Business Center II 45,351 sq. ft. on 9.3 acres Tampa, FL
Liberty Life
Lindsay Parking 7,534 sq. ft. leased Greensboro, NC
Print Shop 10,749 sq. ft. unoccupied Greensboro, NC
Leased to B.F. Goodrich Co 11,630 sq. ft. leased Greensboro, NC
Dixie Sales Co. 19,699 sq. ft. unoccupied Greensboro, NC
Dunwoody Center 17,262 sq. ft. unoccupied DeKalb County, GA
1800 Building 18,000 sq. ft. part leased W. Palm Beach, FL
LPC of SC, Inc.
Leased to Aloca
Fujikura, Ltd. 222,670 sq. ft. on 22 acres Duncan, SC
Leased to Perrigo Co. 72,000 sq. ft. on 9 acres Greenville, SC
Jumper House Lot 44 Phase III Hampton's
Grant unoccupied Columbia, SC
LPG Development Corp.
Spec I @ Northpoint 70,800 sq. ft. on 10 acres Columbia, SC
SouthChase Development Corp.
Leased to Stone Safety 104,200 sq. ft. on 11 acres Greenville, SC
Spec IV @ SouthChase 49,500 sq. ft. on 8 acres Greenville, SC
Spec V @ SouthChase 102,400 sq. ft. on 12.3 acres Greenville, SC
</TABLE>
16
<PAGE> 17
RESIDENTIAL LAND
<TABLE>
<CAPTION>
Name Description/Size Location
- --------------------------- --------------------------- ----------------
<S> <C> <C>
Liberty Life
Prestwick 108 acre, first home Fulton County, GA
Carlos Tract 444 acre, first home Gwinnett County, GA
Jamesford Meadows 194 acre, first home Greensboro, NC
Hampton's Grant 106 acre, first home Columbia, SC
Cedar Grove 56 acre, first home Lexington County, SC
Rose Creek 97 acre, first home Richland County, SC
Liberty Downs 133 acre, first home Williamson Cty., TN
LPC of SC, Inc.
Amberleigh 73 acre, first home Fulton County, GA
Devonhall 68 acre, first home Fulton County, GA
Preston 32 acre, first home Burlington, NC
Ashford 305 acre, first home Columbia, SC
Adam's Run 70 acre, first home Greenville, SC
Neely Farm 92 acre, first home Greenville, SC
Deerspring at Neely Farm 88 acre, first home Greenville, SC
Laurel Brook at Neely Farm 69 acre, first home Greenville, SC
Miramont 69 acre, first home Gwinnett Cty., GA
Storza 117 acre, first home Forsyth Cty., GA
Planter's Row 110.85 acre, first home Greenville, SC
Hawthorne Ridge at
Neely Farm 67 acre, first home Greenville, SC
Berkshire Park 65 acre, first home Greenville, SC
</TABLE>
SHOPPING CENTERS
<TABLE>
<CAPTION>
Name Description/Size Location
- --------------------------- --------------------------- ----------------
<S> <C> <C>
LIBCO of Florida, Inc.
Village Market Place 54,417 sq. ft. on 7 acres Orange City, FL
LPC of SC, Inc.
Rushmore Place 13,585 sq. ft. on 1 acres Greenville, SC
</TABLE>
TIMBER TRACTS
<TABLE>
<CAPTION>
Name Description/Size Location
- --------------------------- --------------------------- --------------------
<S> <C> <C>
Liberty Life
Wolf Mtn/Fox Hill 15 acres undeveloped land Cashiers, NC
</TABLE>
UNDEVELOPED LAND
<TABLE>
<CAPTION>
Name Description/Size Location
- --------------------------- --------------------------- ----------------------
<S> <C> <C>
Liberty Life
Edwards/Wade Hampton 6 acres, adjacent to main
office of Registrant Greenville, SC
North Creek Land 60 acres, undeveloped land Anderson, SC
LPC of SC, Inc.
Haltiwanger 94 acres Columbia, SC
Scuffletown Road 18 acres, adjacent to
Adam's Run Greenville, SC
</TABLE>
17
<PAGE> 18
Park Avenue Associates, Inc., a wholly owned subsidiary
of Liberty Life, has a 60% interest as General Partner of Tanyard Creek
Partnership. The partnership owns a 49,500 square foot office building.
Greensboro Holdings, Inc., a wholly owned subsidiary of
Liberty Life, owns the mortgage loans which funded the sales of a hotel and a
parking deck in Greensboro, NC.
PROPOSED ACQUISITION OF ADDITIONAL INVESTMENT
PROPERTIES. In March 1994, the Company finalized an agreement to purchase a
portion of the real estate assets of SCANA Development Corporation, a
subsidiary of SCANA Corporation, for approximately $50 million in cash. This
transaction is expected to close in April and May 1994, and will significantly
increase the real estate portfolio of the Company.
The properties to be purchased from SCANA are located
primarily in South Carolina and include residential, commercial and industrial
projects, which are similar to the Company's existing real estate investments
throughout the Southeast. The properties to be purchased include residential
projects under development, undeveloped land held for future development,
income producing commercial properties consisting of shopping centers and
office buildings, undeveloped land intended for possible development and/or
sale, and of land to be developed as business parks.
18
<PAGE> 19
<TABLE>
<S> <C>
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently engaged in legal proceedings of material consequence other than ordinary
routine litigation incidental to its business. Any proceedings reported in prior filings have been settled
or otherwise satisfied.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
STOCKHOLDER MATTERS
Information concerning the market for the Company's Common Stock and related stockholder matters is
contained on the inside back cover of The Liberty Corporation Annual Report to Shareholders and is filed as
Exhibit 13 on page 182 of this report and is incorporated in this Item 5 by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data for the Company is contained on page 37 of The Liberty Corporation Annual Report to
Shareholders and is filed as Exhibit 13 on page 183 of this report and is incorporated in this Item 6 by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations is contained on pages
38-47 of The Liberty Corporation Annual Report to Shareholders and is filed as Exhibit 13 on pages 184-193 of
this report and is incorporated in this Item 7 by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
The Company's Consolidated Financial Statements and Report of Independent Auditors are contained on pages
10-35 of The Liberty Corporation Annual Report to Shareholders and is filed as Exhibit 13 on pages 194-219
of this report and are incorporated in this Item 8 by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Directors of the Company is contained in The Liberty Corporation Proxy Statement for
the May 3, 1994 Annual Meeting of Shareholders and is incorporated in this Item 10 by reference.
Information concerning Executive Officers of the Company is submitted in a separate section of this report
in Part I, Item 1 on page 15 and is incorporated in this Item 10 by reference.
</TABLE>
19
<PAGE> 20
<TABLE>
<S> <C>
ITEM 11. EXECUTIVE COMPENSATION
Information concerning Executive Compensation and transactions is contained in The Liberty Corporation
Proxy Statement for the May 3, 1994 Annual Meeting of Shareholders and is incorporated in this Item 11 by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning Security Ownership of Certain Beneficial Owners and Management is contained in The
Liberty Corporation Proxy Statement for the May 3, 1994 Annual Meeting of Shareholders and is incorporated
in this Item 12 by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning Certain Relationships and Related Transactions is contained in The Liberty
Corporation Proxy Statement for the May 3, 1994 Annual Meeting of Shareholders and is incorporated in this
Item 13 by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
</TABLE>
(A)(1) AND (2). LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
The following consolidated financial statements of
The Liberty Corporation and Subsidiaries are included
in the Company's Annual Report to Shareholders for
the year ended December 31, 1993, filed as Exhibit 13
to this report and incorporated in Item 8 by
reference:
Consolidated Balance Sheets - December 31, 1993 and
1992
Consolidated Statements of Income - For Each
of the Three Years Ended December 31, 1993
Consolidated Statements of Cash Flows - For
Each of the Three Years Ended December 31, 1993
Consolidated Statements of Shareholders'
Equity - For Each of the Three Years Ended
December 31, 1993
Notes to Consolidated Financial Statements -
December 31, 1993
Report of Independent Auditors
The following consolidated financial statement
schedules of The Liberty Corporation and Subsidiaries
are included in Item 14(d):
I - Summary of Investments
III - Condensed Financial Statements of The
Liberty Corporation (Parent
Company)
V - Supplementary Insurance Information
VI - Reinsurance
VIII - Valuation and Qualifying Accounts and Reserves
IX - Short-Term Borrowings
20
<PAGE> 21
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission, but which are
excluded from this report, are not required under the related
instructions or are inapplicable, and therefore have been omitted.
(A)(3). LIST OF EXHIBITS
3.1 Restated Articles of Incorporation, as amended through March 28,
1994.
3.2 Bylaws, as amended (filed as Exhibit 3.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1990 and incorporated herein by reference).
4.1 See Articles 4, 5, 7 and 9 of the Company's Restated Article of
Incorporation (filed as Exhibit 3.1) and Articles I, II and VI
of the Company's Bylaws (filed as Exhibit 3.2).
4.2 See the Form of Rights Agreement dated as of August 7, 1990
between The Liberty Corporation and The Bank of New York, as
Rights Agent, which includes as Exhibit B thereto the form of
Right Certificate (filed as Exhibits 1 and 2 to the Registrant's
Form 8-A, dated August 10, 1990, and incorporated herein by
reference) with respect to the Rights to purchase Series A
Participating Cumulative Preferred Stock.
4.3 See Credit Agreement dated September 28, 1993 filed as Exhibit
10.
10. Credit Agreement dated September 28, 1993.
11. The Liberty Corporation and Subsidiaries Consolidated Earnings
Per Share Computation
13. Portions of The Liberty Corporation Annual Report to
Shareholders for the year ended December 31, 1993:
Market for the Registrant's Common Stock and Related
Security Stockholder Matters
Selected Financial Data
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Statements and Supplementary Information:
Consolidated Balance sheets - December 31, 1993 and
1992
Consolidated Statements of Income - For the three
years ended December 31, 1993
Consolidated Statements of Cash Flows - For the
three years ended December 31, 1993
Consolidated Shareholders' Equity - For the three
years ended December 31, 1993
Notes to Consolidated Financial Statements - December
31, 1993
Report of Independent Auditors
21. The Liberty Corporation and Subsidiaries, List of Subsidiaries
23. Consent of Independent Auditors
24. A. Powers of Attorney applicable for certain signatures of
members of the Board of Directors in Registrant's
10-K filed for the year ended December 31, 1983
21
<PAGE> 22
B. Powers of Attorney applicable for certain signatures of
members of the Board of Directors in Registrant's 10-K
filed for the year ended December 31, 1985
C. Powers of Attorney applicable for certain signatures of
members of the Board of Directors in Registrant's 10-K
filed for the year ended December 31, 1986
D. Powers of Attorney applicable for certain signatures of
members of the Board of Directors in Registrant's 10-K
filed for the year ended December 31, 1989
99. Additional Exhibits
A. Annual Statement on Form 11-K for The Liberty
Corporation and Related Adopting Employers' 401(k)
Thrift Plan for the year ended December 31, 1993
(B). REPORTS ON FORM 8-K FILED IN 1993
None
(C). EXHIBITS FILED WITH THIS REPORT
3.1 Restated Articles of Incorporation, as amended through March 28,
1994.
10. Credit Agreement dated September 28, 1993.
11. The Liberty Corporation and Subsidiaries Consolidated Earnings Per
Share Computation
13. Portions of The Liberty Corporation Annual Report to
Shareholders for the year ended d December 31, 1993:
Market for the Registrant's Common Stock and Related Security
Stockholder Matters
Selected Financial Data
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Statements and Supplementary Information:
Consolidated Balance sheets - December 31, 1993 and
1992
Consolidated Statements of Income - For the three years
ended December 31, 1993
Consolidated Statements of Cash Flows - For the three
years ended December 31, 1993
Consolidated Shareholders' Equity - For the three
years ended December 31, 1993
Notes to Consolidated Financial Statements - December 31,
1993
Report of Independent Auditors
21. The Liberty Corporation and Subsidiaries, List of Subsidiaries
23. Consent of Independent Auditors
99. Additional Exhibits
A. Annual Statement on Form 11-K for The Liberty
Corporation and Related Adopting Employers' 401(k)
Thrift Plan for the year ended December 31, 1993
22
<PAGE> 23
(D). CONSOLIDATED FINANCIAL STATEMENT SCHEDULES FILED WITH THIS REPORT
I - Summary of Investments - December 31, 1993
III - Condensed Financial Statements of The Liberty Corporation
(Parent Company) - December 31, 1993 and 1992
V - Supplementary Insurance Information - For the Three Years Ended
December 31, 1993
VI - Reinsurance - For the Three Years Ended December 31, 1993
VIII - Valuation and Qualifying Accounts and Reserves - For the Three
Years Ended December 31, 1993
IX - Short-Term Borrowings - For the Three Years Ended December 31,
1993
23
<PAGE> 24
Schedule I
THE LIBERTY CORPORATION AND SUBSIDIARIES
SUMMARY OF INVESTMENTS
December 31, 1993
(In $000's)
<TABLE>
<CAPTION>
Fair Amount Shown on
Type of Investment Cost Value Balance Sheet
------------------------- ------------- ------------ -----------------
<S> <C> <C> <C>
Fixed Maturities:
Bonds:
United States Government and government
agencies and authorities $ 383,488 $ 407,360 $ 383,488
States, municipalities and political subdivisions 18,530 19,589 18,530
Foreign governments 23,418 24,017 23,418
Public utilities 110,227 134,372 110,227
All other corporate bonds 261,725 273,818 261,725
Redeemable preferred stocks 60,285 62,013 60,285
---------- ----------- ----------
Total Fixed Maturities 857,673 921,169 857,673
---------- ----------- ----------
Equity Securities:
Common stocks:
Public utilities 738 1,306 1,306
Banks, trusts and insurance companies 4,538 5,731 5,731
Industrial, miscellaneous, and all other 10,880 13,441 13,231
Nonredeemable preferred stocks 44,359 48,123 48,123
---------- ----------- ----------
Total Equity Securities 60,515 68,601 68,391
---------- ----------- ----------
Other Investments:
Mortgage loans on real estate 165,784 165,784
Investment properties 84,530 84,530
Policy loans 86,942 86,942
Other long-term investments 82,826 82,826
Short-term investments 13,355 13,355
---------- ----------
Total Other Investments 433,437 433,437
---------- ----------
Total Investments $1,351,625 $1,359,501
========== ==========
</TABLE>
24
<PAGE> 25
Schedule III
THE LIBERTY CORPORATION (PARENT COMPANY)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1993 and 1992
(In $000's, except share data)
<TABLE>
<CAPTION>
ASSETS 1993 1992
------ ---------- ----------
<S> <C> <C>
Cash $ 1,069 $ 2,033
Investment securities 2 2
Loans, notes and other receivables 8,841 934
Investment properties, at cost
less accumulated depreciation of
$5,383 in 1993 and $7,936 in 1992 50,990 60,091
Other long-term investments 1,409 1,974
Buildings and equipment, at cost
less accumulated depreciation of
$9,226 in 1993 and $7,139 in 1992 19,896 17,115
Investment in affiliated companies* 474,942 461,613
Intercompany debt and advances* 19,922 18,656
Income taxes recoverable 4,752 7,347
Deferred income tax benefits 4,818 2,226
Other assets 3,281 2,093
---------- ----------
$ 589,922 $ 574,084
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities
Notes, mortgages and other debt $ 147,843 $ 174,560
Accounts payable and accrued expenses 6,269 7,239
Other liabilities 560 80
---------- ----------
Total liabilities 154,672 181,879
---------- ----------
Shareholders' equity
Common stock
Authorized - 50,000,000 shares, no par value
Issued and Outstanding - 19,497,515 in 1993
and 18,859,164 in 1992 143,939 126,961
Unearned stock compensation (4,475) (3,222)
Net unrealized investment gains (losses) 5,177 3,901
Cumulative foreign currency translation
adjustment (1,529) (880)
Retained earnings 292,138 265,445
---------- ----------
Total shareholders' equity 435,250 392,205
---------- ----------
$ 589,922 $ 574,084
========== ==========
</TABLE>
*Eliminated in consolidation.
See notes to condensed financial statements.
25
<PAGE> 26
Schedule III
THE LIBERTY CORPORATION (PARENT COMPANY)
CONDENSED STATEMENTS OF INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In $000's)
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Dividends from subsidiaries* $ 31,209 $ 43,911 $103,883
Outside interest 59 45 4
Intercompany interest* 6,933 6,736 4,512
Other 25,723 21,506 14,685
-------- -------- --------
Total Revenues 63,924 72,198 123,084
-------- -------- --------
EXPENSES
Salaries and wages 7,530 7,249 6,887
Outside interest 9,360 15,652 20,418
Intercompany interest* 3,642 3,671 1,657
Taxes and licenses 821 889 900
Depreciation and amortization 2,260 2,950 2,742
Other 23,682 14,006 9,601
-------- -------- --------
Total Expenses 47,295 44,417 42,205
-------- -------- --------
16,629 27,781 80,879
Income tax benefits (4,859) (5,537) (7,925)
-------- -------- --------
Income before cumulative effect
of accounting changes 21,488 33,318 88,804
Cumulative effect of accounting
changes (155) --- ---
-------- -------- --------
21,333 33,318 88,804
Earnings of subsidiaries
net of dividends paid to parent* 16,202 4,160 (61,274)
-------- -------- --------
NET INCOME $ 37,535** $ 37,478** $ 27,530**
======== ======== ========
</TABLE>
*Eliminated in consolidation.
**Differs from consolidated net income by $1,612, $3,407 and $3,036 in
1993, 1992 and 1991, respectively, due to gains recognized on a
consolidated basis previously recognized by subsidiaries on intercompany
transactions. Gains were deferred on a consolidated basis until completion
of the earnings process.
See notes to condensed financial statements.
26
<PAGE> 27
Schedule III
THE LIBERTY CORPORATION (PARENT COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In $000's)
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 37,535 $ 37,478 $ 27,530
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,260 2,950 2,742
Provision for deferred income taxes (2,834) 1,663 (631)
Earnings from subsidiary operations, net of
dividends paid to parent (16,202) (4,160) 61,274
(Gain) loss on disposal of assets 2,299 (1,373) (1,378)
Change in operating assets and liabilities:
(Increase) Decrease in intercompany debt and
advances* (1,266) (1,455) (59,592)
(Decrease) Increase in accounts payable and
accrued expenses (970) 1,469 (931)
Decrease (Increase) in other assets (1,188) 1,754 (2,034)
Increase (Decrease) in other liabilities, and
accrued income taxes 3,075 2,918 3,708
Other 856 (4,345) 1,881
---------- ---------- ----------
NET CASH PROVIDED IN OPERATING ACTIVITIES 23,565 36,899 32,569
---------- ---------- ----------
INVESTING ACTIVITIES
Purchases of investment securities --- --- (20)
Sale of investment securities --- --- ---
Additional investment in subsidiaries* (6,500) (7,000) ---
Reduction in investment in subsidiaries* 10,000 5,952 ---
Notes receivable repayments (made) (7,907) 233 (242)
Purchase of investment properties (19,055) (5,753) (14,274)
Sale of investment properties 26,780 26,622 3,225
Purchase of buildings and equipment (3,700) --- (165)
Net cash paid on purchase of insurance business --- (66,434) ---
Other (48) --- ---
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (430) (46,380) (11,476)
---------- ---------- ----------
FINANCING ACTIVITIES
Proceeds from borrowings 2,192,635 1,699,000 424,400
Principal payments on debt (2,219,351) (1,748,869) (443,552)
Dividends paid (13,108) (7,892) (5,472)
Stock issued for employee benefit and performance
incentive compensation programs 7,181 4,153 2,984
Common stock offering 8,544 64,274 ---
Common stock repurchased --- --- ---
---------- ---------- ----------
NET CASH (USED) PROVIDED IN FINANCING ACTIVITIES (24,099) 10,666 (21,640)
---------- ---------- ----------
INCREASE (DECREASE) IN CASH (964) 1,185 (547)
Cash at beginning of year 2,033 848 1,395
---------- ---------- ----------
CASH AT END OF YEAR $ 1,069 $ 2,033 $ 848
========== ========== ==========
</TABLE>
*Eliminated in consolidation.
See notes to condensed financial statements.
27
<PAGE> 28
Schedule III
THE LIBERTY CORPORATION (PARENT COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1993
1. NOTES, MORTGAGES AND OTHER DEBT
The general debt obligations at December 31, 1993, are as follows:
<TABLE>
<CAPTION>
Average
Interest
(In 000's) Rate % Amount
---------- -------- --------
<S> <C> <C>
Notes due to banks 3.7 $145,500
Mortgage loans on investment property 8.0 2,343
--------
$147,843
========
</TABLE>
On September 28, 1993, the Parent Company completed the restructuring of
its revolving credit facility into a new $325,000,000 three and one-half year
facility which will mature on April 1, 1997 and includes a one year extension
provision at the Company's option. This facility provides funds to meet working
capital requirements and finance acquisitions. Note 5 of The Liberty Corporation
and Subsidiaries Consolidated Financial Statements provides additional
information as to this agreement. The maturities of the general debt
obligations at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
(In 000's) Amount
---------- --------
<S> <C>
1994 $ 31,616
1995 1,001
1996 226
1997 115,000
1998 ---
Thereafter ---
--------
$147,843
========
</TABLE>
2. COMMITMENTS AND CONTINGENT LIABILITIES
The Parent Company is contingently liable for $792,000 of debt incurred
by Cosmos on an industrial development bond.
3. RETAINED EARNINGS
As of December 31, 1993 and 1992, retained earnings of $292,138,000 and
$265,445,000 respectively, in The Liberty Corporation (Parent Company) financial
statements differs from The Liberty Corporation and Subsidiaries consolidated
financial statements. The difference of $1,405,000 and $3,017,000 at December
31, 1993 and 1992, respectively, relates to the capitalization of interest on a
consolidated basis and the elimination of gains on intercompany transactions.
28
<PAGE> 29
Schedule V
THE LIBERTY CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In $000's)
<TABLE>
<CAPTION>
December 31
------------------------------------------------------------------------
Future
Policy
Benefits, Other
Deferred Losses, Policy
Policy Claims, Claims &
Acquisition and Loss Unearned Benefits
Segment Costs Expenses Premiums Payable
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993
----
Life/Health Insurance $ 288,635 $1,342,369 $ 3,135 $ 43,672
1992
----
Life/Health Insurance $ 275,875 $1,265,410 $ 5,645 $ 40,210
1991
----
Life/Health Insurance $ 211,829 $1,000,539 $ 4,754 $ 39,791
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------------------------------------------------------------------
Benefits, Amortization
Claims, of Deferred Accident
Net Losses, & Policy Other & Health
Premium Investment Settlement Acquisition Operating Premiums
Segment Revenue Income Expenses Costs Expenses Written
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1993
----
Life/Health Insurance $ 250,922 $ 106,864 $ 159,452 $ 39,402 $ 112,025 $ 42,151
1992
----
Life/Health Insurance $ 209,133 $ 90,120 $ 126,182 $ 29,581 $ 94,200 $ 45,250
1991
----
Life/Health Insurance $ 180,517 $ 93,066 $ 123,783 $ 25,203 $ 77,000 $ 37,710
</TABLE>
29
<PAGE> 30
Schedule VI
THE LIBERTY CORPORATION AND SUBSIDIARIES
REINSURANCE
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In $000's)
<TABLE>
<CAPTION>
Ceded to Assumed Percentage of
Gross Other from Other Net Amount Assumed
Amount(1) Companies Companies Amount to Net
--------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
- ----------------------------
Life insurance in force $ 20,202,101 $ 4,788,883 $ 20,431 $15,433,649 0.1%
============ =========== =========== =========== ====
Insurance premiums and policy charges:
Life, annuity and other considerations $ 233,263 $ 26,075 $ 208 $ 207,396 .1%
Accident and health 45,191 3,546 1,881 43,526 4.3%
------------ ----------- ----------- -----------
TOTAL $ 278,454 $ 29,621 $ 2,089 $ 250,922
============ =========== =========== ===========
Year ended December 31, 1992
- ----------------------------
Life insurance in force $ 20,458,434 $ 4,915,995 $ 28,417 $15,570,856 0.2%
============ =========== =========== =========== ====
Insurance premiums and policy charges:
Life, annuity and other considerations $ 194,311 $ 28,279 $ 150 $ 166,182 0.1%
Accident and health 43,292 3,017 2,676 42,951 6.2%
------------ ----------- ----------- -----------
TOTAL $ 237,603 $ 31,296 $ 2,826 $ 209,133
============ =========== =========== ===========
Year ended December 31, 1991
- ----------------------------
Life insurance in force $ 19,928,079 $ 4,932,644 $ 44,581 $15,040,016 0.3%
============ =========== =========== =========== ====
Insurance premiums and policy charges:
Life, annuity and other considerations $ 148,526 $ 5,499 $ 479 $ 143,506 0.3%
Accident and health 36,163 2,618 3,466 37,011 9.4%
------------ ----------- ----------- -----------
TOTAL $ 184,689 $ 8,117 $ 3,945 $ 180,517
============ =========== =========== ===========
</TABLE>
(1) Includes the blocks of business assumed during 1991 from Kentucky
Central Life Insurance Company and Integon Life Insurance
Corporation for which Kentucky Central and Integon have no further
liability.
30
<PAGE> 31
Schedule VIII
THE LIBERTY CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In $000's)
<TABLE>
<CAPTION>
Additions
----------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Deducted From Asset Accounts of Period Expenses Accounts Deductions of Period
- ---------------------------- ---------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Accounts receivable - 5(b)
reserve for bad debts $ 921 $ 1,004 $ --- $ 893(a) $ 1,027
---------- ------------ ---------- ---------- -----------
Notes and other loans receivable -
discounts $ --- $ --- $ --- $ --- $ ---
---------- ------------ ---------- ---------- -----------
Investment properties -
valuation reserves $ --- $ --- $ --- $ --- $ ---
---------- ------------ ---------- ---------- -----------
Year Ended December 31, 1992
Accounts receivable -
reserve for bad debts $ 556 $ 353 $ 315 $ 303(a) $ 921
---------- ------------ ---------- ---------- -----------
Notes and other loans receivable -
discounts $ --- $ --- $ --- $ --- $ ---
---------- ------------ ---------- ---------- -----------
Investment properties -
valuation reserves $ --- $ --- $ --- $ --- $ ---
---------- ------------ ---------- ---------- -----------
Year Ended December 31, 1991
Accounts receivable -
reserve for bad debts $ 502 $ 744 $ --- $ 690(a) $ 556
---------- ------------ ---------- ---------- -----------
Notes and other loans receivable -
discounts $ --- $ --- $ --- $ --- $ ---
---------- ------------ ---------- ---------- -----------
Investment properties -
valuation reserves $ --- $ --- $ --- $ --- $ ---
---------- ------------ ----------- ---------- -----------
</TABLE>
Notes:
(a) Uncollectible accounts written off, net of recoveries.
(b) Reversal of reserves no longer required.
31
<PAGE> 32
Schedule IX
THE LIBERTY CORPORATION AND SUBSIDIARIES
SHORT-TERM BORROWINGS
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In $000's, except interest rates)
<TABLE>
<CAPTION>
Average
Weighted Average Maximum Amount Weighted Average
Category of Aggregate Balance Interest Rate of Amount Outstanding Interest Rate
Short-Term Borrowings(1) End of Period Amounts Outstanding Outstanding During Period(2) During Period(3)
---------------------------- ------------- ------------------- ----------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Lines of credit $ 30,500 3.68% $ 30,500 $ 10,925 3.70%
Year Ended December 31, 1992
Lines of credit $ 8,000 4.80% $ 10,000 $ 5,800 4.11%
Year Ended December 31, 1991
Lines of credit $ 82,000 6.10% $104,000 $ 97,225 6.51%
</TABLE>
Notes:
(1) Lines of credit arrangements with various banks impose no
restrictions, do not require formal compensating balances and
are at current quoted rates.
(2) The average amount outstanding during the period was computed
primarily by weighting all short-term borrowings during the period
by the number of days outstanding and then dividing by the number
of days outstanding.
(3) The weighted average interest rate during the period was computed
by annualizing the interest expense associated with all short-term
borrowings and then dividing by the total short-term borrowings
during the period.
32
<PAGE> 33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized, as of the xxth day
of March, 1994
<TABLE>
<S> <C>
THE LIBERTY CORPORATION By: /s/ Hayne Hipp
-------------------------- --------------------------
Registrant Hayne Hipp
President and Chief
Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, as of the xxth day of March, 1994.
<TABLE>
<S> <C>
By: /s/ William S. Kleckley *By: /s/ James G. Lindley
-------------------------- --------------------------
William S. Kleckley James G. Lindley
Vice President & Controller Director
By: /s/ Barry L. Edwards *By: /s/ William O. McCoy
-------------------------- --------------------------
Barry L. Edwards William O. McCoy
Vice President & Treasurer Director
*By: /s/ Rufus C. Barkley, Jr. *By: /s/ Buck Mickel
-------------------------- ------------------------
Rufus C. Barkley, Jr. Buck Mickel
Director Director
*By: /s/ Edward E. Crutchfield *By: /s/ John H. Mullin, III
-------------------------- ------------------------
Edward E. Crutchfield John H. Mullin, III
Director Director
*By: /s/ Francis M. Hipp *By: /s/ Benjamin F. Payton
-------------------------- ------------------------
Francis M. Hipp Benjamin F. Payton
Director Director
By: /s/ W. Hayne Hipp *By: /s/ Robert S. Small
-------------------------- ------------------------
W. Hayne Hipp Robert S. Small
Director Director
*By: /s/ W. W. Johnson *By: /s/ John A. Warren
-------------------------- ------------------------
W. W. Johnson John A. Warren
Director Director
*By: /s/ James F. Kane By: /s/ Martha G. Williams
-------------------------- ------------------------
James F. Kane *Martha G. Williams, as
Director Special Attorney-in-Fact
*By: /s/ William S. Lee
--------------------------
William S. Lee
Director
</TABLE>
33
<PAGE> 34
Annual Report on Form 10-K
The Liberty Corporation
December 31, 1993
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit Page Number
----------- -------------
<S> <C> <C>
3.1 Restated Articles of Incorporation, as amended 35 - 81
through March 28, 1994.
10. Credit Agreement dated September 28, 1993. 82 - 180
11. The Liberty Corporation and Subsidiaries Consolidated 181
Earnings Per Share Computation
13. Portions of The Liberty Corporation Annual Report to
Shareholders for the year ended December 31, 1993:
Market for the Registrant's Common Stock and Related 182
Security Stockholder Matters 183
Selected Financial Data
Management's Discussion and Analysis of Financial 184 - 193
Condition and Results of Operations
Financial Statements and Supplementary Information:
Consolidated Balance sheets - December 31, 1993 and 1992 194 - 195
Consolidated Statements of Income - For the three years 196
ended December 31, 1993
Consolidated Statements of Cash Flows - For the three years 197
ended December 31, 1993
Consolidated Shareholders' Equity - For the three years 198
ended December 31, 1993
Notes to Consolidated Financial Statements - December 31, 199 - 218
1993
Report of Independent Auditors 219
21. The Liberty Corporation and Subsidiaries, List of 220
Significant Subsidiaries
23. Consent of Independent Auditors 221
99. Additional Exhibits
A. Annual Statement on Form 11-K for The Liberty
Corporation and Adopting Related Employers' 401(k) 222 - 237
Thrift Plan for the year ended December 31, 1993
</TABLE>
34
<PAGE> 1
STATE OF SOUTH CAROLINA EXHIBIT 3.1
SECRETARY OF STATE
RESTATED ARTICLES OF INCORPORATION
OF
THE LIBERTY CORPORATION
The following Restated Articles of Incorporation supersede and take
the place of the original Articles of Incorporation of The Liberty Corporation
(the "Corporation") filed November 27, 1967 and all amendments thereto. These
Restated Articles of Incorporation and the amendments made thereby were
approved by the shareholders of the Corporation at a meeting held on May 7,
1985.
1. The name of the Corporation is "The Liberty Corporation."
2. The registered office of the Corporation is 2000 Wade Hampton
Boulevard, located in the City of Greenville, County of Greenville, and the
State of South Carolina, and the name of its registered agent at such address
is Martha G. Williams.
3. The period of duration of the Corporation shall be perpetual.
4. (a) The Corporation is authorized to issue shares of stock as
follows:
<TABLE>
<CAPTION>
Authorized Number
Class of Shares of Each Class Par Value
--------------- ----------------- ---------
<S> <C> <C>
Common Stock 25,000,000 $1.00
Preferred Stock 10,000,000 $1.00
</TABLE>
The relative rights, preferences and limitations of the shares of
each class, and of each series within a class, shall be as set forth in, or
established pursuant to, this Article 4.
(b) No holders of shares of the Corporation of any class or
series shall be entitled, as a matter of right, to any preemptive rights to
subscribe for or purchase any shares of any class or series, whether now or
hereafter authorized, any options or rights to purchase any such shares, or any
bonds, debentures or other securities of the Corporation, whether or not
convertible into or carrying an option to purchase any such shares.
35
<PAGE> 2
(c) In any election of Directors of the Corporation, including
any election of additional Directors under specified circumstances by the
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, a shareholder shall not be entitled
to cumulate his votes, but shall be entitled to cast for any one candidate only
as many votes as are entitled to be cast, as provided in or pursuant to this
Article 4, with respect to the number of shares held of record by such
shareholder.
(d) All shares of Common Stock are of one and the same class and
when issued have equal rights of participation in dividends and assets of the
Corporation and shall be non-assessable. The holders of Common Stock shall be
entitled to one vote for each of the shares of such stock held by them of
record at any meeting of shareholders.
(e) In no event, so long as any shares of the Preferred Stock
shall be outstanding, shall any dividends whatsoever (other than dividends in
Common Stock) be paid or declared on the Common Stock, nor shall any
distribution be made on the Common Stock, unless full dividends on all
outstanding shares of the Preferred Stock of all series for all past quarterly
dividend periods and for the current quarter shall have been paid or declared
and set apart for payment.
(f)(i) The Board of Directors is hereby authorized to issue
Preferred Stock from time to time in one or more series, which Preferred Stock
shall be preferred to the Common Stock as to dividends and distribution of
assets of the Corporation on dissolution and shall have such distinctive
designations as may be stated in the resolution or resolutions providing for
the issuance of such stock adopted by the Board of Directors. In such
resolution or resolutions providing for the issuance of shares of each
particular series, the Board of Directors is expressly authorized to fix the
number of shares constituting such series and to fix the relative rights and
preferences of the shares of the series so established to the full extent
allowable by law except insofar as such rights and preferences are fixed
herein. Such authorization in the Board of Directors expressly includes the
authority to fix and determine the relative rights and preferences of such
shares in the following respects:
(A) the annual dividend rate on such shares and the date from
which dividends shall be accumulated;
(B) whether such shares may be redeemed and, if so, the
redemption price, which may vary at different dates, and the terms and
conditions of the redemption, including possible differences with respect to
any purchase, retirement or sinking fund;
(C) the amount payable upon such shares in event of voluntary
and involuntary liquidation;
36
<PAGE> 3
(D) purchase, retirement or sinking fund provisions, if any,
for the redemption or purchase of such shares;
(E) the terms and conditions, if any, on which such shares
may be convertible into, or exchangeable for, shares of Common Stock or shares
of any other series or class; and
(F) the voting rights, if any. All shares of Preferred Stock
shall be of equal rank and shall be identical, except in respect to the
particulars that may be fixed by the Board of Directors as hereinabove provided
in this subparagraph and which may vary among the series.
(ii) The holders of the Preferred Stock of each series, in
preference to the holders of the Common Stock, shall be entitled to receive, as
and when declared by the Board of Directors, cumulative cash dividends at the
rate for such series fixed in accordance with the resolution or resolutions of
the Board of Directors establishing such series, payable quarterly on dates as
may be fixed in such resolution or resolutions. No dividends shall be paid
upon, or declared on, any share of Preferred Stock for any quarterly dividend
period unless at the same time dividends for the same quarterly dividend period
shall be paid upon, or declared on, all shares of Preferred Stock of all series
then issued and outstanding ratably in proportion to the respective annual
dividend rates fixed therefor as hereinabove provided. Cash dividends upon
each series of Preferred Stock shall commence to accrue and shall be
cumulative:
(A) if issued on or prior to the record date for the first
dividend on shares of such series, then from the date fixed for the purpose by
the Board of Directors in its resolutions establishing such series;
(B) if issued during the period commencing immediately after
the record date for a dividend on shares of such series and ending at the close
of the payment date for such dividend, then from such last mentioned dividend
payment date; and
(C) otherwise from the dividend payment date next preceding
the date of issue of such shares.
(iii) The holders of Preferred Stock of any series shall be
entitled to such voting rights as shall be specified in the resolution of the
Board of Directors establishing such series, including the right as a class to
elect additional Directors under specified circumstances. Holders of Common
Stock and any series of Preferred Stock having voting rights shall vote
together as one class, except with respect to matters which are required by law
to be voted upon separately and except that, at any time when the holders of
any series of Preferred Stock, voting as a class, are entitled to elect
additional
37
<PAGE> 4
Directors under specified circumstances, they shall not be entitled to
participate with the holders of Common Stock in the election of any other
Directors.
5. The Corporation's total authorized capital stock is $35,000,000.
6. The Corporation did not begin business until there had been paid
into the Corporation the required minimum consideration for the issuance of
shares, which was $1,000, of which at least $500 was in cash.
7. (a) Except as otherwise fixed pursuant to the provisions of
Article 4 hereof relating to the rights of the holders of any class or series
of stock having a preference over the Common Stock as to dividends or upon
liquidation to elect additional Directors under specified circumstances, the
number of Directors of the Corporation shall be 16; provided, however, that the
number of Directors may be fixed from time to time at any number not less than
9 nor more than 16, by or pursuant to the bylaws of the Corporation. The
Directors, other than those who may be elected by the holders of any class or
series of stock having preference over the Common Stock as to dividends or upon
liquidation, shall be classified, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number of members
as possible, as shall be provided in the manner specified in the bylaws. Such
classification may become effective with respect to an annual election of
Directors held at the same meeting of shareholders which approves this Article
7 or at any succeeding annual election of Directors. Following effectiveness
of such classification, one class of Directors shall hold office initially for
a term expiring at the next succeeding annual meeting of shareholders, another
class shall hold office initially for a term expiring at the second succeeding
annual meeting of shareholders, and another class shall hold office initially
for a term expiring at the third succeeding annual meeting of shareholders. At
each annual meeting of the shareholders of the Corporation, the successors to
the class of Directors whose term expires at that meeting shall be elected to
hold office for a term expiring at the annual meeting of shareholders held in
the third year following the year of their election, and the successor to any
Director previously elected by the Directors pursuant to paragraph (b) of this
Article 7 as a member of a class whose term is not expiring at that meeting
shall be elected by the shareholders for the remainder of the full term of the
class of Directors in which the new directorship was created or the vacancy
occurred. The members of each class of Directors shall hold office until their
successors are elected and qualified, or until their earlier resignation,
disqualifications, disability, death or removal from office.
(b) Except as otherwise fixed pursuant to the provisions of
Article 4 hereof relating to the rights of the holders of any class or series
of stock having a preference over the Common Stock as to dividends or upon
liquidation to elect additional Directors under specified circumstances, newly
created Directorships resulting from any increase in the number of Directors
and any vacancies on the Board of Directors resulting from
38
<PAGE> 5
resignation, disqualification, disability, death, removal or other cause shall
be filled solely by the affirmative vote of a majority of the remaining
Directors then in office, even though less than a quorum of the Board of
Directors. Any Director elected in accordance with the preceding sentence
shall hold office until the next meeting of shareholders and until such
Director's successor shall have been elected and qualified, or until his
earlier resignation, disqualification, disability, death or removal from
office. At the time of any increase in the number of Directors, except in the
case of Directors elected by the holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation, the
Board of Directors shall specifically allocate the additional directorships
among the three classes so as to make the three classes as nearly equal in
number of members as possible. No decrease in the number of Directors
constituting the Board of Directors shall shorten the term of any incumbent
Director.
(c) Subject to the rights of any class or series of stock having
preference over the Common Stock as to dividends or upon liquidation to elect
Directors under specified circumstances, any Director may be removed from
office without cause only by the affirmative vote of the holders of at least
80% of the combined voting power of the then outstanding shares of stock of the
Corporation entitled to vote generally in the election of Directors, voting
together as a single class.
(d) The shareholders or the Board of Directors shall have power
to adopt, alter, amend and repeal the bylaws of the Corporation, subject to any
limitations or requirements specified in the bylaws.
(e) Notwithstanding anything to the contrary contained in these
Restated Articles of Incorporation, the affirmative vote of the holders of at
least 80% of the combined voting power of the then outstanding shares of stock
of the Corporation entitled to vote generally in the election of Directors,
voting together as a single class, shall be required to alter, amend, adopt any
provision inconsistent with, or repeal, this Article 7 or any provision hereof.
8. The general nature of the business for which the Corporation is
organized is to acquire and hold all or part of the outstanding stock of one or
more corporations engaged in the insurance business or other types of
businesses, and to acquire and hold other investment assets. In addition, the
Corporation shall be authorized to undertake and carry on any lawful business
of any kind or character whatsoever and to sell and deal in real or personal
property of any kind or character whatsoever.
9. Part I.
The Corporation shall be authorized to issue bonds or debentures
convertible into other bonds or debentures of the Corporation or into shares of
stock of the Corporation within such period and upon such terms and conditions
as shall be fixed by the Directors.
39
<PAGE> 6
Part II.
The Corporation shall have the power to purchase its own shares of any
class out of unreserved and unrestricted capital surplus available therefor.
Part III.
(1) In addition to any affirmative vote required by law or the
Restated Articles of Incorporation, any of the following transactions (each of
which is referred to herein as a "Business Combination") shall comply with the
requirements specified in paragraph (2) of this Part III:
(i) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (a) any Interested Shareholder (as
hereinafter defined) or (b) any other corporation (whether or not itself an
Interested Shareholder) which is, or after such merger or consolidation would
be, an Affiliate (as hereinafter defined) of an Interested Shareholder;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to or with
any Interested Shareholder or any Affiliate of any Interested Shareholder of
any assets of the Corporation or any Subsidiary having an aggregate Fair Market
Value (as hereinafter defined) of $10,000,000 or more;
(iii) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any securities
of the Corporation or any Subsidiary to any Interested Shareholder or any
Affiliate of any Interested Shareholder in exchange for cash, securities or
other property (or a combination thereof) having an aggregate Fair Market Value
of $10,000,000 or more;
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Shareholder or any Affiliate of any Interested Shareholder; or
(v) any reclassification of securities (including any reverse
stock split, or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an Interested
Shareholder or any Affiliate of an Interested Shareholder) which has the
effect, directly or indirectly, of increasing the proportionate share owned
directly or indirectly by any Interested Shareholder or any Affiliate of any
Interested Shareholder of the outstanding shares of any class of capital stock
of the Corporation entitled to vote generally in the election of Directors (the
"Voting Stock") or any securities convertible into such stock.
40
<PAGE> 7
(2) A Business Combination may be consummated only if all of the
conditions specified in one or more of the following subparagraphs (A), (B) or
(C) are met:
(A) The Business Combination shall have been approved by the
affirmative vote of the holders of at least 80% of the voting power of the then
outstanding Voting Stock, voting together as a single class. Such affirmative
vote shall be required notwithstanding the fact that no vote may be required,
or that a lesser percentage may be specified, by law or in any agreement with
any national securities exchange or otherwise. For purposes of this Part III,
each share of Voting Stock shall have the number of votes prescribed in or
pursuant to Article 4 hereof.
(B) The Business Combination shall have been approved by
two-thirds of the Continuing Directors (as hereinafter defined) then in office.
(C) All of the conditions specified in clauses (i) through (iv)
of this subparagraph (C) shall have been met:
(i) The aggregate amount of cash and the Fair Market Value
(as of the date of the consummation of the Business Combination) of
consideration other than cash to be received per share by holders of Common
Stock of the Corporation in such Business Combination shall be at least equal
to the highest amount determined under subclauses (a) or (b) below:
(a) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by
the Interested Shareholder for any share of Common Stock of the Corporation
acquired by it (1) within the two-year period immediately prior to the first
public announcement of the proposal of the Business Combination (the
"Announcement Date") or (2) in the transaction in which it became an
Interested Shareholder, whichever is higher; or
(b) the Fair Market Value per share of Common Stock of the
Corporation on the Announcement Date or on the date on which the Interested
Shareholder became an Interested Shareholder (such latter date is referred to
in this Part III as the "Determination Date"), whichever is higher.
(ii) The aggregate amount of cash and the Fair Market Value
(as of the date of the consummation of the Business Combination) of
consideration other than cash to be received per share by holders of any other
class or series of the Corporation's capital stock in such Business Combination
shall be at least equal to the highest amount determined under subclauses (a),
(b) or (c) below:
(a) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by
the Interested Shareholder for any share of such class or series of the
Corporation's capital stock
41
<PAGE> 8
acquired by it (1) within the two-year period immediately prior to the
Announcement Date or (2) in the transaction in which it became an Interested
Shareholder, whichever is higher; or
(b) the Fair Market Value per share of such class or
series of capital stock on the Announcement Date or the Determination Date
whichever is higher; or
(c) (if applicable) the highest preferential amount per
share to which the holders of shares of such class or series of capital stock
would be entitled in the event of a voluntary or involuntary liquidation of the
Corporation.
(iii) The consideration to be received by holders of a
particular class or series of the Corporation's capital stock shall be in cash
or in the same form, as the Interested Shareholder has previously paid for
shares of such class or series of capital stock. If the Interested Shareholder
has paid for shares of a class or series of the Corporation's capital stock
with varying forms of consideration, the form of consideration shall be either
cash or the form used to acquire the largest number of shares of such class or
series of capital stock previously acquired by it. The price determined in
accordance with clause (i) or (ii) of this subparagraph (C) shall be subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination of shares or similar event.
(iv) After such Interested Shareholder has become an
Interested Shareholder and prior to the consummation of such Business
Combination:
(a) except as approved by a majority of the Continuing
Directors, there shall have been no failure to declare and pay at the regular
date therefor the full amount of any dividends (whether or not cumulative) on
any outstanding stock having preference over the Common Stock of the
Corporation as to dividends or upon liquidation;
(b) there shall have been (1) no reduction in the annual
rate of dividends paid on the Common Stock of the Corporation (except as
necessary to reflect any subdivision of the Common Stock), except as approved
by a majority of the Continuing Directors, and (2) any increase in such annual
rate of dividends as necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of outstanding shares
of the Common Stock, unless the failure so to increase such annual rate is
approved by a majority of the Continuing Directors; and
(c) such Interested Shareholder shall not have become the
beneficial owner of any additional shares of Common Stock or any other class or
series of capital
42
<PAGE> 9
stock of the Corporation except as part of the transaction which results in
such Interested Shareholder becoming an Interested Shareholder.
(v) After such Interested Shareholder has become an
Interested Stockholder, such Interested Shareholder shall not have received the
benefit, directly or indirectly (except proportionately as a shareholder), of
any loans, advances, guarantees, pledges or other financial assistance or any
tax credits or other tax advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination or otherwise.
(vi) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or regulations) shall be mailed
to all shareholders of the Corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions).
(3) For the purposes of this Part III:
(A) The term "person" shall mean any individual, firm,
corporation or other entity.
(B) The term "Interested Shareholder" shall mean at any date any
person (other than the Corporation or any Subsidiary and other than any
profit-sharing, employee stock ownership or other employee benefit plan of the
Corporation or any Subsidiary or any trustee of or fiduciary with respect to
any such plan when acting in such capacity) who or which:
(i) is the beneficial owner (as hereinafter defined) of more
than 10% of the Voting Stock;
(ii) is an Affiliate (as hereinafter defined) of the
Corporation and at any time within the two-year period immediately prior to the
date in question was the beneficial owner of 10% or more of the Voting Stock;
or
(iii) is an assignee of or has otherwise succeeded to any
shares of Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by an Interested
Shareholder, if such assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
43
<PAGE> 10
(C) A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or Associates
(as hereinafter defined) beneficially owns, directly or indirectly;
(ii) which such person or any of its Affiliates or
Associates, directly or indirectly, has (a) the right to acquire (whether such
right is exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (b) the right to
vote pursuant to any agreement, arrangement or understanding; and
(iii) which is beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates or Associates
has any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
(D) For the purposes of determining whether a person is an
Interested Shareholder pursuant to subparagraph (B) of this paragraph (3), the
number of shares of Voting Stock deemed to be outstanding shall include shares
deemed owned through application of subparagraph (C) of this paragraph (3) but
shall not include any other shares of Voting Stock which may be issuable
pursuant to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
(E) The terms "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect on
April 1, 1985.
(F) The term "Subsidiary" means any corporation of which a
majority of any class of equity security is owned, directly or indirectly, by
the Corporation; provided, however, that for the purposes of the definition of
Interested Shareholder set forth in subparagraph (B) of this paragraph (3), the
term "Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the Corporation.
(G) The term "Continuing Director" means any Director of the
Corporation who was elected as a Director at the annual meeting of the
shareholders on May 1, 1979 or who has been designated (before or after his
election to office) as a Continuing Director by a majority of the then
Continuing Directors.
(H) The term "Fair Market Value" means: (i) in the case of
stock, the highest closing sale price during the 30-day period immediately
preceding the date in question
44
<PAGE> 11
of a share of such stock on the national consolidated transaction reporting
system for stocks listed on the New York Stock Exchange or the American Stock
Exchange, or reported in the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or, if such stock is not
quoted on the national consolidated transaction reporting system or any system
then in use, the highest closing bid quotation with respect to a share of such
stock during the 30-day period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotations System or any
system then in use, or if no such quotations are available, the fair market
value on the date in question of a share of such stock as determined by the
Directors of the Corporation in good faith; and (ii) in the case of property
other than cash or stock, the fair market value of such property on the date in
question as determined in good faith by a majority of the Continuing Directors.
(I) In the event of any Business Combination in which the
Corporation survives, the phrase "other consideration to be received" as used
in clauses (i) and (ii) of subparagraph (C) of paragraph (2) of this Part III
shall include the shares of capital stock retained by the holders of such
shares.
(4) A majority of the Corporation's Directors shall have the power
and duty to determine for the purpose of this Part III, on the basis of
information known by them, (a) the number of shares of Voting Stock
beneficially owned by any person, (b) whether a person is an Affiliate or
Associate of another or (c) whether a person has an agreement, arrangement of
understanding with another as to any matter referred to in subparagraph (C) of
paragraph (3) of this Part III. Any such determination made in good faith
shall be conclusive and binding for all purposes of this Part III.
(5) Nothing contained in this Part III shall be construed to relieve
any Interested Shareholder from any fiduciary obligation imposed by law.
(6) Notwithstanding any other provisions of the Restated Articles of
Incorporation or the bylaws of the Corporation (and notwithstanding the fact
that a lesser percentage may be specified by law, the Restated Articles of
Incorporation or the bylaws of the Corporation), the affirmative vote of the
holders of at least 80% of the combined voting power of the then outstanding
shares of Voting Stock, voting together as a single class, shall be required to
amend or repeal, or adopt any provisions inconsistent with, this Part III;
provided, however, that this paragraph (6) shall not apply to any such
amendment, repeal or adoption which has been recommended to the shareholders of
the Corporation by two-thirds of the Continuing Directors then in office.
45
<PAGE> 12
10. This Restatement of Articles was authorized by the Shareholders
of the Corporation at their Annual Meeting held on May 7, 1985.
Date: May 7, 1985 THE LIBERTY CORPORATION
/s/ W. Hayne Hipp
-------------------------------
W. Hayne Hipp
Chief Executive Officer
/s/ Martha G. Williams
----------------------------------------
Martha G. Williams, Vice President,
General Counsel & Secretary
STATE OF SOUTH CAROLINA )
COUNTY OF GREENVILLE )
The undersigned W. Hayne Hipp and Martha G. Williams do hereby
certify that they are the duly elected and acting President & Chief Executive
Officer and Vice President, General Counsel & Secretary, respectively, of The
Liberty Corporation and are authorized to execute this document; that each of
the undersigned for himself does hereby further certify that he signed and was
so authorized, has read the foregoing document, understands the meaning and
purport of the statements therein contained and the same are true to the best
of his information and belief.
Dated at Greenville, S.C., this 7th day of May, 1985.
/s/ W. Hayne Hipp
----------------------------
W. Hayne Hipp
/s/ Martha G. Williams
----------------------------
Martha G. Williams
46
<PAGE> 13
ARTICLES OF AMENDMENT
OF
SERIES A PARTICIPATING CUMULATIVE
PREFERRED STOCK
OF
THE LIBERTY CORPORATION
Pursuant to Section 33-6-102
of the South Carolina
Business Corporation Act
We, W. Hayne Hipp, President and Chief Executive Officer, and Martha G.
Williams, Vice President, General Counsel and Secretary, of The Liberty
Corporation, a corporation organized and existing under the South Carolina
Business Corporation Act ("South Carolina Law"), in accordance with the
provisions thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Restated Articles of Incorporation of the Corporation, the Board of
Directors on August 7, 1990, duly adopted the following amendment creating a
series of Preferred Stock in the amount and having the designation, voting
powers, preferences and relative, participating, optional and other special
rights and qualifications, limitations and restrictions thereof as follows:
Section 1. Designation and Number of Shares. The shares of such series
shall be designated as "Series A Participating Cumulative Preferred Stock" (the
"Series A Preferred Stock"), and the number of shares constituting such series
shall be 140,000.
Section 2. Dividends and Distributions.
(A) The holders of shares of Series A Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable on the
last day of March, June, September and December of each year (each such date
47
<PAGE> 14
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of any share
or fraction of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1.00 and (b) subject
to the provision for adjustment hereinafter set forth, 100 times the aggregate
per share amount of all cash dividends or other distributions and 100 times the
aggregate per share amount of all non-cash dividends or other distributions
(other than (i) a dividend payable in shares of Common Stock (as hereinafter
defined) or (ii) a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise)), declared on the Common Stock, par value $1.00
per share, of the Corporation (the "Common Stock") since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. If the Corporation shall at
any time after September 6, 1990 (the "Rights Declaration Date") pay any
dividend on Common Stock payable in shares of Common Stock or effect a
subdivision or combination of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the amount to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event under
clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) above immediately after
it declares a dividend or distribution on the Common Stock (other than as
described in clauses (i) and (ii) of the first sentence of paragraph (A));
provided that if no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date (or, with respect to the
first Quarterly Dividend Payment Date, the period between the first issuance of
any share or fraction of a share of Series A Preferred Stock and such first
Quarterly Dividend Payment Date), a dividend of $1.00 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
48
<PAGE> 15
(C) Cash dividends on outstanding shares of Series A Preferred Stock
shall commence to accrue and shall be cumulative (i) if issued on or prior to
the record date for the first Quarterly Dividend Payment Date, from the date of
issue of such shares, (ii) if issued during the period commencing immediately
after the record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive a quarterly dividend and ending at the
close of such Quarterly Dividend Payment Date, from such Quarterly Dividend
Payment Date or (iii) otherwise from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares. Accrued but unpaid dividends shall
not bear interest. Dividends paid on shares of Series A Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall not be more than 60 days prior to the date
fixed for the payment thereof.
