As filed with the Securities and Exchange Commission on February 27, 1998.
Registration No. 333-46211
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________
LAWYERS TITLE CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-1589611
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6630 West Broad Street
Richmond, Virginia 23230
(804) 281-6700
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Russell W. Jordan, III, Esquire
Lawyers Title Corporation
6630 West Broad Street
Richmond, Virginia 23230
(804) 281-6700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of Communications to:
Theodore L. Chandler, Jr., Esquire
Robert E. Spicer, Jr., Esquire
Williams, Mullen, Christian & Dobbins
1021 East Cary Street, 16th Floor
Richmond, Virginia 23219
Approximate date of commencement of proposed sale to the public: from
time to time after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
================================================= ===================== ================== ===================== ===================
Title of Each Class of Amount Proposed Maximum Proposed Maximum
Securities to to be Offering Price Aggregate Amount of
be Registered Registered (1) Per Share (2) Offering Price (2) Registration Fee
- ------------------------------------------------- --------------------- ------------------ --------------------- -------------------
<S> <C> <C> <C> <C>
7% Series B Cumulative Convertible
Preferred Stock, no par value.................. 2,200,000 Shares $78.82 $173,396,124 $51,152
Common Stock, no par value...................... 4,824,561 Shares n/a n/a n/a
Rights to Purchase Series A Junior
Participating Preferred Stock, no par value.... 4,824,561 Rights (3) (3) (3)
================================================= ===================== ================== ===================== ===================
</TABLE>
(1) The amounts of 7% Series B Cumulative Convertible Preferred Stock ("Series
B Preferred Stock") and Common Stock registered hereunder shall be deemed
to include any additional shares issuable as a result of any stock split,
stock dividend or other change in the capitalization of the Registrant and,
with respect to the Series B Preferred Stock, shall be deemed to include
such additional currently indeterminable number of shares of Common Stock
as are issuable pursuant to the anti-dilution provisions of the Series B
Preferred Stock.
(2) Shares of Series B Preferred Stock are not traded in any market, and the
offering price for the