Section 3. Voting Rights. In addition to any other voting rights
required by law, the holders of shares of Series A Preferred Stock shall have
the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of shareholders of the Corporation,
except that, at any time when the holders of Series A Preferred Stock are
entitled to elect two directors pursuant to Section 3(C) below, they shall not
be entitled to participate with the holders of Common Stock in the election of
any other directors. If the Corporation shall at any time after the Rights
Declaration Date pay any dividend on Common Stock payable in shares of Common
Stock or effect a subdivision or combination of the outstanding shares of
Common Stock (by reclassification or otherwise) into a greater or lesser number
of shares of Common Stock, then in each such case the number of votes per share
to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number by
a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
49
<PAGE> 16
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common Stock
shall vote together as a single class on all matters submitted to a vote of
shareholders of the Corporation.
(C) (i) If at any time dividends on any Series A Preferred Stock
shall be in arrears in an amount equal to six quarterly dividends thereon, the
occurrence of such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and for the
current quarterly dividend period on all shares of Series A Preferred Stock
then outstanding shall have been declared and paid or set apart for payment.
During each default period, all holders of Series A Preferred Stock and any
other series of Preferred Stock then entitled as a class to elect directors,
voting together as a single class, irrespective of series, shall have the right
to elect two Directors.
(ii) During any default period, such voting right of the holders of
Series A Preferred Stock may be exercised initially at a special meeting called
pursuant to sub-paragraph (iii) of this Section 3(C) or at any annual meeting
of shareholders, and thereafter at annual meetings of shareholders, provided
that neither such voting right nor the right of the holders of any other series
of Preferred Stock, if any, to increase, in certain cases, the authorized
number of Directors shall be exercised unless the holders of 10% in number of
shares of Preferred Stock outstanding shall be present in person or by proxy.
The absence of a quorum of holders of Common Stock shall not affect the
exercise by holders of Preferred Stock of such voting right. At any meeting at
which holders of Preferred Stock shall exercise such voting right initially
during an existing default period, they shall have the right, voting as a
class, to elect Directors to fill such vacancies, if any, in the Board of
Directors as may then exist up to two Directors or, if such right is exercised
at an annual meeting, to elect two Directors. If the number which may be so
elected at any special meeting does not amount to the required number, the
holders of the Preferred Stock shall have the right to make such increase in
the number of Directors as shall be necessary to permit the election by them of
the required number. After the holders of the Preferred Stock shall have
exercised their right to elect Directors in any default period and during the
continuance of such period, the number of Directors shall not be increased or
decreased except by vote of the holders of
50
<PAGE> 17
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any shareholder or shareholders owning in the
aggregate not less than 10% of the total number of shares of Preferred Stock
outstanding, irrespective of series, may request, the calling of special
meeting of holders of Preferred Stock, which meeting shall thereupon be called
by the President, a Vice President or the Secretary of the Corporation. Notice
of such meeting and of any annual meeting at which holders of Preferred Stock
are entitled to vote pursuant to this paragraph (C)(iii) shall be given to each
holder of record of Preferred Stock by mailing a copy of such notice to him at
his last address as the same appears on the books of the Corporation. Such
meeting shall be called for a time not earlier than 10 days and not later than
50 days after such order or request or in default of the calling of such
meeting within 50 days after such order or request, such meeting may be called
on similar notice by any shareholder or shareholders owning in the aggregate
not less than 10% of the total number of shares of Preferred Stock outstanding,
irrespective of series. Notwithstanding the provisions of this paragraph
(C)(iii), no such special meeting shall be called during the period within 60
days immediately preceding the date fixed for the next annual meeting of
shareholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of Preferred
Stock shall have exercised their right to elect two Directors voting as a
class, after the exercise of which right (x) the Directors so elected by the
holders of Preferred Stock shall continue in office until their successors
shall have been elected by such holders or until the expiration of the default
period, and (y) any vacancy in the Board of Directors may (except as provided
in paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the
remaining Directors theretofore elected by the holders of the class of stock
which elected the Director whose office shall have become vacant. References
in this paragraph (C) to Directors elected by the holders of a particular class
of stock shall include Directors elected by such Directors to fill vacancies as
provided in clause (y) of the foregoing sentence.
51
<PAGE> 18
(v) Immediately upon the expiration of a default period, (x) the right
of the holders of Preferred Stock as a class to elect Directors shall cease,
(y) the term of any Directors elected by the holders of Preferred Stock as a
class shall terminate, and (z) the number of Directors shall be such number as
may be provided for in the Restated Articles of Incorporation or bylaws
irrespective of any increase made pursuant to the provisions of paragraph
(C)(ii) of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the Restated Articles of
Incorporation or bylaws). Any vacancies in the Board of Directors effected by
the provisions of clauses (y) and (z) in the preceding sentence may be filled
by a majority of the remaining Directors.
(D) The Restated Articles of Incorporation of the Corporation shall
not be amended in any manner (whether by merger or otherwise) so as to
adversely affect the powers, preferences or special rights of the Series A
Preferred Stock without the affirmative vote of the holders of a majority of
the outstanding shares of Series A Preferred Stock, voting separately as a
class.
(E) Except as otherwise provided herein, holders of Series A Preferred
Stock shall have no special voting rights, and their consent shall not be
required for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on outstanding shares of Series A
Preferred Stock shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, or make any other distributions
on, any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on, or make any other distributions
on, any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on
52
<PAGE> 19
the Series A Preferred Stock and all such other parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem, purchase or otherwise acquire for value any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Preferred Stock; provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of stock of the Corporation ranking junior (as to
dividends and upon dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) redeem, purchase or otherwise acquire for value any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all holders of
Series A Preferred Stock and all such other parity stock upon such terms as the
Board of Directors, after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for value any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock without designation as to series and may be
reissued as part of a new series of Preferred Stock to be created by resolution
or resolutions of the Board of Directors as permitted by the Restated Articles
53
<PAGE> 20
of Incorporation or as otherwise permitted under South Carolina Law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $1.00 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment; provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders of Common
Stock, or (2) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all such other parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. If the Corporation shall at any time after the
Rights Declaration Date pay any dividend on Common Stock payable in shares of
Common Stock or effect a subdivision or combination of the outstanding shares
of Common Stock (by reclassification or otherwise) into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount
to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. If the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged for or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash or any other property, as the case may be,
54
<PAGE> 21
into which or for which each share of Common Stock is changed or exchanged. If
the Corporation shall at any time after the Rights Declaration Date pay any
dividend on Common Stock payable in shares of Common Stock or effect a
subdivision or combination of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 8. No Redemption. The Series A Preferred Stock shall not be
redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank junior (as
to dividends and upon liquidation, dissolution and winding up) to all other
series of the Corporation's preferred stock except any series that specifically
provides that such series shall rank junior to the Series A Preferred Stock.
Section 10. Fractional Shares. Series A Preferred Stock may be issued
in fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
Section 11. Adoption of Articles of Amendment. These Articles were
duly adopted by the Board of Directors without shareholder action pursuant to
authority conferred upon the Board of Directors by the Restated Articles of
Incorporation of the Corporation. Shareholder action was not required for
adoption of these Articles of Amendment under the Restated Articles of
Incorporation of the Corporation.
55
<PAGE> 22
IN WITNESS WHEREOF, we have executed and subscribed these Articles this
10th day of August, 1990.
THE LIBERTY CORPORATION
/s/ W. Hayne Hipp
-----------------------------------
W. Hayne Hipp, President and
Chief Executive Officer
/s/ Martha G. Williams
-----------------------------------
Martha G. Williams, Vice President,
General Counsel and Secretary
STATE OF SOUTH CAROLINA )
COUNTY OF GREENVILLE )
The undersigned W. Hayne Hipp and Martha G. Williams do hereby certify
that they are the duly elected and acting President & Chief Executive Officer
and Vice President, General Counsel & Secretary, respectively, of The Liberty
Corporation and are authorized to execute this document; that each of the
undersigned for himself or herself does hereby further certify that he or she
signed and was so authorized, has read the foregoing document, understands the
meaning and purport of the statements therein contained and the same are true
to the best of his or her information and belief.
Dated at Greenville, S.C., this 10th day of August, 1990.
/s/ W. Hayne Hipp
----------------------
W. Hayne Hipp
/s/ Martha G. Williams
-----------------------
Martha G. Williams
56
<PAGE> 23
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
Pursuant Section Section 3-10-106 of the 1976 South Carolina Code, as
amended, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
1. The name of the corporation is THE LIBERTY CORPORATION.
2. On November 5, 1991, the corporation adopted the following
Amendment(s) of its Articles of Incorporation.
(Type or attach the complete text of Each Amendment)
SEE ATTACHMENT
3. The manner, if not set forth in the amendment, in which any
exchange, reclassification, or cancellation of issued shares
provided for in the Amendment shall be effected, is as follows:
(if not applicable, insert "not applicable" or "N/A").
N/A
4. Complete either a or b, whichever is applicable.
a. / / Amendment(s) adopted by shareholder action.
At the date of adoption of the amendment, the number of
outstanding shares of each voting group entitled to vote
separately on the Amendment, and the vote of such shares was:
<TABLE>
<CAPTION>
Number of Number of Number of Votes Number of Undisputed*
Voting Outstanding Votes Entitled Represented Shares Voted
Group Shares to be Cast at the meeting For Against
------ ----------- -------------- ---------------- ---------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
57
<PAGE> 24
*NOTE: Pursuant to Section 33-10-106(6)(i), the corporation
can alternatively State the total number of undisputed shares cast
for the amendment by each voting group together with a statement that
the number of cast for the amendment by each voting group was
sufficient for approval by that voting group.
b. /X/ The amendment(s) was duly adopted by the Incorporators or board
of directors without shareholder approval pursuant to Section
33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South Carolina
Code as amended, and shareholder action was not required.
5. Unless a delayed date is specified, the effective date of these Articles
of Amendments shall be the date of acceptance for filing by the Secretary
of State (See Section 33-1-230(b))_______________________________.
DATE: November 8, 1991 THE LIBERTY CORPORATION
------------------------------------
(Name of Corporation)
By: /s/ Martha G. Williams
------------------------------------
(Signature)
Martha G. Williams, Vice President,
------------------------------------
General Counsel & Secretary
------------------------------------
(Type or Print Name and Office)
58
<PAGE> 25
FILING INSTRUCTIONS
1. Two copies of this form, the original and either a duplicate original
or a conformed copy, must be filed.
2. If the space in this form is insufficient, please attach additional
sheets containing a reference to the appropriate paragraph in this
form.
3. Filing fees and taxes payable to the Secretary of State at time of
filling application.
Filing Fee $ 10.00
Filing Tax 100.00
Total $110.00
59
<PAGE> 26
FURTHER RESOLVED, that Article 4 (a) of the Certificate of
Incorporation, as heretofore amended by certificates filed pursuant to law, is
amended to read in its entirety as follows:
"4. (a) The Corporation is authorized to issue shares of stock as
follows:
<TABLE>
<CAPTION>
Authorized Number
Class of Shares of Each Class Par Value
- --------------- -------------- -----------
<S> <C> <C>
Common Stock 50,000,000 $1.00
Preferred Stock 10,000,000 $1.00
</TABLE>
The relative rights, preferences and limitations of the shares of each
class, and of each series within a class, shall be as set forth in, or
established pursuant to this Article 4."
/s/ Martha G. Williams
------------------------------
Martha G. Williams
Vice President
General Counsel and Secretary
60
<PAGE> 27
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
Pursuant Section Section 3-10-106 of the 1976 South Carolina Code, as
amended, the undersigned corporation adopts the following Articles of Amendment
to its Articles of Incorporation:
1. The name of the corporation is THE LIBERTY CORPORATION.
2. On May 5, 1992, the corporation adopted the following Amendment(s) of
its Articles of Incorporation.
(Type or attach the complete text of Each Amendment)
See Exhibit A attached hereto.
3. The manner, if not set forth in the amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the
Amendment shall be effected, is as follows: (if not applicable,
insert "not applicable" or "N/A").
N/A
4. Complete either a or b, whichever is applicable.
a. /x/ Amendment(s) adopted by shareholder action.
At the date of adoption of the amendment, the number of
outstanding shares of each voting group entitled to vote
separately on the Amendment, and the vote of such shares was:
<TABLE>
<CAPTION>
Number of Number of Number of Votes Number of Undisputed*
Voting Outstanding Votes Entitled Represented Shares Voted
Group Shares to be Cast at the meeting For Against
- ------------- ------------ ------------------ ----------------- -----------------------
<S> <C> <C> <C> <C> <C>
Common Stock 15,877,310 15,877,310 15,301,378 15,018,859 101,440
</TABLE>
61
<PAGE> 28
*NOTE: Pursuant to Section 33-10-106(6)(i), the corporation
can alternatively State the total number of undisputed shares cast
for the amendment by each voting group together with a statement that
the number of cast for the amendment by each voting group was
sufficient for approval by that voting group.
b. / / The amendment(s) was duly adopted by the Incorporators
or board of directors without shareholder approval pursuant to
Section 33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South
Carolina Code as amended, and shareholder action was not required.
5. Unless a delayed date is specified, the effective date of these
Articles of Amendments shall be the date of acceptance for filing by
the Secretary of State (See Section 33-1-230(b)) _____________________.
DATE: May 5, 1992 THE LIBERTY CORPORATION
-------------------------------------------
(Name of Corporation)
By: /s/ Martha G. Williams
-------------------------------------------
(Signature)
Vice President, General Counsel & Secretary
-------------------------------------------
(Type or Print Name and Office)
62
<PAGE> 29
FILING INSTRUCTIONS
1. Two copies of this form, the original and either a duplicate original
or a conformed copy, must be filed.
2. If the space in this form is insufficient, please attach additional
sheets containing a reference to the appropriate paragraph in this
form.
3. Filing fees and taxes payable to the Secretary of State at time of
filling application.
Filing Fee $ 10.00
Filing Tax 100.00
Total $110.00
63
<PAGE> 30
EXHIBIT A
AMENDMENT TO THE ARTICLES OF INCORPORATION
Article 4.(a) of the Articles of Incorporation of The Liberty
Corporation, as previously amended, shall be further amended by deleting
wherever used the term, "Par Value", and the amount of Par Value, so that upon
adoption of this Amendment, Article 4.(a) of the Articles of Incorporation will
read as follows:
4.(a) The Corporation is authorized to issue shares of stock
as follows:
Authorized Number
Class of Shares of Each Class
--------------- -----------------
Common Stock 50,000,000
Preferred Stock 10,000,000
The relative rights, preferences and limitations of the shares of each
class, and of each series within a class, shall be as set forth in, or
established pursuant to, this Article 4.
64
<PAGE> 31
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
Pursuant Section Section 3-10-106 of the 1976 South Carolina Code, as
amended, the under-signed corporation adopts the following Articles of Amendment
to its Articles of Incorporation:
1. The name of the corporation is THE LIBERTY CORPORATION.
2. On February 23, 1994, the corporation adopted the following Amendment(s)
of its Articles of Incorporation.
(Type or attach the complete text of Each Amendment)
SEE EXHIBIT A ATTACHED HERETO
3. The manner, if not set forth in the amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in
the Amendment shall be effected, is as follows: (if not applicable,
insert "not applicable" or "N/A").
N/A
4. Complete either a or b, whichever is applicable.
a. / / Amendment(s) adopted by shareholder action.
At the date of adoption of the amendment, the number of
outstanding shares of each voting group entitled to vote
separately on the Amendment, and the vote of such shares was:
<TABLE>
<CAPTION>
Number of Number of Number of Votes Number of Undisputed*
Voting Outstanding Votes Entitled Represented Shares Voted
Group Shares to be Cast at the meeting For Against
- ------ ----------- -------------- -------------- ---------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
65
<PAGE> 32
*NOTE: Pursuant to Section 33-10-106(6)(i), the corporation
can alternatively State the total number of undisputed shares cast
for the amendment by each voting group together with a statement that
the number of cast for the amendment by each voting group was
sufficient for approval by that voting group.
b. /x/ The amendment(s) was duly adopted by the Incorporators
or board of directors without shareholder approval pursuant to
Section 33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South
Carolina Code as amended, and shareholder action was not
required.
5. Unless a delayed date is specified, the effective date of these
Articles of Amendments shall be the date of acceptance for filing by
the Secretary of State (See Section 33-1-230(b))
_______________________________.
DATE: February 23, 1994 THE LIBERTY CORPORATION
-------------------------------------------
(Name of Corporation)
By: /s/ Martha G. Williams
-------------------------------------------
(Signature)
Martha G. Williams, Vice President,
------------------------------------------
General Counsel & Secretary
------------------------------------------
(Type or Print Name and Office)
66
<PAGE> 33
FILING INSTRUCTIONS
1. Two copies of this form, the original and either a duplicate original
or a conformed copy, must be filed.
2. If the space in this form is insufficient, please attach additional
sheets containing a reference to the appropriate paragraph in this
form.
3. Filing fees and taxes payable to the Secretary of State at time of
filling application.
Filing Fee $ 10.00
Filing Tax 100.00
Total $110.00
67
<PAGE> 34
EXHIBIT A
TO
ARTICLES OF AMENDMENT
OF
THE LIBERTY CORPORATION
ESTABLISHING
SERIES 1994-B VOTING CUMULATIVE
PREFERRED STOCK
The Restated Articles of Incorporation of The Liberty Corporation
(the "Corporation"), as previously amended, are hereby further amended to
establish a special series of preferred stock and to set forth the preferences,
limitations and relative rights of such series of preferred stock, all in
accordance with resolutions adopted by the Board of Directors on December 15,
1993 and resolutions adopted by a Special Committee of the Board of Directors
on February 23, 1994 (acting under specific authorization of the Board of
Directors), all pursuant to the authority granted by Article 4 of the Restated
Articles of Incorporation of the Corporation, which preferences, limitations
and relative rights are as follows:
1. Designation and Number of Preferred Shares. The series of
preferred stock, no par value, established by the Board of Directors as
described herein shall consist of 600,000 shares and shall be designated
"Series 1994-B Voting Cumulative Preferred Stock" (hereinafter, the "1994-B
Preferred Stock").
2. Dividends. Dividends on the 1994-B Preferred Stock shall be
at the rate of 5.6% per annum, shall accrue daily (whether or not declared) on
the basis of a 360-day year of twelve 30-day months, shall be paid on or before
the last day of each calendar quarter, but only as and when declared by the
Board of Directors in accordance with applicable law (and subject to the
Corporation's right to defer payment of dividends with respect to affected
shares of 1994-B Preferred Stock until the owners complete applicable
procedures for the issuance to them of stock certificates pursuant to the
merger of American Funeral Assurance Company with a subsidiary of the
Corporation (the "American Merger")), and shall commence to accrue and shall be
cumulative (but unpaid, accumulated dividends shall not accrue dividends or
bear interest), as follows:
(a) if issued as of the effective date of the American
Merger, then from and including the effective date of the American Merger;
(b) if issued as of a date after the effective date of
the American Merger but during the period commencing immediately after the
record date for a dividend on the 1994-B Preferred Shares and ending at the
close of the calendar quarter for such dividend, then from the end of the
calendar quarter for which such last dividend payment was made; and
(c) otherwise from the beginning of the calendar quarter
in which such shares are issued.
3. Rank. No dividends or any other distributions on the common
shares of the Corporation (the "Common Stock") or any other stock of the
Corporation ranking junior to the 1994-B Preferred Stock shall be paid or
declared and set apart for payment unless all accumulated and unpaid dividends
(whether or not declared) on the 1994-B Preferred Stock have been paid or
declared set apart for payment. The 1994-B Preferred Stock shall be on a
parity with all other series of preferred stock of the Corporation as to
payment of dividends or other distributions (including upon liquidation),
whether such series are now existing or are created in the future, unless a
series of preferred stock of the Corporation expressly provides that it is
either senior or junior to the 1994- B Preferred Stock.
68
<PAGE> 35
4. Voting Rights. The holders of shares of 1994-B Preferred
Stock shall be entitled to one vote per share on any matters submitted to a
vote of the shareholders of the Corporation and on any other matters required
by applicable law to be submitted to a vote of the holders of the 1994-B
Preferred Stock.
5. Redemption--At Election of the Corporation.
(a) Generally. Subject to applicable law, the
Corporation has the right to elect to redeem any or all of the 1994-B Preferred
Stock from time to time at any time after March 24, 1999 in exchange for either
cash or Common Stock in an amount determined in accordance with Section 8
hereof and otherwise on the terms set forth in this Section 5. If less than all
of the issued and outstanding shares of 1994-B Preferred Stock are to be
redeemed, then the shares of 1994-B Preferred Stock to be redeemed shall be
selected either pro rata, by lot, or in such other equitable manner as
determined by the Board of Directors.
(b) Notice of Redemption. The Corporation shall give
written notice of its election to redeem 1994-B Preferred Stock pursuant to
this Section 5 to each registered holder of the shares of 1994-B Preferred
Stock to be redeemed. Such notice shall set forth the total number of shares
of 1994-B Preferred Stock being redeemed from such holder and in the aggregate
and the date of the redemption selected by the Corporation. The Corporation's
redemption notice shall be mailed to each such registered holder's address
specified in the share records of the Corporation by first class mail, postage
prepaid, not less than 30 days nor more than 60 days prior to the redemption
date selected by the Corporation.
(c) The Redemption. The 1994-B Preferred Stock as to
which the Corporation's redemption notice has been given shall be redeemed on
the date specified in such notice. On the redemption date: (i) the
Corporation shall deliver (or make available for delivery upon compliance with
clause (ii) of this Section 5(c)) the Redemption Consideration (defined in
Section 8 hereof) to the registered holders of shares of 1994-B Preferred Stock
being redeemed, which Redemption Consideration shall include any accumulated
and unpaid dividends (whether or not declared) to and including the redemption
date; and (ii) such holders shall deliver (or shall have delivered prior to
such redemption date) to the Corporation in exchange for such Redemption
Consideration the share certificates representing the 1994-B Preferred Stock
being redeemed, duly endorsed by the registered holders in blank or with
executed stock powers duly executed by the registered holders in blank, in each
case with signatures guaranteed by a financial institution or brokerage firm
having membership in good standing in a recognized guarantee program. In case
less than all the shares of 1994-B Preferred Stock represented by any such
certificates are redeemed, new share certificates representing the unredeemed
shares of 1994-B Preferred Stock shall be issued to such holders without cost
to such holders.
6. Failure to Surrender Certificates; Effect of Redemption.
When the Corporation has duly and properly given notice for redemption of
1994-B Preferred Stock in accordance with Section 5(b) and applicable law and
any registered holder of the 1994-B Preferred Stock fails to present the
certificate(s) representing the 1994-B Preferred Stock to be redeemed or
otherwise take action required by the Corporation's redemption notice in
accordance with the Restated Articles of Incorporation and applicable law then,
as of the redemption date: (i) the 1994-B Preferred Stock held by such
registered holder shall be deemed to have been redeemed and to be no longer
outstanding; (ii) each such holder's right to receive dividends on such 1994-B
Preferred Stock shall cease to accrue; and (iii) all other rights with respect
to such 1994-B Preferred Stock shall cease and terminate, except the right of
each such holder to receive the Redemption Consideration distributable to such
holder upon such redemption, without interest.
7. Redemption--At Request of Holder.
(a) Generally. Subject to applicable law, each
registered holder of 1994-B Preferred Stock has the right to require the
Corporation, at any time after March 24, 1999, to redeem any or all of such
holder's 1994-B Preferred Stock in exchange for cash or Common Stock in an
amount determined in accordance with Section 8 hereof and otherwise on the
terms set forth in this Section 7.
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(b) Request for Redemption and Notice of Redemption. If
a registered holder of 1994-B Preferred Stock desires to have any or all of
such holder's 1994-B Preferred Stock redeemed, then such holder shall give
written notice of such desire to the Corporation at the Corporation's principal
executive office to the attention of the Legal Department or at such other
office or agency designated by the Corporation for such purpose, accompanied by
the share certificates representing the 1994-B Preferred Stock being redeemed,
duly endorsed by the registered holder in blank or with executed stock powers
duly executed by the registered holder in blank, in each case with signatures
guaranteed by a financial institution or brokerage firm having membership in
good standing in a recognized guarantee program. A holder of 1994-B Preferred
Stock may give no more than one such notice during any calendar year. Within
10 days after the Corporation's receipt of such holder's redemption request
notice, the Corporation may give such holder written notice at such holder's
address set forth in the redemption request notice, or if none is set forth in
such notice, to such holder's address in the share records of the Corporation,
setting forth a date, not sooner than 10 days nor later than 60 days from the
Corporation's giving of its redemption notice, which shall be the redemption
date for the stock covered by such notice. Unless the Corporation gives any
such notice specifying a different date for redemption, the redemption pursuant
to this Section 7(b) shall be effective as of the last day of the calendar
quarter during which the Corporation receives such holder's redemption request
notice.
(c) The Redemption. On the applicable redemption date,
the Corporation, directly or through its agent, shall redeem the shares of
1994-B Preferred Stock as to which the redemption request notice has been
received by the Corporation and shall deliver or send the Redemption
Consideration (defined in Section 8 hereof) to the registered holder of the
1994-B Preferred Stock being redeemed. In case less than all the shares of
1994-B Preferred Stock represented by any surrendered certificate are redeemed,
a new share certificate representing the unredeemed shares of 1994-B Preferred
Stock shall be issued to such holder without cost to such holder.
8. Redemption Consideration. The consideration delivered by the
Corporation in exchange for the shares of 1994-B Preferred Stock redeemed (the
"Redemption Consideration") shall be paid, at the Corporation's option, in
cash, shares of Common Stock, or a combination of cash and Common Stock, as
follows:
(a) for shares redeemed in cash, an amount equal to
$37.50 per share of 1994-B Preferred Stock redeemed, plus any accumulated and
unpaid dividends (whether or not declared) to and including the redemption
date, such consideration to be paid by check; and
(b) for shares redeemed in Common Stock, the Corporation
shall deliver share certificates representing: (i) the number of shares of
Common Stock having a "market value" equal to the sum of $37.50 plus the amount
of any accumulated and unpaid dividends per share (whether or not declared) on
the 1994-B Preferred Stock times the number of shares of 1994-B Preferred Stock
being redeemed, or (ii) in the case of a redemption pursuant to Section 5, the
number of shares of Common Stock into which the 1994- B Preferred Stock could
have been converted on the last business day before the redemption date (if
such conversion were permissible under Section 11), but only if such number of
shares is higher than the number of shares computed pursuant to clause (i). As
used herein, "market value" shall be based on the average of the daily closing
prices of the shares of Common Stock for the ten consecutive business days
ending on the third day before the redemption date.
9. Negotiated Repurchase. In addition to or in lieu of
exercising any redemption rights provided herein, the Corporation and any
holder of the 1994-B Preferred Stock may negotiate and agree upon terms
pursuant to which the Corporation will repurchase any or all of the shares of
1994-B Preferred Stock held by such shareholder. Any such negotiated purchase
may be consummated without restriction or requirement as to time, amount paid
by the Corporation, pro rata repurchase by the Corporation, or any other
restriction or requirement contained herein.
10. No Sinking Fund. No sinking fund exists for the redemption of
1994-B Preferred Stock.
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<PAGE> 37
11. Conversion Rights of 1994-B Preferred Stock into Common Stock.
(a) Right to Convert. At the option of the holder
thereof and upon compliance with the provisions of this Section 11 as to
surrender thereof, each share of the 1994-B Preferred Stock shall be
convertible at any time into fully paid and nonassessable Common Stock at the
rate of one share of Common Stock of the Corporation for each such share of
1994-B Preferred Stock; provided, however, that if the Corporation has given
notice for redemption of such holder's shares of 1994-B Preferred Stock, the
right of conversion as to such shares shall terminate at the close of business
on the seventh day prior to the redemption date; and provided, further, that if
default shall be made by the Corporation in the payment of the Redemption
Consideration for such shares, then conversion rights in respect thereof, if
any, shall again be in full force and effect.
(b) Procedure. Before any holder of shares of the 1994-B
Preferred Stock shall be entitled to convert the same into Common Stock, such
holder shall surrender the certificate or certificates for such 1994-B
Preferred Stock, duly assigned to the Corporation at its principal executive
office, or at such other office or agency designated by the Corporation for
such purpose, accompanied by written notice to the Corporation of the election
to convert such shares into Common Stock, stating therein the name or names in
which the certificate or certificates of Common Stock are to be issued. In
case such notice shall specify a name or names other than that of such holder,
such notice shall be accompanied by payment of any and all transfer taxes
payable upon the issue of Common Stock in such name or names and such other
documentation reasonably requested by the Corporation.
(1) As soon as practicable after such surrender
of certificate or certificates, the Corporation shall issue and deliver to such
holder, or to his nominee or nominees, a certificate or certificates for the
number of shares of Common Stock to which he shall be entitled. Such
conversion shall be deemed to have been made as of the next business day
following the Corporation's receipt of such certificate or certificates for
shares of 1994-B Preferred Stock to be converted, accompanied by any required
taxes or other documentation, and on and after such date the person or persons
entitled to receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock.
(2) No payment or adjustment shall be made on
account of any dividends accumulated and unpaid on any shares of 1994-B
Preferred Stock surrendered for conversion or on account of any dividends on
the Common Stock issuable on such conversion.
(c) Conversion Adjustments.
(1) If the Corporation shall (i) pay a dividend
payable in Common Stock, (ii) subdivide outstanding Common Stock into a larger
number of shares of Common Stock by reclassification or otherwise, or (iii)
combine its outstanding Common Stock into a smaller number of shares of Common
Stock by reclassification or otherwise, then in each such case, the holder of
each share of 1994-B Preferred Stock shall thereafter be entitled to receive
upon the conversion of such share, the number of shares of Common Stock which
such holder would have owned or have been entitled to receive after the
happening of any of the events described above had such 1994-B Preferred Stock
been converted immediately prior to the happening of such event.
(2) In the case of any capital reorganization of
the Corporation or of any reclassification of the Common Stock, or in the case
of the consolidation of the Corporation with or the merger of the Corporation
with or into any other entity or of the sale, lease or other transfer of all or
substantially all of the assets of the Corporation to any other person, the
1994-B Preferred Stock shall after such capital reorganization,
reclassification, consolidation, merger, sale, lease or other transfer be
convertible into the number of shares of stock or other securities or property
which a holder of the Common Stock issuable (at the time of such capital
reorganization, reclassification, consolidation, merger, lease or other
transfer) upon conversion of the 1994-B Preferred Stock would have been
entitled upon such capital reorganization, reclassification, consolidation,
merger, sale, lease or other transfer; and in any such case, if necessary, the
provisions set forth herein with respect to the rights and interest thereafter
of the holders of the 1994-B Preferred Stock shall be appropriately adjusted so
as to be applicable, as nearly as may reasonably be, to any shares of stock or
other securities or property thereafter deliverable on the conversion of the
1994-B Preferred Stock.
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The subdivision or combination of Common Stock issuable upon conversion of
1994-B Preferred Stock at any time outstanding into a greater or lesser number
of shares of Common Stock (whether with or without par value) not be deemed to
be a reclassification of the Common Stock of the Corporation for the purposes
of this Section 11(c)(2).
(3) No fractional shares of Common Stock shall be
issued on any conversion, but in lieu thereof the Corporation shall, at its
option: (i) pay therefor cash in an amount equal to the current market value of
such fractional interest, or (ii) make such arrangements as the Board of
Directors shall approve to enable the holder of a fractional interest to sell
such interest or buy an additional fractional interest sufficient to make one
whole share of Common Stock.
(d) Reservation of Common Stock. The Corporation shall
reserve at all times while any 1994- B Preferred Stock remains outstanding,
free from preemptive rights, out of its treasury shares or its authorized but
unissued Common Stock, or both, solely for the purposes of effecting the
conversion of the 1994-B Preferred Stock, sufficient shares of Common Stock to
provide for the conversion of all outstanding 1994-B Preferred Stock.
(e) Valid Issuance. All shares of Common Stock which may
be issued upon conversion of the 1994-B Preferred Stock will, upon issuance by
the Corporation, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issuance of them,
and the Corporation shall take no action which causes a contrary result.
12. Liquidation Rights. Upon the voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, after payment or
provision for payment of the debts and other liabilities of the Corporation,
the registered holders of the 1994-B Preferred Stock then outstanding shall be
entitled to receive out of the net assets of the Corporation, before any
payment or distribution shall be made on the Common Stock, cash or other
property having a fair market value or some combination thereof in an amount
equal to $37.50 per share, plus an amount equal to all accumulated and unpaid
dividends (whether or not earned or declared) to and including the date of
final distribution to the registered holders of the 1994-B Preferred Stock, and
no more, before any distribution shall be made to the registered holders of
Common Stock. If the assets of the Corporation available for distribution to
the registered holders of 1994-B Preferred Stock shall be insufficient to pay
the full amount to which all such holders are entitled pursuant to the
forgoing, then each such holder shall be entitled to share pro rata in the
amounts so available. Neither the merger or consolidation of the Corporation,
nor the sale, lease or conveyance of all or a part of its assets, shall be
deemed to be a liquidation, dissolution or winding up of the affairs of the
Corporation.
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STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
Pursuant to Section 3-10-106 of the 1976 South Carolina Code, as amended,
the undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
1. The name of the corporation is THE LIBERTY CORPORATION
2. On March 28, 1994, the corporation adopted the following Amendment(s)
of its Articles of Incorporation:
(Type or attach the complete text of each Amendment)
SEE EXHIBIT A ATTACHED HERETO
3. The manner, if not set forth in the amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the
Amendment shall be effected, is as follows: (if not applicable, insert
"not applicable" or "NA").
NOT APPLICABLE
4. Complete either a or b, whichever is applicable.
a. / / Amendment(s) adopted by shareholder action.
At the date of adoption of the amendment, the number of
outstanding shares of each voting group entitled to vote
separately on the Amendment, and the vote of such shares was:
Number of Number of Number of Votes Number of Undisputed*
Voting Outstanding Votes Entitled Represented at Shares Voted
Group Shares to be Cast the meeting For Against
- ----- ------ ---------- ----------- ---------------------
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*NOTE: Pursuant to Section 33-10-106(6)(i), the corporation can
alternatively state the total number of undisputed shares cast for
the amendment by each voting group together with a statement that
the number of shares cast for the amendment by each voting group
was sufficient for approval by that voting group.
b. /X/ The Amendment(s) was duly adopted by the incorporators or board of
directors without shareholder approval pursuant to Section
33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South Carolina
Code as amended, and shareholder action was not required.
5. Unless a delayed date is specified, the effective date of these Articles of
Amendment shall be the date of acceptance for filing by the Secretary of
State (See Section 33-1-230(b)):
------------------
DATE March 28, 1994 THE LIBERTY CORPORATION
--------------------------------
(Name of Corporation)
By: /s/ Martha G. Williams
--------------------------------
(Signature)
Martha G. Williams, Vice President,
General Counsel and Secretary
------------------------------------
(Type or Print Name and Office)
FILING INSTRUCTIONS
1. Two copies of this form, the original and either a duplicate original or a
conformed copy, must be filed.
2. If the space in this form is insufficient, please attach additional sheets
containing a reference to the appropriate paragraph in this form.
3. Filing fees and taxes payable to the Secretary of State at time of filing
application.
Filing Fee $ 10.00
Filing Tax 100.00
Total $110.00
Form Approved by South Carolina
Secretary of State 1/89
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<PAGE> 41
EXHIBIT A
TO
ARTICLES OF AMENDMENT
OF
THE LIBERTY CORPORATION
ESTABLISHING
SERIES 1994-A VOTING CUMULATIVE
PREFERRED STOCK
The Restated Articles of Incorporation of The Liberty Corporation (the
"Corporation"), as previously amended, are hereby further amended to establish
a special series of preferred stock and to set forth the preferences,
limitations and relative rights of such series of preferred stock, all in
accordance with resolutions adopted by the Board of Directors on February 1,
1994 and resolutions adopted by a Special Committee of the Board of Directors
on March 28, 1994 (acting under specific authorization of the Board of
Directors), all pursuant to the authority granted by Article 4 of the Restated
Articles of Incorporation of the Corporation, which preferences, limitations
and relative rights are as follows:
1. Designation and Number of Preferred Shares. The series of
preferred stock, no par value, established by the Board of Directors as
described herein shall consist of 670,000 shares and shall be designated
"Series 1994-A Voting Cumulative Preferred Stock" (hereinafter, the "1994-A
Preferred Stock").
2. Dividends. Dividends on the 1994-A Preferred Stock shall be at
the rate of 6% per annum, shall accrue daily (whether or not declared) on the
basis of a 360-day year of twelve 30-day months, shall be paid (i) with respect
to the first calendar quarter during which any 1994-A Preferred Stock is
issued, in advance for the remainder of such calendar quarter on each share of
1994-A Preferred Stock issued pursuant to the merger of State National Capital
Corporation with and into the Corporation (the "State National Merger"), on the
next business day after the effective date of the State National Merger and
(ii) thereafter on or before the last day of each calendar quarter, but only as
and when declared by the Board of Directors in accordance with applicable law
(and subject to the Corporation's right to defer payment of dividends with
respect to affected shares of 1994-A Preferred Stock until the owners complete
applicable procedures for the issuance to them of stock certificates pursuant
to the State National Merger), and shall commence to accrue and shall be
cumulative (but unpaid, accumulated dividends shall not accrue dividends or
bear interest), as follows:
(a) if issued as of the effective date of the State National
Merger, then from and including the effective date of the State National
Merger;
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<PAGE> 42
(b) if issued as of a date after the effective date of the State
National Merger but during the period commencing immediately after the
record date for a dividend on the 1994-A Preferred Shares and ending at the
close of the calendar quarter for such dividend, then from the end of the
calendar quarter for which such last dividend payment was made; and
(c) otherwise from the beginning of the calendar quarter in which
such shares are issued.
3. Rank. No dividends or any other distributions on the common
shares of the Corporation (the "Common Stock") or any other stock of the
Corporation ranking junior to the 1994-A Preferred Stock shall be paid or
declared and set apart for payment unless all accumulated and unpaid dividends
(whether or not declared) on the 1994-A Preferred Stock have been paid or
declared and set apart for payment. The 1994-A Preferred Stock shall be on a
parity with all other series of preferred stock of the Corporation as to
payment of dividends or other distributions (including upon liquidation),
whether such series are now existing or are created in the future, unless a
series of preferred stock of the Corporation expressly provides that it is
either senior or junior to the 1994-A Preferred Stock.
4. Voting Rights. The holders of shares of 1994-A Preferred Stock
shall be entitled to one vote per share on any matters submitted to a vote of
the shareholders of the Corporation and on any other matters required by
applicable law to be submitted to a vote of the holders of the 1994-A Preferred
Stock.
5. Redemption--At Election of the Corporation.
(a) Generally. Subject to applicable law, the Corporation has the
right to elect to redeem any or all of the 1994-A Preferred Stock from time to
time at any time after May 1, 1999 in exchange for either cash or Common Stock
in an amount determined in accordance with Section 8 hereof and otherwise on
the terms set forth in this Section 5. If less than all of the issued and
outstanding shares of 1994-A Preferred Stock are to be redeemed, then the
shares of 1994-A Preferred Stock to be redeemed shall be selected either pro
rata, by lot, or in such other equitable manner as determined by the Board of
Directors.
(b) Notice of Redemption. The Corporation shall give written
notice of its election to redeem 1994-A Preferred Stock pursuant to this
Section 5 to each registered holder of the shares of 1994-A Preferred Stock to
be redeemed. Such notice shall set forth the total number of shares of 1994-A
Preferred Stock being redeemed from such holder and in the aggregate and the
date of the redemption selected by the Corporation. The Corporation's
redemption notice shall be mailed to each such registered holder's address
specified in the share records of the Corporation by first class mail, postage
prepaid, not less than 30 days nor more than 60 days prior to the redemption
date selected by the Corporation.
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<PAGE> 43
(c) The Redemption. The 1994-A Preferred Stock as to which the
Corporation's redemption notice has been given shall be redeemed on the date
specified in such notice. On the redemption date: (i) the Corporation shall
deliver (or make available for delivery upon compliance with clause (ii) of
this Section 5(c)) the Redemption Consideration (defined in Section 8 hereof)
to the registered holders of shares of 1994-A Preferred Stock being redeemed,
which Redemption Consideration shall include any accumulated and unpaid
dividends (whether or not declared) to and including the redemption date; and
(ii) such holders shall deliver (or shall have delivered prior to such
redemption date) to the Corporation in exchange for such Redemption
Consideration the share certificates representing the 1994-A Preferred Stock
being redeemed, duly endorsed by the registered holders in blank or with
executed stock powers duly executed by the registered holders in blank, in each
case with signatures guaranteed by a financial institution or brokerage firm
having membership in good standing in a recognized guarantee program. In case
less than all the shares of 1994-A Preferred Stock represented by any such
certificates are redeemed, new share certificates representing the unredeemed
shares of 1994-A Preferred Stock shall be issued to such holders without cost
to such holders.
6. Failure to Surrender Certificates; Effect of Redemption. When the
Corporation has duly and properly given notice for redemption of 1994-A
Preferred Stock in accordance with Section 5(b) and applicable law and any
registered holder of the 1994-A Preferred Stock fails to present the
certificate(s) representing the 1994-A Preferred Stock to be redeemed or
otherwise take action required by the Corporation's redemption notice in
accordance with the Restated Articles of Incorporation and applicable law then,
as of the redemption date: (i) the 1994-A Preferred Stock held by such
registered holder shall be deemed to have been redeemed and to be no longer
outstanding; (ii) each such holder's right to receive dividends on such 1994-A
Preferred Stock shall cease to accrue; and (iii) all other rights with respect
to such 1994-A Preferred Stock shall cease and terminate, except the right of
each such holder to receive the Redemption Consideration distributable to such
holder upon such redemption, without interest.
7. Redemption--At Request of Holder.
(a) Generally. Subject to applicable law, each registered holder
of 1994-A Preferred Stock has the right to require the Corporation, at any time
after May 1, 1999, to redeem any or all of such holder's 1994-A Preferred Stock
in exchange for cash or Common Stock in an amount determined in accordance with
Section 8 hereof and otherwise on the terms set forth in this Section 7.
(b) Request for Redemption and Notice of Redemption. If a
registered holder of 1994-A Preferred Stock desires to have any or all of such
holder's 1994-A Preferred Stock redeemed, then such holder shall give written
notice of such desire to the Corporation at the Corporation's principal
executive office to the attention of the Legal Department or at such other
office or agency designated by the Corporation for such purpose, accompanied by
the share certificates representing the 1994-A Preferred Stock
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<PAGE> 44
being redeemed, duly endorsed by the registered holder in blank or with
executed stock powers duly executed by the registered holder in blank, in each
case with signatures guaranteed by a financial institution or brokerage firm
having membership in good standing in a recognized guarantee program. A holder
of 1994-A Preferred Stock may give no more than one such notice during any
calendar year. Within 10 days after the Corporation's receipt of such holder's
redemption request notice, the Corporation may give such holder written notice
at such holder's address set forth in the redemption request notice, or if none
is set forth in such notice, to such holder's address in the share records of
the Corporation, setting forth a date, not sooner than 10 days nor later than
60 days from the Corporation's giving of its redemption notice, which shall be
the redemption date for the stock covered by such notice. Unless the
Corporation gives any such notice specifying a different date for redemption,
the redemption pursuant to this Section 7(b) shall be effective as of the last
day of the calendar quarter during which the Corporation receives such holder's
redemption request notice.
(c) The Redemption. On the applicable redemption date, the
Corporation, directly or through its agent, shall redeem the shares of 1994-A
Preferred Stock as to which the redemption request notice has been received by
the Corporation and shall deliver or send the Redemption Consideration (defined
in Section 8 hereof) to the registered holder of the 1994-A Preferred Stock
being redeemed. In case less than all the shares of 1994-A Preferred Stock
represented by any surrendered certificate are redeemed, a new share
certificate representing the unredeemed shares of 1994-A Preferred Stock shall
be issued to such holder without cost to such holder.
8. Redemption Consideration. The consideration delivered by the
Corporation in exchange for the shares of 1994-A Preferred Stock redeemed (the
"Redemption Consideration") shall be paid, at the Corporation's option, in
cash, shares of Common Stock, or a combination of cash and Common Stock, as
follows:
(a) for shares redeemed in cash, an amount equal to $35.00 per
share of 1994-A Preferred Stock redeemed, plus any accumulated and unpaid
dividends (whether or not declared) to and including the redemption date, such
consideration to be paid by check; and
(b) for shares redeemed in Common Stock, the Corporation shall
deliver share certificates representing: (i) the number of shares of Common
Stock having a "market value" equal to the sum of $35.00 plus the amount of any
accumulated and unpaid dividends per share (whether or not declared) on the
1994-A Preferred Stock times the number of shares of 1994-A Preferred Stock
being redeemed, or (ii) in the case of a redemption pursuant to Section 5, the
number of shares of Common Stock into which the 1994-A Preferred Stock could
have been converted on the last business day before the redemption date (if
such conversion were permissible under Section 11), but only if such number of
shares is higher than the number of shares computed pursuant to clause (i). As
used herein, "market value" shall be based on the average of the daily closing
prices of the shares of
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<PAGE> 45
Common Stock for the ten consecutive business days ending on the third day
before the redemption date.
9. Negotiated Repurchase. In addition to or in lieu of exercising
any redemption rights provided herein, the Corporation and any holder of the
1994-A Preferred Stock may negotiate and agree upon terms pursuant to which the
Corporation will repurchase any or all of the shares of 1994-A Preferred Stock
held by such shareholder. Any such negotiated purchase may be consummated
without restriction or requirement as to time, amount paid by the Corporation,
pro rata repurchase by the Corporation, or any other restriction or requirement
contained herein.
10. No Sinking Fund. No sinking fund exists for the redemption of
1994-A Preferred Stock.
11. Conversion Rights of 1994-A Preferred Stock into Common Stock.
(a) Right to Convert. At the option of the holder thereof and
upon compliance with the provisions of this Section 11 as to surrender thereof,
each share of the 1994-A Preferred Stock shall be convertible at any time into
fully paid and nonassessable Common Stock at the rate of one share of Common
Stock of the Corporation for each such share of 1994-A Preferred Stock;
provided, however, that if the Corporation has given notice for redemption of
such holder's shares of 1994-A Preferred Stock, the right of conversion as to
such shares shall terminate at the close of business on the seventh day prior
to the redemption date; and provided, further, that if default shall be made by
the Corporation in the payment of the Redemption Consideration for such shares,
then conversion rights in respect thereof, if any, shall again be in full force
and effect.
(b) Procedure. Before any holder of shares of the 1994-A
Preferred Stock shall be entitled to convert the same into Common Stock, such
holder shall surrender the certificate or certificates for such 1994-A
Preferred Stock, duly assigned to the Corporation at its principal executive
office, or at such other office or agency designated by the Corporation for
such purpose, accompanied by written notice to the Corporation of the election
to convert such shares into Common Stock, stating therein the name or names in
which the certificate or certificates of Common Stock are to be issued. In
case such notice shall specify a name or names other than that of such holder,
such notice shall be accompanied by payment of any and all transfer taxes
payable upon the issue of Common Stock in such name or names and such other
documentation reasonably requested by the Corporation.
(1) As soon as practicable after such surrender of
certificate or certificates, the Corporation shall issue and deliver to such
holder, or to his nominee or nominees, a certificate or certificates for the
number of shares of Common Stock to which he shall be entitled. Such
conversion shall be deemed to have been made as of the next business day
following the Corporation's receipt of such certificate or certificates for
shares
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<PAGE> 46
of 1994-A Preferred Stock to be converted, accompanied by any required taxes or
other documentation, and on and after such date the person or persons entitled
to receive the Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock.
(2) No payment or adjustment shall be made on account of
any dividends accumulated and unpaid on any shares of 1994-A Preferred Stock
surrendered for conversion or on account of any dividends on the Common Stock
issuable on such conversion.
(c) Conversion Adjustments.
(1) If the Corporation shall (i) pay a dividend payable in
Common Stock, (ii) subdivide outstanding Common Stock into a larger number of
shares of Common Stock by reclassification or otherwise, or (iii) combine its
outstanding Common Stock into a smaller number of shares of Common Stock by
reclassification or otherwise, then in each such case, the holder of each share
of 1994-A Preferred Stock shall thereafter be entitled to receive upon the
conversion of such share, the number of shares of Common Stock which such
holder would have owned or have been entitled to receive after the happening of
any of the events described above had such 1994-A Preferred Stock been
converted immediately prior to the happening of such event.
(2) In the case of any capital reorganization of the
Corporation or of any reclassification of the Common Stock, or in the case of
the consolidation of the Corporation with or the merger of the Corporation with
or into any other entity or of the sale, lease or other transfer of all or
substantially all of the assets of the Corporation to any other person, the
1994-A Preferred Stock shall after such capital reorganization,
reclassification, consolidation, merger, sale, lease or other transfer be
convertible into the number of shares of stock or other securities or property
which a holder of the Common Stock issuable (at the time of such capital
reorganization, reclassification, consolidation, merger, sale, lease or other
transfer) upon conversion of the 1994-A Preferred Stock would have been
entitled upon such capital reorganization, reclassification, consolidation,
merger, sale, lease or other transfer; and in any such case, if necessary, the
provisions set forth herein with respect to the rights and interest thereafter
of the holders of the 1994-A Preferred Stock shall be appropriately adjusted so
as to be applicable, as nearly as may reasonably be, to any shares of stock or
other securities or property thereafter deliverable on the conversion of the
1994-A Preferred Stock. The subdivision or combination of Common Stock
issuable upon conversion of 1994-A Preferred Stock at any time outstanding into
a greater or lesser number of shares of Common Stock (whether with or without
par value) shall not be deemed to be a reclassification of the Common Stock of
the Corporation for the purposes of this Section 11(c)(2).
(3) No fractional shares of Common Stock shall be issued
on any conversion, but in lieu thereof the Corporation shall, at its option:
(i) pay therefor cash in
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an amount equal to the current market value of such fractional interest, or
(ii) make such arrangements as the Board of Directors shall approve to enable
the holder of a fractional interest to sell such interest or buy an additional
fractional interest sufficient to make one whole share of Common Stock.
(d) Reservation of Common Stock. The Corporation shall reserve at
all times while any 1994-A Preferred Stock remains outstanding, free from
preemptive rights, out of its treasury shares or its authorized but unissued
Common Stock, or both, solely for the purposes of effecting the conversion of
the 1994-A Preferred Stock, sufficient shares of Common Stock to provide for
the conversion of all outstanding 1994-A Preferred Stock.
(e) Valid Issuance. All shares of Common Stock which may be
issued upon conversion of the 1994-A Preferred Stock will, upon issuance by the
Corporation, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issuance of them, and the
Corporation shall take no action which causes a contrary result.
12. Liquidation Rights. Upon the voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, after payment or
provision for payment of the debts and other liabilities of the Corporation,
the registered holders of the 1994-A Preferred Stock then outstanding shall be
entitled to receive out of the net assets of the Corporation, before any
payment or distribution shall be made on the Common Stock, cash or other
property having a fair market value or some combination thereof in an amount
equal to $35.00 per share, plus an amount equal to all accumulated and unpaid
dividends (whether or not earned or declared) to and including the date of
final distribution to the registered holders of the 1994-A Preferred Stock, and
no more, before any distribution shall be made to the registered holders of
Common Stock. If the assets of the Corporation available for distribution to
the registered holders of 1994-A Preferred Stock shall be insufficient to pay
the full amount to which all such holders are entitled pursuant to the
foregoing, then each such holder shall be entitled to share pro rata in the
amounts so available. Neither the merger or consolidation of the Corporation,
nor the sale, lease or conveyance of all or a part of its assets, shall be
deemed to be a liquidation, dissolution or winding up of the affairs of the
Corporation.
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<PAGE> 1
EXHIBIT 10
$325,000,000
CREDIT AGREEMENT
dated as of
September 28, 1993
among
THE LIBERTY CORPORATION
The Banks Listed Herein
and
WACHOVIA BANK OF NORTH CAROLINA, N.A.,
as Agent
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<PAGE> 2
TABLE OF CONTENTS
CREDIT AGREEMENT
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C>
SECTION 1.01. Definitions ...................................................... 1
SECTION 1.02. Accounting Terms and Determinations .............................. 14
SECTION 1.03. References ....................................................... 15
</TABLE>
ARTICLE II
THE CREDITS
<TABLE>
<S> <C>
SECTION 2.01. Commitments to Make Syndicated Loans ............................. 15
SECTION 2.02. Method of Borrowing Syndicated Loans ............................. 16
SECTION 2.03. Money Market Loans ............................................... 17
SECTION 2.04. Notes ............................................................ 21
SECTION 2.05. Maturity of Loans ................................................ 21
SECTION 2.06. Interest Rates ................................................... 22
SECTION 2.07. Facility Fee ..................................................... 26
SECTION 2.08. Optional Termination or Reduction of Commitments ................. 27
SECTION 2.09. Mandatory Reduction and Termination of Commitments ............... 27
SECTION 2.10. Optional Prepayments ............................................. 28
SECTION 2.11. Mandatory Prepayments ............................................ 28
SECTION 2.12. General Provisions as to Payments ................................ 28
SECTION 2.13. Computation of Interest and Fees ................................. 29
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 2.14. Security; Setoff ................................................ 29
ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01. Conditions to First Borrowing ................................... 29
SECTION 3.02. Conditions to All Borrowings .................................... 30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power ................................... 31
SECTION 4.02. Corporate and Governmental Authorization: Contravention ......... 31
SECTION 4.03. Binding Effect .................................................. 32
SECTION 4.04. Financial Information ........................................... 32
SECTION 4.05. Litigation ...................................................... 32
SECTION 4.06. Compliance with ERISA ........................................... 33
SECTION 4.07. Taxes ........................................................... 33
SECTION 4.08. Subsidiaries .................................................... 33
SECTION 4.09. Not an Investment Company ....................................... 33
SECTION 4.10. Ownership of Property: Liens .................................... 33
SECTION 4.11. No Default ...................................................... 33
SECTION 4.12. Full Disclosure ................................................. 33
SECTION 4.13. Environmental Matters ........................................... 34
SECTION 4.14. Restricted Payments ............................................. 34
SECTION 4.15. Insolvency ...................................................... 34
</TABLE>
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<PAGE> 4
ARTICLE V
COVENANTS
<TABLE>
<S> <C>
SECTION 5.01. Information ............................................... 35
SECTION 5.02. Inspection of Property, Books and Records ................. 37
SECTION 5.03. Ratio of Consolidated Debt to Consolidated Total Capital .. 38
SECTION 5.04. Minimum Stockholders' Equity. ............................. 38
SECTION 5.05. Stock Payments ............................................ 38
SECTION 5.06. Restricted Payments ....................................... 39
SECTION 5.07. Fixed Charges Coverage .................................... 39
SECTION 5.08. Capital Expenditures ...................................... 39
SECTION 5.09. Loans or Advances ......................................... 39
SECTION 5.10. Investments ............................................... 39
SECTION 5.11. Negative Pledge ........................................... 40
SECTION 5.12. Maximum Consolidated Debt ................................. 40
SECTION 5.13. Ratio of Consolidated Debt to Cash Flow ................... 40
SECTION 5.14. Conduct of Business and Maintenance of Existence .......... 41
SECTION 5.15. Dissolution ............................................... 41
SECTION 5.16. Consolidations; Mergers and Sales of Assets ............... 41
SECTION 5.17. Use of Proceeds ........................................... 41
SECTION 5.18. Compliance with Laws; Payment of Taxes .................... 42
SECTION 5.19. Insurance ................................................. 42
SECTION 5.20. Change in Fiscal Year ..................................... 42
SECTION 5.21. Maintenance of Property ................................... 42
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
SECTION 5.22. Environmental Notices ............................................ 42
SECTION 5.23. Environmental Matters ............................................ 42
SECTION 5.24. Environmental Release ............................................ 43
SECTION 5.25. Aggregate Values of Investment Properties and Total Investments .. 43
SECTION 5.26. Surplus Relief Reinsurance ....................................... 43
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default ................................................ 43
SECTION 6.02. Notice of Default ................................................ 46
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment, Powers and Immunities ............................... 46
SECTION 7.02. Reliance by Agent ................................................ 47
SECTION 7.03. Defaults ......................................................... 47
SECTION 7.04. Rights of Agent as a Bank ........................................ 47
SECTION 7.05. Indemnification .................................................. 48
SECTION 7.06. Payee of Note Treated as Owner ................................... 48
SECTION 7.07. Non-Reliance on Agent and Other Banks ............................ 48
SECTION 7.08. Failure to Act ................................................... 48
SECTION 7.09. Resignation or Removal of Agent .................................. 49
</TABLE>
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<PAGE> 6
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION
<TABLE>
<S> <C>
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair ......... 49
SECTION 8.02. Illegality ....................................................... 50
SECTION 8.03. Increased Cost and Reduced Return ................................ 50
SECTION 8.04. Base Rate Loans or Other Fixed Rate Loans Substituted for Affected
Fixed Rate Loans ................................................. 51
SECTION 8.05. Compensation ..................................................... 52
SECTION 8.06. HLT Classification ............................................... 53
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices .......................................................... 53
SECTION 9.02. No Waivers ....................................................... 54
SECTION 9.03. Expenses; Indemnification ........................................ 54
SECTION 9.04. Sharing of Set-Offs .............................................. 54
SECTION 9.05. Amendments and Waivers ........................................... 55
SECTION 9.06. Margin Stock Collateral .......................................... 56
SECTION 9.07. Successors and Assigns ........................................... 56
SECTION 9.08. Confidentiality .................................................. 57
SECTION 9.09. Representation by Banks .......................................... 58
SECTION 9.10. Obligations Several .............................................. 58
SECTION 9.11. Survival of Certain Obligations .................................. 58
SECTION 9.12. North Carolina Law ............................................... 58
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C>
SECTION 9.13. Consent to Jurisdiction ......................................... 58
SECTION 9.14. Counterparts .................................................... 59
SECTION 9.15. Miscellaneous ................................................... 59
SCHEDULE 5.01(c)
EXHIBIT A Form of Syndicated Note
EXHIBIT B Form of Money Market Note
EXHIBIT C Form of Opinion of Counsel for the Borrower
EXHIBIT D Form of Opinion of Special Counsel for the Banks and the Agent
EXHIBIT E Form of Money Market Quote Request
EXHIBIT F Form of Money Market Quote
EXHIBIT G Form of Assignment and Acceptance
EXHIBIT H Form of Notice of Borrowing
</TABLE>
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<PAGE> 8
CREDIT AGREEMENT
AGREEMENT dated as of September 28, 1993, among THE LIBERTY
CORPORATION, the BANKS listed on the signature pages hereof (and their
SUCCESSORS AND ASSIGNS) AND WACHOVIA BANK OF NORTH CAROLINA, N.A., as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The terms as defined in this Section 1.01
shall, for all purposes of this Agreement and any amendment hereto (except as
herein otherwise expressly provided or unless the context otherwise requires),
have the meanings set forth herein (with the singular form to include the
plural form and vice-versa):
"Acquisition Loan" means any loan, advance or other extension of
credit by the Borrower to a Subsidiary within the Insurance Group, if the
proceeds of such loan, advance or other extension of credit are used by such
Subsidiary within the Insurance Group to acquire outstanding Capital Stock or
assets of any Person (other than a Subsidiary) engaged principally in the life
insurance business.
"Adjusted Cash Flow" for any period means the sum of (i) Cash Flow for
such period and (ii) Interest Expense for such period.
"Adjusted CD Rate" has the meaning set forth in Section 2.06(c).
"Adjusted London Interbank Offered Rate" has the meaning set forth
in Section 2.06(d).
"Affiliate" means (i) any Person that directly, or indirectly through
one or more intermediaries, controls the Borrower (a "Controlling Person"),
(ii) any Person (other than the Borrower or a Subsidiary) which is controlled
by or is under common control with a Controlling Person, or (iii) any Person
(other than a Subsidiary) of which the Borrower owns, directly or indirectly,
20% or more of the common stock or equivalent equity interests. As used herein,
the term "control" means possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Agent" means Wachovia Bank of North Carolina, N.A., a national
banking association organized under the laws of the United States of America,
in its capacity as agent for the Banks hereunder, and its successors and
permitted assigns in such capacity.
"Aggregate Commitments" shall mean the sum of all of the Commitments.
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<PAGE> 9
"Aggregate Value of Investment Properties" means the aggregate value,
without duplication, of all Investment Properties, as shown on the Borrower's
or Subsidiary's (as the case may be) books and records and as determined in
accordance with generally accepted accounting practices consistently applied;
provided, however, for the purposes of Section 5.25(b), the calculation of
"Aggregate Value of Investment Properties" shall not include the value of
Investment Properties acquired in connection with the acquisition of a Person
if the assets or any stock or other equity interests in such Person were
acquired within nine (9) months of the date of calculation.
"Aggregate Value of Total Investments" means the aggregate value,
without duplication, of all bonds, redeemable preferred stocks, non-redeemable
preferred stocks, common stocks, mortgage loans, loans to policy holders, other
long term investments, short term investments, and Investment Properties of the
Borrower and its Subsidiaries, as shown on the Borrower's or Subsidiary's (as
the case may be) books and records and as determined in accordance with
generally accepted accounting practices consistently applied.
"Annual Statement" means, with respect to any Subsidiary within the
Insurance Group, the annual report, statement or other filing made by such
Subsidiary with the insurance department or other governmental authority of the
state in which such Subsidiary is formed or incorporated which regulates,
supervises or otherwise has jurisdiction over such Subsidiary, all in
accordance with statutory accounting principles.
"Applicable Margin" has the meaning set forth in Section 2.06(a).
"Assessment Rate" has the meaning set forth in Section 2.06(c).
"Assignee" has the meaning set forth in Section 9.07(c).
"Assignment and Acceptance" means an Assignment and Acceptance
executed in accordance with Section 9.07(c) substantially in the form attached
hereto as Exhibit G.
"Authority" has the meaning set forth in Section 8.02.
"Bank" means each bank listed on the signature pages hereof as having
a Commitment, and its successors and assigns.
"Base Rate" means, for any Base Rate Loan for any day, the rate per
annum equal to the higher as of such day of (i) the Prime Rate, and (ii)
one-half of one percent plus the Federal Funds Rate for such day. For purposes
of determining the Base Rate for any day, changes in the Prime Rate and Federal
Funds Rate shall be effective on the date of each such change.
"Base Rate Loan" means a Loan which bears or is to bear interest at a
rate based upon the Base Rate.
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<PAGE> 10
"Book Value" means, with respect to any asset, the cost of such asset,
minus accumulated depreciation or amortization, if any, with respect to such
asset.
"Borrower" means The Liberty Corporation, a South Carolina
corporation, and its successors.
"Borrowing" means a borrowing hereunder consisting of Loans made to
the Borrower at the same time by, in the case of a Syndicated Borrowing, the
Banks or, in the case of a Money Market Borrowing, one or more of the Banks, in
either case pursuant to Article II. A Borrowing is a "Syndicated Borrowing" if
such Loans are Syndicated Loans or a "Money Market Borrowing" if such Loans are
Money Market Loans. A Syndicated Borrowing is a "Domestic Borrowing" if such
Loans are Domestic Loans or a "Euro-Dollar Borrowing" if such Loans are
Euro-Dollar Loans. A Domestic Borrowing is a "CD Borrowing" if such Domestic
Loans are CD Loans or a "Base Rate Borrowing" if such Domestic Loans are Base
Rate Loans.
"Capital Expenditures" means for any period the sum of all capital
expenditures incurred during such period by the Borrower and its Consolidated
Subsidiaries, as determined in accordance with generally accepted accounting
principles consistently applied.
"Capital Stock" of any Person means any redeemable or nonredeemable
shares of capital stock of such Person (to the extent issued to a Person other
than the Borrower), whether common or preferred.
"Cash Flow" for any period means the sum of (i) Test Income for such
period, (ii) depreciation, amortization and other non-cash charges of the
Borrower, Cosmos and the Minor Subsidiaries for such period, (iii) all
dividends paid by any Subsidiary to the Borrower or any Minor Subsidiary during
such period in respect of shares of common stock or preferred stock of such
Subsidiary owned by the Borrower or any Minor Subsidiary, (iv) net cash
proceeds from operating asset sales of LIG, (v) all Stock Payments paid by
Liberty Life to the Borrower during such period, and (vi) all payments of
principal of Acquisition Loans received by the Borrower during such period.
"CD Base Rate" has the meaning set forth in Section 2.06(c).
"CD Loan" means a Loan which bears or is to bear interest at a rate
based upon the CD Base Rate.
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act.
"CERCLIS" means the Comprehensive Environmental Response Compensation
and Liability Inventory System established pursuant to CERCLA.
"Change of Law" shall have the meaning set forth in Section 8.02.
"Closing Date" means September 28, 1993.
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<PAGE> 11
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code. Any reference to any provision of the Code shall
also be deemed to be a reference to any successor provision or provisions
thereof.
"Commitment" means, with respect to each Bank, (i) the amount set
forth opposite the name of such bank in Section 2.01, or (ii) as to any Bank
which enters into an Assignment and Acceptance (whether as transferor Bank or
as Assignee thereunder), the amount of such Bank's Commitment after giving
effect to such Assignment and Acceptance, in each case as such amount may be
reduced from time to time pursuant to Sections 2.08 and 2.09.
"Consolidated Debt" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which, in accordance with generally accepted accounting
principles consistently applied, would be consolidated with those of the
Borrower in its consolidated financial statements as of such date.
"Consolidated Total Assets" means, at any time, the total assets of
the Borrower and its Consolidated Subsidiaries, determined on a consolidated
basis, as set forth or reflected on the most recent consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries, prepared in accordance with
generally accepted accounting principles consistently applied.
"Consolidated Total Capital" means, at any time, the sum of (i)
Stockholders' Equity and (ii) Consolidated Debt.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"Cosmos" means Cosmos Broadcasting Corporation, a South Carolina
corporation.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee under capital
leases, (v) all obligations of such Person to reimburse any bank or other
Person in respect of amounts payable under a banker's acceptance, (vi) all
Non-Convertible Redeemable Preferred Stock of such Person (in the event such
Person is a corporation), (vii) all obligations (absolute or contingent) of
such Person to reimburse any bank or other Person in respect of amounts paid
under a letter of credit or similar instrument, (viii) all Debt of others
secured by a Lien on any asset of such Person, whether or not such Debt is
assumed by such Person, and (ix) all Debt of others Guaranteed by such Person.
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<PAGE> 12
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived in writing, become an Event of Default.
"Default Rate" means, for any day, a rate per annum equal to the sum
of 1% plus the rate applicable to Base Rate Loans for such day.
"Depreciation" means for any period the sum of all depreciation
expenses of the Borrower and its Consolidated Subsidiaries for such period, as
determined in accordance with generally accepted accounting principles
consistently applied.
"Dollars" or "$" means dollars in lawful currency of the United States of
America.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in North Carolina or New York are
authorized or required by law to close.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section
2.06(c).
"Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Borrower and its Subsidiaries required by any Environmental
Requirement.
"Environmental Authority" means any foreign, federal, state, local or
regional government that exercises any form of jurisdiction or authority under
any Environmental Requirement.
"Environmental Judgments and Orders" means all judgments, decrees or
orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent or written agreements with an
Environmental Authority or other entity arising from or in any way associated
with any Environmental Requirement, whether or not incorporated in a judgment,
decree or order.
"Environmental Liabilities" means any liabilities, whether accrued,
contingent or otherwise, arising from and in any way associated with any
Environmental Requirements.
"Environmental Notice" means notice from any Environmental Authority
or by any other person or entity, of possible or alleged noncompliance with any
Environmental Requirement, including without limitation any complaints,
citations, demands or requests from any Environmental Authority or from any
other person or entity for correction of any violation of any Environmental
Requirement or any investigations concerning any violation of any Environmental
Requirement.
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<PAGE> 13
"Environmental Proceedings" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.
"Environmental Releases" means releases as defined in CERCLA or under
any applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement relating to
health, safety or the environment and applicable to the Borrower, any
Subsidiary or the Properties, including but not limited to any such requirement
under CERCLA or similar state legislation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law. Any reference to any provision
of ERISA shall also be deemed to be a reference to any successor provision or
provisions thereof.
"Euro-Dollar Business Day" means any Domestic Business Day on which
dealings in Dollar deposits are carried out in the London interbank market.
"Euro-Dollar Loan" means a Loan which bears or is to bear interest at
a rate based upon the London Interbank Offered Rate.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.06(d).
"Event of Default" has the meaning set forth in Section 6.01.
"Fair Market Value" means, with respect to any asset, the greater of:
(i) the Gross Proceeds received by the Borrower or any Subsidiary in connection
with the sale, transfer or other disposition by the Borrower or such Subsidiary
(as the case may be) of such asset; or (ii) the Book Value of such asset.
"Federal Funds Rate" means, for any day, the rate per annum (rounded,
if necessary, to the nearest 1/100th of 1%) equal to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day, provided that (i) if the day for which such rate is to be
determined is not a Domestic Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Domestic Business
Day as so published on the next succeeding Domestic Business Day, and (ii) if
such rate is not so published for any day, the Federal Funds Rate for such day
shall be the average rate charged to Wachovia on such day on such transactions
as determined by the Agent.
"Film Payments" means cash payments for syndicated film products, such
as firstrun and off-network programs.
"Fiscal Quarter" means any fiscal quarter of the Borrower.
"Fiscal Year" means any fiscal year of the Borrower.
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<PAGE> 14
"Fixed CD Rate" has the meaning set forth in Section 2.06(c).
"Fixed Charges" means the sum of (i) Interest Expense for the period
of four Fiscal Quarters ending on the last day of the Fiscal Quarter with
respect to which the determination of Fixed Charges is being made, (ii) all
dividends or other distributions paid by the Borrower in respect of the Liberty
Corporation Preferred Stock for the period of four Fiscal Quarters ending on
the last day of the Fiscal Quarter with respect to which the determination of
Fixed Charges is being made, (iii) Film Payments which are scheduled to be made
by Cosmos during the four Fiscal Quarters immediately following the Fiscal
Quarter with respect to which the determination of Fixed Charges is being made,
and (iv) all payments of principal in respect of Debt of the Borrower, Cosmos
or any Minor Subsidiary which are scheduled to be made during the four Fiscal
Quarters immediately following the Fiscal Quarter with respect to which the
determination of Fixed Charges is being made.
"Fixed Rate Borrowing" means a CD Borrowing or a Euro-Dollar Borrowing.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or both.
"Forfeiture Proceeding" means any action, proceeding or investigation
affecting the Borrower or any of its Subsidiaries before any court,
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, if such action, proceeding or investigation could result
in (i) the seizure or forfeiture of any of their Property, or (ii) a material
adverse change in the business, financial position, results of operations or
prospects of the Borrower or any of its Subsidiaries.
"Gross Proceeds" means any and all cash, plus the face amount of any
and all notes, bonds, debentures, instruments and evidences of indebtedness,
and the value of any other property, of whatever kind or nature, received by
the Borrower or any Subsidiary in connection with the sale, transfer or other
disposition by the Borrower or such Subsidiary (as the case may be) of any of
its assets.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to provide collateral security, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the obligee
of such Debt or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part), provided that
the term Guarantee shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hazardous Materials" includes, without limitation, (a) solid or
hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, or in any applicable state
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<PAGE> 15
or local law or regulation, (b) hazardous substances, as defined in
CERCLA, or in any applicable state or local law or regulation, (c) gasoline, or
any other petroleum product or by-product, (d) toxic substances, as defined in
the Toxic Substances Control Act of 1976, or in any applicable state or local
law or regulation and (e) insecticides, fungicides, or rodenticides, as defined
in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any
applicable state or local law or regulation, as each such Act, statute or
regulation may be amended from time to time.
"HLT Classification" has the meaning set forth in Section 8.06.
"Income" means, as applied to any Person for any period, the aggregate
amount of income of such Person, before taxes, for such period, as determined
in accordance with generally accepted accounting principles consistently
applied.
"Insurance Group" shall mean and include, collectively, all existing
and future Subsidiaries (including, without limitation, Liberty Life, Magnolia
Life, Pierce National and Liberty Insurance Services) which are engaged
principally in the life insurance business.
"Intercompany Loan" means any loan, advance or other extension of
credit made in the ordinary course of business (i) by the Borrower to any
Subsidiary; or (ii) by any Subsidiary to the Borrower.
"Interest Expense" for any period means interest, whether expensed or
capitalized, in respect of Debt of the Borrower, Cosmos or any of the Minor
Subsidiaries outstanding during such period.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending on
the numerically corresponding day in the first, second, third or sixth month
thereafter, as the Borrower may elect in the applicable Notice of Borrowing;
provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (c) below) which would otherwise end on a day which is not a
Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall, subject
to clause (c) below, end on the last Euro-Dollar Business Day of the
appropriate subsequent calendar month; and
(c) any Interest Period which begins before the Termination Date and
would otherwise end after the Termination Date shall end on the Termination
Date.
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<PAGE> 16
(2) with respect to each CD Borrowing, the period commencing on the
date of such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the
Borrower may elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would otherwise end on
a day which is not a Domestic Business Day shall be extended to the
next succeeding Domestic Business Day; and
(b) any Interest Period which begins before the Termination
Date and would otherwise end after the Termination Date shall end on
the Termination Date.
(3) with respect to each Base Rate Borrowing, the period commencing on
the date of such Borrowing and ending 30 days thereafter unless the Borrower
shall have selected an earlier date in the applicable Notice of Borrowing;
provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would otherwise end on
a day which is not a Domestic Business Day shall be extended to the
next succeeding Domestic Business Day; and
(b) any Interest Period which begins before the Termination
Date and would otherwise end after the Termination Date shall end on
the Termination Date.
(4) with respect to each Money Market Borrowing, the period commencing
on the date of such Borrowing and ending 30, 60, 90 or 180 days thereafter, as
the Borrower may indicate in the applicable Money Market Quote Request;
provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would otherwise end on
a day which is not a Domestic Business Day shall be extended to the
next succeeding Domestic Business Day; and
(b) any Interest Period which begins before the Termination
Date and would otherwise end after the Termination Date shall end on
the Termination Date.
"Investment Properties" for any period means all real property owned
by the Borrower and its Consolidated Subsidiaries during the applicable period;
provided, however, the definition of Investment Properties shall exclude any
real property if: (i) at least fifty percent (50%) of the net leasable area
with respect to such real property is occupied by the Borrower and/or its
Subsidiaries; and (ii) the primary use of such real property is the operation
of the Borrower's and/or Subsidiaries' respective businesses.
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<PAGE> 17
"Lending Office" means, as to each Bank, its office located at its
address set forth on the signature pages hereof (or identified on the signature
pages hereof as its Lending Office) or such other office as such Bank may
hereafter designate as its Lending Office by notice to the Borrower and the
Agent.
"Liberty Capital" means Liberty Capital Advisors, Inc., a South
Carolina corporation.
"Liberty Capital Expenditures" means for any period the sum of all
capital expenditures incurred during such period by Liberty Properties, as
determined in accordance with generally accepted accounting principles
consistently applied.
"Liberty Corporation Preferred Stock" means any redeemable or
nonredeemable, preferred capital stock of the Borrower, including, without
limitation, the convertible preferred stock in an aggregate amount of up to
$27,500,000.00 issued to the shareholders of State National Capital
Corporation, a Louisiana corporation ("State National Capital") by the Borrower
in connection with Borrower's acquisition of State National Capital.
"Liberty Insurance Services" means Liberty Insurance Services
Corporation, a South Carolina corporation.
"Liberty Life" means Liberty Life Insurance Company, a South Carolina
corporation.
"Liberty Life Preferred Stock" means the issued and outstanding shares
of $100 Par Value Non-voting Cumulative Preferred Stock, $8.55 Convertible
Series issued to the Borrower by Liberty Life on November 8, 1989, which on the
date of this Agreement is in the aggregate outstanding amount of
$19,048,000.00.
"Liberty Properties" means Liberty Properties Group, Inc., a South
Carolina corporation.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Borrower or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
"LIG" means Liberty Investment Group, Inc., a South Carolina
corporation.
"Loan" means a Syndicated Loan or a Money Market Loan and "Loans"
means Syndicated Loans or Money Market Loans or both.
"Loan Documents" means this Agreement, the Notes and any other
document evidencing or securing the Loans.
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"London Interbank Offered Rate" has the meaning set forth in Section
2.06(d).
"Magnolia Life" means Magnolia Life Insurance Company, a Louisiana
corporation.
"Margin Stock" means "margin stock" as defined in Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System, as in effect from
time to time, together with all official rulings and interpretations issued
thereunder.
"Minor Subsidiaries" shall mean and include, collectively: (i) Liberty
Capital; LIG; Liberty Properties; LPG Development Corporation, a South Carolina
corporation; SouthChase Development Corporation, a South Carolina corporation;
LIBCO of Virginia, Inc., a Virginia corporation; LIBCO of Florida, Inc., a
Florida corporation; LPC of S.C., Inc., a South Carolina corporation; LIBCO of
Tennessee, Inc., a Tennessee corporation; Commerce Center of Greenville, Inc.,
a South Carolina corporation; Special Services Corporation, a South Carolina
corporation; Hampton Insurance Agency, Inc., a South Carolina corporation;
Market, Inc., a South Carolina corporation; The Liberty Marketing Corporation,
a South Carolina corporation; Bent Tree Corporation, a Georgia corporation; and
TLC Business Ventures, Inc., a South Carolina corporation; and (ii) other
Subsidiaries of the Borrower, designated by the Borrower as a "Minor
Subsidiary" in the manner and in accordance with the following standards.
Borrower may designate any Subsidiary (including any newly acquired or newly
formed Subsidiary) to be a "Minor Subsidiary"; provided that: (x) the
Subsidiary to be so designated is created or acquired in the ordinary course of
the Borrower's business; and (y) immediately after giving effect to such
designation, no Default or Event of Default shall have occurred or be
continued. Upon any such designation by the Borrower, the Borrower shall
provide the Agent and the Banks written notice identifying the Minor Subsidiary
being so designated.
"Money Market Loan" means a Loan which bears or is to bear interest at
a rate based upon a Money Market Rate.
"Money Market Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit B hereto, evidencing the obligation of the
Borrower to repay the Money Market Loans.
"Money Market Quote" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.03(c).
"Money Market Quote Request" has the meaning set forth in Section
2.03(b).
"Money Market Rate" has the meaning set forth in Section
2.03(c)(ii)(C).
"Multiemployer Plan" shall have the meaning set forth in Section 4001
(a)(3) of ERISA.
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<PAGE> 19
"Net Income" means, as applied to any Person for any period, the
aggregate amount of net income of such Person, after taxes, for such period, as
determined in accordance with generally accepted accounting principles
consistently applied.
"Net Proceeds of Convertible Preferred Stock" means any proceeds
received by the Borrower or a Subsidiary in respect of the issuance of
convertible preferred stock, after deducting therefrom all reasonable costs and
expenses incurred by the Borrower or such Subsidiary in connection with the
issuance of such convertible preferred stock.
"Non-Convertible Redeemable Preferred Stock" of any Person means
Redeemable Preferred Stock that is redeemable, either in whole or in part, into
any property (including, without limitation, cash) other than the capital stock
of the Person.
"Nonredeemable Capital Stock" means any nonredeemable capital stock of
the Borrower or any Subsidiary (to the extent issued to a Person other than the
Borrower), whether common or preferred.
"Note" means a Syndicated Note or a Money Market Note and "Notes"
means the Syndicated Notes or the Money Market Notes or both.
"Notice of Borrowing" has the meaning set forth in Section 2.02.
"Participant" has the meaning set forth in Section 9.07(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Advances" means (i) Intercompany Loans and (ii) Acquisition
Loans.
"Person" means an individual, a corporation, a partnership, an
unincorporated association, a trust or any other entity or organization,
including, but not limited to, a government or political subdivision or an
agency or instrumentality thereof.
"Pierce National" means Pierce National Life Insurance Co., a
California corporation.
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERlSA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by a member of the
Controlled Group for employees of any member of the Controlled Group or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions.
"Prime Rate" refers to that interest rate so denominated and set by
Wachovia from time to time as an interest rate basis for borrowings. The Prime
Rate is but one of several
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interest rate bases used by Wachovia. Wachovia lends at interest rates
above and below the Prime Rate.
"Properties" means all real property owned, leased or otherwise used
or occupied by the Borrower or any Subsidiary, wherever located.
"Quotation Date" has the meaning set forth in Section 2.03(b).
"Rate Determination Date" has the meaning set forth in Section 2.06(a).
"Redeemable Preferred Stock" of any Person means any preferred stock
issued by such Person which is at any time prior to the Termination Date either
(i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or
(ii) redeemable at the option of the holder thereof.
"Reported Net Income" means, for any period, the Net Income of the
Borrower and its Consolidated Subsidiaries determined on a consolidated basis.
"Required Banks" means at any time Banks having at least 66 2/3% of
the aggregate amount of the Commitments or, if the Commitments are no longer in
effect, Banks holding at least 66 2/3% of the aggregate outstanding principal
amount of the Notes.
"Restricted Payment" means any dividend or other distribution on any
shares of the Borrower's Capital Stock (except dividends payable solely in
shares of its Capital Stock).
"Stock Payment" means any payment (whether in the form of money or
property) made by the Borrower or any Subsidiary on account of the purchase,
redemption, retirement or acquisition by such Borrower or Subsidiary of any
shares of its Capital Stock. As to any payment made in the form of property,
the amount of such payment shall be deemed to be equal to the fair market value
of such property.
"Stockholders' Equity" means, at any time, the shareholders' equity of
the Borrower and its Consolidated Subsidiaries, as set forth or reflected on
the most recent consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries prepared in accordance with generally accepted accounting
principles consistently applied, but excluding any Non-Convertible Redeemable
Preferred Stock of the Borrower or any of its Consolidated Subsidiaries.
Shareholders' equity would generally include, but not be limited to (i) the par
or stated value of all outstanding Nonredeemable Capital Stock, (ii) capital
surplus, (iii) retained earnings, (iv) unearned stock compensation, (v)
cumulative foreign currency translation adjustments and (vi) subtracting items
such as (A) purchases of treasury stock, (B) unrealized investment losses, (C)
receivables due from an employee stock ownership plan and (D) employee stock
ownership plan debt guarantees.
"Subsidiary" means any corporation or other entity (including, without
limitation, Liberty Life, Magnolia Life, Pierce National, Liberty Insurance
Services and Cosmos) of which securities or other ownership interests having
ordinary voting power to elect a majority of the
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board of directors or other persons performing similar functions are
at the time directly or indirectly owned by the Borrower.
"Surplus Relief Reinsurance Transaction" shall mean any transaction in
which any Subsidiary within the Insurance Group cedes business under a
reinsurance agreement that would be considered a "financing-type" reinsurance
agreement as determined by the independent certified public accountants of the
Subsidiaries within the Insurance Group in accordance with principles published
by the Financial Accounting Standards Board or the Fourth Edition of the AICPA
Audit Guide for Stock Life Insurance Companies (pp. 91-92), as the same may be
revised from time to time.
"Syndicated Loan" means a Base Rate Loan, a CD Loan or a Euro-Dollar
Loan.
"Syndicated Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit A hereto, evidencing the obligation of the
Borrower to repay the Syndicated Loans.
"Termination Date" means April 1, 1997, unless such date is otherwise
extended by the Banks pursuant to Section 2.05(b), in their sole and absolute
discretion.
"Test Income" for any period means the sum of (i) Income of the
Borrower and the Minor Subsidiaries for such period (excluding, however, (A)
all dividends paid by Liberty Life to the Borrower or any Minor Subsidiary
during such period in respect of shares of common stock or preferred stock of
Liberty Life owned by the Borrower or any Minor Subsidiary, and (B) adjustments
for capital gains and capital losses and operating gains and operating losses
on asset sales realized by the Borrower and the Minor Subsidiaries for such
period) and (ii) Income of Cosmos for such period.
"Third Parties" means all lessees, sublessees, licensees and other
users of the Properties, excluding those users of the Properties in the
ordinary course of the Borrower's business and on a temporary basis.
"Transferee" has the meaning set forth in Section 9.07(d).
"Undrawn Commitment" means at any date, with respect to any Bank, an
amount equal to such Bank's Commitment less the principal amount of such Bank's
Syndicated Loans outstanding on such day.
"Unused Commitment" means at any date, with respect to any Bank, an
amount equal to its Commitment less the aggregate outstanding principal amount
of its Loans.
"Wachovia" means Wachovia Bank of North Carolina, N.A., a national
banking association and its successors.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all terms of an accounting character used herein shall be
interpreted, all
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accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in accordance
with generally accepted accounting principles as in effect from time to time,
applied on a basis consistent (except for changes concurred in by the
Borrower's independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks.
SECTION 1.03. References. Unless otherwise indicated, references in
this Agreement to "Sections" are references to sections hereof and references
in this Agreement to "Articles" are references to articles hereof.
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Make Syndicated Loans. Each Bank
severally agrees, on the terms and conditions set forth herein, to make
Syndicated Loans to the Borrower from time to time before the Termination Date;
provided that, immediately after each such Syndicated Loan is made, the
aggregate principal amount of Syndicated Loans by such Bank shall not exceed
(i) the amount of its Commitment as set forth below, or (ii) as to any Bank
which enters into an Assignment and Acceptance (whether as transferor Bank or
as Assignee thereunder), the amount of such Bank's Commitment after giving
effect to such Assignment and Acceptance (in each case as such amount may be
reduced from time to time pursuant to Sections 2.08 and 2.09):
<TABLE>
<CAPTION>
Bank Commitment Percentage
---- ---------- ----------
<S> <C> <C>
The South Carolina National Bank $ 65,000,000 20%
Wachovia Bank of North Carolina, N.A. $ 55,000,000 16.923%
NationsBank of Georgia, N.A. $ 55,000,000 16.923%
The Bank of Tokyo, Ltd., Atlanta Agency $ 30,000,000 9.231%
The Sanwa Bank, Ltd., Atlanta Agency $ 25,000,000 7.692%
NBD Bank, N.A. $ 20,000,000 6.154%
First Union National Bank of North Carolina $ 12,500,000 3.846%
The Fuji Bank, Limited $ 12,500,000 3.846%
The Bank of New York $ 12,500,000 3.846%
Branch Banking & Trust Company of South Carolina $ 12,500,000 3.846%
</TABLE>
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<TABLE>
<S> <C> <C>
Southern National Bank of North Carolina $ 12,500,000 3.846%
Bank of Montreal $ 12,500,000 3.846%
------------ -------
Total Commitments $325,000,000 100%
</TABLE>
provided further that the aggregate principal amount of all Syndicated Loans,
together with the aggregate principal amount of all Money Market Loans, at any
one time outstanding shall not exceed the aggregate amount of the Commitments
of all of the Banks at such time. Each Syndicated Borrowing under this Section
shall be in an aggregate principal amount of $10,000,000 or any larger multiple
of $1,000,000 (except that any such Syndicated Borrowing may be in the
aggregate amount of the Unused Commitments) and shall be made from the several
Banks ratably in proportion to their respective Commitments. Within the
foregoing limits, the Borrower may borrow under this Section, repay or, to the
extent permitted by Section 2.10, prepay Syndicated Loans and reborrow under
this Section at any time before the Termination Date.
SECTION 2.02. Method of Borrowing Syndicated Loans. (a) The Borrower
shall give the Agent notice in the form of Exhibit H hereto (a "Notice of
Borrowing") on or before 12:00 P.M. (Atlanta, Georgia time) on or before the
same Domestic Business Day as each Base Rate Borrowing, at least three Domestic
Business Days before each CD Borrowing and at least two Euro-Dollar Business
Days before each Euro-Dollar Borrowing, specifying:
(i) the date of such Syndicated Borrowing, which shall be a
Domestic Business Day in the case of a Domestic Borrowing or a
Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Syndicated Borrowing,
(iii) whether the Syndicated Loans comprising such Syndicated
Borrowing are to be CD Loans, Base Rate Loans or Euro-Dollar Loans,
and
(iv) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period.
(b) Upon receipt of a Notice of Borrowing given in accordance with
Section 2.02(a), the Agent shall promptly (and in any event on or before 2:00
P.M. (Atlanta, Georgia time) on the day such Notice of Borrowing is received by
the Agent) notify each Bank of the contents thereof and of such Bank's ratable
share of such Syndicated Borrowing and such Notice of Borrowing shall not
thereafter be revocable by the Borrower.
(c) Not later than 3:00 P.M. (Atlanta, Georgia time) on the date of
each Syndicated Borrowing, each Bank shall (except as provided in subsection
(d) of this Section) make available its ratable share of such Syndicated
Borrowing, in Federal or other funds immediately available in Atlanta, Georgia,
to the Agent at its address referred to in Section 9.01. Unless the Agent
determines that any applicable condition specified in Article III has not been
satisfied, the Agent will make the funds so received from the Banks available
to the Borrower at the Agent's aforesaid address. Unless the Agent receives
notice from a Bank, at the Agent's
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address referred to in Section 9.01, no later than 4:00 P.M. (local time at
such address) on the Domestic Business Day before the date of a CD Borrowing or
a Euro-Dollar Borrowing stating that such Bank will not make a Loan in
connection with such CD Borrowing or Euro-Dollar Borrowing, the Agent shall be
entitled to assume that such Bank will make a CD Loan or a Euro-Dollar Loan (as
appropriate) in connection with such CD Borrowing or Euro-Dollar Borrowing and,
in reliance on such assumption, the Agent may (but shall not be obligated to)
make available such Bank's Ratable share of such CD Borrowing or Euro-Dollar
Borrowing to the Borrower for the account of such Bank. If the Agent makes such
Bank's Ratable Share available to the Borrower and such Bank does not in fact
make its ratable share of such CD Borrowing or Euro-Dollar Borrowing available
on such date, the Agent shall be entitled to recover such Bank's ratable share
from such Bank and/or the Borrower (and for such purpose shall be entitled to
charge such amount to any account of the Borrower maintained with the Agent),
together with interest thereon for each day during the period from the date of
such CD Borrowing or Euro-Dollar Borrowing until such sum shall be paid in full
at a rate per annum equal to the rate at which the Agent determines that it
obtained (or could have obtained) overnight Federal funds to cover such amount
for each such day during such period, provided that any such payment by the
Borrower of such Bank's ratable share and interest thereon shall be without
prejudice to any rights that the Borrower may have against such Bank. If the
Agent does not exercise its option to advance funds for the account of such
Banks it shall forthwith notify the Borrower of such decision.
(d) If any Bank makes a new Syndicated Loan hereunder on a day on
which the Borrower is to repay all or any part of an outstanding Syndicated
Loan from such Bank, such Bank shall apply the proceeds of its new Syndicated
Loan to make such repayment and only an amount equal to the difference (if any)
between the amount being borrowed and the amount being repaid shall be made
available by such Bank to the Agent as provided in subsection (c) of this
Section, or remitted by the Borrower to such Bank as provided in Section 2.12,
as the case may be.
(e) Notwithstanding anything to the contrary contained in this
Agreement, no Fixed Rate Borrowing may be made if there shall have occurred a
Default or an Event of Default, which Default or Event of Default shall not
have been cured or waived in writing.
(f) In the event that a Notice of Borrowing fails to specify whether
the Loans comprising such Syndicated Borrowing are to be CD Loans, Base Rate
Loans or Euro-Dollar Loans, such Syndicated Loans shall be made as Base Rate
Loans. If the Borrower is otherwise entitled under this Agreement to repay any
Syndicated Loans maturing at the end of an Interest Period applicable thereto
with the proceeds of a new Syndicated Borrowing, and the Borrower fails to
repay such Syndicated Loans using its own moneys and fails to give a Notice of
Borrowing in connection with such new Syndicated Borrowing, a new Syndicated
Borrowing shall be deemed to be made on the date such Loans mature in an amount
equal to the principal amount of the Syndicated Loans so maturing, and the
Syndicated Loans comprising such new Syndicated Borrowing shall be Base Rate
Loans.
SECTION 2.03. Money Market Loans. (a) In addition to making Syndicated
Borrowings, the Borrower may, as set forth in this Section, request the Banks
to make offers to
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<PAGE> 25
make Money Market Loans to the Borrower. The Banks may, but shall have no
obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section,
provided that:
(i) there may be no more than six (6) different Interest
Periods For Both Syndicated Loans and Money Market Loans outstanding
at the same time (for which purpose Interest Periods described in
different numbered clauses of the definition of the term "Interest
Period" shall be deemed to be different Interest Periods even if they
are coterminous);
(ii) the aggregate principal amount of Money Market Loans at
any one time outstanding shall not exceed an amount equal to fifty
percent (50%) of the aggregate amount of the Commitments of all of
the Banks at such time; and
(iii) the aggregate principal amount of all Money Market
Loans, together with the aggregate principal amount of all Syndicated
Loans, at any one time outstanding shall not exceed the aggregate
amount of the Commitments of all of the Banks at such time.
(b) When the Borrower wishes to request offers to make Money Market
Loans, it shall give each Bank notice substantially in the form of Exhibit E
hereto (a "Money Market Quote Request") so as to be received on or before 12:00
P.M. (Atlanta, Georgia time) at least one Domestic Business Day before the date
of the Money Market Borrowing proposed therein (or such other time and date as
the Borrower and the Required Banks may agree), specifying:
(i) the proposed date of such Money Market Borrowing, which
shall be a Domestic Business Day (the "Quotation Date");
(ii) the aggregate amount of such Money Market Borrowing,
which shall be at least $10,000,000 (and in larger multiples of
$1,000,000; provided that such amount need not be a multiple of
$1,000,000 if the amount of such Money Market Borrowing is the maximum
amount permitted under Section 2.03(a)) but shall not cause the limits
specified in Section 2.03(a) to be violated; and
(iii) the duration of the Interest Period applicable thereto,
which shall be 30, 60, 90 or 180 days.
The Borrower may request offers to make Money Market Loans for only
one Interest Period in a single Money Market Quote Request. Except as otherwise
provided in the preceding sentence, after any Money Market Quote Request has
been given hereunder, no Money Market Quote Request shall be given until at
least one Domestic Business Day after all prior Money Market Quote Requests
have been fully processed by the Banks and the Borrower pursuant to this
Section.
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(c) (i) Each Bank may, but shall have no obligation to, submit a Money
Market Quote containing an offer to make a Money Market Loan in response to any
Money Market Quote Request. Each Money Market Quote must be submitted to the
Borrower not later than 10:00 A.M. (Atlanta, Georgia time) on the Quotation
Date (or such other time and date as the Borrower and the Required Banks may
agree). Subject to Section 6.01, any Money Market Quote so made shall be
irrevocable except with the written consent of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit F hereto and shall specify:
(A) the proposed date of the Money Market Borrowing and the
duration of the Interest Period therefor, which shall be 30, 60, 90 or
180 days;
(B) the minimum and maximum principal amounts of the Money
Market Loan which the quoting Bank is willing to make for the
applicable Interest Period, which principal amounts (x) may be greater
than or less than the Commitment of the quoting Bank, (y) shall be at
least $4,000,000 (or a larger multiple of $1,000,000; provided that
such amount need not be in a multiple of $1,000,000 if the amount of
such Money Market Loan is equal to the amount of such Money Market
Borrowing), and (z) may not exceed the principal amount of the Money
Market Borrowing for which offers were requested;
(C) the rate of interest per annum (rounded, if necessary, to
the nearest 1/100th of 15%) (the "Money Market Rate") offered for
each such Money Market Loan; and
(D) the identity of the quoting Bank.
Unless otherwise agreed by the Required Banks and the Borrower, no
Money Market Quote shall contain qualifying, conditional or similar
language or propose terms other than or in addition to those set forth
in the applicable Money Market Quote Request (other than setting forth
the minimum and maximum principal amounts of the Money Market Loan
which the quoting Bank is willing to make for the applicable Interest
Period).
(d) Not later than 11:00 A.M. (Atlanta, Georgia time) on the Quotation
Date (or such other time and date as the Borrower and the Required Banks may
agree), the Borrower shall notify each Bank which has submitted a Money Market
Quote of its acceptance or nonacceptance of the offers so notified to it
pursuant to Section 2.03(c). In the case of acceptance, such notice shall
specify the aggregate principal amount of offers for each Interest Period that
are accepted. The Borrower may accept any Money Market Quote in whole or in
part (provided that any Money Market Quote accepted in part from any Bank shall
not be less
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<PAGE> 27
than the amount set forth in the Money Market Quote of such Bank as the
minimum principal amount of the Money Market Loan such Bank was willing to make
for the applicable Interest Period); provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the
related Money Market Quote Request;
(ii) the aggregate principal amount of each Money Market
Borrowing shall be at least $10,000,000 (and in larger multiples of
$1,000,000; provided that such amount need not be a multiple of
$1,000,000 if the amount of such Money Market Borrowing is the maximum
amount permitted under Section 2.03(a)) but shall not cause the limits
specified in Section 2.03(a) to be violated;
(iii) acceptance of offers may only be made in ascending
order of Money Market Rates; and
(iv) the Borrower may not accept any offer which fails to
comply with Section 2.03(c)(ii) or otherwise fails to comply with the
requirements of this Agreement (including, without limitation, Section
2.03(a)).
If offers are made by two or more Banks with the same Money Market
Rates for a greater aggregate principal amount than the amount in respect of
which offers are accepted for the related Interest Period, the principal amount
of Money Market Loans in respect of which such offers are accepted shall be
allocated by the Borrower among such Banks as nearly as possible (in multiples
of $100,000) in proportion to the aggregate principal amount of such offers;
provided that in the event of any such allocation pursuant to this sentence,
the minimum principal amounts of the Money Market Loans may be less than the
amounts set forth in Section 2.03(c)(ii)(B). Determinations by the Borrower of
the amounts of Money Market Loans shall be conclusive in the absence of
manifest error.
(e) Any Bank whose offer to make any Money Market Loan
has been accepted shall, not later than 3:00 P.M. (Atlanta, Georgia time) on the
Quotation Date, make the amount of such Loan available to the Borrower in
immediately available funds.
(f) Not later than 12:00 P.M. (Atlanta, Georgia time) on
the Quotation Date (or such other time and date as the Borrower and the
Required Banks may agree), the Borrower shall deliver to the Agent and each
Bank a written notice setting forth (i) the principal amount and interest rate
offered by each Bank which has submitted a Money Market Quote and (ii) the
Money Market Quote(s), if any, accepted by the Borrower and the principal
amount of each so accepted.
(g) With respect to any Money Market Borrowing, the
Borrower shall deliver to the Agent (i) on the day of such Money Market
Borrowing, notice of the date and principal amount of such Money Market
Borrowing, and (ii) on the day on which all or any portion of the
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<PAGE> 28
principal amount of the Money Market Loans which comprise such Money Market
Borrowing is paid or prepaid, notice of the date and amount of such payment or
prepayment.
SECTION 2.04. Notes. (a) The Syndicated Loans of each Bank shall be
evidenced by a single Syndicated Note, substantially in the form attached
hereto as Exhibit A, payable to the order of such Bank for the account of its
Lending Office in an amount equal to the original principal amount of such
Bank's Commitment.
(b) The Money Market Loans made by any Bank to the Borrower shall be
evidenced by a Single Money Market Note, substantially in the form attached
hereto as Exhibit B, payable to the order of such Bank for the account of its
Lending Office.
(c) Upon receipt of each Bank's Notes pursuant to Section 3.01, the
Agent shall deliver by hand or by overnight courier such Notes to such Bank.
Each Bank shall record in its books and records, and prior to any transfer of
its Notes shall endorse on the schedules forming a part thereof (or on
schedules prepared substantially in such form) appropriate notations to
evidence, the date, amount and maturity of, and effective interest rate for,
each Loan made by it, the date and amount of each payment of principal made by
the Borrower with respect thereto and whether, in the case of such Bank's
Syndicated Note, such Syndicated Loan is a Base Rate Loan, CD Loan or
Euro-Dollar Loan, and such books and records of such Bank, or schedules of each
of such Bank's Notes, shall constitute rebuttable presumptive evidence of the
respective principal amounts owing and unpaid on such Bank's Notes; provided
that the failure of any Bank to make, or any error in making, any such
recordation or endorsement or schedule shall not affect the obligations of the
Borrower hereunder or under the Notes. Each Bank is hereby irrevocably
authorized by the Borrower so to endorse its Notes and to attach to and make a
part of any Note a continuation of any such schedule as and when required.
SECTION 2.05. Maturity of Loans. (a) Each Loan included in any
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing.
Each payment of principal and/or interest applicable to a Borrowing shall be
applied to repay ratably the Loans of the several Banks included within such
Borrowing.
(b) Notwithstanding the foregoing, the outstanding principal amount of
the Loans together with all accrued but unpaid interest thereon, if any, shall
be due and payable on April 1, 1997, unless the Termination Date is otherwise
extended by the Banks, in their sole and absolute discretion. Upon the written
request of the Borrower, which request shall be delivered to the Agent and each
of the Banks between (i) April 1, 1994 and April 30, 1994; (ii) April 1, 1995
and April 30, 1995; or (iii) April 1, 1996 and April 30, 1996, the Banks shall
have the option (without any obligation whatsoever so to do) of extending the
Termination Date until April 1, 1998. In the event that a Bank chooses not to
extend the Termination Date until April 1, 1998, notice shall be given by such
Bank to the Borrower and the Agent on or before May 30th of the year that the
Bank received the Borrower's request for the extension; provided, that the
Termination Date shall not be extended with respect to any of the Banks unless
the Required Banks are willing to extend the Termination Date and either (x)
the remaining Banks shall purchase ratable assignments (without any obligation
so to do) from such terminating Bank (in
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<PAGE> 29
the form of an Assignment and Acceptance) in accordance with their respective
percentage of the remaining Aggregate Commitments; provided, that, such Banks
shall be provided such opportunity (which opportunity shall allow such Banks at
least 15 Domestic Business Days in which to make a decision) prior to the
Borrower finding another bank pursuant to the immediately succeeding clause
(y); and, provided, further, that, should any of the remaining Banks elect not
to purchase such an assignment, then, such other remaining Banks shall be
entitled to purchase an assignment from any terminating Bank which includes the
ratable interest that was otherwise available to such non-purchasing remaining
Bank or Banks, as the case may be, (y) the Borrower shall find another bank,
acceptable to the Agent, willing to accept an assignment from such terminating
Bank (in the form of an Assignment and Acceptance) or (z) the Borrower shall
reduce the Aggregate Commitments in an amount equal to the Commitment of any
such terminating Bank.
SECTION 2.06. Interest Rates. (a) "Applicable Margin" shall be
determined quarterly based upon the ratio of Consolidated Debt to Cash Flow
(calculated as provided in Section 5.13), as follows:
<TABLE>
<CAPTION>
Ratio of
Consolidated Debt to Cash Flow Base Rate Loans CD Loans Euro-Dollar Loans
- ------------------------------ --------------- -------- -----------------
<S> <C> <C> <C>
Greater than 5.5 to 1.0 + 0% + 1-1/8% + 1%
Equal to or greater than 4.75 to 1.0
but equal to or less than to 5.5 to 1.0 + 0% + 1% + 7/8%
Equal to or greater than 3.75 to 1.0
but less than 4.75 to 1.0 + 0% + 7/8% + 3/4%
Equal to or greater than 3.25 to 1.0
but less than 3.75 to 1.0 + 0% + 3/4% + 5/8%
Less than 3.25 to 1.0 + 0% + 5/8% + 1/2%
</TABLE>
The Applicable Margin shall be determined effective as of the date (herein,
the "Rate Determination Date") which is 60 days after the last day of
the Fiscal Quarter as of the end of which the foregoing ratio is being
determined, based on the quarterly financial statements for such Fiscal
Quarter, and the Applicable Margin so determined shall remain effective from
such Rate Determination Date until the date which is 60 days after the last day
of the Fiscal Quarter in which such Rate Determination Date falls (which latter
date shall be a new Rate Determination Date); provided that (i) for the period
from and including the Closing Date to but excluding the Rate Determination
Date next following the Closing Date, the Applicable Margin shall be (A) 0.0%
for Base Rate Loans, (B) 0.875% for CD Loans, and (C) 0.750% for Euro-Dollar
Loans, (ii) in the case of an Applicable Margin determined from the Borrower-
prepared quarterly financial statements for the fourth and final Fiscal Quarter
of a Fiscal Year, in the event that the annual audited statements for such
Fiscal Year subsequently provided to the Banks indicate that the Applicable
Margin originally determined to be effective on the Rate
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<PAGE> 30
Determination Date immediately following the end of such Fiscal Quarter was
inappropriate in light of such annual audited financial statements, then the
Applicable Margin shall be adjusted retroactively to such Rate Determination
Date to reflect the proper Applicable Margin, and (iii) if on any Rate
Determination Date the Borrower shall have failed to deliver to the Banks the
financial statements required to be delivered pursuant to Section 5.01(b) with
respect to the Fiscal Quarter most recently ended prior to such Rate
Determination Date, then for the period beginning on such Rate Determination
Date and ending on the earlier of (A) the date on which the Borrower shall
deliver to the Banks the financial statements to be delivered pursuant to
Section 5.01(b) with respect to such Fiscal Quarter or any subsequent Fiscal
Quarter, and (B) the date on which the Borrower shall deliver to the Banks
annual financial statements required to be delivered pursuant to Section
5.01(a) with respect to the Fiscal Year which includes such Fiscal Quarter or
any subsequent Fiscal Year, the Applicable Margin shall be determined as if the
ratio of Consolidated Debt to Cash Flow was more than 5.5 to 1.0 at all times
during such period. Any change in the Applicable Margin on any Rate
Determination Date shall result in a corresponding change, effective on and as
of such Rate Determination Date, in the interest rate applicable to each
Syndicated Loan outstanding on such Rate Determination Date.
(b) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made until it
becomes due, at a rate per annum equal to the Base Rate for such day plus the
Applicable Margin. Such interest shall be payable for each Interest Period on
the last day thereof. Any overdue principal of and, to the extent permitted by
applicable law, overdue interest on any Base Rate Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the
Default Rate for such day.
(c) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto, at a rate per annum
equal to the applicable Fixed CD Rate for such Interest Period; provided that
if any CD Loan shall, as a result of clause (2)(b) of the definition of
Interest Period, have an Interest Period of less than 30 days, such CD Loan
shall bear interest during such Interest Period at the rate applicable to Base
Rate Loans during such period. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than 90
days, at intervals of 90 days after the first day thereof Any overdue principal
of and, to the extent permitted by law, overdue interest on any CD Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the Default Rate for such day.
The "Fixed CD Rate" applicable to any CD Loan for any Interest Period
means a rate per annum equal to the sum of the Applicable Margin plus the
applicable Adjusted CD Rate for such Interest Period.
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<PAGE> 31
The "Adjusted CD Rate" applicable to any CD Loan for the Interest
Period of such CD Loan means a rate per annum determined pursuant to the
following formula:
(CDBR )*
ACDR = ------------ + AR
(1.00 - DRP)
ACDR = Adjusted CD Rate
CDBR = CD Base Rate for such Interest Period
DRP = Domestic Reserve Percentage
AR = Assessment Rate
- -------------
* The amount in brackets being rounded, if necessary, to the nearest
1/100 of 1%.
The "CD Base Rate" applicable to any CD Loan for the Interest Period
of such CD Loan is the rate per annum determined on the basis of the bid rate
for certificates of deposit in an amount comparable to the CD Borrowing of
which such CD Loan is a part having a maturity equal to such Interest Period,
which rates appear on the Telerate Screen Page 5 at approximately 9:00 a.m.,
New York City time, on the first day of such Interest Period, provided that if
such publication shall be suspended or terminated, or if one of the above
referenced rate maturities is not available through this source, the applicable
CD Base Rate shall be the arithmetic average as determined by the Agent
(rounded, if necessary, to the nearest 1/100 of 1%) of the prevailing rates per
annum bid at approximately 10:00 a.m., New York City time (or as soon
thereafter as practicable), on the first day of such Interest Period by two or
more New York certificate of deposit dealers of recognized standing selected by
the Agent, for purchase at face value of deposits of leading New York City
banks for a maturity equal to such Interest Period in an amount comparable to
the amount of the CD Borrowing of which such CD Loan is a part.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in respect of non-personal time deposits in Dollars having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Fixed CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any CD Loan the highest net annual
assessment rate (rounded, if necessary, to the nearest 1/100 of 1%) actually
incurred by any Bank to the Federal Deposit Insurance Corporation (or any
successor) for such Federal Deposit Insurance Corporation's (or such
successor's) insuring time deposits at offices of such Bank in the United
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<PAGE> 32
States during the most recent period for which such rate has been determined
prior to the date on which such CD Loan is made.
(d) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the sum of the Applicable Margin plus the applicable
Adjusted London Interbank Offered Rate for such Interest Period; provided that
if any Euro-Dollar Loan shall, as a result of clause (1)(c) of the definition
of Interest Period, have an Interest Period of less than one month, such
Euro-Dollar Loan shall bear interest during such Interest Period at the rate
applicable to Base Rate Loans during such period. Such interest shall be
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than three months, at intervals of three months after the
first day thereof.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded,
if necessary, to the nearest 1/100th of 1%) by dividing (i) the applicable
London Interbank Offered Rate for such Interest Period by (ii) 1.00 minus the
Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Euro-Dollar Loan
means for the Interest Period of such Euro-Dollar Loan the rate per annum
determined on the basis of the offered rate for deposits in Dollars of amounts
equal or comparable to the principal amount of the Euro-Dollar Borrowing of
which such Euro-Dollar Loan is a part offered for a term comparable to such
Interest Period, which rates appear on the Reuters Screen LIBO Page as of 11:00
a.m., London time, two (2) Euro-Dollar Business Days prior to the first day of
such Interest Period, provided that (i) if more than one such offered rate
appears on the Reuters Screen SRO Page, the "London Interbank Offered Rate"
will be the arithmetic average (rounded, if necessary, to the nearest 1/100th
of 1%) of such offered rates; and (ii) if no such offered rates appear on
such page, the "London Interbank Offered Rate" for such Interest Period will be
the arithmetic average (rounded, if necessary, to the nearest 1/100th of 1%) of
rates quoted by not less than two major banks in New York City, selected by the
Agent, at approximately 10:00 a.m., New York City time, two (2) Europe-Dollar
Business Days prior to the first day of such Interest Period, for deposits in
Dollars offered to leading European banks for a period comparable to such
Interest Period in an amount comparable to the principal amount of the
Euro-Dollar Borrowing of which such Euro-Dollar Loan is a part.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
any Bank to United States residents). The Adjusted London Interbank Offered
Rate shall be adjusted automatically on and as of the effective date of any
change in the Euro-Dollar Reserve Percentage.
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<PAGE> 33
(e) Any overdue principal of and, to the extent permitted by law,
overdue interest on any Euro-Dollar Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the Default Rate
for such day.
(f) Each Money Market Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the Money Market Rate for such Loan quoted by the Bank
making such Loan in accordance with Section 2.03. Such interest shall be
payable for such Interest Period on the last day thereof and, if such Interest
Period is longer than 90 days, at intervals of 90 days after the first day
thereof. Any overdue principal of and, to the extent permitted by law, overdue
interest on any Money Market Loan shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the Default Rate for such day.
(g) The Agent shall determine each interest rate applicable to the
Syndicated Loans hereunder. The Agent shall give prompt notice to the Borrower
and the Banks by telex, cable or telecopy of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.
SECTION 2.07. Facility Fee. The Borrower shall pay to each Bank a
facility fee on the amount of such Bank's Commitment, for the period from and
including the Closing Date to and including the earlier of the date such
Commitment is terminated or the Termination Date, at a rate per annum equal to
the Applicable Facility Fee Rate. Facility fees shall be payable quarterly in
arrears on the fifteenth day following each Facility Fee Determination Date.
The "Applicable Facility Fee Rate" shall be determined quarterly based upon the
ratio of Consolidated Debt to Cash Flow (calculated as provided in Section
5.13) as follows:
<TABLE>
<CAPTION>
Ratio of Applicable
Consolidated Facility
Debt to Cash Flow Fee Rate
----------------- --------
<S> <C>
Greater than 5.5 to 1.0 + 1/2%
Equal to or greater than 4.75 to 1.0
but equal to or less than 5.5 to 1.0 + 3/8%
Equal to or greater than 3.75 to 1.0
but less than 4.75 to 1.0 + 3/10%
Equal to or greater than 3.25 to 1.0
but less than 3.75 to 1.0 + 1/4%
Less than 3.25 to 1.0 + 1/5%
</TABLE>
The Applicable Facility Fee Rate shall be determined effective as of the date
(herein, the "Facility Fee Determination Date") which is 60 days after the last
day of the Fiscal Quarter as of the end of which the foregoing ratio is being
determined, based on the quarterly financial statements for such Fiscal
Quarter, and the Applicable Facility Fee Rate so determined shall
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<PAGE> 34
remain effective from such Facility Fee Determination Date until the date which
is 60 days after the last day of the Fiscal Quarter in which such Facility Fee
Determination Date falls (which latter date shall be a new Facility Fee
Determination Date); provided that (i) for the period from and including the
closing Date to but excluding the Facility Fee Determination Date next
following the closing Date, the Applicable Facility Fee Rate shall be 0.30%
(3/10%); (ii) in the case of an Applicable Facility Fee Rate determined from
the Borrower-prepared quarterly financial statements for the fourth and final
Fiscal Quarter of a Fiscal Year, in the event that the annual audited
statements for such Fiscal Year subsequently provided to the Banks indicate
that the Applicable Facility Fee Rate originally determined to be effective on
the Facility Fee Determination Date immediately following the end of such
Fiscal Quarter was inappropriate in light of such annual audited financial
statements, then the Applicable Facility Fee Rate shall be adjusted
retroactively to such Facility Fee Determination Date to reflect the proper
Applicable Facility Fee Rate, and (iii) if on any Facility Fee Determination
Date the Borrower shall have failed to deliver to the Banks the financial
statements required to be delivered pursuant to Section 5.01(b) with respect to
the Fiscal Quarter most recently ended prior to such Facility Fee Determination
Date, then for the period beginning on such Facility Fee Determination Date and
ending on the earlier of (A) the date on which the Borrower shall deliver to
the Banks the financial statements to be delivered pursuant to Section 5.01(b)
with respect to such Fiscal Quarter or any subsequent Fiscal Quarter, and (B)
the date on which the Borrower shall deliver to the Banks annual financial
statements required to be delivered pursuant to Section 5.01(a) with respect to
the Fiscal Year which includes such Fiscal Quarter or any subsequent Fiscal
Year, the Applicable Facility Fee Rate shall be determined as if the ratio of
Consolidated Debt to Cash Flow was more than 5.5 to 1.0 at all times during
such period.
SECTION 2.08. Optional Termination or Reduction of Commitments. The
Borrower may, upon at least three Domestic Business Days' notice to the Agent
and each Bank, terminate at any time, or proportionately reduce from time to
time by an aggregate amount of at least $20,000,000, the Commitments. Upon such
termination or any such reduction of the Commitments, all fees accrued (as
provided under Section 2.07) on the Commitments (in the event of a termination
of the Commitments) or on that portion of the Commitments which is equal to the
amount of any such reduction (in the event of a reduction of the Commitments)
shall be payable on the effective date of such termination or reduction, as the
case may be.
SECTION 2.09. Mandatory Reduction and Termination of Commitments. (a)
The Commitments shall terminate on the Termination Date and any Loans then
outstanding (together with accrued interest thereon) shall be due and payable
on such date.
(b) The aggregate amount of the Commitments shall be automatically
reduced on the Domestic Business Day which is eight (8) Domestic Business Days
following the end of any Fiscal Quarter, if (i) during such Fiscal Quarter the
Borrower or any Subsidiary sold, transferred or otherwise disposed of any
assets (other than Investment Properties or pursuant to a Surplus Relief
Reinsurance Transaction), and (ii) the aggregate Fair Market Value of all
assets sold, transferred or otherwise disposed of by the Borrower and its
Subsidiaries (other than Investment Properties or pursuant to a Surplus Relief
Reinsurance Transaction) during the Fiscal Year of which such Fiscal Quarter is
a part exceeds $10,000,000. The amount of any such
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<PAGE> 35
reduction shall be calculated in accordance with Section 5.01(i)(iii)(B). Each
such reduction shall be applied ratably to the Commitments of the several
Banks.
(c) The aggregate amount of the Commitments shall be automatically
reduced on the Domestic Business Day which is three (3) Domestic Business Days
following the date on which the Borrower receives any Stock Payment in respect
of the Liberty Life Preferred Stock where either (i) all of such Stock Payment
is not used by the Borrower in accordance with clause (ii) of Section 5.05(a)
or (ii) such Stock Payment is not permitted by Section 5.05(b). The amount of
any such reduction shall be equal to the amount of the related Stock Payment
not used by the Borrower in accordance with clause (ii) of Section 5.05(a).
Each such reduction shall be applied ratably to the Commitments of the several
Banks.
SECTION 2.10. Optional Prepayments. (a) The Borrower may, upon at
least one Domestic Business Day's notice to the Agent, prepay any Base Rate
Borrowing in whole at any time, or from time to time in part in amounts
aggregating at least $5,000,000, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment. Each such
optional prepayment shall be applied to prepay ratably the Base Rate Loans of
the several Banks included in such Base Rate Borrowing.
(b) Except as provided in Section 8.02, the Borrower may not prepay
all or any portion of the principal amount of any Fixed Rate Loan prior to the
maturity thereof.
(c) Except as provided in Section 8.02, the Borrower may not prepay
all or any portion of the principal amount of any Money Market Loan prior to
the maturity thereof.
(d) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share of such prepayment and such notice shall not thereafter be
revocable by the Borrower.
SECTION 2.11. Mandatory Prepayments. On each date on which the
Commitments are reduced pursuant to Section 2.08 or Section 2.09, the Borrower
shall repay or prepay such principal amount of the outstanding Loans, if any
(together with interest accrued thereon and any amounts due under Section
8.05(a)), as may be necessary so that after such payment the aggregate unpaid
principal amount of the Loans does not exceed the aggregate amount of the
Commitments as then reduced; provided that such prepayment shall be applied,
first, to Syndicated Loans outstanding on the date of such prepayment (in
direct order of maturity) and then, to the extent necessary, to Money Market
Loans outstanding on the date of such prepayment (in direct order of maturity).
Each such payment or prepayment shall be applied to repay or prepay ratably the
Loans of the several Banks.
SECTION 2.12. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, each Bank's Loans and
of each Bank's facility fees hereunder, not later than 11:00 A.M. (Atlanta,
Georgia time) on the date when due, in Federal or other funds immediately
available at the place where payment is due, to such Bank at its address set
forth on the signature pages hereof
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<PAGE> 36
(b) Whenever any payment of principal of, or interest on, the Domestic
Loans or the Money Market Loans or of facility fees shall be due on a day which
is not a Domestic Business Day, the date for payment thereof shall be extended
to the next succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, the Euro-Dollar Loans shall be due on a day
which is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case the
date for payment thereof shall be the next preceding Euro-Dollar Business
Day. If the date for any payment of principal is extended by operation of law
or otherwise, interest thereon shall be payable for such extended time.
SECTION 2.13. Computation of Interest and Fees. Interest on the Loans
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed, calculated as to each Interest Period from and
including the first day thereof to but excluding the last day thereof Facility
fees which are due and payable on any date (as provided herein) shall be
computed on the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day).
SECTION 2.14. Security: Setoff. The Borrower hereby grants to each
Bank, as security for the full and punctual payment and performance of the
obligations of the Borrower under this Agreement, a continuing lien on and
security interest in all deposits and other sums credited by or due from such
Bank to the Borrower or subject to withdrawal by the Borrower; and regardless
of the adequacy of any collateral or other means of obtaining repayment of such
obligations, each Bank may at any time upon or after the occurrence of an Event
of Default, and without notice to the Borrower, set off the whole or any
portion or portions of any or all such deposits and other sums against such
obligations, whether or not any other Person or Persons could also withdraw
money therefrom.
ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01. Conditions to First Borrowing. The obligation of each
Bank to make a Loan on the occasion of the first Borrowing is subject to the
satisfaction of the conditions set forth in Section 3.02 and the following
additional conditions:
(a) receipt by the Agent from each of the parties hereto of
either (i) a duly executed counterpart of this Agreement signed by
such party or (ii) a telex or facsimile transmission stating that such
party has duly executed a counterpart of this Agreement and sent such
counterpart to the Agent;
(b) receipt by the Agent of a duly executed Syndicated Note
and a duly executed Money Market Note for the account of each Bank
complying with the provisions of Section 2.04, provided that no
executed Money Market Note shall be required to be delivered to or
received by the Agent for the account of any
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Bank which has notified the Agent in writing on or before the closing
Date that such Bank does not wish to receive a Money Market Note;
(c) receipt by the Agent of an opinion (together with any
opinions of local counsel relied on therein) of Martha G. Williams,
General Counsel of the Borrower, substantially in the form of Exhibit
C hereto and covering such additional matters relating to the
transactions contemplated hereby as any Bank may reasonably request;
(d) receipt by the Agent of an opinion of Womble Carlyle
Sandridge & Rice, special counsel for the Banks and the Agent,
substantially in the form of Exhibit D hereto and covering such
additional matters relating to the transactions contemplated hereby as
any Bank may reasonably request;
(e) receipt by the Agent of a certificate, dated the date of
the first Borrowing, signed by a principal financial officer of the
Borrower, to the effect that (i) no Default has occurred and is
continuing on the date of the first Borrowing; (ii) the
representations and warranties of the Borrower contained in Article IV
hereof are true on and as of the date of the first Borrowing
hereunder; and (iii) that certain Credit Agreement dated as of January
1, 1992 among the Borrower, the Agent and the banks listed therein has
been terminated and canceled;
(f) receipt by the Agent of all documents which the Agent may
reasonably request relating to the existence of the Borrower, the
corporate authority for and the validity of this Agreement and the
Notes, and any other matters relevant hereto, all in form and
substance satisfactory to the Agent, including without limitation a
certificate of incumbency of the Borrower, signed by the Secretary or
an Assistant Secretary of the Borrower, certifying as to the names,
true signatures and incumbency of the officer or officers of the
Borrower authorized to execute and deliver the Loan Documents, and
certified copies of the following items: (i) the Borrower's
Certificate of Incorporation, (ii) the Borrower's Bylaws (iii) a
certificate of the Secretary of State of the State of South Carolina
as to the existence of the Borrower as a South Carolina corporation,
and (iv) the action taken by the Board of Directors of the Borrower
authorizing the Borrower's execution, delivery and performance of this
Agreement, the Notes and the other Loan Documents to which the
Borrower is a party; and
(g) receipt by the Agent of a Notice of Borrowing.
SECTION 3.02. Conditions to All Borrowings. The obligation of
each Bank to make a Loan on the occasion of each Borrowing is subject
to the satisfaction of the following conditions:
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(a) either (i) receipt by the Agent of notice of such
Borrowing as required by Section 2.02 (if such Borrowing is a
Syndicated Borrowing), or (ii) compliance with the provisions of
Section 2.03 (if such Borrowing is a Money Market Borrowing);
(b) the fact that, immediately after such Borrowing, no Default
shall have occurred and be continuing;
(c) if either (i) the aggregate amount of such Borrowing
exceeds the aggregate principal amount of Loans maturing (in
accordance with Section 2.05) on the date of such Borrowing, or (ii)
such Borrowing is a Syndicated Borrowing and all or any portion of the
proceeds of such Syndicated Borrowing are being used to repay or
prepay Money Market Loans, the fact that the representations and
warranties of the Borrower contained in Article IV of this Agreement
shall be true on and as of the date of such Borrowing; and
(d) the fact that, immediately after such Borrowing, (i) the
aggregate outstanding principal amount of the Syndicated Loans of each
Bank will not exceed the amount of its Commitment, (ii) the aggregate
outstanding principal amount of the Loans will not exceed the
aggregate amount of the Commitments of all of the Banks as of such
date, and (iii) if such Borrowing is a Money Market Borrowing, the
aggregate outstanding principal amount of Money Market Loans will not
exceed fifty percent (50%) of the aggregate amount of the Commitments
of all of the Banks.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(b), (c) and (d) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, is duly qualified to transact
business in every jurisdiction where, by the nature of its business, such
qualification is necessary, and has all corporate powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization: Contravention.
The execution, delivery and performance by the Borrower of this Agreement, the
Notes and the other Loan Documents (i) are within the Borrower's corporate
powers, (ii) have been duly authorized by all necessary corporate action, (iii)
require no action by or in respect of, or filing with, any
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governmental body, agency or official, (iv) do not contravene, or constitute a
default under, any provision of applicable law or regulation or of the
certificate of incorporation or by-laws of the Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Borrower or any of its Subsidiaries, and (v) do not result in the creation or
imposition of any Lien on any asset of the Borrower or any of its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower enforceable in accordance with its terms, and
the Notes and the other Loan Documents, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations
of the Borrower enforceable in accordance with their respective terms, provided
that the enforceability hereof and thereof is subject in each case to general
principles of equity and to bankruptcy, insolvency and similar laws affecting
the enforcement of creditors' rights generally.
SECTION 4.04. Financial Information. (a) The consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 1992
and the related consolidated statements of income, shareholders' equity and
cash flows for the Fiscal Year then ended, reported on by Ernst & Young, copies
of which have been delivered to each of the Banks, and the unaudited
consolidated financial statements of the Borrower for the interim period ended
June 30, 1993, copies of which have been delivered to each of the Banks, fairly
present, in conformity with generally accepted accounting principles, the
consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such dates and their consolidated results of operations and
cash flows for such periods.
(b) Since June 30, 1993, there has been no material adverse change in
the business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries.
(c) The Annual Statements of Liberty Life, Magnolia Life and Pierce
National, together with the supplemental schedules thereto, as of December 31,
1992, copies of which have been delivered to each of the Banks, fairly present
the respective financial positions of Liberty Life, Magnolia Life and Pierce
National as of such date and its results of operations and cash flow for such
period.
(d) Since December 31, 1992, there has been no material adverse change
in the business, financial position, results of operations or prospects of
Liberty Life, Magnolia Life, Pierce National and Liberty Insurance Services.
SECTION 4.05. Litigation. There is no action, suit or proceeding
pending, or to the knowledge of the Borrower threatened, against or affecting
the Borrower or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official which could materially adversely affect
the business, consolidated financial position or consolidated results of
operations of the Borrower and its Consolidated Subsidiaries or which in any
manner draws into question the validity or enforceability of, or could impair
the ability of the Borrower to perform its obligations under, this Agreement,
the Notes or any of the other Loan Documents.
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SECTION 4.06. Compliance with ERISA. (a) The Borrower and each member
of the Controlled Group have fulfilled their obligations, if any, under the
minimum funding standards of ERISA and the Code with respect to each Plan and
are in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and have not incurred any liability to the
PBGC or a Plan under Title IV of ERISA.
(b) Neither the Borrower nor any member of the Controlled Group
is or ever has been obligated to contribute to any Multiemployer Plan.
SECTION 4.07. Taxes. There have been filed on behalf of the Borrower
and its Subsidiaries all Federal, state and local income, excise, property and
other tax returns which are required to be filed by them and all taxes due
pursuant to such returns or pursuant to any assessment received by or on behalf
of the Borrower or any Subsidiary have been paid. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of taxes
or other governmental charges are, in the opinion of the Borrower, adequate.
United States income tax returns of the Borrower and its Subsidiaries have been
examined and closed through the Fiscal Year ended December 31, 1985.
SECTION 4.08. Subsidiaries. Each of the Borrower's Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, is duly qualified to transact
business in every jurisdiction where, by the nature of its business, such
qualification is necessary, and has all corporate powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
SECTION 4.09. Not an Investment Company. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.10. Ownership of Property, Liens. Each of the Borrower and
its Consolidated Subsidiaries has title to its Properties sufficient for the
conduct of its business, and none of such Property is subject to any Lien
except as permitted in Section 5.11.
SECTION 4.11. No Default. Neither the Borrower nor any of its
Consolidated Subsidiaries is in default under or with respect to any agreement,
instrument or undertaking to which it is a party or by which it or any of its
property is bound which will be materially adverse to the business, operations,
property or financial or other condition of the Borrower and its Consolidated
Subsidiaries or which will materially adversely affect the ability of the
Borrower to perform its obligations under the Loan Documents. No Default or
Event of Default has occurred and is continuing.
SECTION 4.12. Full Disclosure. All information heretofore furnished by
the Borrower to the Agent or any Bank for purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Borrower to the Agent or any Bank will
be, true, accurate and complete in every material respect or based on
reasonable estimates on the date as of which such information is stated or
certified. The Borrower has disclosed to the Banks in writing any and all facts
which materially and adversely
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affect or may affect (to the extent the Borrower can now reasonably foresee),
the business, operations, prospects or condition, financial or otherwise, of
the Borrower and its Consolidated Subsidiaries or the ability of the Borrower
to perform its obligations under this Agreement or any other Loan Document.
SECTION 4.13. Environmental Matters. (a) Neither the Borrower nor any
Subsidiary is subject to any Environmental Liability which is likely to have a
material adverse effect on the business, financial position, results of
operations or prospects of the Borrower or any of its Subsidiaries and neither
the Borrower nor any Subsidiary has been designated as a potentially
responsible party under CERCLA or under any state statute similar to CERCLA.
None of the Properties has been identified on any current or proposed (i)
National Priorities List under 40 C.F.R. Section 300, (ii) CERCLIS list or
(iii) any list arising from a state statute similar to CERCLA.
(b) No Hazardous Materials have been or are being used,
produced, manufactured, processed, generated, stored, disposed of, managed at,
or shipped or transported to or from the Properties or are otherwise present
at, on, in or under the Properties, or, to the best of the knowledge of the
Borrower, at or from any adjacent site or facility, except for Hazardous
Materials, such as cleaning solvents, pesticides and other materials used,
produced, manufactured, processed, generated, stored, disposed of, and
managed in the ordinary course of business in compliance with all
applicable Environmental Requirements.
SECTION 4.14. Restricted Payments. The aggregate amount of Restricted
Payments declared or made by the Borrower during the period beginning on
January 1, 1993 and ending on the closing Date does not exceed fifty percent
(50%) of cumulative Net Income of the Borrower for all fiscal periods beginning
on or after January 1, 1993 and ending on or before the closing Date.
SECTION 4.15. Insolvency. After giving effect to the execution and
delivery of the Loan Documents and the making of the Loans under this
Agreement, the Borrower will not be "insolvent," within the meaning of such
term as used in N.C. GEN. STAT. Section 22-3, as amended from time to time, or
as defined in Section 101 of Title 11 of the United States Code, as amended
from time to time, or be unable to pay its debts generally as such debts become
due, or have an unreasonably small amount of capital to engage in any business
or transaction, whether current or contemplated.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable hereunder or under any Note remains unpaid:
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SECTION 5.1. Information. The Borrower will deliver to each of the
Banks:
(a) (i) as soon as available and in any event within 90 days
after the end of each Fiscal Year, a consolidated balance sheet and the
consolidating balance sheets of the Borrower and its Consolidated Subsidiaries
as of the end of such Fiscal Year and the related consolidated and
consolidating statements of income, shareholders' equity and cash flows for
such Fiscal Year, setting forth in each case in comparative form the figures
for the previous fiscal year, all certified by Ernst & Young or other
independent public accountants of nationally recognized standing, with such
certification to be free of exceptions and qualifications not acceptable to
the Required Banks, and (ii) as soon as available and in any event within 90
days after the end of each fiscal year of each Subsidiary within the
Insurance Group (excluding Liberty Insurance Services), a copy of the Annual
Statement of each such Subsidiary within the Insurance Group (excluding
Liberty Insurance Services), together with all supplemental schedules thereto,
as of the end of such fiscal year, all prepared in accordance with statutory
accounting principles;
(b) as soon as available and in any event within 60 days
after the end of each Fiscal Quarter, a consolidated balance sheet and the
consolidating balance sheets of the Borrower and its Consolidated Subsidiaries
as of the end of such quarter and the related consolidated and consolidating
statements of income and consolidated and consolidating statements of cash
flows for such quarter and for the portion of the Fiscal Year ended at the
end of such quarter, setting forth in each case in comparative form the
figures for the corresponding quarter and the corresponding portion of the
previous Fiscal Year, all certified (subject to normal year-end adjustments)
as to fairness of presentation, generally accepted accounting principles and
consistency by the chief financial officer or the chief accounting officer of
the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the chief
financial officer or the chief accounting officer of the Borrower (i) setting
forth in reasonable detail the calculations required to establish whether the
Borrower was in compliance with the requirements of Sections 5.03 through 5.08,
inclusive, 5.12., 5.13 and 5.17(c) on the date of such financial statements
(which calculations shall be presented substantially in the form attached
hereto as Schedule 5.01(c)) and (ii) stating whether any Default exists on the
date of such certificate and, if any Default then exists, setting forth the
details thereof and the action which the Borrower is taking or proposes to take
with respect thereto;
(d) simultaneously with the delivery of each set of annual
financial statements referred to in clause (a)(i) above, a statement of the
firm of independent public accountants which reported on such statements to
the effect that nothing has come to their attention to cause them to believe
that any Default existed on the date of such financial statements;
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(e) within five Domestic Business Days after the Borrower becomes
aware of the occurrence of any Default, a certificate of the chief financial
officer or the chief accounting officer of the Borrower setting forth the
details thereof and the action which the Borrower is taking or proposes to take
with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Borrower, copies of all financial statements, reports and proxy statements so
mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and annual, quarterly or monthly reports which the
Borrower shall have filed with the Securities and Exchange Commission;
(h) if and when any member of the Controlled Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA, a copy of such notice; or (iii)
receives notice from the PBGC under Title IV of ERISA of an intent to terminate
or appoint a trustee to administer any Plan, a copy of such notice;
(i) on or before the date which is five (5) Domestic Business Days
prior to the date of any sale, transfer or other disposition of any assets of
the Borrower or any Subsidiary (other than Investment Properties or pursuant to
a Surplus Relief Reinsurance Transaction), if the Fair Market Value of such
assets to be sold, transferred or otherwise disposed of, when aggregated with
the Fair Market Value of all other assets of the Borrower and its Subsidiaries
sold, transferred or otherwise disposed of in such Fiscal Year (other than
Investment Properties or pursuant to a Surplus Relief Reinsurance Transaction),
exceeds $10,000,000, the Borrower shall provide written notice to the Agent
(the "Asset Sale Notice") which Asset Sale Notice shall: (i) state that as a
result of the sale, transfer or other disposition of assets, the Commitments
will be reduced pursuant to Section 2.09(b) in an amount equal to the
difference between: (1) the aggregate amount of Gross Proceeds received by the
Borrower and its Subsidiary in connection with all sales, transfers and other
disposition of assets (other than Investment Properties or pursuant to a
Surplus Relief Reinsurance Transaction) during such Fiscal Year minus
$10,000,000; and (2) the aggregate amount of all previous reductions in the
Commitments made with respect to such Fiscal Year pursuant to Section 2.09(b);
(ii) the identity of the assets sold, transfered or otherwise disposed of by
the Borrower or Subsidiary; (iii) the form and aggregate amount of Gross
Proceeds received by the Borrower and the Subsidiary in
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connection with such sale, transfer or other disposition of assets; and the
date of such sale, transfer or other disposition of assets.
(j) within five Domestic Business Days following the end of each
Fiscal Quarter, a certificate of the chief financial officer or chief
accounting officer of the Borrower setting forth (i) the identity of all assets
sold, transferred or otherwise disposed of by the Borrower or any Subsidiary
(other than Investment Properties or pursuant to a Surplus Relief Reinsurance
Transaction) during such Fiscal Quarter, (ii) the aggregate Fair Market Value
of all assets sold, transferred or otherwise disposed of by the Borrower and
its Subsidiaries (other than Investment Properties or pursuant to a Surplus
Relief Reinsurance Transaction) during (A) such Fiscal Quarter and (B) the
Fiscal Year of which such Fiscal Quarter is a part, and (iii) the following
information (if the aggregate Fair Market Value of all assets sold, transferred
or otherwise disposed of by the Borrower and its Subsidiaries (other than
Investment Properties or pursuant to a Surplus Relief Reinsurance Transaction)
during the Fiscal Year of which such Fiscal Quarter is a part exceeds
$10,000,000): (A) the form and aggregate amount of Gross Proceeds received by
the Borrower and its Subsidiaries in connection with all sales, transfers and
other dispositions of assets (other than Investment Properties or pursuant to a
Surplus Relief Reinsurance Transaction) during (1) such Fiscal Quarter and (2)
the Fiscal Year of which such Fiscal Quarter is a part, and (B) the amount by
which the Commitments are to be reduced pursuant to Section 2.09(b) (which
amount shall be equal to the difference between (1) the aggregate amount of
Gross Proceeds received by the Borrower and its Subsidiaries in connection with
all sales, transfers and other dispositions of assets (other than Investment
Properties or pursuant to a Surplus Relief Reinsurance Transaction) during such
Fiscal Year minus $10,000,000, and (2) the aggregate amount of all previous
reductions in the Commitments made with respect to such Fiscal Year pursuant to
Section 2.09(b));
(k) promptly after the Borrower knows of the commencement or
threat thereof, notice of any Forfeiture Proceeding;
(l) promptly after the Borrower knows of the commencement thereof,
notice of any litigation, dispute or proceeding involving a claim against the
Borrower and/or any Subsidiary for $5,000,000 or more in excess of amounts
covered in full by applicable insurance; and
(m) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Inspection of Property, Books and Records. The
Borrower will keep, and will cause each Subsidiary to keep, proper books of
record and account in which full, true and correct entries in conformity with
generally accepted accounting principles shall be made of all dealings and
transactions in relation to its business and activities; and will permit, and
will
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cause each Subsidiary to permit, representatives of any Bank at such Bank's
expense for such Bank's direct costs incurred prior to the occurrence of an
Event of Default and at the Borrower's expense for all direct costs incurred
after the occurrence of an Event of Default to visit and inspect any of their
respective Properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs, finances
and accounts with their respective officers, employees and independent public
accountants. The Borrower agrees to cooperate and assist in such visits and
inspections, in each case at such reasonable times and as often as may
reasonably be desired.
SECTION 5.03. Ratio of Consolidated Debt to Consolidated Total
Capital. As of the last day of each Fiscal Quarter ending during each period
set forth below, the ratio of Consolidated Debt to Consolidated Total Capital
shall not be greater than the applicable ratio set forth below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date through December 31, 1994 .45 to 1.00
January 1, 1995 through March 31, 1996 .40 to 1.00
April 1, 1996 and thereafter .35 to 1.00
</TABLE>
SECTION 5.04. Minimum Stockholders' Equity. Stockholders' Equity will
at no time be less than $400,000,000, plus the sum of: (i) 50% of the
cumulative Reported Net Income during any period beginning after June 30, 1993
(taken as one accounting period), calculated quarterly but excluding from such
calculations any quarter in which Reported Net Income is negative; and (ii)
100% of the cumulative Net Proceeds of Convertible Preferred Stock received
during any period after June 30, 1993, calculated quarterly.
SECTION 5.05. Stock Payments. (a) Liberty Life shall not make, and the
Borrower shall not accept, any Stock Payment in respect of the Liberty Life
Preferred Stock, unless (i) such Stock Payment is permitted by Section 5.05(b),
or (ii) (A) such Stock Payment is used by the Borrower, within thirty (30)
Domestic Business Days following receipt thereof by the Borrower, to finance
(in whole or in part) the acquisition by the Borrower of the assets or Capital
Stock of a Person (other than a Subsidiary) which is engaged principally in the
life insurance business, (B) the Borrower shall have delivered written notice
to each Bank, on or before the date which is the tenth (10th) Domestic Business
Day prior to the date such Stock Payment is to be made by Liberty Life to the
Borrower, of its intention to use such Stock Payment to finance (in whole or in
part) such acquisition (which notice shall (x) set forth (1) the identity of
the Person from whom such assets are to be acquired and a description of such
assets (in the case of an acquisition of assets) or the identity of the Person
which is the issuer of the Capital Stock to be acquired (in the case of an
acquisition of Capital Stock), (2) the amount of such Stock Payment and (3) the
date of such proposed acquisition, and (y) be accompanied by such information
as any Bank may reasonably request in order to assist such Bank's decision as
to whether or not such Bank shall consent to such acquisition), and (C) the
Required Banks shall have failed to notify the Borrower, on or before the date
which is one (1) Domestic Business Day prior to the date on which such Stock
Payment is to be made, that the Required Banks do not consent to the use of
such Stock Payment to finance (in whole or in part) such acquisition.
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(b) Neither the Borrower nor any Subsidiary shall make any Stock
Payment during any Fiscal Year (except for Stock Payments permitted by Section
5.05(a)(ii) unless after giving effect thereto (i) the aggregate amount of all
Stock Payments made (A) during such Fiscal Year does not exceed $10,000,000,
and (B) during the period commencing on the Closing Date and ending on the date
such Stock Payment is made does not exceed $25,000,000, and (ii) no Default
shall have occurred and be continuing.
SECTION 5.06. Restricted Payments. The Borrower will not declare or
make any Restricted Payment after December 31, 1992, if the amount of such
Restricted Payment, when aggregated with all other Restricted Payments made
after December 31, 1992, would exceed fifty percent (50%) of cumulative Net
Income of the Borrower for all fiscal periods beginning January 1, 1993;
provided that: (i) in no event shall the Borrower declare or make any
Restricted Payment if after giving effect to the payment of any such Restricted
Payment, a Default shall have occurred and be continuing; and (ii) for purposes
of this Section 5.06 only, Net Income shall be determined without regard to any
effect on Net Income resulting solely from any treatment of post-retirement
benefits of the Borrower and its Consolidated Subsidiaries required by
Financial Accounting Standards Board Statement No. 106.
SECTION 5.07. Fixed Charges Coverage. As of the last day of each
Fiscal Quarter, commencing with the Fiscal Quarter ending June 30, 1993, the
ratio of Adjusted Cash Flow for the period of four Fiscal Quarters ending on
such day to Fixed Charges for the period of four Fiscal Quarters ending on such
date shall not be less than 2.0.
SECTION 5.08. Capital Expenditures. Capital Expenditures will not
exceed: (i) $12,500,00;0 in the aggregate in the fiscal year ending December
31, 1993; and (ii) $7,500,000 in the aggregate in any Fiscal Year thereafter.
For the purposes of this Section 5.08, "Capital Expenditures" shall exclude the
following: (i) expenditures by Subsidiaries included within the Insurance Group
or by LIG in connection with Investment Properties; (ii) expenditures by
Subsidiaries included within the Insurance Group in connection with computer
software; and (iii) Film Payments made by Cosmos.
SECTION 5.09. Loans or Advances. Neither the Borrower nor any of its
Subsidiaries shall make loans or advances to any Person except Permitted
Advances; provided that after giving effect to any such Permitted Advances, no
Default shall have occurred and be continuing.
SECTION 5.10. Investments. The Borrower and its Subsidiaries shall not
make investments in any Person except as permitted by Section 5.09 and except
investments in (i) direct obligations of the United States Government maturing
within one year, (ii) certificates of deposit issued by a commercial bank whose
credit is satisfactory to the Agent, (iii) commercial paper rated A-1 or the
equivalent thereof by Standard & Poor's Corporation or P-1 or the equivalent
thereof by Moody's Investors Service, Inc. and in either case maturing within 6
months after the date of acquisition and/or (iv) tender bonds the payment of
the principal of and interest on which is fully supported by a letter of credit
issued by a United States bank whose long-term certificates of deposit are
rated at least AA or the equivalent thereof by Standard & Poor's Corporation
and Aa or the equivalent thereof by Moody's Investors Service, Inc.; provided,
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however. that (x) this Section 5.10 shall not prohibit investments made in the
ordinary course of business involving either (A) the investment portfolio of
any Subsidiary within the Insurance Group or (B) the real estate investment
portfolio of the Borrower and its Minor Subsidiaries, and (y) notwithstanding
clause (x) (A) of this Section 5.10. each bond portfolio of each of the
Subsidiaries within the Insurance Group must at all times maintain a weighted
average quality rating of A or the equivalent thereof by Standard & Poor's
Corporation or A-2 or the equivalent thereof by Moody's Investors Service, Inc.
SECTION 5.11. Negative Pledge. Neither the Borrower nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement in an aggregate principal
Amount not exceeding $8,500,000;
(b) any Lien existing on any asset of any corporation at the
time such corporation becomes a Consolidated Subsidiary and not
created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed
for the purpose of financing all or any part of the cost of acquiring
or constructing such asset, provided that such Lien attaches to such
asset concurrently with or within 18 months after the acquisition or
completion of construction thereof;
(d) any Lien on any asset of any corporation existing at the
time such corporation is merged or consolidated with or into the
Borrower or a Consolidated Subsidiary and not created in contemplation
of such event;
(e) any Lien existing on any asset prior to the acquisition
thereof by the Borrower or a Consolidated Subsidiary and not created
in contemplation of such acquisition; and
(f) any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien permitted by any
of the foregoing clauses of this Section, provided that (i) such Debt
is not secured by any additional assets, and (ii) the amount of such
Debt secured by any such Lien is not increased.
SECTION 5.12. Maximum Consolidated Debt. Consolidated Debt
will at no time exceed $335,000,000.
SECTION 5.13. Ratio of Consolidated Debt to Cash Flow. As of
the last day of each Fiscal Quarter ending during each period set forth below,
the ratio of Consolidated Debt as of such day to Cash Flow for the four Fiscal
Quarters ending on such day shall not be greater than the applicable ratio set
forth below.
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<TABLE>
<CAPTION>
Period Ratio
- ------ -----
<S> <C>
Closing Date through June 30, 1995 6.50 to 1.00
July 1, 1995 through June 30, 1996 6.00 to 1.00
July 1, 1996 and thereafter 5.50 to 1.00
</TABLE>
SECTION 5.14. Conduct of Business and Maintenance of Existence. The
Borrower shall, and shall cause each Subsidiary to, (a) maintain its corporate
existence and carry on its business in substantially the same manner and in
substantially the same fields as such business is now carried on and
maintained, and (b) preserve, renew and keep in full force and effect their
respective rights, privileges, licenses (including, without limitation, all
broadcast licenses and insurance licenses) and franchises necessary or
desirable in the normal conduct of business.
SECTION 5.15. Dissolution. Neither the Borrower nor any of its
Subsidiaries shall suffer or permit dissolution or liquidation either in whole
or in part or redeem or retire any shares of its own stock or that of any
Subsidiary, except (a) through corporate reorganization to the extent permitted
by Section 5.16, and (b) the Borrower and any Subsidiary may make Stock
Payments to the extent permitted by Section 5.05.
SECTION 5.16. Consolidations. Mergers and Sales of Assets. (a) The
Borrower will not, nor will it permit any Subsidiary to, consolidate or merge
with or into any other Person, provided that (1) the Borrower or any Subsidiary
(other than Cosmos) or any Minor Subsidiaries utilized in a merger or
acquisition transaction may merge with another Person if (A) such other Person
was organized under the laws of the United States of America or one of its
states, (B) (i) the Borrower or such Subsidiary (other than Cosmos) or any
Minor Subsidiaries utilized in a merger or acquisition transaction (as the case
may be) is the corporation surviving such merger; or (ii) the Person into which
a Minor Subsidiary is merged, contemporaneously with such merger, becomes a
Subsidiary, and (C) immediately after giving effect to such merger, no Default
shall have occurred and be continuing; (2) Subsidiaries of the Borrower may
merge with one another; and (3) Cosmos may consolidate or merge with another
Person with the prior written consent of the Required Banks.
(b) The Borrower will not, nor will it permit any Subsidiary to,
sell, transfer or otherwise dispose of any asset (excluding Investment
Properties) unless the Borrower shall have delivered the notice provided for in
Section 5.01(i) at the time and in the manner stated in Section 5.01(i) and
performed its obligations under Sections 2.09 and 2.11. Nothing contained in
this Section 5.16(b) shall be construed to prohibit the sale, transfer or other
disposition of investments permitted under Section 5.10.
SECTION 5.17. Use of Proceeds. (a) No portion of the proceeds of the
Loans will be used by the Borrower (i) in connection with any tender offer for,
or other acquisition of (except as permitted in Section 5.17(c)), stock of any
corporation with a view towards obtaining control of such other corporation,
(ii) directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any Margin Stock, or (iii) for any purpose
in violation of any applicable law or regulation.
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(b) The proceeds of the Loans made on the date of the initial
Borrowing or Borrowings hereunder shall be used exclusively by the Borrower to
refinance existing indebtedness of the Borrower.
(c) The proceeds of Loans other than those Loans referenced in
Section 5.17(b) shall be used exclusively by the Borrower (i) for working
capital purposes, (ii) to prepay or repay Loans pursuant to the terms of this
Agreement, and (iii) to finance the acquisition of the assets or Capital Stock
of any Person (other than a Subsidiary) engaged principally in the life
insurance business.
SECTION 5.18. Compliance with Laws: Payment of Taxes. The Borrower
will, and will cause each of its Subsidiaries and each member of the Controlled
Group to, comply with applicable laws (including but not limited to ERISA),
regulations and similar requirements of governmental authorities (including but
not limited to PBGC), except where the necessity of such compliance is being
contested in good faith through appropriate proceedings diligently pursued. The
Borrower will, and will cause each of its Subsidiaries to, pay promptly when
due all taxes, assessments, governmental charges, claims for labor, supplies,
rent and other obligations which, if unpaid, might become a lien against the
Property of the Borrower or any Subsidiary, except liabilities being contested
in good faith by appropriate proceedings diligently pursued and against which,
if requested by the Agent, the Borrower shall have set up reserves satisfactory
to the Agent.
SECTION 5.19. Insurance. The Borrower will maintain, and will cause
each of its Subsidiaries to maintain (either in the name of the Borrower or in
such Subsidiary's own name), with financially sound and reputable insurance
companies acceptable to the Agent, insurance on all its Property in at least
such amounts and against at least such risks as are usually insured against in
the same general area by companies of established repute engaged in the same or
similar business.
SECTION 5.20. Change in Fiscal Year. The Borrower will not change its
Fiscal Year without the consent of the Required Banks.
SECTION 5.21. Maintenance of Property. The Borrower shall, and shall
cause each Subsidiary to, maintain all of its Properties and assets in good
condition, repair and working order, ordinary wear and tear excepted.
SECTION 5.22. Environmental Notices. The Borrower shall furnish to the
Banks and the Agent prompt written notice of all Environmental Liabilities,
pending, threatened or anticipated Environmental Proceedings, Environmental
Notices, Environmental Judgments and Orders, and Environmental Releases at, on,
in, under or in any way affecting the Properties or any adjacent property, and
all facts, events, or conditions that could lead to any of the foregoing.
SECTION 5.23. Environmental Matters. The Borrower will not, and will
not permit any Third Party to, use, produce, manufacture, process, generate,
store, dispose of, manage at, or ship or transport to or from the Properties
any Hazardous Materials except for Hazardous Materials such as cleaning
solvents, pesticides and other similar materials used,
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produced, manufactured, processed, generated, stored, disposed or managed in
the ordinary course of business in compliance with all applicable Environmental
Requirements.
SECTION 5.24. Environmental Release. The Borrower agrees that upon the
occurrence of an Environmental Release it will act immediately to investigate
the extent of, and to take appropriate remedial action to eliminate, such
Environmental Release, whether or not ordered or otherwise directed to do so by
any Environmental Authority.
SECTION 5.25. Aggregate Values of Investment Properties and Total
Investments. (a) The Borrower will not, and will not permit any of its
Subsidiaries, at any time permit the Aggregate Value of Investment Properties
to exceed 10% of the Aggregate Value of Total Investments.
(b) The Borrower will not permit, and will not permit any of its
Subsidiaries to permit, the Aggregate Value of Investment Properties to exceed:
(i) at any time between January 1, 1994 through December 31,
1994, $115,000,000;
(ii) at any time between January 1, 1995 through December 31,
1995, $125,000,000; and
(iii) at any time from January 1, 1996 and thereafter,
$140,000,000.
SECTION 5.26. Surplus Relief Reinsurance. The Borrower will not permit
any Subsidiary within the Insurance Group to enter into any Surplus Relief
Reinsurance Transaction, if, upon giving effect to any such Surplus Relief
Reinsurance Transaction on a pro forma basis, the aggregate statutory capital
and surplus of the Subsidiaries within the Insurance Group would increase by
more than $10,000,000 in the aggregate as a result of all of the Surplus Relief
Reinsurance Transactions entered into by the Subsidiaries within the Insurance
Group during the period from the Closing Date through and including the date of
such Surplus Relief Reinsurance Transaction.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of
any Loan or shall fail to pay any interest on any Loan within three Domestic
Business Days after such interest shall become due, or shall fail to pay any
fee or other amount payable hereunder within three Domestic Business Days after
such fee or other amount becomes due; or
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(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.02 to 5.17. inclusive; or
(c) the Borrower shall fail to observe or perform any covenant
or agreement contained in this Agreement (other than those covered by
clause (a) or (b) above) for thirty days after written notice thereof
has been given to the Borrower by the Agent at the request of any
Bank; or
(d) any representation, warranty, certification or statement
made or deemed made by the Borrower in Article IV of this Agreement or
in any certificate, financial statement or other document delivered
pursuant to this Agreement shall prove to have been incorrect in any
material respect when made (or deemed made); or
(e) the Borrower or any Subsidiary shall fail to make any
payment in respect of Debt outstanding (other than the Notes) when due
or within any applicable grace period; or
(f) any event or condition shall occur which results in the
acceleration of the maturity of Debt outstanding of the Borrower or
any Subsidiary or enables (or, with the giving of notice or lapse of
time or both, would enable) the holders of such Debt or any Person
acting on such holders' behalf to accelerate the maturity thereof; or
(g) the Borrower or any Subsidiary shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its Property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally, or shall admit
in writing its inability, to pay its debts as they become due, or
shall take any corporate action to authorize any of the foregoing; or
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its Property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 60 days; or an order
for relief shall be entered against the Borrower or any Subsidiary
under the federal bankruptcy laws as now or hereafter in effect; or
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(i) the Borrower or any member of the Controlled Group shall
fail to pay when due any material amount which it shall have become
liable to pay to the PBGC or to a Plan under Title IV of ERISA; or the
PBGC shall institute proceedings under Title IV of ERISA to terminate
or to cause a trustee to be appointed to administer any such Plan or
Plans or a proceeding shall be instituted by a fiduciary of any such
Plan or Plans to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within 30 days thereafter; or
a condition shall exist by reason of which the PBGC would be entitled
to obtain a decree adjudicating that any such Plan or Plans must be
terminated; or the Borrower or any other member of the Controlled
Group shall enter into, contribute or be obligated to contribute to,
terminate or incur any withdrawal liability with respect to, a
Multiemployer Plan; or
(j) one or more judgments or orders for the payment of money
in an aggregate amount in excess of $1,000,000 shall be rendered
against the Borrower or any Subsidiary and such judgment or order
shall continue unsatisfied and unstayed for a period of 30 days; or
(k) a federal tax lien shall be filed against the Borrower
under Section 6323 of the Code or a lien of the PBGC shall be filed
against the Borrower under Section 4068 of ERISA and in either case
such lien shall remain undischarged for a period of 25 days after the
date of filing; or
(l) (i) any Person or two or more Persons acting in concert
(other than Person(s) who are lineal descendants (including without
limitation adopted children) of W. Frank Hipp, spouses of such lineal
descendants, or fiduciaries with respect to voting stock held by,
under the control of or for the benefit of such lineal descendants or
spouses of such lineal descendants and other than Person(s) whose
ownership of 20% or more of the outstanding shares of the voting stock
of the Borrower is approved in advance by the Board of Directors of
the Borrower) shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission under
the Securities Exchange Act of 1934) of 20% or more of the outstanding
shares of the voting stock of the Borrower; or (ii) as of any date a
majority of the Board of Directors of the Borrower consists of
individuals who were not either (A) directors of the Borrower as of
the corresponding date of the previous year, (B) selected or nominated
to become directors by the Board of Directors of the Borrower of which
a majority consisted of individuals described in clause (A),
or (C) selected or nominated to become directors by the Board of
Directors of the Borrower of which a majority consisted of individuals
described in clause (A) and individuals described in clause (B); or
(m) either (i) any Forfeiture Proceeding shall have been
commenced or the Borrower shall have given the Banks written notice of
the commencement or threatened commencement of any Forfeiture
Proceeding as provided in
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Section 5.01(k); or (ii) the Agent has a good faith basis to believe
that a Forfeiture Proceeding has been threatened or commenced.
then, and in every such event, the Agent shall (i) if requested by the Required
Banks, by notice to the Borrower terminate the Commitments and they shall
thereupon terminate, and (ii) if requested by the Required Banks, by notice to
the Borrower declare the Notes (together with accrued interest thereon) and all
other amounts payable hereunder and under the other Loan Documents to be, and
the Notes (together with all accrued interest thereon) and all other amounts
payable hereunder and under the other Loan Documents shall thereupon become,
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower; provided
that if any Event of Default specified in clause (g) or (h) above occurs with
respect to the Borrower, without any notice to the Borrower or any other act by
the Agent or the Banks, the Commitments shall thereupon automatically terminate
and the Notes (together with accrued interest thereon) and all other amounts
payable hereunder and under the other Loan Documents shall automatically become
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Borrower of any Event of Default under Section 6.01(c) promptly upon being
requested to do so by any Bank and shall thereupon notify all the Banks
thereof.
ARTICLE VII
THE AGENCY
SECTION 7.01. Appointment, Powers and Immunities. Each Bank hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the other Loan Documents with such powers as are specifically delegated
to the Agent by the terms hereof and thereof, together with such other powers
as are reasonably incidental thereto. The Agent: (a) shall have no duties or
responsibilities except as expressly set forth in this Agreement and the other
Loan Documents, and shall not by reason of this Agreement or any other Loan
Document be a trustee for any Bank; (b) shall not be responsible to the Banks
for any recitals, statements, representations or warranties contained in this
Agreement or any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any Bank under, this Agreement
or any other Loan Document, or for the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
any other document referred to or provided for herein or therein or for any
failure by the Borrower to perform any of its obligations hereunder or
thereunder; (c) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder or under any other Loan Document except to the
extent requested by the Required Banks, and (d) shall not be responsible for
any action taken or omitted to be taken by it hereunder or under any other Loan
Document or any other document or instrument referred to or provided for herein
or therein or in connection herewith or therewith, except for its own gross
negligence or willful misconduct. The Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care.
The provisions of this
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Article VII are solely for the benefit of the Agent and the Banks, and the
Borrower shall not have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement
and under the other Loan Documents, the Agent shall act solely as agent of the
Banks and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for the Borrower.
The duties of the Agent shall be ministerial and administrative in nature, and
the Agent shall not have by reason of this Agreement or any other Loan Document
a fiduciary relationship in respect of any Bank.
SECTION 7.02. Reliance by Agent. The Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telefax, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants or other experts selected by the Agent. As to any matters not
expressly provided for by this Agreement or any other Loan Document, the Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder and thereunder in accordance with instructions signed by the Required
Banks (or, in the case of instructions given with respect to any matter as to
which Section 9.05(a) requires the signatures of all the Banks, instructions
signed by all the Banks), and such instructions of the Required Banks or all
the Banks, as the case may be, in any action taken or failure to act pursuant
thereto shall be binding on all of the Banks.
SECTION 7.03. Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default or an Event of Default (other than the
non-payment of principal of or interest on the Syndicated Loans) unless the
Agent has received notice from a Bank or the Borrower specifying such Default
or Event of Default and stating that such notice is a "Notice of Default". In
the event that the Agent receives such a notice of the occurrence of a Default
or an Event of Default, the Agent shall give prompt notice thereof to the
Banks. The Agent shall (subject to Section 9.05) take such action with respect
to such Default or Event of Default as shall be directed by the Required Banks,
provided that, unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Banks.
SECTION 7.04. Rights of Agent as a Bank. With respect to the Loans
made by it, Wachovia in its capacity as a Bank hereunder shall have the same
rights and powers hereunder as any other Bank and may exercise the same as
though it were not acting as the Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include Wachovia in its individual
capacity. The Agent may (without having to account therefor to any Bank)
accept deposits from, lend money to and generally engage in any kind of
banking, trust or other business with the Borrower (and any of its Affiliates)
as if it were not acting as the Agent, and the Agent may accept fees and other
consideration from the Borrower (in addition to any agency fees and arrangement
fees heretofore agreed to between the Borrower and the Agent) for services in
connection with this Agreement or any other Loan Document or otherwise without
having to account for the same to the Banks.
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SECTION 7.05. Indemnification. Each Bank severally agrees to indemnify
the Agent, to the extent the Agent shall not have been reimbursed by the
Borrower, ratably in accordance with its Commitment, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including, without limitation, counsel fees and
disbursements) or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of this Agreement or any other Loan Document or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (excluding, unless an Event of Default has
occurred and is continuing, the normal administrative costs and expenses
incident to the performance of its agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or any such other documents; provided,
however, that no Bank shall be liable for any of the foregoing to the extent
they arise from the gross negligence or willful misconduct of the Agent. If any
indemnity furnished to the Agent for any purpose shall, in the reasonable
opinion of the Agent, be insufficient or become impaired, the Agent may call
for additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished.
SECTION 7.06. Payee of Note Treated as Owner. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes hereof unless
and until a written notice of the assignment or transfer thereof shall have
been filed with the Agent. Any requests, authority or consent of any Person
who at the time of making such request or giving such authority or consent is
the holder of any Note shall be conclusive and binding on any subsequent
holder, transferee or assignee of that Note or of any Note or Notes issued in
exchange therefor or replacement thereof.
SECTION 7.07. Non-Reliance on Agent and Other Banks. Each Bank agrees
that it has, independently and without reliance on the Agent or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Borrower and decision to enter into this
Agreement and that it will, independently and without reliance upon the Agent
or any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. The Agent shall not be required to keep itself informed as to the
performance or observance by the Borrower of this Agreement or any of the other
Loan Documents or any other document referred to or provided for herein or
therein or to inspect the properties or books of the Borrower or any other
Person. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Agent hereunder or under
the other Loan Documents, the Agent shall not have any duty or responsibility
to provide any Bank with any credit or other information concerning the
affairs, financial condition or business of the Borrower or any other Person
(or any of their Affiliates) which may come into the possession of the Agent.
SECTION 7.08. Failure to Act. Except for action expressly required of
the Agent hereunder or under the other Loan Documents, the Agent shall in all
cases be fully justified in failing or refusing to act hereunder and thereunder
unless it shall receive further assurances to its satisfaction by the Banks of
their indemnification obligations under Section 7.05 against any
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and all liability and expense which may be incurred by the Agent by reason of
taking, continuing to take, or failing to take any such action.
SECTION 7.09. Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent
may resign at any time by giving notice thereof to the Banks and the Borrower
and the Agent may be removed at any time with or without cause by the Required
Banks. Upon any such resignation or removal, the Required Banks shall have the
right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Required Banks and shall have accepted such appointment within
30 days after the retiring Agent's notice of resignation or the Required Banks'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent. Any successor Agent shall be a Bank or a bank
which has a combined capital and surplus of at least $500,000,000 and which has
a long-term certificate of deposit rating or long-term senior indebtedness
rating by Moody's Investor Services, Inc. of Aa2 or better (or the comparable
rating then in existence) or by Standard and Poor's Corporation of AA or better
(or the comparable rating then in existence). Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this Article VII
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Agent hereunder.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period:
(a) the Agent determines that deposits in Dollars (in the
applicable amounts) are not being offered in the relevant market for
such Interest Period, or
(b) the Required Banks advise the Agent that the Adjusted CD
Rate or the London Interbank Offered Rate, as the case may be, as
determined by the Agent will not adequately and fairly reflect the
cost to such Banks of funding the relevant type of Fixed Rate Loans
for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make
the type of Fixed Rate Loans specified in such notice shall be suspended.
Unless the Borrower notifies the Agent at least two Domestic Business Days
before the date of any Borrowing of such type of Fixed Rate Loans for which a
Notice of Borrowing has previously been given that it elects not to borrow on
such date, such Borrowing shall instead be made as a Base Rate Borrowing.
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SECTION 8.02. Illegality. If, after the date hereof, the
adoption of any applicable law, rule or regulation, or any change in any
existing or future law, rule or regulation, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof
(any such authority, bank or agency being referred to as an "Authority" and any
such event being referred to as a "Change of Law"), or compliance by any Bank
(or its Lending Office) with any request or directive (whether or not having
the force of law) of any Authority shall make it unlawful or impossible for any
Bank (or its Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Bank shall so notify the Agent, the Agent shall forthwith give notice
thereof to the other Banks and the Borrower, whereupon until such Bank notifies
the Borrower and the Agent that the circumstances giving rise to such
suspension no longer exist, the obligation of such Bank to make Euro-Dollar
Loans shall be suspended. Before giving any notice to the Agent pursuant to
this Section, such Bank shall designate a different Lending Office if such
designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank
shall determine that it may not lawfully continue to maintain and fund any of
its outstanding Euro-Dollar Loans to maturity and shall so specify in such
notice, the Borrower shall immediately prepay in full the then outstanding
principal amount of each Euro-Dollar Loan of such Bank, together with accrued
interest thereon and any amount due such Bank pursuant to Section 8.05(a).
Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall
borrow a Base Rate Loan in an equal principal amount from such Bank (on which
interest and principal shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base
Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If after
the date hereof, a Change of Law or compliance by any Bank for its Lending
Office) with any request or directive (whether or not having the force of law)
of any Authority:
(i) shall subject any Bank (or its Lending Office) to any tax,
duty or other charge with respect to its Fixed Rate Loans, its Notes
or its obligation to make Fixed Rate Loans, or shall change the basis
of taxation of payments to any Bank (or its Lending Office) of the
principal of or interest on its Fixed Rate Loans or any other amounts
due under this Agreement in respect of its Fixed Rate Loans or its
obligation to make Fixed Rate Loans (except for changes in the rate of
tax on the overall net income of such Bank or its Lending Office
imposed by the jurisdiction in which such Bank's principal executive
office or Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding (A) with respect to any CD Loan any such
requirement included in an applicable Domestic Reserve Percentage and
(B) with respect to any Euro-Dollar Loan any such requirement included
in an applicable Euro-Dollar Reserve Percentage) against assets of,
deposits with or for the account of, or credit extended by, any Bank
(or its Lending Office); or
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(iii) shall impose on any Bank (or its Lending Office) or on
the United States market for certificates of deposit or the London
interbank market any other condition affecting its Fixed Rate Loans,
its Notes or its obligation to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce
the amount of any sum received or receivable by such Bank (or its Lending
Office) under this Agreement or under its Notes with respect thereto, by an
amount deemed by such Bank to be material, then, within 15 days after demand by
such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such increased
cost or reduction.
(b) If any Bank shall have determined that after the date hereof the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any existing or future law, rule or regulation, or any change
in the interpretation or administration thereof, or compliance by any Bank (or
its Lending Office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any Authority, has or would have
the effect of reducing the rate of return on such Bank's capital as a
consequence of its obligations hereunder to a level below that which such Bank
could have achieved but for such adoption, change or compliance (taking into
consideration such Bank's policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, then from time to time, within 15
days after demand by such Bank, the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such reduction.
(c) Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. A certificate of any Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
(d) The provisions of this Section 8.03 shall be applicable with
respect to any Participant, Assignee or other Transferee, and any calculations
required by such provisions shall be made based upon the circumstances of such
Participant, Assignee or other Transferee.
SECTION 8.04. Base Rate Loans or Other Fixed Rate Loans Substituted
for Affected Fixed Rate Loans. If (i) the obligation of any Bank to make or
maintain Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii)
any Bank has demanded compensation under Section 8.03, and the Borrower shall,
by at least five Euro-Dollar Business Days' prior notice to such Bank through
the Agent, have elected that the provisions of this Section shall apply to such
Bank, then, unless and until such Bank notifies the Borrower that the
circumstances giving rise to such suspension or demand for compensation no
longer apply:
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(a) all Loans which would otherwise be made by such Bank as CD
Loans or Euro-Dollar Loans, as the case may be, shall be made instead
either (A) as Base Rate Loans, (B) if such suspension or demand for
compensation relates to Euro-Dollar Loans, but not CD Loans, as CD
Loans, or (C) if such demand for compensation relates to CD Loans, but
not Euro-Dollar Loans, as Euro-Dollar Loans, as the Borrower may elect
in the notice to such Bank through the Agent referred to hereinabove
(in all cases interest and principal on such Loans shall be payable
contemporaneously with the related Fixed Rate Loans of the other
Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the
case may be, has been repaid, all payments of principal which would
otherwise be applied to repay such Fixed Rate Loans shall be applied
to repay its Base Rate Loans instead.
In the event that the Borrower shall elect that the provisions of this Section
shall apply to any Bank, the Borrower shall remain liable for, and shall pay to
such Bank as provided herein, all amounts due such Bank under Section 8.03 in
respect of the period preceding the date of conversion of such Bank's Loans
resulting from the Borrower's election.
SECTION 8.05. Compensation. Upon the request of any Bank,
delivered to the Borrower and the Agent, the Borrower shall pay to such Bank
such amount or amounts as shall compensate such Bank for any loss, cost or
expense incurred by such Bank as a result of:
(a) any payment or prepayment (pursuant to Section 2.10,
Section 2.11, Section 8.02 or otherwise) of a Fixed Rate Loan or a
Money Market Loan on a date other than the last day of an Interest
Period for such Fixed Rate Loan or Money Market Loan, as the case may
be; or
(b) any failure by the Borrower to prepay a Fixed Rate Loan or
a Money Market Loan on the date for such prepayment specified in the
relevant notice of prepayment hereunder;
(c) any failure by the Borrower to borrow a Fixed Rate Loan on
the date for the Fixed Rate Borrowing of which such Fixed Rate Loan is
a part specified in the applicable Notice of Borrowing delivered
pursuant to Section 2.02; or
(d) any failure by the Borrower to borrow a Money Market Loan
(with respect to which the Borrower has accepted a Money Market Quote)
on the date for the Money Market Borrowing of which such Money Market
Loan is a part specified in the applicable Money Market Quote Request
delivered pursuant to Section 2.03;
such compensation to include, without limitations an amount (in the case of
Fixed Rate Loans) equal to the excess, if any, of (x) the amount of interest
which would have accrued on the
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amount so paid or prepaid or not prepaid or borrowed for the period from the
date of such payment, prepayment or failure to prepay or borrow to the last day
of the then current Interest Period for such Fixed Rate Loan (or, in the case
of a failure to prepay or borrow, the Interest Period for such Fixed Rate Loan
which would have commenced on the date of such failure to prepay or borrow) at
the applicable rate of interest for such Fixed Rate Loan provided for herein
over (y) the amount of interest (as reasonably determined by such Bank) such
Bank would have paid on (i) deposits in Dollars of comparable amounts having
terms comparable to such period placed with it by leading banks in the London
interbank market (if such Fixed Rate Loan is a Euro-Dollar Loan), or (ii)
certificates of deposit of comparable amounts having terms comparable to such
period placed with it by leading banks in New York, New York (if such Fixed
Rate Loan is a CD Loan).
SECTION 8.06. HLT Classification. If, after the date hereof, the Agent
determines that, or the Agent is advised by any Bank that such Bank has
received notice from any Authority that, Loans hereunder are classified as a
"highly leveraged transaction" (an "HLT Classification"), the Agent shall
promptly give notice of such HLT classification to the Borrower and the other
Banks. The Agent, the Banks and the Borrower shall commence negotiations in
good faith to agree on the extent to which fees, interest rates and/or margins
hereunder should be increased, and/or any other terms and conditions set forth
in this Agreement should be modified, so as to reflect such HLT Classification.
If the Borrower and the Required Banks agree on the amount of such increase or
increases and on the terms of any such modification, this Agreement may be
amended to give effect to such increase or increases, or modification, as
provided in Section 9.05. If the Borrower and the Required Banks fail to so
agree within 60 days after notice is given by the Agent as provided above, then
the Agent shall, if requested by Banks having 50% or more in aggregate
amount of the Commitments, by notice to the Borrower terminate the Commitments
and they shall thereupon terminate and the Borrower shall repay each
outstanding Loan at the end of the Interest Period applicable thereto. The
Banks acknowledge that an HLT Classification is not a Default or an Event of
Default.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given to such party at
its address, telex number or telecopy number set forth on the signature pages
hereof or such other address, telex number or telecopy number as such party may
hereafter specify for the purpose by notice to the Agent and the Borrower. Each
such notice, request or other communication shall be effective (i) if given by
telex, when such telex is transmitted to the telex number specified in this
Section and the appropriate answerback is received, (ii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid, (iii) if given by telecopy, when
receipt is confirmed by telephone, or (iv) if given by any other means, when
delivered at the address specified in this Section; provided that notices,
requests and other communications given by telecopy to the Borrower in
connection with Section 2.03 shall be given at the telecopy number set forth
under the signature of the Borrower on the signature pages hereof opposite the
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designation "Money Market Notices" and all notices, requests and other
communications given by telecopy to the Borrower other than in connection with
Section 2.03 shall be given at the telecopy number set forth under the
signature of the Borrower on the signature pages hereof opposite the
designation "Other Notices"; provided further that notices to the Agent under
Article II or Article VIII shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank
in exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay
(i) all out-of-pocket expenses of the Agent, including fees and disbursements
of special counsel for the Banks and the Agent, and the reasonable fees and
disbursements of counsel to each Bank, in connection with the preparation,
review and negotiation of this Agreement and the other Loan Documents, any
waiver or consent hereunder or thereunder or any amendment hereof or thereof or
any Default or alleged Default hereunder or thereunder and (ii) if an Event of
Default occurs, all out-of-pocket expenses incurred by the Agent or any Bank,
including fees and disbursements of counsel, in connection with such Event of
Default and collection and other enforcement proceedings resulting therefrom,
including out-of-pocket expenses incurred in enforcing this Agreement and the
other Loan Documents. The Borrower shall indemnify each Bank against any
transfer taxes, documentary taxes, assessments or charges made by any Authority
by reason of the execution and delivery of this Agreement or the other Loan
Documents.
(b) The Borrower agrees to indemnify and hold harmless the Agent and
each Bank from and against any and all claims, damages, liabilities and
expenses (including, without limitation, reasonable counsel fees and expenses)
which may be incurred by or asserted against the Agent or such Bank in
connection with or arising out of any investigation, litigation or proceeding
related to the transactions contemplated by this Agreement or any other Loan
Document, whether or not the Agent or such Bank is a party thereto.
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest due
with respect to the Syndicated Notes held by it which is greater than the
proportion received by any other Bank in respect of the aggregate amount of all
principal and interest due with respect to the Syndicated Notes held by such
other Bank, the Bank receiving such proportionately greater payment shall
purchase such participations in the Syndicated Notes held by the other Banks
owing to such other Banks, and/or such other adjustments shall be made, as may
be required so that all such payments of principal and interest with respect to
the Syndicated Notes held by the Banks owing to such other Banks shall be
shared by the Banks pro rata; provided that (i) nothing in this Section shall
impair the right of any Bank to exercise any right of set-off or counterclaim
it may have and to apply the amount subject to such exercise to the payment of
indebtedness (including, without limitation, Money Market Loans) of the
Borrower other than its indebtedness under the Syndicated Notes, and (ii)
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if all or any portion of such payment received by the purchasing Bank is
thereafter recovered from such purchasing Bank, such purchase from each other
Bank shall be rescinded and such other Bank shall repay to the purchasing Bank
the purchase price of such participation to the extent of such recovery
together with an amount equal to such other Bank's ratable share (according to
the proportion of (x) the amount of such other Bank's required repayment to (y)
the total amount so recovered from the purchasing Bank) of any interest or
other amount paid or payable by the purchasing Bank in respect of the total
amount so recovered. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in a
Syndicated Note, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount of such
participation.
SECTION 9.05. Amendments and Waivers. (a) Any provision of this
Agreement, the Notes or any other Loan Documents may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by the
Borrower and the Required Banks (and, if the rights or duties of the Agent are
affected thereby, by the Agent); provided that, except as provided in the next
succeeding proviso, no such amendment or waiver shall, unless signed by all the
Banks, (i) change the Commitment of any Bank or subject any Bank to any
additional obligation, (ii) change the principal of or rate of interest on any
Loan or any fees hereunder, (iii) change the date fixed for any payment of
principal of or interest on any Loan or any fees hereunder, (iv) change the
amount of principal, interest or fees due on any date fixed for the payment
thereof, (v) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Notes, or the number of Banks, which shall be
required for the Banks or any of them to take any action under this Section or
any other provision of this Agreement, (vi) change the manner of application of
any payments made under this Agreement or the Notes, (vii) release or
substitute all or any substantial part of the collateral (if any) held as
security for the Loans, (viii) release any guaranty given to support payment of
the Loans, or (ix) modify Section 2.09(a), Article III, Section 8.03, Section
8.05, Section 8.06, Section 9.03, Section 9.04 or Section 9.07(a); provided,
further, that this Agreement may be amended to give effect (x) to any increased
fees, interest rates and/or margins, and/or any modification of the terms and
conditions set forth in this Agreement, agreed upon pursuant to Section 8.06 or
(y) to reduce or rescind any such increases, or to rescind any such
modification, previously agreed upon pursuant to Section 8.06, if such
amendment is in writing and is signed by the Borrower and the Required Banks.
(b) The Borrower will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement unless each Bank shall be informed thereof by the Borrower and shall
be afforded an opportunity of considering the same and shall be supplied by the
Borrower with sufficient information to enable it to make an informed decision
with respect thereto. Executed or true and correct copies of any waiver or
consent effected pursuant to the provisions of this Agreement shall be
delivered by the Borrower to each Bank forthwith following the date on which
the same shall have been executed and delivered by the requisite percentage of
Banks. The Borrower will not, directly or indirectly, pay or cause to be paid
any remuneration, whether by way of supplemental or additional interest, fee or
otherwise, to any Bank as consideration for or as an inducement to the entering
into by
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such Bank of any waiver or amendment of any of the terms and provisions of this
Agreement unless such remuneration is concurrently paid, on the same terms,
ratably to all such Banks.
SECTION 9.06. Margin Stock Collateral. Each of the Banks represents to
the Agent and each of the other Banks that it in good faith is not relying upon
any Margin Stock as collateral in the extension or maintenance of the credit
provided for in this Agreement.
SECTION 9.07. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement.
(b) Any Bank may at any time sell to one or more Persons
(each a "Participant") participating interests in any Loan owing to such Bank,
any Note held by such Bank, any Commitment hereunder or any other interest of
such Bank hereunder. In the event of any such sale by a Bank of a participating
interest to a Participant, such Bank's obligations under this Agreement shall
remain unchanged, such Bank shall remain solely responsible for the performance
thereof, such Bank shall remain the holder of any such Note for all purposes
under this Agreement, and the Borrower and the Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. In no event shall a Bank that sells a
participation be obligated to the Participant to take or refrain from taking
any action hereunder except that such Bank may agree that it will not (except
as provided below), without the consent of the Participant, agree to (i) the
change of any date fixed for the payment of principal of or interest on the
related Loan or Loans, (ii) the change of the amount of any principal, interest
or fees due on any date fixed for the payment thereof with respect to the
related Loan or Loans, (iii) the change of the principal of the related Loan or
Loans, or (iv) any change in the rate at which either interest is payable
thereon or (if the Participant is entitled to any part thereof) facility fee is
payable hereunder from the rate at which the Participant is entitled to receive
interest or facility fee (as the case may be) in respect of such participation;
provided that such Bank may agree (x) to any increase in the fees, interest
rates and/or margins, and/or to any modification of the terms and conditions
set forth in this Agreement, agreed upon pursuant to Section 8.06 hereof or (y)
to the reduction or rescission of any such increases, or the rescission of any
such modification, previously agreed upon pursuant to Section 8.06 hereof. Each
Bank selling a participating interest in any Loan, Note, Commitment or other
interest under this Agreement shall, within ten Domestic Business Days of such
sale, provide the Borrower and the Agent with written notification stating that
such sale has occurred and identifying the Participant and the interest
purchased by such Participant. The Borrower agrees that each Participant shall
be entitled to the benefits of Article VIII with respect to its participation in
Loans outstanding from time to time.
(c) Any Bank may at any time assign to one or more banks or
financial institutions (each an "Assignee") all, or a proportionate part of
all, of its rights and obligations under this Agreement, the Notes and the
other Loan Documents, and such Assignee shall assume all such rights and
obligations, pursuant to an Assignment and Acceptance in the form attached
hereto as Exhibit G, executed by such Assignee, such transferor Bank and the
Agent (and, in the case of an Assignee that is not then a Bank or an Affiliate
of a Bank, by the
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Borrower); provided that (i) no interest may be sold by a Bank pursuant to this
paragraph (c) unless the Assignee shall agree to assume ratably equivalent
portions of the transferor Bank's Commitment, (ii) the amount of the Commitment
of the assigning Bank subject to such assignment (determined as of the
effective date of the assignment) shall be equal to $10,000,000 (or any larger
multiple of $1,000,000), (iii) no interest may be sold by a Bank pursuant to
this paragraph (c) to any Assignee that is not then a Bank or Affiliate of a
Bank without the consent of the Borrower, which consent shall not be
unreasonably withheld and (iv) a Bank may not have more than three Assignees
that are not then Banks at any one time. Upon (A) execution of the Assignment
and Acceptance by such transferor Bank, such Assignee, the Agent and (if
applicable) the Borrower, (B) delivery of an executed copy of the Assignment
and Acceptance to the Borrower and the Agent, (C) payment by such Assignee to
such transferor Bank of an amount equal to the purchase price agreed between
such transferor Bank and such Assignee, and (D) payment of a processing and
recordation fee of $2,500 to the Agent, such Assignee shall for all purposes be
a Bank party to this Agreement and shall have all the rights and obligations of
a Bank under this Agreement to the same extent as if it were an original party
hereto with a Commitment as set forth in such instrument of assumption, and the
transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by the Borrower, the
Banks or the Agent shall be required. Upon the consummation of any transfer to
an Assignee pursuant to this paragraph (c), the transferor Bank, the Agent and
the Borrower shall make appropriate arrangements so that, if required, a new
Note is issued to each of such Assignee and such transferor Bank.
(d) Subject to the provisions of Section 9.08, the Borrower
authorizes each Bank to disclose to any Participant, Assignee or other
transferee (each a "Transferee") and any prospective Transferee any and all
financial and other information in such Bank's possession concerning the
Borrower which has been delivered to such Bank by the Borrower pursuant to
this Agreement or which has been delivered to such Bank by the Borrower in
connection with such Bank's credit evaluation prior to entering into this
Agreement.
(e) No Transferee shall be entitled to receive any greater
payment under Section 8.03 than the transferor Bank would have been entitled to
receive with respect to the rights transferred, unless such transfer is made
with the Borrower's prior written consent or by reason of the provisions of
Section 8.02 or 8.03 requiring such Bank to designate a different Lending
Office under certain circumstances or at a time when the circumstances giving
rise to such greater payment did not exist.
(f) Notwithstanding anything herein to the contrary, any Bank
may pledge and assign its rights and interests under this Agreement and its
Notes to any Federal Reserve Bank as collateral.
SECTION 9.08. Confidentiality. Each Bank agrees to exercise its best
efforts to keep any information delivered or made available by the Borrower to
it which is clearly indicated to be confidential information, confidential from
anyone other than persons employed or retained by such Bank who are or are
expected to become engaged in evaluating, approving, structuring or
administering the Loans; provided, however, that nothing herein shall prevent
any Bank from disclosing such information (i) to any other Bank, (ii) upon the
order of any court or
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administrative agency, (iii) upon the request or demand of any regulatory
agency or authority having jurisdiction over such Bank, (iv) which has been
publicly disclosed, (v) to the extent reasonably required in connection with
any litigation to which the Agent, any Bank or their respective Affiliates may
be a party, (vi) to the extent reasonably required in connection with the
exercise of any remedy hereunder, (vii) to such Bank's legal counsel and
independent auditors and (viii) to any actual or proposed Participant, Assignee
or other Transferee of all or part of its rights hereunder which has agreed in
writing to be bound by the provisions of this Section 9.08.
SECTION 9.09. Representation by Banks. Each Bank hereby represents
that it is a commercial lender or financial institution which makes loans in
the ordinary course of its business and that it will make its Loans hereunder
for its own account in the ordinary course of such business; provided, however,
that, subject to Section 9.07 of this Agreement, the disposition of the Note or
Notes held by that Bank shall at all times be within its exclusive control.
SECTION 9.10. Obligations Several. The obligations of each Bank
hereunder are several, and no Bank shall be responsible for the obligations or
commitment of any other Bank hereunder. Nothing contained in this Agreement and
no action taken by Banks pursuant hereto shall be deemed to constitute the
Banks to be a partnership, an association, a joint venture or any other kind of
entity. The amounts payable at any time hereunder to each Bank shall be a
separate and independent debt, and each Bank shall be entitled to protect and
enforce its rights arising out of this Agreement or any other Loan Document and
it shall not be necessary for any other Bank to be joined as an additional
party in any proceeding for such purpose.
SECTION 9.11. Survival of Certain Obligations. Sections 8.03(a),
8.03(b). 8.05 and 9.03, and the obligations of the Borrower thereunder, shall
survive, and shall continue to be enforceable notwithstanding, the termination
of this Agreement and the Commitments and the payment in full of the principal
of and interest on all Loans.
SECTION 9.12. North Carolina Law. This Agreement and each Note shall
be construed in accordance with and governed by the law of the State of North
Carolina.
SECTION 9.13. Consent to Jurisdiction. The Borrower (a) submits to
personal jurisdiction in the State of North Carolina, the courts thereof and
the United States District Courts sitting therein, for the enforcement of this
Agreement, the Notes and the other Loan Documents, (b) waives any and all
personal rights under the law of any jurisdiction to object on any basis
(including, without limitation, inconvenience of forum) to jurisdiction or
venue within the State of North Carolina for the purpose of litigation to
enforce this Agreement, the Notes or the other Loan Documents, and (c) agrees
that service of process may be made upon it in the manner prescribed in Section
9.01 for the giving of notice to the Borrower. Nothing herein contained,
however, shall prevent the Agent from bringing any action or exercising any
rights against any security and against the Borrower personally, and against
any assets of the Borrower, within any other state or jurisdiction.
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SECTION 9.14. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
SECTION 9.15. Miscellaneous. If any term or provision of this
Agreement or the application thereof to any Person or circumstances shall, to
any extent, be invalid or unenforceable, the remainder of such term or provision
or the application thereof to Persons or circumstances other than those as to
which it is held invalid or unenforceable shall not be affected thereby and
shall be valid and enforceable to the fullest extent permitted by law. The Loan
Documents contain the entire agreement of the parties with respect to the
matters covered and the transactions contemplated hereby and thereby, and no
other agreement, statement or promise made by any such party, or by any
employee, officer, agent or attorney of such party, which is not contained
herein or therein shall be valid or binding. The section and subsection
headings of this Agreement are for convenience only and shall not limit or
otherwise affect any of the terms thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
THE LIBERTY CORPORATION
By: /s/ Barry L. Edwards
-----------------------------
Title: Vice President & Treasurer
--------------------------
P.O. Box 789
Greenville, South Carolina 29602
Telex number: Not applicable
Answerback: Not applicable
Telecopy numbers:
(803) 292-4411 (Money Market Notices)
(803) 292-4390 (Other Notices)
COMMITMENTS
$65,000,000 THE SOUTH CAROLINA NATIONAL BANK
By:
------------------------------
Title:
---------------------------
Lending Office
The South Carolina National Bank
1401 Main Street, Suite 705
Columbia, South Carolina 29226
Telex number: 205807
Answerback: SCNB UR
Telecopy number: (803) 765-3232
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
THE LIBERTY CORPORATION
By:
------------------------------
Title:
---------------------------
P.O. Box 789
Greenville, South Carolina 29602
Telex number: Not applicable
Answerback: Not applicable
Telecopy numbers:
(803) 292-4411 (Money Market Notices)
(803) 292-4390 (Other Notices)
COMMITMENTS
$65,000,000 THE SOUTH CAROLINA NATIONAL BANK
By: /s/ J.T. Wilkins, Jr.
-----------------------------
Title: Senior Vice President
--------------------------
Lending Office
The South Carolina National Bank
1401 Main Street, Suite 705
Columbia, South Carolina 29226
Telex number: 205807
Answerback: SCNB UR
Telecopy number: (803) 765-3232
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$55,000,000 WACHOVIA BANK OF NORTH CAROLINA,
N.A., as Agent and as a Bank
By: /s/ Joanne M. Starnes
-----------------------------
Title: Vice President
--------------------------
Lending Office
Wachovia Bank of North Carolina, N.A.
400 South Tryon Street
P.O. Box 31608
Charlotte, North Carolina 28231
Telex number: 4613011
Answerback: WAC UI
Telecopy number: (704) 378-5624
$55,000,000 NATIONSBANK OF GEORGIA, N.A.
By:
-----------------------------
Title:
---------------------------
Lending Office
NationsBank of Georgia, N.A.
35 Broad Street
Atlanta, Georgia 30303
Telex number: 542-346
Answerback: CSINTLATL
Telecopy number: (404) 581-3398
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$55,000,000 WACHOVIA BANK OF NORTH CAROLINA,
N.A., as Agent and as a Bank
By:
------------------------------
Title:
---------------------------
Lending Office
Wachovia Bank of North Carolina, N.A.
400 South Tryon Street
P.O. Box 31608
Charlotte, North Carolina 28231
Telex number: 4613011
Answerback: WAC UI
Telecopy number: (704) 378-5624
$55,000,000 NATIONSBANK OF GEORGIA, N.A.
By: /s/ Edmund H. Schenck, Jr.
------------------------------
Title: Assistant Vice President
---------------------------
Lending Office
NationsBank of Georgia, N.A.
35 Broad Street
Atlanta, Georgia 30303
Telex number: 542-346
Answerback: CSINTLATL
Telecopy number: (404) 581-3398
151
<PAGE> 71
$30,000,000 THE BANK OF TOKYO, LTD., ATLANTA AGENCY
By: /s/ Richard Davis
-----------------------------
Title: Assistant Vice President
--------------------------
Lending Office
The Bank of Tokyo, Ltd., Atlanta Agency
5050 Georgia-Pacific Center
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telex number: 6827300
Answerback: BOT ATL
Telecopy number: (404) 577-1155
$25,000,000 THE SANWA BANK, LTD., ATLANTA AGENCY
By:
-----------------------------
Title:
--------------------------
Lending Office
The Sanwa Bank, Ltd., Atlanta Agency
4750 Georgia-Pacific Center
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telex number: 4611830
Answerback: SANWATL
Telecopy number: (404) 589-1629
152
<PAGE> 72
$30,000,000 THE BANK OF TOKYO, LTD., ATLANTA AGENCY
By:
------------------------------
Title:
---------------------------
Lending Office
The Bank of Tokyo, Ltd., Atlanta Agency
5050 Georgia-Pacific Center
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telex number: 6827300
Answerback: BOT ATL
Telecopy number: (404) 577-1155
$25,000,000 THE SANWA BANK, LTD., ATLANTA AGENCY
By: /s/ Virginia C. Simpson
------------------------------
Title: Assistant Vice President
---------------------------
Lending Office
The Sanwa Bank, Ltd., Atlanta Agency
4750 Georgia-Pacific Center
133 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telex number: 4611830
Answerback: SANWATL
Telecopy number: (404) 589-1629
153
<PAGE> 73
$20,000,000 NBD BANK, N.A.
By: /s/ D. Andrew Bateman
------------------------------
Title: Vice President
---------------------------
Lending Office
NBD Bank, N.A.
National Banking Division
611 Woodward Avenue
Detroit, Michigan 48226
Telex number: 4320060
Answerback: NATIONBANK DET
Telecopy number: (313) 225-2649
$12,500,000 THE FUJI BANK, LIMITED
By:
------------------------------
Title:
---------------------------
Lending Office
The Fuji Bank, Limited
Marquis One Tower, Suite 2100
245 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303-1208
Telex number: 9102507122
Answerback: FUJI BANK LTD UQ
Telecopy number: (404) 653-2119
154
<PAGE> 74
$20,000,000 NBD BANK, N.A.
By:
-------------------------------
Title:
----------------------------
Lending Office
NBD Bank, N.A.
National Banking Division
611 Woodward Avenue
Detroit, Michigan 48226
Telex number: 4320060
Answerback: NATIONBANK DET
Telecopy number: (313) 225-2649
$12,500,000 THE FUJI BANK, LIMITED
By: /s/ A. Inoue
-------------------------------
Title: Vice President
----------------------------
Lending Office
The Fuji Bank, Limited
Marquis One Tower, Suite 2100
245 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303-1208
Telex number: 9102507122
Answerback: FUJI BANK LTD UQ
Telecopy number: (404) 653-2119
155
<PAGE> 75
$12,500,000 THE BANK OF NEW YORK
By: /s/ Timothy J. Stambaugh
-------------------------------
Title:
----------------------------
Lending Office
The Bank of New York
One Wall Street, 17th Floor
New York, New York 10286
Telex number: TRT 177363
Answerback: BONY UT
Telecopy number: (212) 809-9520
$12,500,000 BRANCH BANKING & TRUST COMPANY OF
SOUTH CAROLINA
By:
------------------------------
Title:
---------------------------
Lending Office
Branch Banking & Trust Company
of South Carolina
301 N. Main Street, Daniel Building
Greenville, South Carolina 29601
Telex number: 362817
Answerback: None
Telecopy number: (803) 241-7599
156
<PAGE> 76
$12,500,000 THE BANK OF NEW YORK
By:
------------------------------
Title:
---------------------------
Lending Office
The Bank of New York
One Wall Street, 17th Floor
New York, New York 10286
Telex number: TRT 177363
Answerback: BONY UT
Telecopy number: (212) 809-9520
$12,500,000 BRANCH BANKING & TRUST COMPANY OF
SOUTH CAROLINA
By: /s/ Barry Maness
------------------------------
Title: Vice President
---------------------------
Lending Office
Branch Banking & Trust Company
of South Carolina
301 N. Main Street, Daniel Building
Greenville, South Carolina 29601
Telex number: 362817
Answerback: None
Telecopy number: (803) 241-7599
157
<PAGE> 77
$12,500,000 SOUTHERN NATIONAL BANK OF NORTH
CAROLINA
By: /s/ J. Kemp Mattocks
------------------------------
Title: Vice President
---------------------------
Lending Office
Southern National Bank of North Carolina
1310 Battleground Road (27408)
P. O. Box 20200
Greensboro, North Carolina 27420
Telex number: 6843067
Answerback: SOINPB UW
Telecopy number: (919) 271-5309
$12,500,000 FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By:
------------------------------
Title:
---------------------------
Lending Office
First Union National Bank of North Carolina
One First Union Center, TW-19
301 South College Street
Charlotte, North Carolina 28288-0735
Telex number: 6843115
Answerback: FUNBCHA
Telecopy number: (704) 374-4092
158
<PAGE> 78
$12,500,000 SOUTHERN NATIONAL BANK OF NORTH
CAROLINA
By:
------------------------------
Title:
---------------------------
Lending Office
Southern National Bank of North Carolina
1310 Battleground Road (27408)
P. O. Box 20200
Greensboro, North Carolina 27420
Telex number: 6843067
Answerback: SOINPB UW
Telecopy number: (919) 271-5309
$12,500,000 FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: /s/ Robert C. Mayer, Jr.
------------------------------
Title: Vice President
---------------------------
Lending Office
First Union National Bank of North Carolina
One First Union Center, TW-19
301 South College Street
Charlotte, North Carolina 28288-0735
Telex number: 6843115
Answerback: FUNBCHA
Telecopy number: (704) 374-4092
159
<PAGE> 79
$12,500,000 BANK OF MONTREAL
By: /s/ K. Daniel Strieff
-----------------------------
Title: Director
--------------------------
Lending Office
Bank of Montreal
115 South LaSalle Street
12th Floor West
Chicago, Illinois 60603
Telex number: None
Answerback: None
Telecopy number: (312) 750-3783
- -----------------
TOTAL COMMITMENTS:
$325,000,000
160
<PAGE> 80
Page 1 of 2
SCHEDULE 5.01(c)
The Liberty Corporation
Ratios for Loss Covenants
Ratio of Senior Debt to Capitalization / / / / / / / / / / / / / /
Senior Debt
Bank Loans
Other Debt
Total Senior Debt
Shareholders' Equity
Total Capital
Ratio of Senior Debt to Total Capital
Maximum Ratio Covenant
Ratio of Senior Debt to Cash Flow / / / / / / / / / / / / / /
Total Senior Debt (from above)
Cash Flow
TLC & Minor Subsidiary Pretax Income
Less Preferred Dividend From Liberty Life
Less Capital Gains (Losses)
Less Operating Gains (Losses) on Asset Sales of LIG
TLC & Minor Subsidiary Pretax Income Excluding Preferred Dividend,
Capital Gains (Losses) & Operating Gains (Losses) on Asset Sales
Cosmos Pretax Income
TLC & Minor Subsidiary Depreciation & Amortization
TLC & Minor Subsidiary Deferred Compensation
TLC & Minor Subsidiary Cost & Sales
Cosmos Depreciation
Cosmos Film Amortization
Cosmos Amortization of Intangibles
Insurance Group Dividends
Net Cash Proceeds from Operating Asset Sales of LIG
Liberty Life Preferred Stock Repayments
Principal Repayments on Acquisition Loans
Total Cash Flow
Ratio of Senior Debt to Cash Flow
Maximum Ratio Per Covenant
Interest Rate Spread
161
<PAGE> 81
Page 2 of 2
Ratio of Adjusted Cash Flow to Fixed Charges / / / / / / / / / / / / / /
Adjusted Cash Flow
Cash Flow (from above)
TLC & Minor Subsidiary Interest Expenses
Adjusted Cash Flow
Fixed Charges
TLC & Minor Subsidiary Interest Expense
TLC & Minor Subsidiary Capitalized Interest
Cosmos, TLC & Minor Subsidiary Principal Payments
Cosmos Film Payments
Dividend Payments on Liberty Corporation Preferred Stock
Total Fixed Charges
Ratio of Adjusted Cash Flow to Fixed Charges
Minimum Ratio Per Covenant
162
<PAGE> 82
EXHIBIT A
SYNDICATED NOTE
Charlotte, North Carolina
$____________________ September _____, 1993
For value received, The Liberty Corporation, a South Carolina
corporation (the "Borrower"), promises to pay to the order of ____________
__________________________________________________________________________
(the "Bank"), for the account of its Lending Office, the principal sum of
_________________ and No/100 Dollars ($______________), or such lesser amount
as shall equal the unpaid principal amount of each Syndicated Loan made by
the Bank to the Borrower pursuant to the Credit Agreement referred to below,
on the dates provided for in the Credit Agreement. The Borrower promises to
pay interest on the unpaid principal amount of this Syndicated Note on the
dates and at the rate or rates provided for in the Credit Agreement. Interest
on any overdue principal of and, to the extent permitted by law, overdue
interest on the principal amount hereof shall bear interest at the Default
Rate, as provided for in the Credit Agreement. All such payments of principal
and interest shall be made in lawful money of the United States in Federal
or other immediately available funds at the office of the Bank located at
___________________, or such other address as the Bank may hereafter designate
by notice to the Borrower and the Agent.
All Syndicated Loans made by the Bank, the respective maturities
thereof, the interest rates applicable thereto and all repayments of the
principal thereof shall be recorded by the Bank in its books and records and,
prior to any transfer hereof, endorsed by the Bank on the schedule attached
hereto (or on a schedule prepared substantially in the form of such schedule
and attached hereto), or on a continuation of such schedule attached to and
made a part hereof; provided that the failure of the Bank to make, or any error
of the Bank in making, any such recordation or endorsement or schedule shall
not affect the obligations of the Borrower hereunder or under the Credit
Agreement.
This note is one of the Syndicated Notes referred to in the Credit
Agreement dated as of September _______, 1993 among the Borrower, the banks
listed on the signature pages thereof (and their successors and assigns) and
Wachovia Bank of North Carolina, N.A., as Agent (as the same may be amended
from time to time, the "Credit Agreement"). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment and the repayment hereof
and the acceleration of the maturity hereof.
The Borrower hereby waives presentment, demand, protest, notice of
demand, protest and nonpayment and any other notice required by law relative
hereto, except to the extent as otherwise may be expressly provided for in the
Credit Agreement.
163
<PAGE> 83
The Borrower agrees, in the event that this note or any portion hereof
is collected by law or through an attorney at law, to pay all reasonable costs
of collection, including, without limitation, reasonable attorneys' fees.
THE LIBERTY CORPORATION
By:
----------------------
Title:
164
<PAGE> 84
Syndicated Note (cont'd)
SYNDICATED LOANS AND PAYMENTS OF PRINCIPAL
**************************************************
Type Amount Amount of
of Interest of Principal Maturity Notation
Date Loan* Rate Loan Repaid Date Made By
- ---- ----- -------- ------ --------- -------- --------
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
________________________
* I.e., a Base Rate, CD or Euro-Dollar Loan.
165
<PAGE> 85
EXHIBIT B
MONEY MARKET NOTE
Charlotte, North Carolina
$____________________ September ____, 1993
For value received, The Liberty Corporation, a South Carolina
corporation (the "Borrower"), promises to pay to the order of ___________
_________________________________________________________________________
(the "Bank"), for the account of its Lending Office, the principal sum of
___________________ and No/100 Dollars ($ __________________), or such lesser
amount as shall equal the unpaid principal amount of each Money Market Loan
made by the Bank to the Borrower pursuant to the Credit Agreement referred to
below, on the dates provided for in the applicable Money Market Quote Request
and Money Market Quote. The Borrower promises to pay interest on the unpaid
principal amount of each such Money Market Loan on the dates and at the rate or
rates provided for in the applicable Money Market Quote Request and Money
Market Quote. Interest on any overdue principal of and, to the extent permitted
by law, overdue interest on the principal amount hereof shall bear interest at
the Money Market Loan Default Rate, as provided for in the Credit Agreement.
All such payments of principal and interest shall be made in lawful money of
the United States in Federal or other immediately available funds at the office
of the Bank located at _________________________, or such other address as the
Bank may hereafter designate by notice to the Borrower and the Agent.
All Money Market Loans made by the Bank, the respective maturities
thereof, the interest rates applicable thereto and all repayments of the
principal thereof shall be recorded by the Bank in its books and records and,
prior to any transfer hereof, endorsed by the Bank on the schedule attached
hereto (or on a schedule prepared substantially in the form of such schedule
and attached hereto), or on a continuation of such schedule attached to and
made a part hereof; provided that the failure of the Bank to make, or any error
of the Bank in making, any such recordation or endorsement or schedule shall
not affect the obligations of the Borrower hereunder or under the Credit
Agreement.
This note is one of the Money Market Notes referred to in the Credit
Agreement dated as of September _____, 1993 among the Borrower, the banks
listed on the signature pages thereof (and their successors and assigns) and
Wachovia Bank of North Carolina, N.A., as Agent (as the same may be amended
from time to time, the "Credit Agreement"). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
The Borrower hereby waives presentment, demand, protest, notice of
demand, protest and nonpayment and any other notice required by law relative
hereto, except to the extent as otherwise may be expressly provided for in the
Credit Agreement.
166
<PAGE> 86
The Borrower agrees, in the event that this note or any portion hereof
is collected by law or through an attorney at law, to pay all reasonable costs
of collection, including, without limitation, reasonable attorneys' fees.
THE LIBERTY CORPORATION
By:
-----------------------
Title:
167
<PAGE> 87
Money Market Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
*********************************************
Amount Amount of
Interest of Principal Maturity Notation
Date Rate Loan Repaid Date Made By
- ---- -------- -------- ---------- ---------- --------
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
168
<PAGE> 88
EXHIBIT C
OPINION OF
COUNSEL FOR THE BORROWER
------------------------
To the Banks and the Agent
Referred to Below
c/o Wachovia Bank of North
Carolina, N.A., as Agent
400 South Tryon Street
P.O. Box 31608
Charlotte, North Carolina 28231
Dear Sirs:
I am General Counsel for The Liberty Corporation (the "Borrower") and in
such capacity I have represented the Borrower in connection with the Credit
Agreement (the "Credit Agreement") dated as of September____, 1993 among the
Borrower, the banks listed on the signature pages thereof and Wachovia Bank of
North Carolina, N.A., as Agent. Terms defined in the Credit Agreement are used
herein as therein defined.
I have examined originals or copies, certified or otherwise identified to
my satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as I have deemed necessary or advisable for purposes of this
opinion. I have assumed for purposes of my opinions set forth below that the
execution and delivery of the Credit Agreement by each Bank and by the Agent
have been duly authorized by each Bank and by the Agent. As to questions of
fact relating to the Borrower material to such opinions, I have relied upon
representations of appropriate officers of the Borrower.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing and
in good standing under the laws of South Carolina and has all corporate powers
required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of the Credit
Agreement and the Notes (i) are within the Borrower's corporate powers, (ii)
have been duly authorized by all necessary corporate action, (iii) require no
action by or in respect of, or filing with, any governmental body, agency or
official, (iv) do not contravene, or constitute a default under, any provision
of applicable law or regulation or of the certificate of incorporation or
by-laws of the Borrower or of any agreement, judgment, injunction, order, decree
or other instrument which to my knowledge is binding upon the Borrower and (v)
to my knowledge,
169
<PAGE> 89
except as provided in the Credit Agreement, do not result in the creation or
imposition of any Lien on any asset of the Borrower or any of its Subsidiaries.
3. The Credit Agreement constitutes a valid and binding agreement of the
Borrower, enforceable against the Borrower in accordance with its terms, and
the Notes constitute valid and binding obligations of the Borrower, enforceable
in accordance with their respective terms, except as such enforceability may be
limited: (i) by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and (ii) by general principles of
equity.
4. To my knowledge, there is no action, suit or proceeding pending, or
threatened, against or affecting the Borrower or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official in which
there is a reasonable possibility of an adverse decision which could materially
adversely affect the business, consolidated financial position or consolidated
results of operations of the Borrower and its Consolidated Subsidiaries,
considered as a whole, or which in any manner questions the validity or
enforceability of the Credit Agreement or any Note.
5. Each of the Borrower's Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
6. The Borrower is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
I am qualified to practice in the State of South Carolina and do not
purport to be an expert on any laws other than the laws of the United States
and the State of South Carolina, and this opinion is rendered only with respect
to such laws. I have made no independent investigation of the laws of any other
jurisdiction.
I express no opinion as to the laws of any jurisdiction wherein any Bank
may be located which limits rates of interest which may be charged or collected
by such Bank other than in paragraph 3 with respect to the State of South
Carolina.
Very truly yours,
170
<PAGE> 90
EXHIBIT D
OPINION OF
WOMBLE CARLYLE SANDRIDGE & RICE, SPECIAL COUNSEL
FOR THE BANKS AND THE AGENT
---------------------------
To the Banks and the Agent
Referred to Below
c/o Wachovia Bank of North
Carolina, N.A., as Agent
400 South Tryon Street
P.O. Box 31608
Charlotte, North Carolina 28231
Dear Sirs:
We have participated in the preparation of the Credit Agreement (the
"Credit Agreement") dated as of September____, 1993 among The Liberty
Corporation, a South Carolina corporation (the "Borrower"), the banks listed on
the signature pages thereof (the "Banks") and Wachovia Bank of North Carolina,
N.A., as Agent (the "Agent"), and have acted as special counsel for the Banks
and the Agent for the purpose of rendering this opinion pursuant to Section
3.01(d) of the Credit Agreement. Terms defined in the Credit Agreement are used
herein as therein defined.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments and have conducted such other
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion.
Upon the basis of the foregoing, and assuming the due authorization,
execution and delivery of the Credit Agreement and each of the Notes by or on
behalf of the Borrower, we are of the opinion that the Credit Agreement
constitutes a valid and binding agreement of the Borrower and each Note
constitutes valid and binding obligations of the Borrower, in each case
enforceable in accordance with its terms except as: (i) the enforceability
thereof may be affected by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar laws applicable to creditors' rights or the
collection of debtors' obligations generally; (ii) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles
of general applicability; and (iii) the enforceability of certain of the
remedial, waiver and other provisions of the Credit Agreement and the Notes may
be further limited by the laws of the State of North Carolina; provided,
however, such additional laws do not, in our opinion, substantially interfere
with the practical realization of the benefits expressed in the Credit
Agreement and Notes, except for the economic consequences of any procedural
delay which may result from such laws.
171
<PAGE> 91
A creditor is permitted under North Carolina law in the enforcement or
collection of a debt instrument providing for "reasonable attorneys' fees" in
the collection or enforcement thereof to collect, after written notice to the
debtor, attorneys' fees up to but not exceeding 15% of the amount outstanding.
In giving the foregoing opinion, we express no opinion as to the effect
(if any) of any law of any jurisdiction except the State of North Carolina.
Very truly yours,
172
<PAGE> 92
EXHIBIT E
MONEY MARKET QUOTE REQUEST
(Date)
To: (Insert Name of Bank)
From: The Liberty Corporation
Re: Money Market Quote Request
Pursuant to Section 2.03 of the Credit Agreement (as amended from time to
time, the "Credit Agreement") dated as of September _____, 1993, among The
Liberty Corporation, the banks listed on the signature pages thereof (and their
successors and assigns) and Wachovia Bank of North Carolina, N.A., as Agent, we
hereby give notice that we request Money Market Quotes for the following
proposed Money Market Borrowing(s)
Date of Borrowing:
Principal Amount* Interest Period**
Terms used herein have the meanings assigned to them in the Credit
Agreement.
THE LIBERTY CORPORATION
By:
-------------------------
Title:
- ------------------------------
* Amount must be $10,000,000 or a larger multiple of $1,000,000; provided
that such amount need not be a multiple of $1,000,000 if the amount is
the maximum amount permitted under Section 2.03(a) of the Credit
Agreement.
** A period of 30, 60, 90 or 180 days.
173
<PAGE> 93
EXHIBIT F
MONEY MARKET QUOTE
The Liberty Corporation
- --------------------------------
- --------------------------------
Attention:
Re: Money Market Quote to The Liberty Corporation (the "Borrower")
This Money Market Quote is given in accordance with Section 2.03(c)(ii)
of the Credit Agreement (as amended from time to time, the "Credit Agreement")
dated as of September ___, 1993, among The Liberty Corporation, the banks listed
on the signature pages thereof (and their successors and assigns) and Wachovia
Bank of North Carolina, N.A., as Agent. Terms defined in the Credit Agreement
are used herein as defined therein.
In response to the Borrower's invitation dated ___________, 19__, we
hereby make the following Money Market Quote on the following terms:
1. Quoting Bank:
2. Person to contact at Quoting Bank:
3. Date of Borrowing: 1
4. We hereby offer to make Money Market Loan(s) in the following
minimum and maximum principal amounts, for the following Interest Periods and
at the following rates:
Minimum Maximum
Principal Principal Interest
Amount(2) Amount(2) Period(3) Interest Rate
- ----------- ---------- ---------- -------------
- ----------------------
* All numbered footnotes appear on the last page of this Exhibit.
174
<PAGE> 94
We understand and agree that the offer(s) set forth above, subject to the
satisfaction of the applicable conditions set forth in the Credit Agreement,
irrevocably obligate(s) us to make the Money Market Loan(s) for which any
offer(s) (is) (are) accepted, in whole or in part (subject to the third sentence
of Section 2.03(d) of the Credit Agreement).
Very truly yours,
(Name of Bank)
Dated: By:
------------------------------
Authorized Officer
(1) As specified in the related Money Market Quote Request.
(2) The principal amount bid for each Interest Period may not exceed
the principal amount requested. Bids must be made for at least $4,000,000 or a
larger multiple of $1,000,000; provided that such amount need not be a multiple
of $1,000,000 if the amount is the maximum amount permitted under Section
2.03(a) of the Credit Agreement.
(3) A period of 30, 60, 90 or 180 days.
175
<PAGE> 95
EXHIBIT G
ASSIGNMENT AND ACCEPTANCE
Dated______________ __, ___
Reference is made to the Credit Agreement dated as of September __, 1993
(the "Credit Agreement") among The Liberty Corporation, a South Carolina
corporation (the "Borrower"), the Banks (as defined in the Credit Agreement)
and Wachovia Bank of North Carolina, N.A., as Agent (the "Agent"). Terms
defined in the Credit Agreement are used herein with the same meaning.
(the "Assignor") and (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, a % interest in and
to all of the Assignor's rights and obligations under the Credit Agreement as
of the Effective Date (as defined below) (including, without limitation, a ___%
interest (which on the Effective Date hereof is $______) in the Assignor's
Commitment and a _____% interest (which on the Effective Date hereof is
$_________) in the Loans owing to the Assignor and a __% interest in the
Note[s] held by the Assignor (which on the Effective Date hereof is
$_________)).
2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement, any other Loan Document or
any other instrument or document furnished pursuant thereto or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Credit Agreement, any other Loan Document or any other instrument or document
furnished pursuant thereto, other than that it is the legal and beneficial
owner of the interest being assigned by it hereunder, that such interest is
free and clear of any adverse claim and that as of the date hereof its
Commitment (without giving effect to assignments thereof which have not yet
become effective) is $________ and the aggregate outstanding principal
amount of Loans owing to it (without giving effect to assignments thereof which
have not yet become effective) is $____________; (ii) makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of the Borrower or the performance or observance by the Borrower of
any of its obligations under the Credit Agreement, any other Loan Document or
any other instrument or document furnished pursuant thereto; and (iii) attaches
the Note(s) referred to in paragraph 1 above and requests that the Agent
exchange such Note(s) for (a new Note dated in the principal amount of ______
payable to the order of the Assignee) (new Notes as follows: a Note dated
_________, in the principal amount of $________ payable to the order of the
Assignor and a Note dated __________, in the principal amount of $________
payable to the order of the Assignee).
176
<PAGE> 96
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 4.04(a) thereof (or any more recent financial statements of the
Borrower delivered pursuant to Section 5.01(a) or (b) thereof) and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (ii) agrees
that it will, independently and without reliance upon the Agent, the Assignor
or any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iii) confirms that it is a bank
or financial institution; (iv) appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under the Credit
Agreement as are delegated to the Agent by the terms thereof, together with
such powers as are reasonably incidental thereto; (v) agrees that it will
perform in accordance with their terms all of the obligations which by the
terms of the Credit Agreement are required to be performed by it as a Bank;
(vi) specifies as its Lending Office (and address for notices) the office set
forth beneath its name on the signature pages hereof, (vii) represents and
warrants that the execution, delivery and performance of this Assignment and
Acceptance are within its corporate powers and have been duly authorized by all
necessary corporate action(, and (viii) attaches the forms prescribed by the
Internal Revenue Service of the United States certifying as to the Assignee's
status for purposes of determining exemption from United States withholding
taxes with respect to all payments to be made to the Assignee under the Credit
Agreement and the Notes or such other documents as are necessary to indicate
that all such payments are subject to such taxes at a rate reduced by an
applicable tax treaty).*
4. The Effective Date for this Assignment and Acceptance shall be ________
__________________ (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Agent for execution and
acceptance by the Agent (and to the Borrower for execution by the Borrower)**.
5. Upon such execution and acceptance by the Agent (and execution by the
Borrower)**, from and after the Effective Date, (i) the Assignee shall be a
party to the Credit Agreement and, to the extent rights and obligations have
been transferred to it by this Assignment and Acceptance, have the rights and
obligations of a Bank thereunder and (ii) the Assignor shall, to the extent its
rights and obligations have been transferred to the Assignee by this Assignment
and Acceptance, relinquish its rights (other than under Section 8.03 and
Section 9.03 of the Credit Agreement) and be released from its obligations
under the Credit Agreement.
6. Upon such execution and acceptance by the Agent (and execution by the
Borrower)**, from and after the Effective Date, the Agent shall make all
payments in respect of the interest assigned hereby to the Assignee. The
Assignor and Assignee shall make all
- --------------------------------
* If the Assignee is organized under the laws of a jurisdiction outside the
United States.
** If the Assignee is not a Bank or Affiliate of a Bank prior to the
Effective Date.
177
<PAGE> 97
appropriate adjustments in payments for periods prior to such acceptance by the
Agent directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of North Carolina.
(NAME OF ASSIGNOR)
By:
-------------------
Title:
(NAME OF ASSIGNEE)
By:
-------------------
Title:
Lending Office:
(Address)
WACHOVIA BANK OF NORTH CAROLINA,
N.A., as Agent
By:
-------------------
Title:
THE LIBERTY CORPORATION*
By:
-------------------
Title:
- --------------------------------
*If the Assignee is not a Bank prior to the Effective Date.
178
<PAGE> 98
EXHIBIT H
NOTICE OF BORROWING
(Date)
This Notice of Borrowing is given under and pursuant to Section 2.02 of
the Credit Agreement (as amended from time to time, the "Credit Agreement")
dated as of September___, 1993, among The Liberty Corporation, the banks listed
on the signature pages thereof (and their successors and assigns) and Wachovia
Bank of North Carolina, N.A., as Agent. Capitalized terms used and not defined
herein shall have the meanings assigned to them in the Credit Agreement.
1. The date of the Syndicated Borrowing in connection with which this
Notice of Borrowing is given shall be __________________________ 19__.(1)
2. The aggregate amount of such Syndicated Borrowing shall be
$__________________.(2)
3. The Syndicated Loans comprising such Syndicated Borrowing shall be
___________________ Loans.(3)
(4. The duration of the Interest Period applicable to the CD Loans
comprising such Syndicated Borrowing shall be ______________ (4) days.)(5)
- -------------------
(1) Such date must be a Domestic Business Day in the case of a
Domestic Borrowing or a Euro-Dollar Business Day in the case of
a Euro-Dollar Borrowing.
(2) Amount must be $10,000,000 or any larger multiple of $1,000,000;
provided that any Syndicated Borrowing may be in the aggregate
amount of the Unused Commitments.
(3) Specify either "CD", "Base Rate" or "Euro-Dollar".
(4) Specify either 30, 60, 90 or 180 days.
(5) Use only if CD Loans comprise such Syndicated Borrowing.
179
<PAGE> 99
(4. The duration of the Interest Period applicable to the Euro-Dollar
Loans comprising such Syndicated Borrowing shall be ____________ (6) months.)(7)
(4. The duration of the Interest Period applicable to the Base Rate
Loans comprising such Syndicated Borrowing shall be ______________.)(8)
- ------------------------------------
(6) Specify either one, two, three or six months.
(7) Use only if Euro-Dollar Loans comprise such Syndicated Borrowing.
(8) Use only if Base Rate Loans comprise such Syndicated Borrowing.
180
<PAGE> 1
EXHIBIT 11
THE LIBERTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED EARNINGS PER SHARE COMPUTATION
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In $000's, except per share data)
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
PRIMARY SHARES (1)
--------------
Weighted average common shares outstanding 19,327 16,165 15,771
Weighted average common stock options outstanding 169 143 77
---------- ---------- ----------
Total primary shares 19,496 16,308 15,848
========== ========== ==========
NET INCOME
----------
Earnings $ 39,147 $ 40,885 $ 30,566
========== ========== ==========
Primary earnings per share (earnings/total primary share) $ 2.01 $ 2.51 $ 1.93
========== ========== ==========
</TABLE>
(1) Primary and fully diluted earnings per share are identical for all
years presented.
181
<PAGE> 1
EXHIBIT 13
CORPORATE INFORMATION
The Liberty Corporation and Subsidiaries
- --------------------------------------------------------------------------------
STOCK DATA
The Liberty Corporation's Common Stock is listed on the New York Stock
Exchange. Its symbol is L.C. As of December 31, 1993, 1,525 shareholders of
record in 40 states, the District of Columbia, Canada, Australia and New
Zealand held the 19,497,515 Common Stock shares outstanding. Quarterly high
and low stock prices and dividends per share as reported by the Wall Street
Journal were:
<TABLE>
<CAPTION>
Market Price Quarterly
Per Share Dividend
1993 High Low Per Share
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fourth Quarter 31 24 .140
Third Quarter 34 5/8 30 .140
Second Quarter 33 5/8 29 .140
First Quarter 31 7/8 28 3/8 .140
1992
- ----------------------------------------------------------------------------------------------
Fourth Quarter 28 1/2 25 5/8 .140
Third Quarter 32 1/4 26 1/2 .125
Second Quarter 30 3/4 22 1/2 .125
First Quarter 25 3/8 20 7/8 .125
1991
- ----------------------------------------------------------------------------------------------
Fourth Quarter 22 7/8 20 1/2 .125
Third Quarter 21 3/8 19 9/16 .115
Second Quarter 22 13/16 20 1/8 .115
First Quarter 23 7/8 19 1/2 .115
</TABLE>
The Company expects to continue its policy of paying regular cash dividends,
although there is no assurance as to future dividends because they are
dependent on future earnings, capital requirements and financial condition.
Also, the payment of dividends is subject to the restrictions described in
Notes 5 and 7 of the Consolidated Financial Statements.
CO-REGISTRAR AND CO-TRANSFER AGENTS
Wachovia Bank of North Carolina, N.A.
P.O. Box 3001
Winston-Salem, NC 27102
The Bank of New York
101 Barclay Street
New York, NY 10286
FOR A COPY OF THE 10-K OR OTHER INFORMATION, CONTACT:
The Liberty Corporation Shareholder Relations
Box 789
Greenville, SC 29602
Telephone (803) 268-8436
Stock Exchange Listing:
New York Stock Exchange
Symbol: LC
ANNUAL MEETING
The Liberty Corporation will hold its annual meeting on Tuesday, May 3, 1994,
at 10:30 a.m. in The Liberty Corporation Headquarters, Greenville, South
Carolina. All Shareholders are invited to attend.
182
<PAGE> 2
SELECTED FINANCIAL DATA
The Liberty Corporation and Subsidiaries
December 31, 1993
<TABLE>
<CAPTION>
(In 000's, except per share data) 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Insurance $ 384,132 $ 305,934 $ 271,806 $ 246,661 $ 232,706 $ 214,818
Broadcasting 87,984 89,989 88,174 89,709 124,652 107,244
Parent & Minor Subsidiaries 16,089 20,301 19,254 12,936 8,717 9,350
Adjustments & Eliminations (15,260) (13,468) (14,752) (13,707) (8,022) (12,975)
- -----------------------------------------------------------------------------------------------------------------------
Total Revenues $ 472,945 $ 402,756 $ 364,482 $ 335,599 $ 358,053 $ 318,437
=======================================================================================================================
Income (Loss) Before Income Taxes &
Cumulative Effect of Accounting
Changes
Insurance $ 71,518 $ 53,962 $ 43,255 $ 42,442 $ 30,103 $ 35,194
Broadcasting 16,180 16,859 16,417 22,158 34,939 17,263
Parent & Minor Subsidiaries (12,846) (13,690) (20,439) (25,911) (25,709) (20,449)
Adjustments & Eliminations 2,472 4,768 4,217 -- 1,236 (3,093)
- -----------------------------------------------------------------------------------------------------------------------
Consolidated Income Before
Income Taxes & Cumulative
Effect of Accounting Changes $ 77,324 $ 61,899 $ 43,450 $ 38,689 $ 40,569 $ 28,915
=======================================================================================================================
Net Income (Loss)
Insurance $ 33,459 $ 35,369 $ 30,077 $ 28,094 $ 28,545 $ 28,674
Broadcasting 12,217 10,262 9,967 13,600 20,939 10,285
Parent & Minor Subsidiaries (8,141) (8,153) (12,514) (16,136) (16,877) (13,516)
Adjustments & Eliminations 1,612 3,407 3,036 -- 926 (2,115)
- -----------------------------------------------------------------------------------------------------------------------
Net Income $ 39,147 $ 40,885 $ 30,566 $ 25,558 $ 33,533 $ 23,328
=======================================================================================================================
Earnings Per Share $ 2.01 $ 2.51 $ 1.93 $ 1.55 $ 1.97 $ 1.35
=======================================================================================================================
Change in Net Unrealized Investment
Gains (Losses) $ 1,276 $ (78) $ 7,316 $ (4,613) $ (3,609) $ 6,181
- -----------------------------------------------------------------------------------------------------------------------
Dividends Per Share $ .56 $ .515 $ .47 $ .46 $ .40 $ .40
- -----------------------------------------------------------------------------------------------------------------------
Depreciation and Amortization
Insurance $ 3,286 $ 3,424 $ 3,381 $ 3,371 $ 6,556 $ 4,576
Broadcasting 6,566 6,848 10,654 11,044 13,323 14,049
Parent & Minor Subsidiaries 2,260 2,950 2,749 3,209 2,783 2,419
Adjustments & Eliminations -- -- -- -- 227 88
- -----------------------------------------------------------------------------------------------------------------------
Total Depreciation and Amortization $ 12,112 $ 13,222 $ 16,784 $ 17,624 $ 22,889 $ 21,132
=======================================================================================================================
Capital Expenditures
Insurance $ 7,640 $ 5,222 $ 3,594 $ 7,539 $ 4,268 $ 14,273
Broadcasting 2,168 2,513 2,961 6,476 4,268 4,340
Parent & Minor Subsidiaries 22,755 5,753 14,274 9,510 3,530 4,664
Adjustments & Eliminations -- -- -- -- 721 (3,508)
- -----------------------------------------------------------------------------------------------------------------------
Total Capital Expenditures $ 32,563 $ 13,488 $ 20,829 $ 23,525 $ 12,787 $ 19,769
=======================================================================================================================
Assets
Insurance $2,057,126 $1,937,908 $1,528,901 $1,357,406 $1,325,909 $1,191,333
Broadcasting 101,982 110,849 119,714 141,467 145,879 124,544
Parent & Minor Subsidiaries 581,406 565,135 504,199 484,401 489,462 472,545
Adjustments & Eliminations (553,481) (539,014) (438,610) (438,899) (428,962) (368,016)
- -----------------------------------------------------------------------------------------------------------------------
Total Assets $2,187,033 $2,074,878 $1,714,204 $1,544,375 $1,532,288 $1,420,406
=======================================================================================================================
Consolidated Shareholders' Equity $ 433,845 $ 389,188 $ 277,108 $ 243,465 $ 264,116 $ 246,406
=======================================================================================================================
Notes, Mortgages and Other Debts $ 149,489 $ 176,632 $ 226,925 $ 246,531 $ 228,297 $ 221,603
=======================================================================================================================
</TABLE>
183
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Liberty Corporation and Subsidiaries
CONSOLIDATED RESULTS OF OPERATIONS
Consolidated income before the cumulative effect of accounting changes for 1993
was $51.1 million, an increase of 25% over 1992's $40.9 million. As shown in
the table which follows, the $10.2 million increase in income before the
cumulative effect of accounting changes consisted of: (i) a $15.4 million
increase in income before taxes, and the cumulative effect of accounting
changes offset in part by (ii) a $5.2 million increase in income taxes. The
increase in income taxes reflects $3.8 million of additional taxes incurred
during 1993 related to the Company's federal tax rate change from 34% to 35% as
a result of the Omnibus Budget Reconciliation Act of 1993 offset by a $3.4
million reduction in accrued income taxes in the broadcasting operations. The
reduction in accrued income taxes was the result of a recent favorable tax
court decision on the deductibility of certain broadcasting intangible assets.
Approximately $3.2 million of the additional taxes related to the tax rate
change represent taxes on the Company's deferred tax liability as of the
beginning of the year. The 25% increase in income before taxes, and the
cumulative effect of accounting changes was due to increased earnings of $17.6
million from the Insurance Group coupled with a $1.5 million decrease in the
parent company and a decrease of $0.7 million from the broadcasting operations.
Excluding realized investment gains, the parent company experienced a $4.1
million improvement in 1993 in income before taxes and the cumulative effect of
accounting changes. This improvement in the parent company was primarily the
result of lower interest expense on bank debt due to lower interest rates and
lower debt outstanding. The cumulative effect of accounting changes represent
a one time, non-cash charge of $11.9 million relating to the implementation of
FAS 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" and FAS 112, "Employers' Accounting for Postemployment Benefits"
during the first quarter 1993.
<TABLE>
<CAPTION>
(In 000's) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income Before Income Taxes and the Cumulative Effect of Accounting Changes $ 77,324 $61,899 $43,450
Income Taxes 26,237 21,014 12,884
- -----------------------------------------------------------------------------------------------------------------------
Income Before the Cumulative Effect of Accounting Changes $ 51,087 $40,885 $30,566
Cumulative Effect of Accounting Changes (11,940) -- --
- -----------------------------------------------------------------------------------------------------------------------
Net Income $ 39,147 $40,885 $30,566
=======================================================================================================================
</TABLE>
Consolidated net income for 1992 was $40.9 million, an increase of 34% over
1991's $30.6 million. The $10.3 million increase in net income was the result
of: (i) an $18.4 million increase in income before taxes and (ii) an $8.1
million increase in income taxes. The 42% increase in income before taxes for
1992 resulted from: (i) a $10.7 million increase from the Insurance Group, (ii)
a $0.4 million increase from broadcasting operations and (iii) a $7.3 million
improvement in the parent company. The improvement in the parent company was
due primarily to lower interest expense despite approximately $1.0 million of
financing costs incurred on the Pierce National and Magnolia Life acquisitions
as well as an increase in realized investment gains.
Consolidated 1993 revenues of $472.9 million were up 17% over last year's
$402.8 million. This revenue growth consisted of a 26% increase in revenues
from the Insurance Group, which was offset slightly by a 2% decrease in
broadcasting revenues. The increase in the Insurance Group's revenue was a
function of: an increase in premiums of $41.8 million or 20%, an increase in
net investment income of $16.7 million or 18%, which included a favorable
impact due to accelerated discount amortization from early pre-payments (see
"Investments" section for details), a $5.0 million increase in service contract
revenues, primarily due to new client growth, and a $14.7 million increase in
realized investment gains.
Consolidated 1992 revenues of $402.8 million increased 11% over 1991. This
increase was primarily a function of growth in insurance premiums due to the
acquisitions in the last half of 1991 and during 1992; first year service
contract revenues generated by Liberty Insurance Services; and an increase in
broadcasting revenues. Liberty Insurance Services was formed during 1991 to
provide a wide range of home office support services for other life and health
insurance companies on a fee basis.
Realized investment gains before tax for 1993 were $14.7 million compared to
$5.6 million last year. The insurance investment operations realized pre-tax
gains of $14.3 million primarily from the sale of common stock and bond
investments. The parent company contributed pre-tax gains of $0.4 million.
The majority of the $5.6 million of realized investment gains for 1992 were
generated by the parent company's sale of real estate properties and a
substantial common stock holding. Other income for 1991 included $3.6 million
of interest income associated with a favorable tax settlement, a $1.8 million
loss on the coinsurance of the General Agency business and $2.3 million of
non-compete income in Cosmos.
184
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Liberty Corporation and Subsidiaries
Due to the effect of two significant items--the cumulative effect of accounting
changes and additional taxes related to the tax rate change--return on equity,
defined as reported net income divided by average equity, at December 31, 1993
decreased to 9.5% from 12.3% in 1992. Excluding the $11.9 million cumulative
effect of accounting changes and the $3.8 million of additional taxes related
to the tax rate change, return on equity for 1993 was 13.1%.
INSURANCE RESULTS OF OPERATIONS
Net income before the cumulative effect of accounting changes from the
Insurance Group for 1993 was $44.4 million, an increase of 26% over the prior
year's $35.4 million. As shown in the table below, the increase was comprised
of: (i) a $17.6 million increase in income before taxes and the cumulative
effect of accounting changes and (ii) an $8.5 million increase in taxes as a
result of increased earnings and the tax rate change. The $17.6 million
increase in the Insurance Group's income before taxes and the cumulative effect
of accounting changes for 1993 included $14.7 million of realized investment
gains. Excluding realized investment gains and losses, earnings for 1993
included contributions of $5.8 million from Pierce National (acquired in July
1992) and $3.5 million from Magnolia Life (acquired in October 1992), which
were offset in part by a $5.2 million decrease in Liberty Life and a $1.2
million decrease in Liberty Insurance Services. Earnings for 1992 include
one-half year of earnings from Pierce National and one quarter from Magnolia.
The decrease in Liberty Life's 1993 earnings, excluding realized investment
gains, was primarily due to unfavorable lapse experience resulting in higher
deferred acquisition cost amortization in the home service and mortgage
protection divisions, a decrease in premium income in the mortgage protection
division due to a continuation of high lapses, and higher claims in the
mortgage protection and general agency divisions. Earnings in Liberty Life also
reflect non-recurring charges related to the consolidation of a number of
branch offices and the sale of a small discontinued block of insurance. The
decrease in Liberty Insurance Services was primarily due to non-recurring
charges related to systems development costs previously deferred. The
cumulative effect of accounting changes relate to the implementation of FAS 106
and FAS 112.
<TABLE>
<CAPTION>
(In 000's) 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income Before Income Taxes and the Cumulative Effect of Accounting Changes $ 71,518 $53,962 $43,255
Income Taxes 27,071 18,593 13,178
- -------------------------------------------------------------------------------------------------------------------
Income Before the Cumulative Effect of Accounting Changes $ 44,447 $35,369 $30,077
Cumulative Effect of Accounting Changes (10,988) -- --
- -------------------------------------------------------------------------------------------------------------------
Net Income $ 33,459 $35,369 $30,077
===================================================================================================================
</TABLE>
Net income from the Insurance Group for 1992 was $35.4 million, an increase of
18% over the prior year's $30.1 million. The increase reflected the positive
results from Pierce National (acquired in July 1992) and Magnolia Life
(acquired in October 1992), as well as 1991 acquisitions through reinsurance of
a block of home service business from Kentucky Central and a block of mortgage
protection business from Integon. Other contributing factors included overall
favorable benefit and claims experience, strong net sales growth in the home
service line, product repricing and continued expense control. Net income from
the Insurance Group for 1991 increased 7% over 1990. A block of home service
insurance business acquired on July 1, 1991 from Kentucky Central, coupled with
positive operating results in the existing insurance lines and lower taxes,
accounted for the majority of the increase in income before taxes and other
income.
Revenues from the Insurance Group in 1993 were $384.1 million, an increase of
26% over last year's $305.9 million. Premiums increased 20% to $250.9 million
over last year. The strong growth in insurance premiums was primarily due to
additional premiums from Magnolia Life of $10.8 million and a $33.3 million
increase in premiums from Pierce National but was partially offset by a decline
in premiums in Liberty Life's mortgage protection business as a result of high
lapses due to mortgage refinancings. Net investment income increased 18% over
last year to $110.5 million. The increase in net investment income is primarily
a result of a 16% increase in average invested assets and a favorable impact
from accelerated bond discount amortization as a result of early pre-payments
(see "Investments" section for details). Net investment income continues to be
constrained by low interest rates which have resulted in reducing the Company's
average bond portfolio yield to 9.0% in 1993 compared to 9.4% in 1992 and 9.9%
in 1991. Revenues of $8.4 million from service contracts were generated by
Liberty Insurance Services. Realized investment gains of $14.3 million
increased significantly compared to realized losses of $383,000 last year. The
realized gains for 1993 were primarily from the sale of common stock and bond
investment sales and maturities.
185
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Liberty Corporation and Subsidiaries
Insurance Group revenues for 1992 were up 13% to $305.9 million, reflecting a
16% increase in premiums and policy charges and a 3% decrease in net investment
income. Pierce National and Magnolia Life added $21.7 million to premiums and
$7.2 million to net investment income. The mortgage protection block of
business acquired from Integon and the home service block acquired from
Kentucky Central also significantly contributed to premiums and net investment
income. 1992 also marked the beginning of client service operations in Liberty
Insurance Services which provided $3.4 million of service contract revenues.
Insurance revenues were up 11% for 1991. The realized investment losses for
both 1992 and 1991 represented primarily impairment write-downs in valuing
individual investments. Impairments are discussed in Notes 1 and 2 to the
Consolidated Financial Statements. The balance of the 1991 other income
consisted of a loss of $1.8 million on coinsurance of the General Agency
business.
General expenses in the Insurance Group for 1993 were up 28% over 1992 and were
primarily a result of the Pierce National and Magnolia Life acquisitions and
expenses associated with the growth of Liberty Insurance Services' operations.
Additionally, expenses increased over last year due to non-recurring charges in
Liberty Life related to the consolidation of a number of branch offices and the
sale of a small block of discontinued medicare business and in Liberty
Insurance Services costs related to systems development costs which were
previously deferred. Excluding these non-recurring charges, general expenses in
the Insurance Group increased 23% over last year and were basically flat in
Liberty Life. General expenses for 1992 were $51.8 million, an increase of 20%
over 1991. Excluding general expenses related to Pierce National, Magnolia
Life, and Liberty Insurance Services, 1992 expenses were flat compared to 1991
despite expenses incurred for the first time on the block of business acquired
from Integon and a full year of expenses on the Kentucky Central block of
business.
The ratio of policyholder benefits and reserves to premium income for 1993
increased to 63.5% from 60.3% last year reflecting the unfavorable claims
experience in the mortgage protection and general agency lines. The ratio for
1992 reflected very favorable claims experience as compared to 1991 when the
ratio was 68.6%. A substantial portion of this improvement in 1992 was due to
reserve releases in the mortgage protection line. The mortgage protection line
also incurred significant reserve releases during 1993 but not to the extent
incurred during 1992.
Amortization of deferred acquisition costs increased 33% over last year. Part
of the increase in amortization of deferred acquisition costs was also a
function of the Pierce National and Magnolia Life acquisitions; however,
excluding these acquisitions, amortization of deferred acquisition costs
increased 23% and was primarily a result of high lapses in the home service
line and continued high lapses in the mortgage protection line. Management
believes that the high lapse experience in the home service line was related to
the Company's consolidation of branch offices and this unfavorable experience
is expected to improve over the near future with the consolidation process
having been completed. The mortgage protection line continued to be impacted by
higher than normal refinancings during 1993 due to the low interest rate
environment. The mortgage protection line experienced higher than expected
lapses during 1992 as a result of loans paid off in connection with
refinancings and transfers of loan portfolios between financial institutions.
However, the effect on 1992 earnings was positive due to reserve releases on
the lapsed business exceeding the related amortization of deferred acquisition
costs. Premiums in force on the mortgage protection line decreased from $69.6
million at year-end 1991 to $60.7 million at year-end 1993. Refinancings are
expected to continue over the near future. The unfavorable lapse experience in
both the home service and mortgage portection lines has not and is not expected
to have a material impact on the Company's liquidity.
The Company's acquisitions over the past several years have primarily been in
the pre-need and home service markets and are discussed below:
INSURANCE ACQUISITIONS--PRE-NEED
The purchase of Pierce National Life in July 1992 provided the Company with a
substantial presence in the pre-need market and the opportunity to expand its
presence on a national level. Pierce National's operations are conducted
through two regional offices in the United States--one in Los Angeles,
California and the other in Greenville, South Carolina--and through a Canadian
office in Vancouver, British Columbia. Pierce National markets its products
through funeral directors and independent agents. Approximately two-thirds of
Pierce National's sales are from Canada and California. At the time of
acquisition, Pierce National had $31 million in annualized premiums (which
included $6 million of single pay premiums) and added $220 million to insurance
assets and liabilities at the time of acquisition. Pierce National generated
$51.4 million of premium income in 1993 compared to $18 million in 1992 from
the time of acquisition.
186
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Liberty Corporation and Subsidiaries
In April 1993, the Company further expanded its presence in the pre-need market
with the acquisition of the assets of Estate Assurance Company, a pre-need
insurance subsidiary of Stewart Enterprises, Inc. Estate Assurance's $31
million of insurance in force was assumed through reinsurance by Pierce
National.
In February 1994, the Company significantly expanded its presence in the
pre-need market with the acquisitions of North American National Corporation,
headquartered in Columbus, Ohio, and American Funeral Assurance Company,
headquartered in Amory, Mississippi.
North American is a holding company whose principal subsidiaries, Pan-Western
Life Insurance Company, Howard Life Insurance Company, and Brookings
International Life Insurance Company, are major providers of pre-need life
insurance and combined provided $24.4 million in premium income in 1992 (which
included $5 million of single pay premiums), primarily for pre-need insurance.
The acquisition adds strategic Midwest markets to the Company's pre-need
territory. The purchase price, which includes payment for a substantial amount
of excess capital in North American's subsidiaries, was approximately $51.9
million.
American Funeral is one of the largest providers of pre-need life insurance and
generated approximately $59 million in premium income in 1992 (which included
$44 million of single pay premiums). This acquisition complements the Company's
existing pre-need business and had a purchase price of $28.1 million.
INSURANCE ACQUISITIONS--HOME SERVICE
The July 1, 1991 purchase of the home service block of insurance of Kentucky
Central Life Insurance Company significantly enhanced the Company's home
service line of business, its strongest distribution system. It expanded the
Company's home service market out of its traditional base in the Carolinas into
the states of Kentucky, Tennessee, Indiana, Ohio, Pennsylvania, West Virginia,
and Georgia. The acquired Kentucky Central block of business, excluding a
portion sold by the Company during 1992, added over 300 agents and sales
managers and 21 district offices and $16.2 million in annualized premiums.
In October 1992, the Company further expanded its home service business with
the acquisition of Magnolia Life Insurance Company headquartered in Lake
Charles, Louisiana. The acquisition consisted of approximately $15 million in
annualized premiums and added approximately $104 million to insurance assets
and liabilities at the time of acquisition. Magnolia Life generated $14.5
million of premium income during 1993 compared to $3.7 million last year from
the time of acquisition but does not reflect premium income from new business
written. All new business generated by Magnolia Life is written in Liberty Life
and Magnolia Life will be integrated into Liberty Life during early 1994.
On June 24, 1993, the Company announced the execution of a letter of intent to
acquire State National Capital Corporation, headquartered in Baton Rouge,
Louisiana. State National Capital Corporation is the parent of State National
Life Insurance Company, Delta National Life Insurance Company, State National
Title Guaranty Company, State National Fire Insurance Company, State National
Mortgage Corporation and several other small subsidiaries. The acquisition is
expected to add over $10 million in annualized premium income, primarily from
monthly pay home service insurance, and combined with Magnolia Life would
provide the Company with a significant home service presence in the state of
Louisiana. The purchase price is approximately $27.5 million and the
acquisition is subject to shareholder approval, regulatory approval, and
certain other conditions. At this time, the Company expects to close the
acquisition during the first quarter of 1994.
BROADCASTING RESULTS OF OPERATIONS
Net income before the cumulative effect of accounting changes from broadcasting
operations for 1993 was $13.0 million, up 26% over the prior year's $10.3
million and includes the release of $3.4 million of tax reserves. Excluding the
release of tax reserves, net income before the cumulative effect of accounting
changes for 1993 decreased 6% to $9.6 million. The decrease in 1993 income
before taxes and the cumulative effect of accounting changes resulted primarily
from a $3.1 million decrease in political revenues which was offset in part by
a $1.8 million increase in local revenues and a decrease in operating expenses.
The decrease in operating expenses were primarily related to a decrease in
depreciation, program rental expense, and agency commissions. The decrease in
income taxes reflects the release of the $3.4 million of tax reserves. The
cumulative effect of accounting changes relate to the implementation of FAS 106
and FAS 112.
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The Liberty Corporation and Subsidiaries
<TABLE>
<CAPTION>
(In 000's) 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income Before Income Taxes and the Cumulative Effect of
Accounting Changes $16,180 $16,859 $16,417
Income Taxes 3,221 6,597 6,450
- ------------------------------------------------------------------------------------------------------------------------
Income Before the Cumulative Effect of Accounting Changes $12,959 $10,262 $ 9,967
Cumulative Effect of Accounting Changes (742) -- --
- ------------------------------------------------------------------------------------------------------------------------
Net Income $12,217 $10,262 $ 9,967
========================================================================================================================
</TABLE>
Net income from broadcasting operations for 1992 was $10.3 million, up 3% over
the prior year's $10.0 million. The increase was driven by: (i) a $4.9 million
increase in revenues excluding other income, primarily from political and local
advertising and (ii) a $3.8 million decrease in depreciation expense which was
partially offset by (iii) a $2.2 million increase in interest paid to the
parent company. Operating expenses for 1992 decreased 2% from 1991. Net income
for 1991 of $10.0 million was down 27% from the prior year's $13.6 million. The
decline in 1991 net income resulted from: (i) a decline of $4.3 million in
revenues excluding other income on a slightly higher expense base and (ii) an
increase of $4.5 million in interest paid to the parent company. Other income
for 1991 included $3.6 million of interest on refunds from a favorable tax
settlement.
Broadcasting revenues for 1993 were $88.0 million, a decrease of 2% over last
year. The decrease was primarily a function of: (i) declines in political
revenues of $3.1 million and network compensation of $0.7 million which were
partially offset by (ii) a $2.0 million increase in national and local
revenues, which are a broadcaster's advertising time sales. Strong local
revenues were driven by continued growth in both the auto and retail
advertising categories. The decline in political revenues during 1993 was a
function of a non-election year. The deterioration in network compensation is
expected to level out over the next few years.
Broadcasting revenues for 1992 of $90.0 million were up 2% over 1991. National
and local revenues were up $4.2 million; political revenues were up $1.3
million; network compensation was down $.7 million; and other income was down
$3.0 million. Strong local revenues were driven by rebounds in core advertising
categories, especially fast foods and auto, while the increase in political
revenues was a function of the election year. Broadcasting revenues for 1991
were down 2% compared to 1990. A drop of $2.4 million in political revenues
accounted for most of the decline.
INVESTMENTS
As of December 31, 1993, approximately 59% of the Company's $1.4 billion
consolidated invested assets were in bonds with an overall average credit
rating of AA. Less than 5% of the bond portfolio was rated below investment
grade.
Approximately 60% of the Company's $797.4 million bond portfolio at December
31, 1993 was comprised of mortgage-backed securities. This compares to
approximately 60% at year-end 1992. Certain mortgage-backed securities are
subject to significant prepayment risk due to the fact that in periods of
declining interest rates mortgages may be repaid more rapidly than scheduled as
borrowers refinance higher rate mortgages to take advantage of the lower
current rates. As a result, holders of mortgage-backed securities may receive
large prepayments on their investments which cannot be reinvested at interest
rates comparable to the rates on the prepaid mortgages. Mortgage-backed
pass-through securities and "sequential" CMO's, which comprised 22% of the book
value of the Company's mortgage-backed securities at December 31, 1993, and 21%
at year-end 1992, are sensitive to this prepayment risk.
The Company has experienced higher actual prepayments during the current year
than originally anticipated. Accordingly, the Company evaluated the investment
portfolio for anticipated prepayments based on assumptions using current market
conditions which were applied back to the time of purchase for each individual
investment. As a result, the effective yield on mortgage-backed securities
which have demonstrated higher prepayments was adjusted to reflect actual
payments to date and anticipated future payments, and the net investment amount
was adjusted to the amount that would have existed had the new effective yield
been applied since the time of purchase. Since a majority of these securities
were purchased at a discount, the impact was an increase to net investment
income as a result of the additional discount amortization during 1993. Net
investment income for 1993 included additional discount amortization on bonds
of approximately $3.1 million of which $1.9 million of the total was a result
of changing the effective yield with the balance due to prepayments during the
year. Prepayments on mortgage-backed pass-through securities and "sequential"
CMO's are expected to continue in the near future as long as refinancings
continue to remain high. Refinancings are expected to be above normal for at
least the first half of 1994. The Company will evaluate the bond portfolio on
an annual basis to determine whether future adjustments are required.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
The Liberty Corporation and Subsidiaries
The remaining 78% of the Company's mortgage-backed investment portfolio at
December 31, 1993 consisted of planned amortization class ("PAC") instruments.
This compares to 79% at December 31, 1992. These investments are designed to
amortize in a more predictable manner by shifting the primary risk of
prepayment of the underlying collateral to investors in other tranches of the
CMO. PAC's are tranches of CMO's specifically designed to protect against
prepayments as interest rates decline. In periods of declining interest rates,
prepayments are first applied to the non-PAC tranches of the CMO, creating
improved call protection for the PAC tranches. Only after all non-PAC tranches
have been paid off are prepayments applied to the PAC tranche. In periods of
increasing interest rates, prepayments are first applied to the PAC tranche,
thus reducing extension risk for PAC's. As a result, PAC's have a more stable
cash flow than most other mortgage securities because they have better call
protection and less extension risk.
The Company follows a value-oriented, as opposed to a trading oriented,
investment philosophy concerning its securities portfolios. Purchases are
generally made with the intention of holding securities to maturity.
Accordingly, turnover in the portfolios is normally very low. Turnover on the
bond portfolio has averaged approximately 5% of the portfolio balance over the
past four years reflecting the Company's strategy of maintaining attractive
securities within the portfolio as long as possible. Gains trading, which is
short-sighted, is not in keeping with the Company's investment philosophy of
longer term value-oriented investing.
Mortgage loans of $165.8 million comprised 12% of the consolidated investment
portfolio at December 31, 1993. This compares to mortgage loans of $162.1
million or 13% of the consolidated investment portfolio at December 31, 1992.
Substantially all of these mortgage loans are commercial mortgages with a loan
to value ratio not exceeding 75% when made. Approximately 50% of these loans at
December 31, 1993 are concentrated in North and South Carolina; and 87% are in
the states of North Carolina, South Carolina, Virginia, Florida, Georgia and
Tennessee. These percentages have not changed materially from December 31,
1992. Mortgage loan delinquencies, defined as payments 60 or more days past
due, have historically been low and were 1.59% at the end of 1993 compared to
2.19% at the end of 1992 and to the latest industry rate of 4.54%. Due to the
overall low delinquency rate, the Company has not deemed it necessary to
establish a general loss reserve on the portfolio, but establishes impairments
on specific assets at the time that losses are probable and can be reasonably
estimated. Impairments are discussed in Notes 1 and 2 to the Consolidated
Financial Statements.
Investment real estate at December 31, 1993 of $84.5 million comprised 6% of
the consolidated investment portfolio. This compares to $97.5 million of
investment real estate at December 31, 1992 or 8% of the consolidated
investment portfolio. Four key property types made up 95% of the Company's real
estate investment assets at December 31, 1993: residential land development
(40%), business parks (25%), business property rentals (25%) and shopping
centers (5%). Of the Company's investment real estate, 80% is located in South
Carolina and Florida; and 99% is located in South Carolina, Florida, Georgia,
and North Carolina.
The Company has experienced impairments on investment assets of $6.2 million,
$8.2 million and $3.2 million for the years ended December 31, 1993, 1992 and
1991, respectively. The increase in impairments in 1992 over 1991 was a direct
result of impairments taken against real estate investments, primarily shopping
centers. The real estate impairments were a result of the real estate market
recession and a weak economy combined with the Company's posture and strategy
on divesting of certain shopping center investments. Subsequent to 1992, the
Company has divested of a majority of its shopping centers. In 1993, there were
no material impairments taken on real estate investments. Over half of the
impairments in 1993 were related to other long-term investments, consisting of
oil and gas investments and a long-term note. While the level of impairments
over the last several years has been above average, the Company does not expect
the level to increase over the foreseeable future. Consequently, management
does not expect impairments to have a significant impact on the Company's
results of operations or liquidity.
The Company is in the process of finalizing an agreement to purchase a portion
of the real estate assets of SCANA Development Corporation, a subsidiary of
SCANA Corporation, for approximately $50 million in cash. This transaction is
expected to close during the first half of 1994, and will significantly
increase the real estate portfolio of the Company. See Capital, Financing, and
Liquidity for details.
CAPITAL, FINANCING AND LIQUIDITY
The parent company's short-term cash needs consist primarily of: (1) working
capital requirements, (2) interest on corporate debt, (3) dividends to
shareholders and (4) funds for real estate investments.
The parent company's primary long-term cash need is the repayment of corporate
debt, the majority of which is financed through a revolving credit facility.
The Company successfully completed the restructuring of its $250 million credit
facility into a new $325 million facility on September 28, 1993. The
restructured credit facility has no stipulated repayment plan until termination
of the agreement in 1997. The restructured credit facility will continue to
provide the Company the additional debt capacity required to fund
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MANAGEMENT'S DISCUSSION AND ANALYSIS
The Liberty Corporation and Subsidiaries
growth through acquisitions and is discussed in detail below. Concurrent with
the restructuring of the revolving credit facility, the Company terminated all
of its remaining fixed interest rate swap agreements in early October 1993. The
termination of these agreements resulted in a pre-tax termination charge of
approximately $1.5 million in 1993.
The net proceeds of the public stock offering made during late 1992 and early
1993, which is discussed in detail later in this section, were used to repay
debt then outstanding under the credit facility.
The parent company depends primarily on dividends, reimbursements for
management services, debt service payments and consolidated tax return benefits
paid to it by its subsidiaries to meet its short term and long term cash needs.
Historically, the Company's primary businesses--insurance and
broadcasting--have provided sufficient liquidity to fund their operations and
the operations of the parent company. Dividends from each insurance subsidiary
are restricted under applicable state law. The Company receives funds from its
insurance subsidiaries primarily in the form of dividends. Annual dividends in
excess of maximum amounts prescribed by state statutes ("extraordinary
dividends") may not be paid without the approval of the insurance commissioner
of each state in which an insurance subsidiary is domiciled. Recently the
National Association of Insurance Commissioners ("NAIC") proposed, and certain
states adopted, legislation that lowers the threshold amount for determining
what constitutes an extraordinary dividend. Such legislative changes could make
it more difficult for insurance subsidiaries to pay dividends to their parent.
See Note 7 to the Consolidated Financial Statements.
In order to strengthen Pierce National's capital position and to provide
capital for its growth, the Company does not plan to take dividends from Pierce
National over the next several years. The Company has also agreed with certain
state regulators not to take dividends from Pierce National until certain
surplus levels are achieved. The Company contributed $6 million of capital
during 1992 and approximately $6.5 million in 1993, of which $3.5 million was
in connection with the purchase of the pre-need business of Estate. The Company
expects to contribute additional amounts as required, for the purchase of
blocks of pre-need business, as well as to meet required capital levels for
regulatory purposes.
Management believes liquidity risk of the Insurance Group is minimized by
investment strategies which stress high quality assets and an integrated
asset/liability matching process. Investments are primarily in intermediate to
long-term maturities in order to match the long-term nature of insurance
liabilities. Accordingly, most long-term investments are held to maturity and
interim market fluctuations present no significant liquidity problems.
The Company's net cash flow from operating activities was $36.4 million for
1993 compared to $16.5 million last year. The increase in net cash flow from
operating activities over last year is primarily due to a substantial increase
in future policy benefits, and a significant increase in amortization of
deferred acquisition costs. The Company's net cash used in investing activities
was $52.2 million for 1993 compared to $38.4 million last year. The increase in
net cash used in investing activities is primarily a function of the increase
in investment securities purchases, purchases of investment properties and
buildings and equipment. Cash flow provided from financing activities was $13.0
million for 1993 compared to cash provided of $47.6 million for 1992. The
decrease in cash flow provided from financing activities was due to the
proceeds received on the stock offering during 1992. As a result of its
activities, the Company generated a $2.7 million decrease in cash compared to a
$25.7 million increase in 1992. The decrease in net cash generated primarily
reflects the increase in last year's cash from financing activities due to
proceeds from the Company's stock offering.
Since late 1986, the Company or its subsidiaries have completed several large
transactions. In December 1986, two television stations and an insurance
company were acquired for a total of $148 million. In December 1987, the
Company tendered for 1,400,000 shares of its common stock at a cost of $30
million. Prior to the tender, 1,050,000 shares at a total cost of $22.6 million
were purchased at various times in 1987. In 1989, 498,000 shares were purchased
at a cost of $9.2 million. Additionally, a block of mortgage protection
insurance was purchased in 1989 for $20 million. In 1990, 1,521,182 shares of
common stock were purchased for $38.3 million. In 1991, a block of home service
business (Kentucky Central) and a block of mortgage protection business
(Integon) were acquired at a total cost of $59 million. In 1992, the Company
acquired Pierce National for $45 million in cash plus 10,000 shares of common
stock and Magnolia Life for $32.7 million, consisting of $11.3 million in cash,
409,795 shares of common stock valued at $11.3 million and repayment of $10.1
million of outstanding debt of Magnolia Financial Corporation. These
transactions have been financed out of a combination of bank debt, cash flow
from operations, a loan from Liberty Life to the parent company and asset
sales.
During December 1992 and January 1993, the Company completed its public stock
offering of 2,725,100 shares of its common stock at a per share price of $28.25
which generated $73 million in net proceeds which were used to pay down
outstanding bank debt. Of the total shares issued, 2,400,000 were issued during
December 1992. The remaining 325,100 shares were issued in January 1993 as a
result of the underwriters exercising the over-allotment provision of the stock
offering. The offering helped to reduce the Company's debt to equity ratio to
45% at the end of 1992 from 76% at the end of the previous quarter.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
The Liberty Corporation and Subsidiaries
On September 28, 1993, the Company completed the restructuring of its $250
million revolving credit agreement into a new $325 million three and one-half
year facility which will mature on April 1, 1997 with a one year extension
provision at the Company's option. Payment terms under the restructured credit
facility remain unchanged from the original facility. The Company uses this
revolving credit facility and several uncommitted lines of credit extensively
for short term funding of operations and acquisitions. At December 31, 1993,
borrowings against this revolving credit facility and the lines of credit
amounted to $145.5 million, down from $158.5 million outstanding at September
30, 1993.
At December 31, 1992, borrowings against the Company's credit facility and the
lines of credit amounted to $174.4 million, down from $228.5 million
outstanding at the end of the previous quarter. This decrease is primarily a
result of the public stock offering which was partially offset by funding $21.4
million of the Magnolia Life acquisition during October 1992. The revolving
credit facility was also used to fund $25 million of the Pierce National
purchase price during July 1992. For details of the revolving credit facility,
see Note 5 to the Consolidated Financial Statements.
The Company believes that its current level of cash and future cash flows from
operations are sufficient to meet the needs of its business and to satisfy its
debt service. If suitable opportunities arise for additional acquisitions, the
Company plans to draw on its revolving credit facility or use Common Stock or
Preferred Stock as payment of all or part of the consideration for such
acquisitions; or the Company may seek additional funds in the equity or debt
markets. Under the restructured credit facility, there exists no restriction on
acquisition funding; however, consolidated debt is limited to a maximum of $335
million. As discussed below, the Company used its credit facility to finance a
total of approximately $57.5 million for its acquisitions of North American and
American Funeral and anticipates using up to an additional $58.5 million to
finance its pending acquisition of State National and certain real estate
assets. The maximum amount available under the revolving credit agreement will
be permanently reduced by certain amounts if the Company sells certain assets.
Additional covenants require that the Company maintain certain ratios,
including the following: (i) the ratio of consolidated debt to consolidated
total capital shall not exceed .45 at the inception of the facility, decreasing
to .40 at January 1, 1995, and decreasing to .35 at April 1, 1996; (ii) the
ratio of adjusted cash flow to fixed charges for any period of four consecutive
fiscal quarters shall not be less than 2.00 to 1.00 at the inception of the
facility and throughout the life of the facility; and (iii) the ratio of
consolidated debt to cash flow for any period of four consecutive fiscal
quarters shall not exceed 6.50 to 1.00 at the time of inception, decreasing to
6.00 to 1.00 at July 1, 1995, and decreasing to 5.50 to 1.00 at July 1, 1996.
The Company is currently and has been in compliance with these covenants since
the restructuring of the loan, and was in compliance during applicable periods
with similar covenants in the loan agreement prior to its restructuring.
The Company financed the $51.9 million purchase price of North American, which
closed on February 23, 1994, entirely with proceeds borrowed under its
revolving credit facility. Of the $28.1 million American Funeral purchase
price, approximately $22.4 million was financed with a new series (1994-B) of
convertible preferred stock issued at the time of closing on February 24, 1994;
and the remaining $5.6 million was financed from the Company's credit facility.
The 1994-B Series Preferred Stock has a stated value of $37.50, will pay an
annual dividend of 5.6% and will be convertible into shares of Liberty Common
Stock on a share for share basis. Only the American Funeral shareholders
received shares of the 1994-B Series Preferred Stock in connection with the
acquisition and no additional shares of this Series were made available to the
public.
The $27.5 million State National purchase price is expected to be financed
through a combination of cash, a new series (1994-A) of convertible preferred
stock to be issued at the time of closing which is expected to occur in early
1994, and Liberty common stock. Certain State National shareholders will be
allowed to choose to receive their merger consideration in any combination of
cash, 1994-A Series Preferred Stock (valued at $35.00 per share) or Liberty
Common Stock (based on an agreed value of $28.00 per share), subject to the
limitation that no more than 50% of the total merger consideration will be paid
in cash and subject to the requirement that, in order to comply with an
exemption from registration under the Securities Act, certain limitations will
be imposed on the number of shareholders entitled to receive their merger
consideration in the form of stock. Based on the current market price compared
to the agreed per share value for any Liberty Common Stock issuable in the
State National merger, it is not currently anticipated that the State National
shareholders would elect to receive any significant amount of Liberty Common
Stock. Based in part on discussions with the management of State National who
believe that the State National shareholders are likely to elect to receive at
least 70% of the total merger consideration in the form of stock, the Company
anticipates that the cash needed for this acquisition will not exceed
approximately $8 million. The cash needed for State National will be funded
through the Company's credit facility. The 1994-A Series Preferred Stock will
have a stated value of $35.00 per share, will pay a 6% annual dividend and will
be convertible into shares of Liberty Common Stock on a share for share basis.
Only the State National shareholders will receive shares of the 1994-A Series
Preferred Stock in connection with the acquisition and no additional shares of
this series will be made available to the public.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
The Liberty Corporation and Subsidiaries
The Company is in the process of finalizing an agreement to purchase a portion
of the real estate assets of SCANA Development Corporation, a subsidiary of
SCANA Corporation, for approximately $50 million in cash subject to the
completion of due diligence. The purchase is expected to close during the
first half of 1994 and consists of residential development properties under
development, undeveloped land held for future development, business parks, and
retail and office properties--most of which are located in South Carolina.
Liberty Life entered into a coinsurance agreement with Lincoln National Life
Reinsurance Company effective September 30, 1991 ("Lincoln Agreement"). This
agreement increased Liberty Life's statutory surplus by $24.0 million,
replacing a portion of the surplus reduction incurred with the purchase of the
Kentucky Central block of business earlier in the year (which cost was charged
to surplus in accordance with statutory accounting practices). Under the
Lincoln Agreement the $24.0 million began reversing in 1992, resulting in a
charge to surplus of $4.8 million per year for the years 1992-1996. The Company
expects such charges to be covered by Liberty Life's current and expected
future statutory income from operations and not to significantly affect future
operations. The surplus relief allowed Liberty Life to restore its statutory
capital (which had been reduced by the Kentucky Central transaction), a factor
considered important by insurance rating services, and was not necessary for
Liberty Life to meet regulatory statutory capital and surplus requirements. The
Company has no present plans for the use of similar reinsurance in the
foreseeable future.
Most states have laws requiring solvent life insurance companies to pay
guaranty fund assessments to protect the interests of policyholders of
insolvent life insurance companies. Due to the recent increase in the number of
companies that are under regulatory supervision, there is expected to be an
increase in assessments. Under present law, most assessments can be recovered
through a credit against future premium taxes. The Company has reviewed its
exposure to potential assessments, and the effect on its financial position and
results of operations is not expected to be material.
Effective December 31, 1993, the NAIC adopted Risk-Based Capital ("RBC")
requirements for life/health insurance companies to evaluate the adequacy of
statutory capital and surplus in relation to investment and insurance risks
such as asset quality, mortality and morbidity, asset and liability matching,
and other business factors. The RBC formula will be used by states as an early
warning tool to identify companies that potentially are inadequately
capitalized for the purpose of initiating regulatory action. In addition, the
formula defines new minimum capital standards that will supplement the current
system of low fixed minimum capital and surplus requirements on a
state-by-state basis. The RBC ratios for the Company's insurance subsidiaries
significantly exceed the minimum capital requirements at December 31, 1993.
Other Company commitments are shown in Note 6 to the Consolidated Financial
Statements. Further discussion of investments and valuation is contained in
Notes 1 and 2 to the Consolidated Financial Statements.
ACCOUNTING DEVELOPMENTS
Financial Accounting Standard No. 109, "Accounting for Income Taxes," was
adopted by the Company, effective for the first quarter of 1993 by restating
prior year financial statements for 1987 through 1992. The cumulative effect of
the adoption resulted in an $18.4 million reduction to the beginning balance of
retained earnings at January 1, 1991. The restatement did not result in any
material change in net income for 1987 through 1992. The charge to equity was
due to additional deferred taxes related primarily to years prior to 1984 when
deferred taxes were established for insurance operations at an effective tax
rate lower than the rate at the time of adoption of FAS 109.
One of the requirements of FAS 109 is that the amount of the deferred tax
liability be adjusted for the effect of a change in enacted tax rates and that
the amount of the adjustment be included in income from continuing operations.
During the third quarter of 1993, the Company revised its estimated annual
effective tax rate to reflect the change in the federal statutory rate from 34%
to 35% as a result of the Omnibus Budget Reconciliation Act of 1993. The effect
of this change, which was retroactive to January 1, 1993, was an increase in
income tax expense of approximately $3.8 million for 1993. Approximately $3.2
million of this additional income tax expense was a result of applying the
newly enacted tax rates to the deferred tax balance as of January 1, 1993.
The Company adopted Financial Accounting Standard No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", effective for the
first quarter of 1993. The cumulative effect of this accounting change was
accounted for as a one-time charge to earnings of $10.1 million after-tax
during the first quarter 1993. With the exception of the one-time transition
obligation, FAS 106 does not have a material impact on the Company's annual
earnings. During December 1992, the NAIC approved new statutory accounting
principles for postretirement benefits. Statutory accounting, like GAAP
accounting, requires that the liability for postretirement benefits be accrued
immediately or phased in over twenty years. Unlike GAAP accounting, statutory
accounting requires that only the liability related to current retirees and
fully eligible or vested employees be accrued. The Insurance Group is
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MANAGEMENT'S DISCUSSION AND ANALYSIS
The Liberty Corporation and Subsidiaries
amortizing the transition obligation of $13.3 million pre-tax for statutory
purposes instead of recognizing the entire amount as an immediate reduction of
surplus. This will result in a pre-tax charge of approximately $670,000 to
statutory earnings annually for 20 years.
The Company has adopted Financial Accounting Standard No. 107, "Disclosure
about Fair Value of Financial Instruments" for the year ended December 31, 1993
and 1992. This statement requires disclosure of the fair value of financial
instruments, whether recognized or not recognized in the Company's consolidated
balance sheet. This form of disclosure is commonly known as "marking to
market." FAS 107 has no impact on reported results of operations or on the
carrying value of assets.
During 1992, the FASB issued Financial Accounting Standard No. 112, "Employer's
Accounting for Postemployment Benefits." This statement requires current
accrual for the cost of benefits to be provided to former or inactive employees
and their dependents and beneficiaries before retirement. The Company adopted
this statement effective for the first quarter of 1993. The cumulative effect
of this accounting change was accounted for as a one-time charge of $1.9
million after-tax during first quarter 1993. With the exception of the one-time
transition obligation, FAS 112 does not have a material impact on the Company's
annual earnings.
Also during 1992, the FASB issued Financial Accounting Standard No. 113,
"Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration
Contracts." This statement amends FAS 60, "Accounting and Reporting by
Insurance Enterprises," to eliminate the practice by insurance enterprises of
reporting assets and liabilities relating to reinsured contracts net of the
effects of reinsurance. The Company adopted this statement effective for the
first quarter of 1993. Adoption of FAS 113 had no impact on reported earnings.
In May, 1993, the FASB issued Financial Accounting Standard No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" which is
effective for fiscal years beginning after December 15, 1993. This statement
supersedes FAS 12, "Accounting for Certain Marketable Securities" and generally
replaces the historical cost accounting approach to debt securities with a fair
value approach. FAS 115 will require that all affected debt and equity
securities be classified into one of three categories--held-to-maturity,
trading, or available-for-sale. These classifications are important in that
they affect the carrying value of the security as well as the timing of gain or
loss recognition in the income statement. This standard will most significantly
affect the Company's accounting for its investment in fixed maturities (bonds
and redeemable preferred stocks). The Company expects to adopt and implement
FAS 115 during the first quarter of 1994 and currently anticipates that
approximately 60% of its bond portfolio will be classified as
available-for-sale and 40% as held-to-maturity and 100% of the redeemable
preferred stock portfolio will be classified as available-for-sale. The
adoption of FAS 115 is expected to result in an unrealized gain, net of taxes
and related amortization of deferred acquisition costs, in the range of
$10,000,000 to $15,000,000 on the available-for-sale portion.
Also in May, 1993, the FASB issued Financial Accounting Standard No. 114,
"Accounting by Creditors for Impairments of a Loan" which is effective for
fiscal years beginning after December 15, 1994. The Company plans to adopt this
statement effective for the first quarter of 1995. This statement will require
the Company to recognize impairments by establishing valuation allowances which
will result in corresponding charges to income. At this time, the Company has
not completely analyzed the impact of the adoption of FAS114, but expects that
it will not have a material effect on net income or shareholders' equity.
The Company currently accounts for impairments on mortgage loans on individual,
specific assets at the time the Company judges the assets to have been impaired
and this impairment can be estimated. Currently the Company does not use the
reserve method to account for future losses on mortgage loans. This practice
reflects that the Company has historically experienced a low level of losses on
its mortgage loan investments.
193
<PAGE> 13
CONSOLIDATED BALANCE SHEETS
The Liberty Corporation and Subsidiaries
December 31, 1993 and 1992 (In 000's)
<TABLE>
<CAPTION>
(Restated)
1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments:
Bonds, at amortized cost, market of $859,156 in 1993, $811,899 in 1992 $ 797,388 $ 751,578
Redeemable preferred stocks, at amortized cost, market of $62,013 in
1993, $44,918 in 1992 60,285 42,827
Nonredeemable preferred stocks, at market, cost of $44,359 in
1993, $26,603 in 1992 48,123 29,243
Common stocks, primarily at market, cost of $16,156 in 1993, $14,774 in 1992 20,268 18,045
Mortgage loans 165,784 162,089
Investment properties, at cost less accumulated depreciation
$10,503 in 1993, $15,996 in 1992 84,530 97,502
Loans to policyholders 86,942 87,595
Other long-term investments 82,826 72,952
Short-term investments 13,355 26,396
- ------------------------------------------------------------------------------------------------------------------------
Total Investments 1,359,501 1,288,227
- ------------------------------------------------------------------------------------------------------------------------
Cash 29,487 32,180
Accrued investment income 12,736 13,400
Receivables net of bad debt reserves, $1,027 in 1993, $921 in 1992 46,648 39,907
Receivable from reinsurers 245,210 227,640
Deferred acquisition costs 288,635 275,875
Buildings and equipment, at cost, less accumulated depreciation
$94,553 in 1993, $89,138 in 1992 63,499 63,590
Intangibles related to television operations, at cost, net of amortization
$14,794 in 1993, $24,717 in 1992 48,418 49,903
Goodwill related to insurance acquisitions, at cost, net of amortization
$5,039 in 1993, $4,006 in 1992 27,683 27,819
Other assets 65,216 56,337
- ------------------------------------------------------------------------------------------------------------------------
827,532 786,651
- ------------------------------------------------------------------------------------------------------------------------
Total Assets $2,187,033 $2,074,878
========================================================================================================================
</TABLE>
194
<PAGE> 14
The Liberty Corporation and Subsidiaries
<TABLE>
<CAPTION>
(Restated)
1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Policy liabilities:
Future policy benefits $1,345,504 $1,271,055
Claims and benefits payable 17,860 17,414
Policyholder funds 25,812 22,796
- ------------------------------------------------------------------------------------------------------------------------
1,389,176 1,311,265
Notes, mortgages and other debt 149,489 176,632
Accrued income taxes 12,054 7,029
Deferred income taxes 110,004 112,868
Accounts payable and accrued expenses 61,932 60,887
Other liabilities 30,533 17,009
- ------------------------------------------------------------------------------------------------------------------------
Total Liabilities 1,753,188 1,685,690
- ------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity:
Common stock
Authorized--50,000,000 shares, no par value
Issued and outstanding--19,497,515 shares in 1993,
18,859,164 shares in 1992 143,939 126,961
Preferred stock
Authorized--10,000,000 shares
Issued and outstanding--none
Unearned stock compensation (4,475) (3,222)
Unrealized investment gains less deferred taxes of $2,699 in 1993, $2,010 in 1992 5,177 3,901
Cumulative foreign currency translation adjustment (1,529) (880)
Retained earnings 290,733 262,428
- ------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 433,845 389,188
- ------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $2,187,033 $2,074,878
========================================================================================================================
</TABLE>
See notes to consolidated financial statements.
195
<PAGE> 15
CONSOLIDATED STATEMENTS OF INCOME
The Liberty Corporation and Subsidiaries
For the three years ended December 31, 1993 (In 000's, except per share data)
<TABLE>
<CAPTION>
(Restated)
1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Insurance premiums and policy charges $250,922 $209,133 $180,517
Broadcasting revenues 87,984 89,989 88,174
Net investment income 110,966 94,624 97,562
Service contract revenues 8,383 3,393 --
Realized investment gains 14,686 5,617 3
Other income 4 -- (1,774)
- -----------------------------------------------------------------------------------------------------------------------
Total revenues 472,945 402,756 364,482
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES
Policyholder benefits 159,452 126,182 123,783
Commissions 44,491 40,870 32,509
General insurance expenses 66,213 51,759 43,019
Amortization of deferred acquisition costs 39,402 29,581 25,203
Broadcasting expenses 64,705 66,415 67,463
Interest expense 9,945 16,130 18,734
Other expenses 11,413 9,920 10,321
- -----------------------------------------------------------------------------------------------------------------------
Total expenses 395,621 340,857 321,032
- -----------------------------------------------------------------------------------------------------------------------
Income before income taxes and cumulative effect of accounting changes 77,324 61,899 43,450
Provision for income taxes 26,237 21,014 12,884
- -----------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting changes 51,087 40,885 30,566
Cumulative effect of accounting changes
FAS 106--Postretirement Benefits (10,068) -- --
FAS 112--Postemployment Benefits (1,872) -- --
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 39,147 $ 40,885 $ 30,566
- -----------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE AMOUNTS
Income before cumulative effect of accounting changes $ 2.62 $ 2.51 $ 1.93
Cumulative effect of accounting changes
FAS 106--Postretirement Benefits (.52) -- --
FAS 112--Postemployment Benefits (.09) -- --
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 2.01 $ 2.51 $ 1.93
=======================================================================================================================
</TABLE>
See notes to consolidated financial statements.
196
<PAGE> 16
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Liberty Corporation and Subsidiaries
For the three years ended December 31, 1993 (In 000's)
<TABLE>
<CAPTION>
(Restated)
1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 39,147 $ 40,885 $ 30,566
Adjustments to reconcile net income to net cash provided (used) in
operating activities:
Increase (decrease) in policy liabilities 30,763 (3,090) (16,116)
Increase (decrease) in accounts payable and accrued liabilities 4,948 2,843 (1,616)
(Increase) decrease in receivables (11,569) (2,495) 1,407
Amortization of policy acquisition costs 39,402 29,581 25,203
Policy acquisition costs deferred (58,017) (53,272) (45,225)
Realized investment (gains) losses (14,686) (5,617) (3)
Depreciation and amortization 12,112 13,222 16,784
Amortization of bond premium and discount (6,033) (4,084) (5,935)
Provision for deferred income taxes (4,062) 7,132 11,067
Loss on reinsurance ceded -- -- 1,774
All other operating activities, net 4,421 (8,584) (2,787)
- -----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED IN OPERATING ACTIVITIES 36,426 16,521 15,119
- -----------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Investment securities sold 50,822 45,946 51,692
Investment securities matured or redeemed by issuer 241,000 91,331 45,543
Cost of investment securities acquired (351,900) (153,494) (223,625)
Mortgage loans made (28,883) (25,491) (6,831)
Mortgage loan repayments 23,648 19,408 16,694
Purchase of investment properties, buildings and equipment (32,563) (13,488) (20,829)
Sale of investment properties, buildings and equipment 37,238 30,062 7,361
Purchases of short-term investments (781,400) (752,840) (391,773)
Sales of short-term investments 794,284 791,906 391,823
Net cash received on purchases of insurance business -- -- 90,980
Net cash paid on purchases of insurance companies (722) (66,841) --
Net cash paid on sale of insurance business (2,250) -- (26,780)
Coinsurance of General Agency insurance business -- -- 28,500
All other investment activities, net (1,439) (4,940) (19,271)
- -----------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (52,165) (38,441) (56,516)
- -----------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from borrowings 2,192,635 1,699,000 424,400
Principal payments on debt (2,219,778) (1,749,293) (444,006)
Dividends paid (13,108) (7,892) (5,472)
Stock issued for employee benefit and compensation programs 7,181 4,544 3,177
Common stock offering 8,544 64,274 --
Return of policyholders' account balances (26,201) (22,287) (44,372)
Receipts credited to policyholders' account balances 63,773 59,282 106,574
- -----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED IN FINANCING ACTIVITIES 13,046 47,628 40,301
- -----------------------------------------------------------------------------------------------------------------------
(DECREASE) INCREASE IN CASH (2,693) 25,708 (1,096)
Cash at beginning of year 32,180 6,472 7,568
- -----------------------------------------------------------------------------------------------------------------------
CASH AT END OF YEAR $ 29,487 $ 32,180 $ 6,472
=======================================================================================================================
</TABLE>
See notes to consolidated financial statements.
197
<PAGE> 17
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
The Liberty Corporation and Subsidiaries
For the three years ended December 31, 1993 (In 000's, except per share data)
(RESTATED)
<TABLE>
<CAPTION>
Cumulative
Net Foreign
Capital in Unearned Unrealized Currency
Shares Common Excess of Stock Investment Translation Retained
Outstanding Stock Par Value Compensation Gains (Losses) Adjustments Earnings Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1991
(as previously reported) 7,847 $ 7,847 $ 27,338 $(2,954) $(3,337) $ -- $232,978 $261,872
Restatement for change in
accounting principle for
income taxes (18,407) (18,407)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 1991, restated 7,847 7,847 27,338 (2,954) (3,337) -- 214,571 243,465
Net income 30,566 30,566
Net unrealized investment gains 7,316 7,316
Dividends ($.47) (7,416) (7,416)
Stock issued for employee benefit
and performance incentive
compensation programs 72 72 2,891 193 3,156
Issuance of shares in connection with
two-for-one stock split 7,918 7,918 (7,918) --
Tax benefit of stock options and
grants 21 21
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1991 15,837 15,837 30,250 (2,761) 3,979 -- 229,803 277,108
Net income 40,885 40,885
Net unrealized investment losses (78) (78)
Dividends ($.515) (8,260) (8,260)
Foreign currency translation
adjustment (880) (880)
Stock issued for employee benefit
and performance incentive
compensation programs 202 1,697 2,917 (461) 4,153
Stock offering 2,400 64,274 64,274
Elimination of par value 33,167 (33,167) --
Stock issued as part of the purchase
price of acquisitions 420 11,595 11,595
Tax benefit of stock options and grants 391 391
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 18,859 126,961 -- (3,222) 3,901 (880) 262,428 389,188
Net income 39,147 39,147
Net unrealized investment gains 1,276 1,276
Dividends ($.56) (10,842) (10,842)
Foreign currency translation
adjustment (649) (649)
Stock issued for employee benefit and
performance incentive
compensation programs 314 7,866 (1,253) 6,613
Stock offering 325 8,544 8,544
Tax benefit of stock options and grants 568 568
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 19,498 $143,939 $ -- $(4,475) $ 5,177 $(1,529) $290,733 $433,845
===================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
198
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The accompanying consolidated financial statements
of The Liberty Corporation and Subsidiaries (the Company) include the accounts
of the Company after elimination of all significant intercompany balances and
transactions. Primary operating subsidiaries are Liberty Life Insurance Company
and Cosmos Broadcasting Corporation. Other subsidiaries which comprise the
Insurance Group, in addition to Liberty Life, are Pierce National Life
Insurance Company and Liberty Insurance Services Corporation.
INSURANCE PREMIUMS--Traditional life insurance and accident and health
insurance products--Revenues are recognized over the premium paying period as
they become due. For limited payment whole life products, the excess of the
premiums received over the portion of the premiums required to establish
reserves is deferred and recognized in income over the anticipated life of the
policy.
Universal life products--Revenues for these products consist of investment
income and policy charges for the cost of insurance, administration and
surrenders during the period. Policy issue fees are deferred as unearned
revenues and are recognized in income over the life of the policies in relation
to the incidence of expected gross profits.
BENEFITS TO POLICYHOLDERS AND BENEFICIARIES--Traditional life insurance and
accident and health insurance products--Benefits for these products include
claims paid during the period, accrual for claims reported but not yet paid,
and accrual for claims incurred but not reported based on historical claims
experience modified for expected future trends.
Universal life products--Benefits for these products include the amount of
claims paid in excess of the policy value accrued to the benefit of the
policyholder.
INSURANCE RESERVES AND POLICY MAINTENANCE EXPENSES--Traditional life insurance
and accident and health insurance--Insurance reserves and policy maintenance
expenses are associated with earned premiums so as to recognize profits over
the premium paying period. This association is accomplished by recognizing the
liabilities for insurance reserves on a net level premium method based on
assumptions deemed appropriate at the date of issue as to future investment
yield, mortality, morbidity, withdrawals and maintenance expenses and including
margins for adverse deviations. Interest assumptions are based on Company
experience. Mortality, morbidity, and withdrawal assumptions are based on
recognized actuarial tables or Company experience, as appropriate. Accident and
health reserves consist principally of unearned premiums and claims reserves,
including provisions for incurred but unreported claims.
Universal Life--Insurance reserves on these products are determined following
the retrospective deposit method and consist of policy values that accrue to
the benefit of the policyholder, unreduced by surrender charges. Insurance
reserves also include deferred revenues arising from unamortized policy issue
fees.
ACQUISITION COSTS--Acquisition costs incurred in the process of acquiring new
business are deferred and amortized as described below. These deferred costs
consist primarily of commissions and certain policy underwriting, issue and
agency expenses which vary with and are directly related to production of new
business. Costs assigned to the value of in-force business acquired in
acquisitions are included in deferred acquisition costs.
AMORTIZATION--Traditional life insurance and accident and health
insurance--Amortization is recognized in proportion to the ratio of annual
premium revenue to the total anticipated premium revenue, which gives effect to
actual terminations. Deferred costs are amortized over the premium paying
period (not to exceed 30 years) of the related policy. Anticipated premium
revenue is determined using assumptions consistent with those utilized in the
determination of liabilities for insurance reserves.
Universal life--Deferred acquisition costs related to universal life are
amortized in relation to the incidence of expected gross profits, over the life
of the policies (not to exceed 30 years). Gross profits are equal to revenues
as described above less expenses. Expenses include interest credited to policy
account balances, policy administration expenses, and expected benefit payments
in excess of policy account balances.
Costs assigned to the value of in force business acquired through acquisitions
are amortized on a basis consistent with deferred acquisition costs.
INVESTMENTS--The Company follows a value-oriented investment philosophy in
which purchases are generally made with the intention of holding investments to
maturity. As market relationships change and individual investments become
increasingly over or undervalued, investments may be sold and replaced with
similar items. Investment philosophy is focused on the intermediate to
longer-term horizon and is not oriented toward trading.
199
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
Investments are reported on the following basis:
- Bonds and redeemable preferred stocks, which the Company has
the intent and ability to hold to maturity, are carried at
amortized cost which includes impairments for other than
temporary declines in fair value.
- Common stocks and nonredeemable preferred stocks are carried
at fair value if owned by the insurance subsidiaries and at
lower of cost or fair value if owned by the Parent or its
non-insurance subsidiaries.
- Mortgage loans on real estate are carried at amortized cost
which includes write-downs for impaired value where
appropriate.
- Investment properties are carried at cost less accumulated
depreciation and write-downs for impaired value where
appropriate. Depreciation over the estimated useful lives of
the properties is determined using principally the
straight-line method.
- Loans to policyholders are carried at cost.
- Other long-term investments are carried at cost which includes
write-downs for impaired value where appropriate. Included in
other long-term investments are investments in venture capital
funds, oil and gas properties, and the Company's interest in
trusts established for the assets supporting the coinsured
General Agency Marketing business (see Note 3).
- Short-term investments are carried at cost which approximates
fair value.
REALIZED INVESTMENT GAINS AND LOSSES are recognized using the specific
identification method to determine the cost of investments sold. Gains or
losses on the sale of real estate held for investment are included in realized
investment gains (losses). Gains and losses on the sale of real estate acquired
for development and resale are included in net investment income. Realized
gains and losses include write-downs for impaired values of investment assets.
The Company establishes impairments on individual, specific assets at the time
the Company judges the assets to have been impaired and this impairment can be
estimated (See Note 2). Realized gains and losses also include write-downs of
$1,200,000 in 1993, $2,188,000 in 1992 and $3,500,000 in 1991 related to notes
receivable.
UNREALIZED INVESTMENT GAINS AND LOSSES relating to the insurance subsidiaries'
investments in common stocks and nonredeemable preferred stocks are recorded
directly in shareholders' equity net of deferred taxes.
BUILDINGS AND EQUIPMENT are recorded at cost. Depreciation over the estimated
useful lives of the properties is determined using principally the
straight-line method.
INTANGIBLE ASSETS arose in the acquisition of certain television stations.
Amounts not being amortized ($4,071,000) represent the excess of the total cost
over the underlying value of the tangible and amortizable intangible assets
acquired prior to 1970. Amounts being amortized are expensed principally over
forty years.
GOODWILL arose in the acquisition of insurance companies. Of the total,
$7,324,000 is being amortized over twenty years with the remainder being
amortized over forty years.
FOREIGN CURRENCY TRANSLATION has been accounted for in accordance with
Financial Accounting Standard No. 52, "Foreign Currency Translation." The
assets and liabilities of the Canadian operations of Pierce National Life
Insurance Company, the Company's pre-need subsidiary, are translated into U.S.
dollars at the year-end rate of exchange. Revenues and expenses are translated
at average exchange rates. Net exchange gains and losses resulting from
translation are included as a separate component of shareholders' equity. Gains
and losses from foreign currency transactions are included in net income.
INTEREST RATE SWAP AGREEMENTS were used to lock in interest rates on a portion
of the Company's debt. The interest differential to be paid or received was
accrued as interest rates changed. Payments and/or receipts under these
agreements were combined with interest expense for financial reporting
purposes. In early October 1993, the Company terminated these swap agreements
as discussed in Note 5.
INCOME TAXES are computed using the liability method required by Financial
Accounting Standard No. 109, "Accounting for Income Taxes". Under FAS 109,
deferred tax assets and liabilities are determined based on the differences
between financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and law that will be in effect when the
differences are expected to reverse.
EARNINGS PER SHARE are computed based on the weighted average number of shares
outstanding during the year, including the average number of dilutive shares
under stock options.
200
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
FAIR VALUES OF FINANCIAL INSTRUMENTS are estimated based on the following
methods and assumptions:
- Cash and short-term investments: The carrying amounts reported
in the balance sheet for these instruments approximate their
fair values.
- Investment securities: Fair values for fixed maturity
securities (including redeemable preferred stock) are based on
quoted market prices, where available. For fixed maturity
securities not actively traded, fair values are estimated
using values obtained from independent pricing services or, in
the case of private placements, are estimated by discounting
expected future cash flows using a current market rate
applicable to the yield, credit quality, and maturity of the
investments. The fair values for equity securities are based
on quoted market prices and are recognized in the balance
sheet (see Note 2).
- Mortgage loans and policy loans: The fair values for mortgage
loans and policy loans are estimated using discounted cash
flow analyses, using interest rates currently being offered
for similar loans to borrowers with similar credit ratings.
Loans with similar characteristics are aggregated for purposes
of the calculations (see Note 2).
- Other long-term investments: The Company determined that it
was not practicable to estimate the fair values of its
investments in venture capital because of a lack of primary
and secondary market prices and the inability to estimate fair
values without incurring excessive costs. The Company's
investment in venture capital totals $8,059,000 at December
31, 1993. Information on the fair value of investments in a
reinsurance trust included in other long-term investments is
shown in Note 2.
- Policy liabilities: Fair values for the Company's liabilities
under investment-type insurance contracts that are not subject
to policyholder mortality or morbidity risk are estimated
using discounted cash flow calculations, based on interest
rates currently being offered for similar contracts with
remaining maturities consistent with those for the contracts
being valued (see Note 4).
- Short and long-term debt: Substantially all of the Company's
short and long-term debt is floating rate debt. Accordingly,
the carrying amount approximates its fair value.
- Other liabilities: Fair values on film contract obligations
related to the Company's broadcasting operations were
determined by discounting future cash flows using current
fixed borrowing rates for similar types of borrowing
arrangements. At December 31, 1993, the carrying value and
fair value of these obligations were $7,189,000 and
$6,582,000, respectively.
FINANCIAL ACCOUNTING STANDARD NO. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," was adopted by the Company,
effective January 1, 1993. The adoption of FAS 106 resulted in a $15,254,000
transition obligation ($10,068,000 after-tax) which was expensed during the
first quarter 1993 as a cumulative effect of a change in accounting principle.
With the exception of the one-time transition obligation, the adoption of FAS
106 does not have a material impact on the Company's annual earnings (see Note
8).
FINANCIAL ACCOUNTING STANDARD NO. 109, "Accounting for Income Taxes," was
adopted by the Company, effective January 1, 1993. The Company elected to apply
the provisions of FAS 109 retroactively and to restate prior years' financial
statements. Accordingly, the beginning balance of retained earnings as of
January 1, 1991 has been restated to reflect a decrease of $18,407,000 to
$214,571,000. The decrease in retained earnings was the result of providing
additional deferred taxes under FAS 109. These additional deferred taxes relate
primarily to years prior to 1984 when deferred taxes were established for
insurance operations at an effective tax rate lower than the rate anticipated
at the time of adoption of FAS 109 (see Note 9).
FINANCIAL ACCOUNTING STANDARD NO. 112, "Employers' Accounting for
Postemployment Benefits," was adopted by the Company, effective January 1,
1993. This standard requires the accrual of benefits provided to former or
inactive employees and their dependents and beneficiaries after termination of
employment but before retirement. The adoption of FAS 112 resulted in a
$2,837,000 transition obligation ($1,872,000 after-tax) which was expensed
during the first quarter as a cumulative effect of a change in accounting
principle. With the exception of the one-time transition obligation, the
adoption of FAS 112 does not have a material impact on the Company's annual
earnings.
FINANCIAL ACCOUNTING STANDARD NO. 113, "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts," was adopted by the
Company, effective January 1, 1993, by restating prior years' financial
statements. This standard requires insurance enterprises to report assets and
liabilities relating to reinsured contracts gross of the effects of
reinsurance. Adoption of this statement had no impact on the Company's reported
earnings (see Note 3).
201
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
FINANCIAL ACCOUNTING STANDARD NO. 115, "Accounting for Certain Investments in
Debt and Equity Securities" was issued by the Financial Accounting Standards
Board in May 1993 and is effective for fiscal years beginning after December
15, 1993. This statement supersedes FAS 12, "Accounting for Certain Marketable
Securities" and generally replaces the historical cost accounting approach to
debt securities with a fair value approach. FAS 115 will require that all
affected debt and equity securities be classified into one of three
categories-- held-to-maturity, trading or available-for-sale. These
classifications are important in that they affect the carrying value of the
security as well as the timing of gain or loss recognition in the income
statement. This standard will most significantly affect the Company's
accounting for its investment in fixed maturities (bonds and redeemable
preferred stocks). The Company expects to adopt and implement FAS115 during the
first quarter of 1994. The Company currently anticipates that approximately 60%
of its bond portfolio will be classified as available-for-sale and 40% as
held-to-maturity and 100% of the redeemable preferred stock portfolio will be
classified as available-for-sale. The adoption of FAS 115 is expected to result
in an unrealized gain, net of taxes and related amortization of deferred
acquisition costs, in the range of $10,000,000 to $15,000,000 for the
available-for-sale portion.
FINANCIAL ACCOUNTING STANDARD NO. 114 "Accounting by Creditors for Impairments
of a Loan" was issued by the Financial Accounting Standards Board in May 1993
and is effective for fiscal years beginning after December 15, 1994. The
Company plans to adopt this statement effective for the first quarter of 1995.
This statement will require the Company to recognize impairments by
establishing valuation allowances which will result in corresponding charges to
income. At this time, the Company has not completely analyzed the impact of the
adoption of FAS114, but expects that it will not have a material effect on net
income or shareholders' equity.
RECLASSIFICATIONS have been made in the 1992 and 1991 Consolidated Financial
Statements to conform to the 1993 presentation.
2. INVESTMENTS
Investment securities as of December 31, 1993 and 1992, consist of the
following:
Balance
Fair Sheet
1993 (In 000's) Cost Value Amount
- --------------------------------------------------------------------------------
Bonds $ 797,388 $ 859,156 $ 797,388
Preferred stocks:
Redeemable 60,285 62,013 60,285
Nonredeemable 44,359 48,123 48,123
Common stocks 16,156 20,478 20,268
Other long-term investments:
Reinsurance trust 56,780 59,223 56,780
Other 26,046 26,046 26,046
Short-term investments 13,355 13,183 13,355
- --------------------------------------------------------------------------------
Total $1,014,369 $1,088,222 $1,022,245
================================================================================
Balance
Fair Sheet
1992 (In 000's) Cost Value Amount
- --------------------------------------------------------------------------------
Bonds $ 751,578 $ 811,899 $ 751,578
Preferred stocks:
Redeemable 42,827 44,918 42,827
Nonredeemable 26,603 29,243 29,243
Common stocks 14,774 18,675 18,045
Other long-term investments:
Reinsurance trust 47,033 50,881 47,033
Other 25,919 25,919 25,919
Short-term investments 26,396 26,396 26,396
- --------------------------------------------------------------------------------
Total $ 935,130 $1,007,931 $ 941,041
================================================================================
202
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
The estimated fair value and balance sheet amount of the Company's investments
in mortgage loans and policy loans were as follows at December 31, 1993:
<TABLE>
<CAPTION>
Estimated Balance
Fair Sheet
(In 000's) Value Amount
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage loans $176,338 $165,784
- --------------------------------------------------------------------------------------------------------------------------
Loans to policyholders $ 84,029 $ 86,942
==========================================================================================================================
</TABLE>
Gross realized gains (losses) and the change in gross unrealized gains (losses)
on the Company's fixed maturities (bonds and redeemable preferred stocks) and
equity securities are summarized as follows:
<TABLE>
<CAPTION>
Total Gains
Fixed Equity (Losses) on
(In 000's) Maturities Securities Investments
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1993
Gross realized $ 10,705 $ 6,546 $ 17,251
Gross unrealized 1,084 1,965 3,049
- --------------------------------------------------------------------------------------------------------------------------
Combined $ 11,789 $ 8,511 $ 20,300
- --------------------------------------------------------------------------------------------------------------------------
1992
Gross realized $ 2,834 $ 3,026 $ 5,860
Gross unrealized (11,911) (129) (12,040)
- --------------------------------------------------------------------------------------------------------------------------
Combined $ (9,077) $ 2,897 $ (6,180)
- --------------------------------------------------------------------------------------------------------------------------
1991
Gross realized $ 2,677 $ 3,033 $ 5,710
Gross unrealized 42,920 11,096 54,016
- --------------------------------------------------------------------------------------------------------------------------
Combined $ 45,597 $ 14,129 $ 59,726
==========================================================================================================================
</TABLE>
The schedule below details consolidated investment income and related
investment expenses for the three years ended December 31.
<TABLE>
<CAPTION>
(In 000's) 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest on
--Bonds $ 74,438 $ 60,137 $ 65,536
--Mortgage loans 15,452 15,786 15,621
--Loans to policyholders 4,162 4,097 4,654
--Short-term investments 1,376 1,542 2,070
Dividends on
--Preferred stocks 7,469 4,697 6,330
--Common stocks 376 623 835
Investment property rentals 4,265 5,828 6,197
Net gain on investment properties held for development 4,501 2,885 1,720
Other investment income 5,987 5,970 2,100
- --------------------------------------------------------------------------------------------------------------------------
Total investment income 118,026 101,565 105,063
Investment expenses 7,060 6,941 7,501
- --------------------------------------------------------------------------------------------------------------------------
Net investment income $110,966 $ 94,624 $ 97,562
==========================================================================================================================
</TABLE>
203
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
Amortized cost and estimated fair values of investment in fixed maturities at
December 31, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
1993 (In 000's) Cost Gains Losses Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
US Treasury securities and obligations of US government
corporations and agencies $ 28,056 $ 834 $ 148 $ 28,742
Obligations of states and political subdivisions 18,530 1,264 205 19,589
Debt securities issued by foreign governments 23,418 702 103 24,017
Corporate securities 304,324 32,962 1,228 336,058
Mortgage-backed securities 482,521 29,699 804 511,416
Other debt securities 824 620 97 1,347
- -----------------------------------------------------------------------------------------------------------------------
Total $857,673 $66,081 $ 2,585 $921,169
=======================================================================================================================
Gross Gross
Amortized Unrealized Unrealized Fair
1992 (In 000's) Cost Gains Losses Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
US Treasury securities and obligations of US government
corporations and agencies $ 47,534 $ 2,358 $ 162 $ 49,730
Obligations of states and political subdivisions 2,707 154 127 2,734
Debt securities issued by foreign governments 31,429 284 168 31,545
Corporate securities 260,797 38,103 823 298,077
Mortgage-backed securities 450,671 23,715 1,342 473,044
Other debt securities 1,267 557 137 1,687
- -----------------------------------------------------------------------------------------------------------------------
Total $794,405 $65,171 $ 2,759 $856,817
=======================================================================================================================
</TABLE>
Proceeds from sales of fixed maturities and the related gross realized gains
and losses for the three years ended December 31 are shown below. The amounts
shown below do not include those related to unscheduled redemptions or
prepayments, nor do they reflect any impairments taken during the years
presented.
<TABLE>
<CAPTION>
(In 000's) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Proceeds from sales $10,124 $13,897 $ 36,077
Gross realized gains 383 328 2,016
Gross realized losses (294) (214) (521)
</TABLE>
At December 31, 1993, gross unrealized gains pertaining to equity securities
were $9,410,000 and gross unrealized losses were $1,535,000.
The following investment assets were non-income producing for the twelve months
ended December 31, 1993:
<TABLE>
<CAPTION>
(In 000's) Balance Sheet Amount
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment properties $13,629
Other long-term investments 7,908
Mortgage loans 1,105
Fixed maturities 315
- -----------------------------------------------------------------------------------------------------------------------
Total $22,957
=======================================================================================================================
</TABLE>
204
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
For the year ended December 31, 1993, the Company incurred realized losses of
$6,227,000 due to impairment of assets included in the year-end investment
portfolio. Cumulative write-downs on the total investment portfolio by asset
category at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
(In 000's)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Mortgage loans $ 3,235
Investment properties 3,600
Other long-term investments 5,007
Equity securities 2,244
Fixed maturities 1,380
- -----------------------------------------------------------------------------------------------------------------------
Cumulative write-downs $15,466
=======================================================================================================================
</TABLE>
The amortized cost and estimated fair value of fixed maturities at December 31,
1993, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Fair
(In 000's) Cost Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 33,382 $ 33,803
Due after one year through five years 113,175 126,144
Due after five years through ten years 127,732 143,543
Due after ten years 100,863 106,263
- -----------------------------------------------------------------------------------------------------------------------
375,152 409,753
Mortgage-backed securities primarily maturing in five to twenty-five years 482,521 511,416
- -----------------------------------------------------------------------------------------------------------------------
Total $ 857,673 $921,169
=======================================================================================================================
</TABLE>
Below is listed investment information relative to the Company's insurance
operations reflected in the consolidated financial statements and is after
elimination of intercompany items.
<TABLE>
<CAPTION>
(In 000's) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Invested assets $1,308,312 $1,229,215 $963,803
Gross investment income 111,346 93,953 96,643
Net investment income 106,864 90,120 93,066
Gross realized investment gains (losses) 14,320 (383) (3,852)
Gross unrealized investment gains 9,410 8,595 10,925
Gross unrealized investment losses 1,535 2,684 4,885
Change in equity due to net change in unrealized investment gains (losses) 1,276 (78) 7,316
</TABLE>
3. REINSURANCE AGREEMENTS
Effective January 1, 1993, the Company adopted FAS 113, "Accounting & Reporting
for Reinsurance of Short-Duration and Long-Duration Contracts". As permitted by
FAS 113, the Company elected to restate its financial statements to report
reinsurance assets and liabilities on a gross basis for all periods presented
in the financial statements. In addition, certain information presented in the
unaudited "Six Years in Review" section and Note 13 has been restated to comply
with the provisions of FAS 113. The Company previously reported assets and
liabilities relating to reinsured contracts net of the effects of reinsurance.
The application of the new rules pursuant to FAS 113 had no impact on reported
net income. The following restated balance sheet amounts at December 31, 1992
are significantly different from the amounts originally reported. In addition,
there were several individually insignificant restatements made to increase net
other assets and liabilities by $3.1 million.
205
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
As Originally As Restated
(In 000's) Reported Under FAS 113
- --------------------------------------------------------------------------------
Policy benefits $1,030,889 $1,271,055
Receivable from reinsurers -- 227,640
Policy loans 71,957 87,595
The Company uses reinsurance as a risk management tool in the normal course of
business and in isolated strategic transactions to effectively buy or sell
blocks of in force business. The reinsurance contracts do not relieve the
Company from its contract with its policyholders and it remains contingently
liable should any reinsurer be unable to meet its obligations.
Amounts paid or deemed to be paid for reinsurance contracts are recorded as
reinsurance receivables. The cost of reinsurance related to long-term duration
contracts is accounted for over the life of the underlying reinsured policies
using assumptions consistent with those used to account for the underlying
policies.
On December 31, 1991, Liberty Life entered into an agreement with Life
Reassurance Corporation (Life Re) to coinsure its General Agency Division's
universal life policies in force. The agreement provided for 80% coinsurance on
policies in force at December 31, 1991, and 50% coinsurance on policies issued
subsequent to such date. The transaction resulted in a charge to 1991 earnings
of $1.8 million before income taxes. Under the terms of the agreement, assets
supporting the business ceded are required to be held in trusts. At December
31, 1993, Liberty Life's interest in the trusts consisted of investments with a
book value of $56.8 million ($51.2 million in bonds, $3.5 million in cash and
$2.1 million in preferred stocks) and a fair value of $59.2 million. Liberty
Life's interest in the trust is included in other long-term investments. The
book and fair value of Liberty Life's investments in the trust at December 31,
1992 were $47.0 million and $50.9 million, respectively. The book value and
market value of Life Re's portion of assets held in trust at December 31, 1993
were $206.1 million and $215.8 million, respectively. These invested assets had
an average rating of AA+. Comparable amounts at December 31, 1992 were $181.8
million and $189.5 million, respectively. The total face value of insurance
ceded to Life Re at December 31, 1993 was $3.0 billion and the Company has
recorded a receivable related to this transaction from Life Re of $235.3
million as of December 31, 1993. Currently, Life Re has an A.M. Best rating of
A+. During 1993 Liberty Life had ceded premiums and policy charges of $18.3
million under the agreement.
During 1991 Liberty Life acquired (through an assumption reinsurance agreement)
a block of home service and ordinary business at a cost of $39 million. In
December 1991, a portion of the block acquired was sold for $10.4 million.
Effective December 31, 1991, the Company acquired (under an
indemnity/assumption reinsurance agreement) a block of mortgage protection
business for $20.5 million.
Effective September 30, 1991, Liberty Life entered into an agreement to
coinsure 50% of its Career Agency line of business. Under generally accepted
accounting principles this agreement has been treated as financial reinsurance,
and no reserve reduction had been taken for the business ceded. Accordingly,
there was no financial reporting impact from the adoption of FAS 113 related to
this agreement. The reinsurance contract contains an escrow agreement that
requires assets equal to the reserves reinsured, as determined under statutory
accounting principles, be held in escrow for the benefit of this block of
business. At December 31, 1993, the invested assets held in escrow were
approximately $231 million.
The Insurance Group also reinsures with other insurance companies portions of
the life insurance it writes in order to limit its exposure on large or
substandard risks. Due to this broad allocation of reinsurance with several
insurance companies, there exists no significant concentration of credit risk.
The maximum amount of life insurance that Liberty Life will retain on any life
is $300,000, plus an additional $50,000 in the event of accidental death. This
maximum is reduced for higher ages and for special classes of risks. The
maximum amount of life insurance that Pierce National will retain on any life
is $50,000. Insurance in excess of the retention limits is either automatically
ceded under reinsurance agreements or is reinsured on an individually agreed
basis with other insurance companies.
The Company remains contingently liable with respect to reinsurance ceded
should any reinsurer be unable to meet the obligations assumed by it. At
December 31, 1993, $4.8 billion (24%) of the Insurance Group's total $20.2
billion gross insurance in force was ceded to other companies.
206
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
The effect of reinsurance on premiums and amounts earned for the years ended
December 31, 1993, 1992 and 1991 was as follows:
(In 000's) 1993 1992 1991
- -------------------------------------------------------------------------------
Direct premiums $278,454 $237,603 $184,689
Reinsurance assumed 2,089 2,826 3,945
Reinsurance ceded (29,621) (31,296) (8,117)
- -------------------------------------------------------------------------------
Net premiums and amounts earned $250,922 $209,133 $180,517
- -------------------------------------------------------------------------------
Gross benefits $174,588 $137,088 $124,330
Reinsurance recoveries (15,136) (10,906) (547)
- -------------------------------------------------------------------------------
Net benefits $159,452 $126,182 $123,783
===============================================================================
4. DEFERRED ACQUISITION COSTS AND FUTURE POLICY BENEFITS
A summary of the changes in deferred acquisition costs, which includes the
costs assigned to the value of the in force business acquired through
acquisitions, is set forth as follows:
(In 000's) 1993 1992 1991
- -------------------------------------------------------------------------------
Beginning balance $275,875 $211,829 $250,961
Deferred during the year 58,017 53,272 45,225
Amortized during the year (39,402) (29,581) (25,203)
Related to insurance in force acquired 317 40,617 17,063
Related to insurance in force ceded (6,082) -- (76,217)
Adjustment for foreign currency translation (90) (262) --
- -------------------------------------------------------------------------------
Ending balance $288,635 $275,875 $211,829
===============================================================================
A summary of the changes in costs assigned to the value of the in force
business acquired through acquisitions, which is included as a component of
deferred acquisitions costs above, is as follows:
(In 000's) 1993 1992 1991
- -------------------------------------------------------------------------------
Beginning balance $ 63,930 $ 30,266 $ 16,050
Additions from acquisitions 317 40,617 17,063
Interest accrued 4,426 2,938 1,192
Foreign currency adjustment -- (232) --
Amortized during the year (11,911) (9,659) (4,039)
- -------------------------------------------------------------------------------
Ending Balance $ 56,762 $ 63,930 $ 30,266
===============================================================================
The Company accounts for these costs in a manner consistent with deferred
acquisition costs. The Company's interest rate used to amortize these costs is
7.75% for a majority of the asset. Periodically, the Company performs the "net
liability" premium deficiency test in order to analyze potential impairments.
The Company incurred no write-offs due to impairments as a result of this test
for the year ended December 31, 1993. Under current assumptions, amortization
of these costs for the next five years is as follows:
(In 000's) Amortization
- -------------------------------------------------------------------------------
1994 $ 10,298
1995 9,037
1996 7,964
1997 6,979
1998 5,196
207
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
The liabilities for traditional life insurance and accident and health
insurance policy benefits and expenses are computed using a net level premium
method, including assumptions based on the Company's experience, modified as
necessary to reflect anticipated trends and to include provisions for possible
unfavorable deviations. Reserve interest assumptions are graded and range from
3.5% to 9.5%. Such liabilities are, for some plans, graded to equal statutory
values or cash values at or prior to maturity. The weighted average assumed
investment yield for all traditional life and accident and health policy
reserves was 6.8%, 6.8%, and 6.9% in 1993, 1992, and 1991, respectively.
Benefit reserves for traditional life insurance policies include certain
deferred profits on limited-payment policies that are being recognized in
income over the policy term. Policy benefit claims are charged to expense in
the period that the claims are incurred.
Benefit reserves for universal life insurance and investment products are
computed under a retrospective deposit method and represent policy account
balances before applicable surrender charges. Policy benefits and claims that
are charged to expense include benefit claims incurred in the period in excess
of related policy account balances. Interest crediting rates for universal life
and investment products range from 5.8% to 8.0% in 1993, 6.5% to 8.3% in 1992,
and 7.3% to 8.8% in 1991.
Participating business accounts for approximately 1% of the Company's life
insurance in force and premium income. The dividend to be paid is determined
annually by the Board of Directors. At December 31, 1993, the carrying value
and fair value of the Company's liabilities under investment type insurance
contracts not subject to policyholder mortality and morbidity risk was $30.0
million and $28.1 million, respectively.
5. NOTES, MORTGAGES, AND REVOLVING CREDIT AGREEMENT
The debt obligations at December 31 are as follows:
<TABLE>
<CAPTION>
(In 000's) INTEREST RATE % 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Borrowings under revolving credit agreement and lines of credit 3.7 $145,500 $174,400
Other notes due to banks 3.4 792 1,108
Mortgage loans on investment property 8.0 to 12.5 3,146 938
Other 9.0 51 186
- -----------------------------------------------------------------------------------------------------------------------
Total $149,489 $176,632
=======================================================================================================================
</TABLE>
The mortgage loans are secured by property with a net carrying value of
$7,273,000 at December 31, 1993. Maturities of the debt obligations at December
31, 1993 are as follows:
<TABLE>
<CAPTION>
Maturities Amount
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
1994 $ 31,997
1995 1,332
1996 401
1997 115,019
1998 21
Thereafter 719
- -----------------------------------------------------------------------------------------------------------------------
Total $149,489
=======================================================================================================================
</TABLE>
On September 28, 1993 the Company completed the restructuring of its
$250,000,000 revolving credit facility into a new $325,000,000, three and
one-year facility which will mature on April 1, 1997 and includes a one
year extension provision at the Company's option. This facility provides funds
to meet working capital requirements and finance acquisitions. The Company
borrowed $3,500,000 under the facility during 1993 to partially fund the
acquisition of a block of business of Estate Assurance Company ("Estate") and
borrowed $25,000,000 and $21,400,000 during 1992 to partially fund the
acquisitions of Pierce National Life Insurance Company ("Pierce National") and
Magnolia Life Insurance Company ("Magnolia Life") (See Note 12). At December
31, 1993 the Company's borrowings against the revolving credit agreement were
$115,000,000. During 1993 the maximum amount outstanding on the revolving
credit agreement amounted to approximately $168,000,000 with an average balance
outstanding of approximately $150,667,000 and an average weighted interest rate
of 6.6%. In addition to the revolving credit facility, the Company also uses
several lines of credit totalling $44,000,000 to manage day-to-day cash flow.
The amount borrowed against the lines of
208
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
credit at December 31, 1993 was $30,500,000. The average balance outstanding on
the lines of credit was approximately $10,925,000 during 1993 with a maximum
borrowing of $30,500,000 and an average weighted interest rate of 3.7%.
The revolving credit agreement provides for borrowing at interest rates based
on a formula that incorporates the use of Eurodollar, certificate of deposit,
prime rate, or federal funds rate. The applicable interest rate includes a
margin which varies according to the Company's ratio of consolidated debt to
cash flow. The Company also has the option to solicit money market interest
quotes from the bank group on $162,500,000 of the credit facility. A facility
fee is charged on the facility based on the total $325,000,000 commitment and
varies depending on the Company's ratio of consolidated debt to cash flow.
The revolving credit agreement contains certain restrictions. One restriction
requires the total available commitment of $325,000,000 to be permanently
reduced by the fair market value of certain asset sales exceeding $10,000,000
during any fiscal year during the term of the agreement. Other significant
restrictions include the following: (1) aggregate consolidated debt outstanding
may not exceed $335,000,000; (2) cash dividends may not exceed 50% of
cumulative consolidated net income for all fiscal periods beginning after
January 1, 1993; (3) repurchase of Liberty Life's preferred stock by the
Company or repurchase of its common stock may not exceed $10,000,000 in any
fiscal year and $25,000,000 over the credit term; (4) consolidated
shareholders' equity may not be less than a defined minimum, which at December
31, 1993 was $411,896,000; and (5) capital expenditures may not exceed
$7,500,000 in any fiscal year beginning after December 31, 1993. As defined,
capital expenditures exclude investment properties, computer software
expenditures within Liberty's Insurance Group, and film payments. Additionally,
the Company must also comply with several financial covenant restrictions under
the revolving credit agreement including defined ratios of consolidated debt to
cash flow, consolidated debt to consolidated total capital, and fixed charges
coverage.
The Company used proceeds, net of capitalized costs, of $8,544,000 received in
January 1993 in connection with the exercise of the over-allotment provision of
the stock offering and $64,274,000 received in December 1992 from the stock
offering to repay borrowings under the revolving credit agreement. (See Note
7).
During October 1993, the Company terminated all of its remaining interest rate
swap agreements which covered $67,143,000 of the outstanding debt. The
termination of these swaps resulted in a loss of $1,003,000, net of taxes.
Interest paid, net of amounts capitalized, amounted to approximately
$12,580,000, $15,918,000 and $20,131,000 in 1993, 1992 and 1991, respectively.
Interest capitalized amounted to $1,161,000, $1,049,000 and $1,252,000 in 1993,
1992 and 1991, respectively.
6. COMMITMENTS AND CONTINGENCIES
At December 31, 1993 the Company had commitments for additional investments and
other items totaling $21,763,000.
The Company has lease agreements, primarily for branch offices, data processing
and telephone equipment, which expire on various dates through 2004, none of
which are material capital leases. Most of these agreements have optional
renewal provisions covering additional periods of one to ten years. All leases
were made in the ordinary course of business and contain no significant
restrictions or obligations. Future commitments under operating leases are not
material. Annual rental expense amounted to approximately $6,225,000,
$4,491,000 and $3,809,000 in 1993, 1992 and 1991, respectively.
Most states have laws requiring solvent life insurance companies to pay
guaranty fund assessments to protect the interests of policyholders of
insolvent life insurance companies. Due to the recent increase in the number of
companies that are under regulatory supervision, there is expected to be an
increase in assessments by state guaranty funds. Under present law, most
assessments can be recovered through a credit against future premium taxes. The
Company has reviewed its exposure to potential assessments, and the effect on
its financial position and results of operations is not expected to be
material.
The Company has one pending insurance acquisition and one pending real estate
acquisition, both of which are expected to close during the first half of 1994
(See Note 12).
7. SHAREHOLDERS' EQUITY
On December 17, 1992 the Company completed the public offering of 2,400,000
shares of its common stock at a price of $28.25 per share. The offering
generated net proceeds of $64,274,000 which were used to repay bank debt. On
January 8, 1993 the underwriters of the offering exercised the over-allotment
provision, resulting in the issuance of an additional 325,100 shares at the
same per share price of $28.25. This provided the Company with additional net
proceeds of $8,544,000 which were also used to repay bank debt (See Note 5).
209
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
Pro-forma earnings per share of $2.27 on an as reported basis for the year
ended December 31, 1992 gives effect to the net proceeds of the stock offering
used to retire bank debt as though the offering and the repayment of debt had
occurred at the beginning of the year. This pro-forma earnings per share
includes the exercise of the over-allotment provision and was based on assumed
net proceeds of $26.93 per share and a pre-tax floating interest rate of 4.3%
on such debt. Pro-forma results are not necessarily indicative of the results
that actually would have occurred or which will be obtained in the future.
On October 1, 1992 the Company issued 409,795 shares of its common stock at
$27.575 per share as part of the purchase price of Magnolia Life Insurance
Company. Ten thousand shares of the Company's common stock were issued at
$29.50 per share in connection with the purchase of Pierce National Life
Insurance Company on July 2, 1992.
On May 5, 1992 the Company's shareholders adopted an amendment to the Articles
of Incorporation (the "Amendment") to eliminate the concept of par value with
respect to the Company's shares of stock. Effective May 14, 1992, the Amendment
serves to conform the Company's Articles of Incorporation to the South Carolina
Business Corporations Act of 1988 which revised substantially all of the South
Carolina law governing general business corporations, South Carolina being the
jurisdiction in which the Company's principal place of business is located and
its state of incorporation.
On November 5, 1991 the Company's Board of Directors declared a two-for-one
split of its common stock payable in the form of a 100 percent stock dividend
which was distributed on December 2, 1991 to shareholders of record on November
25, 1991. The par value of the additional 7,916,739 shares of common stock
issued in connection with the stock split was credited to common stock and a
like amount charged to retained earnings. All share and per share data have
been restated for all periods presented to reflect the stock split.
The Company has a Performance Incentive Compensation Program (the "Program")
which provides that the Compensation Committee of the Board of Directors may
grant: (a) incentive stock options within the meaning of Section 422 of the
Internal Revenue Code; (b)non-qualified stock options; (c) performance units;
(d) awards of restricted shares of the Company's common stock; or (e) all or
any combination of the foregoing to officers and key employees. Only common
stock, not to exceed 2,800,000 shares, may be delivered under the Program; and
shares so delivered will be made available from the authorized but unissued
shares or from shares reacquired by the Company, including shares purchased in
the open market. The aggregate number of shares which may be acquired by any
participant in the Program shall not exceed 20% of the shares subject to the
Program. As of December 31, 1993, 46 officers and employees were participants
in the Program. There is no fixed number of persons eligible for participation.
Restricted shares awarded to participants under the Program vest in equal
annual installments, generally over the five-year period commencing on the date
the shares are awarded. Non-vested shares may not be assigned, transferred,
pledged or otherwise encumbered or disposed of. During the applicable
restriction period, the Company retains possession of the certificates for the
restricted shares with executed stock powers attached. Participants are
entitled to dividends and voting rights with respect to the restricted shares.
Stock options under the Program are issued at 100% of the market price on the
date of grant, are vested over such period of time, which may not be less than
one year, as may be established by the Compensation Committee, and expire ten
years after the grant. Of the incentive stock options outstanding, 116,240 were
exercisable at December 31, 1993, 191,700 were exercisable at December 31, 1992
and 183,700 were exercisable at December 31, 1991. Of the non-qualified options
outstanding, 191,800 were exercisable at December 31, 1993, 137,200 were
exercisable at December 31, 1992 and 84,800 were exercisable at December 31,
1991. The options expire on various dates beginning January 3, 1994 and ending
June 14, 2003.
210
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
The following schedule summarizes activity in the Program during 1993, 1992 and
1991.
<TABLE>
<CAPTION>
Incentive Non-Qualified
Restricted Shares Stock Options Stock Options
- -----------------------------------------------------------------------------------------------------------------------
Number Market Price Number Average Number Average
of at Date of Exercise of Exercise
Shares of Grant Options Price Options Price
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding 1/1/91 266,400 210,300 $16.84 225,000 $21.14
Awarded 90,700 $20.37 -- 70,000 20.13
Vested (81,800) 19.64
Exercised (3,000) 17.19 (2,000) 16.25
Forfeited -- -- (11,000) 16.25
- -----------------------------------------------------------------------------------------------------------------------
Outstanding 12/31/91 275,300 207,300 $16.83 282,000 $21.02
Awarded 83,490 25.63 -- 127,000 24.89
Vested (86,940) 20.00
Exercised (15,600) 17.74 (1,210) 19.50
Forfeited -- -- (3,790) 19.50
- -----------------------------------------------------------------------------------------------------------------------
Outstanding 12/31/92 271,850 191,700 $16.75 404,000 $22.26
Awarded 90,220 29.23 -- 75,500 29.38
Vested (98,638) 31.43
Exercised (75,460) 14.80 (30,200) 20.20
Forfeited (4,749) 27.97 -- (3,200) 24.31
- -----------------------------------------------------------------------------------------------------------------------
Outstanding 12/31/93 258,683 116,240 $18.02 446,100 $23.59
=======================================================================================================================
</TABLE>
At December 31, 1993, 741,130 shares of the Company's stock were reserved for
future grants under the Program.
Under the Program, a committee of the Board is authorized to grant a request
for alternative settlement of any outstanding stock option. An optionee is
permitted to request exchange of his option for an amount equal to the excess
of the market value of the shares on the date of the request over the option
price. This amount can be paid in the form of shares of the Company's common
stock (valued at its market price at the date of the request), cash, or a
combination thereof.
The Company had an earlier non-qualified Stock Option Plan (the "Plan") which
expired March 31, 1985. No options were granted under the Plan during the
period January 1, 1983 through March 31, 1985; and no further options can be
granted. The last of the options expired on May 7, 1992 and all available
options were exercised before the expiration date. The following schedule
summarizes activity in the Plan during 1993, 1992 and 1991.
<TABLE>
<CAPTION>
Number of Average
Options Exercise
Outstanding Price
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding--January 1, 1991 26,000 $6.75
Exercised -- --
- -----------------------------------------------------------------------------------------------------------------------
Outstanding--December 31, 1991 26,000 6.75
Exercised (26,000) 6.75
- -----------------------------------------------------------------------------------------------------------------------
Outstanding--December 31, 1992 -- --
Exercised -- --
- -----------------------------------------------------------------------------------------------------------------------
Outstanding--December 31, 1993 -- --
=======================================================================================================================
</TABLE>
Shareholders' equity as determined under generally accepted accounting
principles of the Company's Insurance Group was $484,357,000 and $464,837,000
at December 31, 1993 and 1992, respectively. The comparable amounts as
determined under
211
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
statutory accounting practices were $151,646,000 and $148,233,000 at December
31, 1993 and 1992, respectively. Retained earnings exceed statutory unassigned
surplus by $338,662,000, which amount is restricted and, therefore, not
available for dividends. Without regulatory approval, dividends are generally
limited to prior year statutory gain from operations.
In August, 1990 the Company adopted a Shareholder Rights Plan and declared a
dividend of one right for each outstanding share of common stock. Upon becoming
exercisable, each right entitles the holder to purchase one one-hundredth of a
share of Series A Participating Cumulative Preferred stock (Series A Preferred
no par value per share, at a price of $150, subject to adjustment). The rights
are not exercisable into common stock or transferable apart from the common
stock; and no separate rights certificates will be distributed until ten
business days after the public announcement that a person or group ("Acquiring
Person") either (i) has acquired, or has obtained the right to acquire,
beneficial ownership of 20 percent or more of the outstanding common shares, or
(ii) has commenced, or announced an intention, to make a tender offer or
exchange offer if, upon consummation, such person or group would be the
beneficial owner of 20 percent or more of the outstanding common shares.
Acquiring Person does not include any person who beneficially owns 20 percent
or more of the Company's common stock: (1) as a result of the reduction in the
number of shares of common stock outstanding due to the Company's acquisition
of its common stock; (2) as a result of (a) a transfer by will or the laws of
descent and distribution, (b) the transfer of shares to any member of the
transferor's immediate family or to a trust for the benefit of a member of the
transferor's immediate family, (c) a divorce decree or settlement or (d) the
transfer of shares to a beneficiary of a trust; or (3) as a result of any
acquisition of shares pursuant to an employee benefit plan of the Company.
If such rights become exercisable as a result of clause (i) described above,
each right will entitle its holder, other than the Acquiring Person, upon
payment of the $150 exercise price, to receive common shares with a deemed
market value of twice such exercise price. Such rights for common shares will
not be triggered if the 20 percent acquisition is made pursuant to a tender or
exchange offer for all outstanding common shares which a majority of the
Continuing Directors (as defined in the plan) of the Company deem to be in the
best interests of the Company and its shareholders. If there is a merger with
an acquirer of 20 percent or more of the Company's common stock and the Company
is not the surviving corporation, or more than 50 percent of the Company's
assets, earning power, or cash flow is transferred or sold, each right will
entitle its holder to receive the acquiring company's common shares with a
deemed market value of twice such exercise price.
All of the rights may be redeemed by the Board of Directors of the Company at a
price of $.01 per right until ten business days (or such later date as the
Board of Directors determines) after the public announcement that a person or
group has acquired beneficial ownership of 20 percent or more of the
outstanding common shares. After a person or group acquires 20 percent or more
of the Company's common shares, the Board of Directors may redeem the rights
only with the concurrence of a majority of the Continuing Directors. The
rights, which do not have voting rights and are not entitled to dividends,
expire on August 7, 2000.
There are 10,000,000 shares of preferred stock, no par value per share
authorized for issuance. At December 31, 1993, there was no preferred stock
outstanding; and 140,000 shares of preferred stock were reserved for issuance
in connection with the Shareholder Rights Plan.
8. EMPLOYEE BENEFITS
The Company has a number of postretirement plans which provide certain medical
and life insurance benefits for qualified retired employees. Substantially all
of the Company's active employees may become eligible for these benefits if
they have 15 years of service and have reached age 55. The postretirement
medical plans are generally contributory with retiree contributions adjusted
annually and contain cost-sharing features such as deductibles and coinsurance.
The accounting for postretirement medical plans anticipates future cost-sharing
changes such that the Company's portion of total cost does not increase,
consistent with its past practice. In addition, cost sharing will be modified
for employees retiring in 1993 or later such that the Company's cost does not
increase over the 1997 level.
The postretirement life plans provide free insurance coverage up to a maximum
of $5,000 for retirees prior to January 1, 1993 of the Company with the
exception of Cosmos whose retirees are insured with an outside company.
Effective January 1, 1993 the Company adopted the accrual method of accounting
for postretirement medical and life insurance benefits pursuant to FAS 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." The
Company elected to immediately expense a transition obligation of $15,254,000
pre-tax ($10,068,000 after-tax), representing the cumulative effect of adopting
this accounting principle. Prior to 1993, the Company had expensed the cost of
these benefits as claims were incurred,
212
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
primarily on a cash basis. The Company's policy has historically been to fund
for postretirement benefits on a pay-as-you-go basis with no amounts
accumulated specifically to prefund future benefits. Currently, there are no
plans to change this policy.
Net periodic postretirement benefit cost for the year ended December 31, 1993
was $1,477,000 and included the following components:
<TABLE>
<CAPTION>
December 31, 1993
- -----------------------------------------------------------------------------------------------------------------------
(In $000's) Medical Life
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Service cost $ 129 $ --
Interest cost 1,071 277
- -----------------------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $1,200 $277
=======================================================================================================================
</TABLE>
Postretirement benefit costs for the periods ended December 31, 1992, and 1991,
which were recorded on a cash basis, were $1,032,000 and $1,390,000,
respectively.
Proforma amounts for net income and earnings per share assuming the retroactive
application of the accrual method of accounting for postretirement benefits
compared to reported net income and earnings per share are shown below:
<TABLE>
<CAPTION>
(In $000's, except per share amounts) 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Pro Forma
- ---------
Net income $40,729 $30,315
Earnings per share $ 2.50 $ 1.91
As Reported
- -----------
Net income $40,885 $30,566
Earnings per share $ 2.51 $ 1.93
</TABLE>
The following schedule reconciles the status of the Company's plans with the
postretirement benefit liability reported on its balance sheets:
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
- -----------------------------------------------------------------------------------------------------------------------
(In $000's) Medical Life Medical Life
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retirees $14,172 $4,140 $ 12,344 $ 3,577
Fully eligible active plan participants 757 -- 1,101 --
Other active plan participants 880 -- 433 --
- -----------------------------------------------------------------------------------------------------------------------
Accumulated post-retirement benefit obligation 15,809 4,140 13,878 3,577
Unrecognized net gain or (loss) (1,957) (362) -- --
Unrecognized transition obligation -- -- (13,389) (1,865)
- -----------------------------------------------------------------------------------------------------------------------
Accrued postretirement benefit obligation $13,852 $3,778 $ (489 $ 1,712
=======================================================================================================================
</TABLE>
At December 31, 1993, the weighted-average annual assumed rate of increase in
the per capita cost of covered medical benefits (ie. the health care cost
trend rate) is 13% for 1994, and is assumed to decrease by 1% per year to 5% in
2002 and thereafter. At December 31, 1992, the health care cost trend rate
assumption was 14% and the rate graded down by 1% per year to 6% in 2001 and
thereafter. A one percentage point increase in the assumed health care cost
trend rate for each future year would increase the accrued postretirement
benefit obligation by approximately $750,000 and postretirement expense by
$46,000.
The assumed weighted average discount rate used in determining the accrued
postretirement medical and life benefit obligation was 7% and 8% at December
31, 1993 and 1992, respectively.
The Company has profit sharing plans for substantially all of its employees.
Contributions to these plans are made at the discretion of the Board of
Directors and are paid into a trust which is administered by a separate
trustee. Contributions for these plans were $4,234,000, $3,952,000 and
$3,533,000 in 1993, 1992 and 1991, respectively.
213
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
The Company has a voluntary thrift and investment plan, qualified under Section
401(k) of the Internal Revenue Code, for substantially all of its employees.
The Company makes a matching contribution to the plan of up to 3% of the
employee's compensation. The Company's matching contributions percentage may be
changed at the discretion of each participating subsidiary's Board of
Directors. The Company's contributions for this plan were $2,020,000,
$1,632,000 and $1,393,000 in 1993, 1992, and 1991, respectively.
9. PROVISION FOR INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by FAS
109, "Accounting for Income Taxes". As permitted under the new rules, the 1992
and 1991 Consolidated Financial Statements have been restated in conformity
with FAS 109. In addition, certain information presented in the unaudited "Six
Years in Review" and Note 13 has been restated to comply with the provisions of
FAS 109. The cumulative effect of adopting FAS 109 was to decrease January 1,
1991 retained earnings by $18,407,000. The application of the new income tax
rules had the following effect on net income and earnings per share:
(In 000's, except per share amounts) 1992 1991
- --------------------------------------------------------------------------
Increase to net income $393 $464
Increase to earnings per share .03 .03
The following restated balance sheet amounts at December 31, 1992 are
significantly different from the amounts originally reported:
As Originally As Restated
(In 000's) Reported Under FAS 109
- ----------------------------------------------------------------------------
Deferred income taxes $ 89,010 $112,868
Retained earnings $279,978 $262,428
The Company has net operating loss carryforwards of $22,722,000 and $16,598,000
at December 31, 1993 and 1992, which will expire between the years 2002 and
2007.
214
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
Deferred income taxes reflect the tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets as of December 31, 1993 and 1992
are as follows:
<TABLE>
<CAPTION>
(In 000's) 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Insurance operations deferred tax liabilities:
Policy acquisition costs expensed on tax return and deferred on books $ 85,276 $ 84,131
Deduction for increase in life insurance reserves on tax return in
excess of amount on books 16,622 14,958
Bond market discount accrued on books but not on tax return 8,394 8,705
Tax over book partnership losses 4,642 3,285
Software development costs expensed on tax return 7,438 6,505
Deferred tax on unrealized gains 2,699 2,010
Non-insurance companies deferred tax liabilities:
Tax over book depreciation 6,559 7,197
Tax over book amortization 4,375 4,038
- -----------------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities $136,005 $130,829
- -----------------------------------------------------------------------------------------------------------------------
Insurance operations deferred tax assets:
Taxable income from financial reinsurance not included in income per books 5,040 6,528
Postretirement benefits not deducted for tax 7,188 748
Other 4,418 4,333
Non-insurance companies deferred tax assets:
Net operating loss carryover 7,953 4,505
Other 1,402 1,847
- -----------------------------------------------------------------------------------------------------------------------
Total deferred tax assets 26,001 17,961
- -----------------------------------------------------------------------------------------------------------------------
Net deferred tax liability $110,004 $112,868
=======================================================================================================================
</TABLE>
Significant components of the provisions for income taxes are as follows:
<TABLE>
<CAPTION>
(In 000's) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $23,017 $ 12,735 $ 663
State 1,131 1,147 1,154
- -----------------------------------------------------------------------------------------------------------------------
Total current 24,148 13,882 1,817
Deferred:
Federal 2,217 7,182 11,188
State (128) (50) (121)
- -----------------------------------------------------------------------------------------------------------------------
Total deferred 2,089 7,132 11,067
=======================================================================================================================
Total tax provision $26,237 $ 21,014 $ 12,884
=======================================================================================================================
</TABLE>
The total tax provision for 1993 includes $3.8 million related to the impact
from the federal tax rate change from 34% to 35% of which $3.2 million relates
to the impact on the Company's deferred tax liability as of the beginning of
the year. The total tax provision for 1993 does not include the deferred tax
benefit of $6.1 million related to the cumulative effect of accounting changes
resulting from the adoption of FAS 106 and FAS 112 which are reported net of
taxes.
215
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is:
<TABLE>
<CAPTION>
(In 000's) 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax rate 35% 34% 34%
Rate applied to pre-tax income before the cumulative effect of accounting changes $ 27,063 $ 21,046 $ 14,773
Release of tax reserves (3,350) -- (511)
Rate change expense on beginning liability 3,216 -- --
Tax exempt interest and dividends (1,466) (1,143) (1,437)
Prior year tax exempt interest -- -- (886)
State and local income taxes 652 757 762
Other 122 354 183
- --------------------------------------------------------------------------------------------------------------------------------
Provision for income taxes $ 26,237 $ 21,014 $ 12,884
================================================================================================================================
</TABLE>
Income taxes paid were approximately $18,437,000, $16,300,000 and $3,774,000 in
1993, 1992 and 1991, respectively.
Under prior tax law, a portion of the life insurance subsidiaries' earnings was
not taxed when earned. Such accumulated income ("policyholders' surplus")
amounts to approximately $56,292,000 at December 31, 1983 and, under the Tax
Reform Act of 1984, was frozen at that amount. Under certain conditions,
including certain cash distributions to shareholders, policyholders' surplus
could be subject to income tax at current rates. At rates in effect for 1993,
such income taxes would amount to approximately $19,702,000. Since the Company
believes that no tax will be incurred on any part of policyholders' surplus in
the foreseeable future, no provision for taxes thereon has been made.
10. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Quarterly results of operations for each of the years ended December 31, 1993
and 1992 are as follows:
<TABLE>
<CAPTION>
Quarter Ended
- --------------------------------------------------------------------------------------------------------------------------------
1993 (In 000's) March 31 June 30 Sept. 30 Dec. 31
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $115,554 $120,978 $115,749 $120,664
================================================================================================================================
Income before income taxes and cumulative effect
of accounting changes $ 21,183 $ 20,460 $ 17,569 $ 18,112
================================================================================================================================
Cumulative effect of accounting changes, net of taxes $(11,940) $ -- $ -- $ --
================================================================================================================================
Net income $ 2,074 $ 13,281 $ 8,078 $ 15,714
================================================================================================================================
Earnings per share before cumulative effect of accounting changes $ .72 $ .68 $ .41 $ .80
================================================================================================================================
Earnings per share $ .11 $ .68 $ .41 $ .80
================================================================================================================================
<CAPTION>
Quarter Ended
- --------------------------------------------------------------------------------------------------------------------------------
1992 (In 000's) March 31 June 30 Sept. 30 Dec. 31
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 92,190 $ 94,805 $104,266 $111,495
================================================================================================================================
Income before income taxes $ 13,318 $ 17,603 $ 14,672 $ 16,306
================================================================================================================================
Net income $ 8,875 $ 11,671 $ 9,767 $ 10,572
================================================================================================================================
Earnings per share $ .56 $ .73 $ .60 $ .62
================================================================================================================================
</TABLE>
11. STATUTORY RESULTS OF OPERATIONS
Statutory net income including realized gains and losses of the Insurance Group
for each of the years ended December 31, 1993, 1992, and 1991 was $22.1
million, $14.4 million, and $70.9 million, respectively. 1993 includes results
of operations for Estate from the date of acquisition. 1992 includes results of
operations for both Pierce National and Magnolia Life from the date of
acquisition. 1991 includes reinsurance income of $27.1 million from Lincoln
National Life Reinsurance Company related to home service business and $24.8
million from Life Reassurance Corporation of America related to general agency
business; and $9.0 million of reinsurance cost paid to Integon Life Insurance
Corporation related to mortgage protection business.
216
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
12. ACQUISITIONS
The Company's principal strategy is to grow internally and through insurance
acquisitions. As summarized below, the Company completed the acquisition of two
insurance companies during 1992, the acquisition of a small block of insurance
business during 1993, and the acquisition of two insurance companies during
February 1994 with two additional acquisitions currently pending (one insurance
acquisition and one real estate).
In July 1992, the Company acquired Pierce National Life Insurance Company, a
major provider of pre-need life insurance writing $31.0 million of annualized
premiums, for $45.0 million in cash and 10,000 shares of common stock valued at
$295,000. The acquisition was accounted for as a purchase. Accordingly, the
consolidated financial statements include the results of operations of Pierce
National from the date of acquisition. $6.5 million excess of the purchase
price over the value of identifiable net assets acquired was assigned to
goodwill and is being amortized over twenty years on a straight-line basis. The
Company effectively relocated Pierce National's headquarters from Los Angeles,
California to Greenville, South Carolina in October 1992. Approximately
one-third of Pierce National's operations are in Canada and are subject to
foreign currency translation (see Note 1).
In October 1992, the Company acquired Magnolia Life Insurance Company, a home
service company writing $15.0 million of annualized premiums, for $11.3 million
in cash, 409,795 shares of common stock valued at $11.3 million and repayment
of $10.1 million of outstanding debt. The acquisition was accounted for as a
purchase and, accordingly, the consolidated financial statements include the
results of operations of Magnolia Life from the date of acquisition. The
acquisition resulted in no goodwill. The Company relocated the headquarters of
Magnolia Life from Lake Charles, Louisiana to Greenville, South Carolina during
March 1993 and is currently in the process of integrating Magnolia Life into
Liberty Life.
The following unaudited pro forma combined results of operations for the years
ended December 31, 1992 and 1991 give effect to the acquisitions of Pierce
National and Magnolia Life as though they had occurred at the beginning of that
year. Pro forma results are not necessarily indicative of the results that
actually would have occurred or which will be obtained in the future.
(In 000's, except per share data) 1992 1991
- --------------------------------------------------------------------------------
Revenues $443,715 $433,379
Net income $ 44,459 $ 31,289
Earnings per share $ 2.69 $ 1.92
The combined pro forma earnings per share for both the effect of the stock
offering as discussed in Note 7 and the acquisitions above for the year ended
December 31, 1992 as though they had occurred at the beginning of that year is
$2.42.
In April 1993 the Company closed its acquisition of the assets and block of
business of Estate Assurance Company, the insurance subsidiary owned by Stewart
Enterprises Inc. of Metarie, Louisiana. With $7 million of annualized premiums,
of which a substantial majority consists of single pay premiums, the
acquisition of Estate did not have a material impact on the Company's business
but did result in increasing the Company's penetration into the pre-need
market.
In February 1994, the Company completed the acquisition of North American
National Corporation ("North American") and American Funeral Assurance Company
("American Funeral"), two pre-need companies which have significantly expanded
the Company's pre-need life insurance business.
North American, headquartered in Columbus, Ohio, is a holding company whose
principal subsidiaries, Pan-Western Life Insurance Company, Howard Life
Insurance Company, and Brookings International Life Insurance Company, are
major providers of pre-need life insurance and combined provide $24 million in
annualized premiums. The acquisition adds strategic midwest markets to
Liberty's pre-need territory. The $51.9 million purchase price was funded with
proceeds from the Company's credit facility. North American is expected to be
relocated to Greenville, South Carolina in the near future and merged into the
Company.
American Funeral, headquartered in Amory, Mississippi, is one of the largest
providers of pre-need insurance with $59 million in annualized premiums, of
which a significant amount consists of single pay premiums. The $28.1 million
purchase price was funded through a combination of proceeds from the Company's
credit facility and a new class of convertible preferred stock issued at the
time of closing.
In addition to the pre-need insurance acquisitions, the Company signed a letter
of intent in June 1993 to purchase State National Capital Corporation ("State
National"), headquartered in Baton Rouge, Louisiana. State National is the
parent company of State National Life Insurance Company, a home service
company, and several other small subsidiaries. The acquisition is expected to
add
217
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Liberty Corporation and Subsidiaries
December 31, 1993
$10 million in annualized premiums and combined with Magnolia Life would
provide the Company with a significant home service presence in the state of
Louisiana. The $27.5 million purchase price is expected to be funded through a
combination of proceeds from the Company's credit facility, a new class of
preferred stock to be issued at the time of closing, and common stock. The
acquisition is expected to close during the first quarter of 1994 and is
subject to regulatory approval, shareholder approval and other conditions.
State National is expected to be relocated to Greenville, South Carolina in the
near future and merged into the Company.
The Company is in the process of finalizing an agreement to purchase a portion
of the real estate assets of SCANA Development Corporation, a subsidiary of
SCANA Corporation for approximately $50 million. The real assets expected to be
acquired from SCANA consist of residential development properties under
development, undeveloped land held for future development, business parks, and
retail and office properties (rental income producing). A substantial majority
of the projects are located in South Carolina. The acquisition is expected to
close during early second quarter 1994 and is subject to the completion of due
diligence. The purchase price is expected to be funded with proceeds from a
combination of internally generated funds and the Company's credit facility.
13. BUSINESS SEGMENT INFORMATION
The Company is actively engaged through certain of its subsidiaries in two
major business segments: insurance and broadcasting. Sales between the various
subsidiaries of the Company are not material and are eliminated. Information
for these segments is contained in the Selected Financial Data on page 37 and,
with respect to the years 1991 through 1993, is incorporated by reference.
218
<PAGE> 38
REPORT OF INDEPENDENT AUDITORS
The Liberty Corporation and Subsidiaries
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
THE LIBERTY CORPORATION
We have audited the accompanying consolidated balance sheets of The Liberty
Corporation and subsidiaries as of December 31, 1993 and 1992 and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Liberty
Corporation and subsidiaries at December 31, 1993, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its methods of accounting for income taxes and reinsurance in 1993 and
restated prior period financial statements to reflect the changes. In addition,
as discussed in Note 1 to the consolidated financial statements, effective
January 1, 1993, the Company changed its methods of accounting for
postretirement benefits other than pensions and postemployment benefits.
/s/ Ernst & Young
Greenville, South Carolina
February 24, 1994
219
<PAGE> 1
EXHIBIT 21
THE LIBERTY CORPORATION AND SUBSIDIARIES
LIST OF SUBSIDIARIES
DECEMBER 31, 1993
<TABLE>
<CAPTION>
Percentage of
Voting Stock
Jurisdiction Owned by
of Immediate
Incorporation Parent
------------- -----------------
<S> <C> <C> <C>
A. The Liberty Corporation S. C.
B. Liberty Life Insurance Company S. C. 100
C. Orion Life Insurance Company Delaware 100
C. Park Avenue Associates, Inc. S. C. 100
C. Tanyard Creek Partnership S. C. 60
C. Exchange Place Corporation N. C. 100
C. Greensboro Holdings, Inc. S. C. 100
B. Liberty Insurance Services Corporation S. C. 100
B. Pierce National Life Insurance Co. California 100
B. Magnolia Life Insurance Company Louisiana 100
B. AFAC Acquisition Insurance Company Mississippi 100
B. Cosmos Broadcasting Corporation S. C. 100
C. CableVantage Inc. S. C. 100
D. Special Services Corporation S. C. 100
D. Hampton Insurance Agency, Inc. S. C. 100
D. The Liberty Marketing Corporation S. C. 100
D. Bent Tree Corporation Georgia 100
D. TLC Business Ventures, Inc. S. C. 100
D. LC Limited Insurance Company Bermuda
D. Liberty Investment Group, Inc. S. C. 100
D. Liberty Capital Advisors, Inc. S. C. 100
D. Liberty Properties Group, Inc. S. C. 100
D. LPG Development Corporation S. C. 100
D. SouthChase Development Corporation S. C. 100
D. LIBCO of Virginia, Inc. Virginia 100
D. LIBCO of Florida, Inc. Florida 100
D. LPC of S. C., Inc. S. C. 100
D. LIBCO of Tennessee, Inc. Tennessee 100
D. Commerce Center of Greenville, Inc. S. C. 100
D. Liberty Stone Associates, Inc. S. C. 50
</TABLE>
A. Separate condensed financial statements filed as a
schedule to the consolidated financial statements. Also
included in the consolidated financial statements.
B. Separate financial statements not filed. Included in
the consolidated financial statements.
C. Consolidated with the applicable parent.
D. Minor subsidiaries. Included in the condensed financial
statements of The Liberty Corporation.
220
<PAGE> 1
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of The Liberty Corporation of our report dated February 24, 1994, included in
the 1993 Annual Report to Shareholders of The Liberty Corporation.
Our audits also included the financial statement schedules of The Liberty
Corporation listed in Item 14(a). These schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in Post-Effective Amendment
No. 5 to the Registration Statement (Form S-8 No. 2-53890) pertaining to the
Company's Stock Option Plan, in the Registration Statement (Form S-8 No.
33-34314) pertaining to the 1983 Performance Incentive Compensation Program, in
the Registration Statement (Form S-8 No. 33-34816) pertaining to The Liberty
Corporation and Adopting Related Employers' 401(k) Thrift Plan, and in the
Registration Statements (Form S-8 No. 33-34814, Form S-8 No. 33-34815, and Form
S-8 No. 33-34817) all pertaining to The Liberty Corporation and subsidiaries
Profit Sharing and Trust Plans of our report dated February 24, 1994 with
respect to the consolidated financial statements and schedules of The Liberty
Corporation included and incorporated by reference in the annual report on Form
10-K and our report dated March 11, 1994 with respect to the financial
statements and schedules included in the annual report on Form 11-K of The
Liberty Corporation and Adopting Related Employers' 401(k) Thrift Plan for the
year ended December 31, 1993.
/s/ Ernst & Young
Greenville, South Carolina
March 23, 1994
221
<PAGE> 1
EXHIBIT 99-A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------
FORM 11-K
------------------
ANNUAL REPORT
Pursuant to Section 15 (d) of the
Securities Exchange Act of 1934
The Liberty Corporation
2000 Wade Hampton Boulevard
Greenville, South Carolina 29615
For the Year Ended December 31, 1993
------------------
THE LIBERTY CORPORATION
AND ADOPTING RELATED EMPLOYERS'
401(K) THRIFT PLAN
The Liberty Corporation
2000 Wade Hampton Boulevard
Greenville, South Carolina 29615
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<PAGE> 2
Item 1. Changes in the Plan
None.
Item 2. Changes in Investment Policy
None.
Item 3. Contributions Under the Plan
Contributions under the Plan by The Liberty Corporation (the "Company") and its
participating subsidiaries (the Company and the participating subsidiaries
being collectively referred to as the "employers") are measured by reference to
the employees' contributions which may be on a pre-tax or after-tax basis.
Employer matching contributions are made only on pre-tax employee contributions
in accordance with a formula set each year by the employer's board of
directors. During 1993, the Company and all participating subsidiaries,
contributed an amount equal to 100% of a participant's pre-tax contribution, up
to a maximum of 3% of the participant's compensation.
Employer matching contributions totaling $2,052,000 in 1993, $1,655,000 in
1992, $1,388,000 in 1991, $1,298,000 in 1990, and $1,373,000 in 1989 were
credited to the accounts of participating employees.
Item 4. Participating Employees
There were 1,975 enrolled participants in the Plan as of December 31, 1993.
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<PAGE> 3
Item 5. Administration of the Plan
(a) Parties responsible for the administration of the Plan are: (1) the
Plan Committee, made up of at least three members named by the
Company, (2) the Trustee and (3) the Plan Administrator which is named
by the Plan Committee.
The Plan Committee is responsible for the administration and operation
of the Plan, except as to responsibilities which have been
specifically assigned to the Trustee, to an Investment Manager, or to
the Plan Administrator. Present members of the Plan Committee, their
positions with the Company and its subsidiaries, and their addresses
are as follows:
Jennie M. Johnson
Vice President, Planning
The Liberty Corporation
P.O. Box 789
Greenville, South Carolina 29602
Porter B. Rose
President
Liberty Investment Group, Inc.
Chairman of the Board
Liberty Capital Advisors, Inc.
Liberty Properties Group, Inc.
P.O. Box 789
Greenville, South Carolina 29602
William C. Schulze
Vice President, Human Resources
Liberty Life Insurance Company
P.O. Box 789
Greenville, South Carolina 29602
Neil Smith
Vice President, Controller
Cosmos Broadcasting Corporation
P.O. Box 789
Greenville, South Carolina 29602
Martha G. Williams
Vice President, General Counsel and Secretary
The Liberty Corporation
P.O. Box 789
Greenville, South Carolina 29602
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<PAGE> 4
The Trustee is responsible for the management, investment and control
of the assets of the Trust established by the Plan, and for the
disbursements of benefits therefrom, except to the extent that the
Trustee may be relieved of investment responsibility by the
appointment of an Investment Manager or by direction of the Plan
Committee. The present Trustee is Wachovia Bank of NC, N.A., P.O. Box
3099, Winston-Salem, North Carolina 27102. Wachovia Bank of NC, N.A.,
is also trustee under Profit-Sharing Plans maintained by the Company
and its subsidiaries for employees. Neuberger & Berman Pension
Management, Inc. ("Neuberger & Berman") is Investment Manager of a
portion of the Common Stock Fund, one of the four funds comprising the
Plan (see page 9, Notes to Financial Statements - Description of Plan
for further details). Neuberger & Berman's address is 522 Fifth
Avenue, New York, New York 10036. Hellman, Jordan Management Company,
Inc. ("Hellman, Jordan") is also Investment Manager of a portion of
the Common Stock Fund. Their address is P.O. Box 389, Boston, MA
02101. Wachovia has investment responsibility for one of the Plan's
other three funds, The Liberty Corporation Stock Fund. Liberty
Capital Advisors, Inc., a subsidiary of the Company and a
participating employer of the Plan, was given investment
responsibility of the Plan's Money Market Fund, effective January 1,
1988 and of the Plan's Intermediate Bond Fund, effective July 1, 1990.
Liberty Capital Advisor's address is Post Office Box 789, Greenville,
South Carolina 29602.
The Plan Administrator is currently an Administrative Committee which
is responsible for the daily administration and operational functions
of the Plan, including filing all reports with governmental agencies,
providing Plan participants with information, preparing year-end
reports to participants, maintaining all required records,
interpreting the provisions of the Plan and settling disputes over the
rights of employees, participants and beneficiaries. Present members
of the Administrative Committee, their positions with the Company and
its Subsidiaries, and their addresses are as follows:
Mary Anne Bunton, Assistant Vice President of the Benefits
Department of The Liberty Corporation, whose address is P.O.
Box 789, Greenville, South Carolina 29602
Susan E. Cyr, Counsel and Assistant Secretary of the Legal
Department of The Liberty Corporation, whose address is P.O.
Box 789, Greenville, South Carolina 29602
The Plan Committee members, the Trustee and the Administrative
Committee members do not have any positions or offices with the
Company or any of its affiliates except as indicated above.
(b) For the year ended December 31, 1993, expenses of administration of
the Plan of approximately $227,000, including fees and expenses of the
Trustee and two of the Investment Managers, Neuberger & Berman and
Hellman, Jordan, were paid out of the assets of the Plan. Expenses of
Liberty Capital Advisors were paid by the employers rather than out of
the Plan assets.
Item 6. Custodian of Investments
(a) Wachovia Bank of NC, N.A., P.O. Box 3099, Winston-Salem, North
Carolina 27102 serves as Trustee of the Plan and the assets of the
Plan.
(b) The Trustee received compensation from the assets of the Plan of
$25,969 during the year ended December 31, 1993.
(c) No bond was furnished by the custodian (Wachovia).
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<PAGE> 5
Item 7. Reports to Participating Employees
Each Plan participant receives a quarterly statement showing the balance in his
Plan account (including a breakdown of the amounts invested in each investment
medium offered), amounts contributed by him and by his Employer, dividends,
interest and other gains credited to his account, any amounts forfeited or
otherwise charged against his account, and additional shares purchased if the
employee has elected to have some or all of his and his Employer's
contributions invested in the Company's stock. These individualized reports, a
copy of the proxy statement and a copy of the annual report are the reports
that were distributed to Plan participants during the year ended December 31,
1993.
Item 8. Investment of Funds
(a) Employee contributions and matching Employer contributions may be
invested in increments of 25% in: the Liberty Corporation Stock Fund
which consists solely of Company common stock, the Money Market Fund
which consists of various money market instruments and U.S. Government
securities, the Intermediate Bond Fund which consists of intermediate
- term government and good quality corporate bonds, or the Common
Stock Fund which consists of high quality common stock or securities
convertible into common stock, other than Company stock. For the
years ended December 31, 1993, 1992, and 1991, there were no brokerage
commissions paid by the Plan for the Intermediate Bond Fund and the
Money Market Fund, but there were brokerage commissions paid by the
Plan for the Common Stock Fund.
(b) No brokerage transactions effected for the Plan, during the three
years ended December 31, 1993, were directed to brokers because of
research services provided.
<TABLE>
<S> <C> <C>
Item 9. Financial Statements and Exhibits
- ------------------------------------------
Page No.
--------
(a) Financial Statements
Report of Independent Auditors 6
(The Consent of Independent Auditors is Exhibit 24 of
the Form 10-K of which this report is also an exhibit.)
Statements of Net Assets Available for Plan Benefits -
December 31, 1993 and 1992 7
Statements of Changes in Net Assets Available for Plan
Benefits - For the Years Ended December 31, 1993 and 1992 8
Notes to Financial Statements - December 31, 1993 9 - 13
Schedule of Assets Held for Investments - December 31, 1993 14 - 15
Schedule of Transactions or Series of Transactions in Excess
of 5% of the Current Value of Plan Assets - December 31, 1993 16
(b) Exhibits
None
</TABLE>
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<PAGE> 6
REPORT OF INDEPENDENT AUDITORS
To the Administrative Committee of The Liberty Corporation
and the Adopting Related Employers' 401(k) Thrift Plan
and Board of Directors
The Liberty Corporation
We have audited the accompanying statements of net assets available for plan
benefits of The Liberty Corporation and Adopting Related Employers' 401(k)
Thrift Plan as of December 31, 1993 and 1992, and the related statements of
changes in net assets available for plan benefits for the years then ended.
These financial statements are the responsibility of the Plan's management.
Our responsibility is to express an opinion of these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan
at December 31, 1993 and 1992, and the changes in net assets available for plan
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion of the financial
statements taken as a whole. The accompanying supplemental schedules
of net assets held for investments as of December 31, 1993, and transactions or
series of transactions in excess of 5% of the current value of plan assets for
the year then ended are presented for purposes of complying with the Department
of Labor's Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974, and are not a required part of
the financial statements. The supplemental schedules have been subjected to
the auditing procedures applied in our audit of the 1993 financial statements
and, in our opinion, are fairly stated in all material respects in relation to
the 1993 financial statements taken as a whole.
/s/ Ernst & Young
Greenville, South Carolina
March 11, 1994
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<PAGE> 7
THE LIBERTY CORPORATION AND ADOPTING RELATED EMPLOYERS' 401(K) THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1993 and 1992
(In $000's)
<TABLE>
<CAPTION>
1993
----------------------------------------------------------
Liberty Money Common Inter.
Stock Market Stock Bond
Fund Fund Fund Fund Total
--------- --------- --------- --------- --------
ASSETS
<S> <C> <C> <C> <C> <C>
Cash $ -- $ -- $ 4 $ -- $ 4
Investments
Short-term investments
(total cost of $5,956 in
1993 and $6,776 in 1992) -- 2,834 1,529 1,593 5,956
The Liberty Corporation
common stock (total cost of
$7,611 in 1993 and $5,352
in 1992) 7,913 -- -- -- 7,913
Other common stocks
(total cost of $14,088 in 1993
and $10,439 in 1992) -- -- 16,661 -- 16,661
Convertible preferred stocks
(total cost of $259 in 1992) -- -- -- -- --
Securities of US government
and agencies (total cost of $9,149
in 1993 and $7,231 in 1992) -- 6,411 -- 2,889 9,300
Due from broker for securities sold 2 252 229 -- 483
Participant loans receivable 730 838 1,136 111 2,815
Accrued investment income 43 115 16 45 219
--------- -------- -------- -------- --------
8,688 10,450 19,575 4,638 43,351
--------- -------- -------- -------- --------
LIABILITIES
Expenses payable 10 13 24 6 53
Due to broker for securities
purchased 90 -- 291 252 633
--------- -------- -------- -------- --------
NET ASSETS AVAILABLE FOR $ 8,588 $ 10,437 $ 19,260 $ 4,380 $ 42,665
PLAN BENEFITS ========= ======== ======== ======== ========
<CAPTION>
1992
----------------------------------------------------------
Liberty Money Common Inter.
Stock Market Stock Bond
Fund Fund Fund Fund Total
ASSETS --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Cash $ -- $ 20 $ 2 $ 6 $ 28
Investments
Short-term investments
(total cost of $5,956 in
1993 and $6,776 in 1992) 111 3,547 2,291 827 6,776
The Liberty Corporation
common stock (total cost of
$7,611 in 1993 and $5,352
in 1992) 7,236 -- -- -- 7,236
Other common stocks
(total cost of $14,088 in 199
and $10,439 in 1992) -- -- 13,304 -- 13,304
Convertible preferred stocks
(total cost of $259 in 1992) -- -- 342 -- 342
Securities of US government
and agencies (total cost of $9,149
in 1993 and $7,231 in 1992) -- 5,439 -- 2,018 7,457
Due from broker for securities sold
-- -- -- -- --
Participant loans receivable 579 628 924 25 2,156
Accrued investment income 36 97 16 23 172
--------- --------- --------- -------- --------
7,962 9,731 16,879 2,899 37,471
--------- --------- --------- -------- --------
LIABILITIES
Expenses payable 9 12 20 4 45
Due to broker for securities
purchased -- -- -- -- --
--------- --------- --------- -------- --------
NET ASSETS AVAILABLE FOR $ 7,953 $ 9,719 $ 16,859 $ 2,895 $ 37,426
PLAN BENEFITS ========= ========= ========= ======== ========
</TABLE>
See notes to financial statements.
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<PAGE> 8
THE LIBERTY CORPORATION AND ADOPTING RELATED EMPLOYERS' 401(K) THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE TWO YEARS ENDED DECEMBER 31, 1993
(In $000's)
<TABLE>
<CAPTION>
1993
-----------------------------------------------------------
Liberty Money Common Inter.
Stock Market Stock Bond
Fund Fund Fund Fund Total
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income
Dividends
The Liberty Corporation
common stock $ 159 -- -- -- $ 159
Other stocks -- -- 200 -- 200
Interest on securities 8 477 69 205 759
Interest on participant
loans 43 31 74 14 162
Miscellaneous -- -- 5 -- 5
------- ------- -------- -------- --------
Total Investment Income 210 508 348 219 1,285
Net realized and unrealized
appreciation (depreciation) in
fair value of investments (1442) (23) 1,101 (19) (383)
CONTRIBUTIONS
Employer 481 452 878 241 2,052
Employee 858 744 1,559 453 3,614
------- ------- -------- -------- --------
Total Contributions 1,339 1,196 2,437 694 5,666
------- ------- -------- -------- --------
TRANSFERS FROM OTHER QUALIFIED PLANS 212 541 334 313 1,400
TRANSFERS BETWEEN FUNDS 749 (481) (793) 525 --
WITHDRAWALS
Benefits paid (414) (997) (853) (238) (2,502)
PLAN EXPENSES (19) (26) (173) (9) (227)
------- ------- -------- -------- --------
INCREASE (DECREASE) IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS 635 718 2,401 1,485 5,239
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT BEGINNING OF YEAR 7,953 9,719 16,859 2,895 37,426
------- ------- -------- -------- --------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS AT END OF YEAR $ 8,588 $10,437 $ 19,260 $ 4,380 $ 42,665
======= ======= ======== ======== ========
See notes to financial statements.
<CAPTION>
1992
-----------------------------------------------------------
Liberty Money Common Inter.
Stock Market Stock Bond
Fund Fund Fund Fund Total
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income
Dividends
The Liberty Corporation $ 123 $ -- $ -- $ -- $ 123
common stock -- -- 160 -- 16
Other stocks 3 491 71 145 71
Interest on securities
Interest on participant 30 37 64 11 142
loans -- -- -- -- --
Miscellaneous ------- ------- -------- -------- --------
Total Investment 156 528 295 156 1,135
Income
Net realized and unrealized
appreciation (depreciation) in 1,517 (55) 1,251 3 2,716
fair value of investments
CONTRIBUTIONS 328 415 737 175 1,655
Employer 587 747 1,354 357 3,045
Employee ------- ------- -------- -------- --------
915 1,162 2,091 532 4,700
Total Contributions ------- ------- -------- -------- --------
209 532 211 187 1,139
TRANSFERS FROM OTHER QUALIFIED PLAN
33 (471) 93 345 --
TRANSFERS BETWEEN FUNDS
WITHDRAWALS (333) (647) (648) (101) (1,729)
Benefits paid
(22) (26) (152) (8) (208)
PLAN EXPENSES ------- ------- ------- -------- --------
INCREASE (DECREASE) IN NET ASSETS 2,475 1,023 3,141 1,114 7,753
AVAILABLE FOR PLAN BENEFITS
NET ASSETS AVAILABLE FOR PLAN 5,478 8,696 13,718 1,781 29,673
BENEFITS AT BEGINNING OF YEAR ------- ------- -------- -------- --------
NET ASSETS AVAILABLE FOR PLAN $ 7,953 $ 9,719 $ 16,859 $ 2,895 $ 37,426
BENEFITS AT END OF YEAR ======= ======= ======== ======== ========
See notes to financial statements.
</TABLE>
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<PAGE> 9
THE LIBERTY CORPORATION AND ADOPTING RELATED EMPLOYERS' 401(K) THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
(In $000's)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting records of the Plan are maintained on the accrual
basis. Investments are carried in the financial statements at market
value. Securities traded on a national securities exchange are valued
at the last reported sales price on the last business day of the Plan
year; investments traded in the over-the-counter market and listed
securities for which no sale was reported on that date are valued at
the average of the last reported bid and ask prices. The difference
between proceeds received and the cost of investments sold is
recognized as realized gains (losses) in the statements of changes in
net assets available for plan benefits. Cost is determined based on
the average cost method for The Liberty Corporation stock, and the
first-in, first-out basis for other investments. The net change in
the aggregate current value of investments is reflected in the
statements of net assets available for plan benefits as unrealized
gains (losses).
Reclassifications
Certain 1992 amounts have been reclassified to conform to the 1993
presentation.
2. DESCRIPTION OF THE PLAN
The Plan was first offered to eligible employees beginning January,
1982. Effective July 1, 1985, the Plan was amended to include a
provision for a "qualified cash or deferred arrangement" under Section
401(k) of the Internal Revenue Code, to provide for the merger and
consolidation of the Cosmos Broadcasting Corporation Thrift and
Investment Plan into the Company's Plan and to rename the Plan The
Liberty Corporation and Adopting Related Employers' 401(k) Thrift
Plan. Any full-time employee of the Company or participating
subsidiaries who is at least 21 years old and has completed one year
of service is eligible to participate in the Plan. Subsidiaries of
the Company presently participating in the Plan consist of Liberty
Life Insurance Company, Special Services Corporation, Cosmos
Broadcasting Corporation, Liberty Capital Advisors, Inc., Liberty
Properties Group, Inc., Liberty Insurance Services Corporation,
Liberty Investment Group, Inc., and Pierce National Life Insurance
Company. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA). Administrative costs
of the Plan incurred are paid either out of Plan assets or by the
Company or its subsidiaries.
Participation in the Plan is voluntary and eligible employees may
elect to contribute up to a total of 13% of their compensation on
either a pre-tax or after-tax basis, or a combination of both, through
payroll deductions. Each participating employer makes matching
contributions on pre-tax employee contributions of up to 3% of each
employee participants' annual compensation. The matching percentage
may be changed by resolution of the Board of Directors of a
participating company, effective at the beginning of any plan year
(January 1).
The Plan is comprised of four separate funds with different investment
alternatives. The Liberty Corporation Stock Fund ("Liberty Stock
Fund") invests in the common stock of The Liberty Corporation. The
Money Market Fund invests in certificates of deposit, government
securities and other money market instruments. The Intermediate Bond
Fund invests in intermediate term government and good quality
corporate bonds with three year to seven year average maturity. The
Common Stock Fund invests in common stock, or securities
-9-
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<PAGE> 10
convertible into common stock, other than The Liberty Corporation
stock. Certain investments in the Money Market Fund and idle
investments waiting to be invested in stock in The Liberty Corporation
Stock Fund, Intermediate Bond Fund, and Common Stock Fund are invested
in short-term investments.
Employee participants may elect to invest their contributions in
increments of 25% in any fund. Matching employer contributions will
be invested in the same way as the employee's pre-tax contributions
upon which they are based. At December 31, 1993, there were 1,975
active participants in the Plan of whom 1,153, 966, 669 and 1,435
were electing to invest, either wholly or partially, in the Liberty
Stock Fund, Money Market Fund, Intermediate Bond Fund and Common Stock
Fund, respectively.
Amounts credited to a participant's employee account, either before
tax or after tax, are fully vested at all times. Amounts credited to
a participant's employer matching account vest based on the total
number of years of service (as defined under the Plan) with the
Company or its Related Employers:
<TABLE>
<CAPTION>
Number of Years Percentage
of Service of Vesting
----------------- ----------
<S> <C>
Less than 3 years ---
3 years 25%
4 years 50%
5 years 75%
6 years 100%
</TABLE>
All amounts credited to a participant's employee (before tax or after
tax) and employer matching accounts are distributed without any
forfeitures upon termination of employment due to a participant's
death, total disability or retirement, or after a participant has
completed six or more years of service.
A participant who has completed less than six years of service and is
terminated for any reason other than those mentioned above forfeits
the non-vested amounts in his employer matching account. All amounts
credited to the employee's account (before tax or after tax) and all
vested amounts credited to the employer's matching account are
distributable upon termination.
The Plan allows participants to obtain loans, within stated limits,
from the vested portion of their account balance. Repayment is
required over a period not to exceed five years, unless the loan is
used for the purchase of a principal residence. Interest is charged
on outstanding loans at a rate determined by the plan administrator.
3. INCOME TAX STATUS
The Plan is an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974. The Plan has
received a determination letter from the Internal Revenue Service
stating that the Plan is qualified under Section 401(a) of the
Internal Revenue Code, and is not subject to income taxation. The
Plan is required to operate in conformity with the Internal Revenue
Code to maintain its qualification. The Plan Committee is not aware
of any course of action or events that have occurred that might
adversely affect the Plan's qualified status.
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<PAGE> 11
Contributions made by a participant and a participating Company on or
after July 1, 1985 which constitute employee before- tax contributions
will not be currently taxable to participants when they are
contributed to the Plan, assuming this part of the Plan constitutes a
"qualified cash or deferred arrangement" within the meaning of section
401(k) of the Code. To constitute a "qualified cash or deferred
arrangement," the ratio of contributions to compensation for highly
compensated eligible employees must not exceed the ratio of
contributions to compensation for the non-highly compensated eligible
employees by more than certain percentages specified in section 401(k)
and 401(m) of the Code. The Plan has represented that these
percentage tests have been satisfied, and the above tax consequences
relating to employee before tax contributions are based on the
assumption that they are governed by the provisions of section 401(k).
Participating Company matching contributions and investment earnings
on all contributions are not taxable to a participant until these
amounts are paid to the participant. The participating Company is
entitled to a business expense deduction for its contributions.
After-tax contributions (contributions not designated as employee
before-tax contributions) made by a participant are not deductible by
the participant in computing his federal taxable income.
4. INVESTMENTS
<TABLE>
<CAPTION>
Net Appreciation
(Depreciation) in Fair Value
Fair Value At End of
During Year Year
----------------- ----------
Year ended December 31, 1993
----------------------------
<S> <C> <C>
Fair value as determined by
quoted market price
Short-term investments $ --- $ 5,956
The Liberty Corporation
common stock (1,442) 7,913
Other common stock 1,103 16,661
Convertible preferred stock ( 2) --
U.S. Government and
agency securities (42) 9,300
---------- ----------
$ (383) $ 39,830
========== ==========
Year ended December 31, 1992
----------------------------
Fair value as determined by
quoted market price
Short-term investments $ --- $ 6,776
The Liberty Corporation
common stock 1,517 7,236
Other common stock 1,222 13,304
Convertible preferred stock 29 342
U.S. Government and
agency securities (52) 7,457
---------- ----------
$ 2,716 $ 35,115
========== ==========
</TABLE>
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<PAGE> 12
The market value of individual investments that represent
5 percent or more of the Plan's total assets are as follows:
<TABLE>
<CAPTION>
December 31,
1993 1992
-------- --------
<S> <C> <C>
Wachovia Short-Term Investment Fund $ 5,956 $ 5,976
The Liberty Corporation Common Stock 7,913 7,236
</TABLE>
5. SOURCES OF CONTRIBUTIONS
The sources of contributions for the two years ended December
31, 1993, consist of the following:
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Employer:
The Liberty Corporation $ 76 $ 77
Liberty Life Insurance Company 1,232 1,191
Cosmos Broadcasting Corporation 486 305
Special Services Corporation 6 6
Liberty Capital Advisors, Inc. 13 11
Liberty Properties Group, Inc. 29 24
Pierce National Life Insurance Co. 20 1
Liberty Investment Group 12 5
Liberty Insurance Services 178 35
-------- --------
Total employer contributions 2,052 1,655
-------- --------
Employee:
The Liberty Corporation 141 129
Liberty Life Insurance Company 2,182 2,002
Cosmos Broadcasting Corporation 842 760
Special Services Corporation 11 11
Liberty Capital Advisors, Inc. 31 28
Liberty Property Group 56 50
Pierce National Life Insurance Co. 38 3
Liberty Investment Group 19 9
Liberty Insurance Services 294 53
-------- --------
Total employee contributions 3,614 3,045
-------- --------
Total contributions $ 5,666 $ 4,700
======== ========
</TABLE>
Forfeitures of non-vested balances in employer accounts of $80 in
1993 and $55 in 1992 were used to reduce employer contributions.
Additionally, amounts con-tributed by the employer during 1993 and
1992 included non-cash contributions of the Company's common stock
which had a market value, at date of contribution, of $1,518 and
$1,128, respectively. All other employer contributions were made
in cash.
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<PAGE> 13
6. PRIORITIES ON TERMINATION OF PLAN
In the event that the Plan is terminated, all expenses will be paid and
the accounts of the affected participants will be proportionately
adjusted to reflect such expenses and all contributions and withdrawals
up to the date of termination. The Plan will then be revalued and each
participant will be paid all amounts credited to his accounts. The
accounts of all participants become fully vested as of the date of
termination.
An exception to this method of distribution at termination is made for
the case in which termination is due to revocation of the Plan's
exemption from income taxes under Section 401 of the Internal Revenue
Code. In that case, all contributions, including those made by the
employer, would be returned to the respective contributors.
7. TRANSACTIONS WITH PARTIES-IN-INTEREST
During the two years ended December 31, 1993, the Plan purchased and
sold securities of parties-in-interest as summarized below:
<TABLE>
<CAPTION>
1993 1992
------------------------- -------------------------
Shares or Shares or
Principal Principal
Amount Cost Amount Cost
(In $000's) --------- -------- --------- --------
<S> <C> <C> <C> <C>
Common Stock of The Liberty
Corporation:
Purchases 89,183 $ 2,697 63,760 $ 1,625
Sales 19,007 $ 438 31,026 $ 646
Short-term investments of Plan
trustee (Wachovia Bank &
Trust Co., N. A.):
Purchases 24,515 $ 24,515 26,458 $ 26,458
Sales 24,535 $ 24,535 24,165 $ 24,165
</TABLE>
The Plan also received dividends of $159 in 1993 and $123 in 1992 from
The Liberty Corporation, interest of $216 in 1993 and $198 in 1992 from
a short-term investment fund sponsored by the Plan trustee.
Liberty Capital Advisors, Inc., a subsidiary of The Liberty Corporation
and a participating employer in the Plan, was given investment
responsibility of the Money Market Fund effective January 1, 1988 and the
Intermediate Bond Fund effective July 1, 1990. All expenses for services
performed by Liberty Capital Advisors, Inc. were paid by the participating
employers.
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<PAGE> 14
THE LIBERTY CORPORATION AND ADOPTING RELATED EMPLOYERS' 401(K) THRIFT PLAN
ASSETS HELD FOR INVESTMENTS
DECEMBER 31, 1993
(In $000's except number of shares data)
<TABLE>
<CAPTION>
Principal Amount
Name of Issuer and of Bonds & Notes, Market
Title of Each Issue Number of Shares Cost Value
- ------------------------------------------------------------ ---------------- --------- ---------
<S> <C> <C> <C>
Short-Term Investments
Wachovia Short-Term Investment Fund $ 5,956 $ 5,956 $ 5,956
--------- ---------
Total Short-Term Investments 5,956 5,956
Common Stocks
The Liberty Corporation Common Stock 326,326 7,611 7,913
Other Common Stocks
Emerging Mkts Infrastructure 10,000 142 160
Rockwell Intl Corp. 5,500 200 204
Chrysler Corp. 6,000 259 320
General Mtrs. Corp. 5,500 259 302
General Mtrs Corp. 3,500 132 137
Banc One Corp. 8,750 314 342
Citicorp 5,500 204 203
NationsBank 6,000 286 294
Wells Fargo & Co. 3,300 331 427
Pepsico Inc. 10,000 315 409
Alliedsignal Inc. 3,500 224 277
Hercules Inc. 3,000 247 341
First Data Corp. 5,000 127 204
Gillette Co. 5,000 188 298
Procter & Gamble Co. 3,500 205 200
Abbott Labs 13,500 401 400
Blockbuster Entmt 15,000 215 459
King World Prodtns Inc. 6,000 160 230
Mattel Inc. 14,000 240 387
Federal Natl Mgt Assn. 5,500 249 432
Merrill Lynch & Co. Inc. 4,400 169 185
Schwab Charles Corp. 4,000 126 129
McDonalds Corp. 6,000 187 342
Newell Co. 7,000 269 282
American Intl Group Inc. 3,750 223 329
Capital Hldg Corp. 9,000 330 334
Chubb Corp. 4,000 369 312
General Re Corp. 2,000 116 214
Torchmark Corp. 5,000 168 225
Varity Corp 7,000 269 313
Columbia Healthcare Corporation 12,000 355 398
Johnson & Johnson 7,000 276 314
Price / Costco Inc. 16,000 274 308
Amerada Hess Corp. 5,500 295 248
Tenneco Inc. 6,000 279 316
Tosco Corp. 6,000 184 175
Dow Jones & Co. Inc. 12,500 394 447
Conrail Inc. 4,700 246 314
Southern Pacific Rail Corp. 6,500 126 128
Musicland Stores Corp. 5,000 93 104
Goodyear Tire & Rubber Co. 7,000 242 320
Caesars World Inc. 6,000 209 320
Telefonos De Mexico L Adr 6,500 245 439
Tele Communications Inc. 9,000 260 272
Foamex Intl Inc. 10,000 150 170
Chrysler Corp. 4,400 168 234
Ford Motor Co Del 2,300 142 148
General Mtrs Corp. 1,500 73 82
Citicorp 4,800 175 177
Fleet Financial Group Inc. 4,900 151 164
Compaq Computer Corp. 1,300 65 96
Hewlett Packard Co. 1,000 82 79
Silicon Graphics Inc. 4,000 73 99
Wellfleet Communications Inc. 800 46 52
First Data Corp. 2,300 89 94
Microsoft Corp. 1,850 159 149
Novell Inc 2,500 70 52
Oracle Sys Corp. 1,500 45 43
Foster Wheeler Corp. 2,100 54 70
Wheelabrator Technologies Inc. 7,200 117 128
Alza Corp. 3,200 117 90
United Healthcare Corp. 1,000 78 76
</TABLE>
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235
<PAGE> 15
THE LIBERTY CORPORATION AND ADOPTING RELATED EMPLOYERS' 401(K) THRIFT PLAN
ASSETS HELD FOR INVESTMENTS
DECEMBER 31, 1993
(In $000's except number of shares data)
<TABLE>
<CAPTION>
Principal Amount
Name of Issuer and of Bonds & Notes Market
Title of Each Issue Number of Shares Cost Value
- ------------------------------------------------------------ ----------------- --------- --------
<S> <C> <C> <C>
General Instr Corp. 2,500 145 141
Intel Corp. 1,800 96 111
Scientific Atlanta Inc. 2,300 57 77
Gtech Hldgs Corp. 2,100 76 69
Waste Mgmt Intl Plc 6,200 133 109
American Express Co. 4,200 140 130
Merrill Lynch & Co. Inc. 1,500 69 63
SCI System Inc. 3,400 45 60
Beverly Enterprises, Inc. 5,000 67 66
Chiron Corp. 1,400 111 117
Columbia Healthcare Corporation 4,105 112 136
Genzyme Corp. 3,200 106 88
HCA Hosp Corp. Amer 900 26 31
Healthtrust Inc. 4,900 99 130
Value Health Inc. 1,400 50 44
Ventritex Inc. 1,600 57 62
Newmont Mining Corp. 3,200 170 184
Ashland Oil Inc. 2,400 81 82
Oryx Energy Co. 4,000 86 69
Compusa Inc. 2,200 63 44
Genentech Inc. 1,000 43 51
--------- --------
Total Other Common Stock 14,088 16,661
Securities of United States Goverment & Agencies
United States Treasury Notes 4.625% due 08/15/1995 500 498 504
United States Treasury Notes 4.25% due 07/31/1995 750 750 752
United States Treasury Notes 3.875% due 10/31/1995 500 498 498
United States Treasury Notes 4.25% due 12/31/1995 250 250 250
United States Treasury Notes 7.375% due 05/15/1996 750 780 800
United States Treasury Notes 7.00% due 01/15/1994 500 490 500
United States Treasury Notes 7% due 04/15/1994 500 493 505
United States Treasury Notes 7.50% due 01/31/1996 1,000 1,051 1,063
Federal Home Loan Banks 7.875% due 03/27/1995 500 503 524
Federal Home Loan Banks 5.00% due 10/25/1995 1,000 998 1,014
United States Treasury Notes 4.375% due 08/15/1996 250 250 250
United States Treasury Notes 4.375% due 11/15/1996 500 499 498
United States Treasury Notes 7% due 04/15/1994 300 295 303
Federal Home Loan Banks 6.85% due 02/25/1997 250 259 265
Federal National Mortgage Assn 6.10% due 02/10/2000 500 516 513
Tennessee Valley Authority 6.50% due 01/15/1999 200 194 208
Federal Home Loan Mortgage Corp 7.00% due 05/15/2020 300 287 311
Federal Home Loan Mortgage Corp 7.00% due 04/15/2002 400 417 410
Federal National Mortgage Assn Gtd 7.00% due 08/25/2005 127 121 132
--------- --------
Total Securities of United States Government & Agencies 9,149 9,300
Total Investments $ 36,804 $ 39,830
========= ========
</TABLE>
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236
<PAGE> 16
THE LIBERTY CORPORATION AND ADOPTING RELATED EMPLOYERS' 401(K) THRIFT PLAN
TRANSACTIONS OR SERIES OF TRANSACTIONS IN EXCESS OF 5% OF THE CURRENT VALUE OF
PLAN ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1993
(In $000's, except number of shares data)
<TABLE>
<CAPTION>
Category (3) - series of securities transactions
- ------------------------------------------------
Purchase Sales Expenses
Party Involved Description of Assets Price Price Incurred
- -------------------------- ----------------------------------------------------- --------- -------- -------------
<S> <C> <C> <C> <C>
Wachovia Bank & Trust Co. Wachovia Short-Term Investment Fund -
$24,515 principal amount, various interest rates $ 24,515 $ --- $ ---
Wachovia Bank & Trust Co. Wachovia Short-Term Investment Fund -
$24,535 principal amount, various interest rates $ --- $ 24,535 $ ---
The Liberty Corporation The Liberty Corporation Common Stock - 89,183 shares $ 2,697 $ --- $ ---
The Liberty Corporation The Liberty Corporation Common Stock - 19,007 shares $ --- $ 566 $ ---
<CAPTION>
Value on Realized
Transaction Gain
Party Involved Description of Assets Cost Date (Loss)
- -------------------------- ----------------------------------------------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Wachovia Bank & Trust Co. Wachovia Short-Term Investment Fund -
$24,515 principal amount, various interest rates $ 24,515 $ 24,515 $ ---
Wachovia Bank & Trust Co. Wachovia Short-Term Investment Fund -
$24,535 principal amount, various interest rates $ 24,535 $ 24,535 $ ---
The Liberty Corporation The Liberty Corporation Common Stock - 89,183 shares $ 2,697 $ 2,697 $ ---
The Liberty Corporation The Liberty Corporation Common Stock - 19,007 shares $ 438 $ --- $ 128
</TABLE>
There were no category (i), (ii) or (iv) transactions during 1993
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237
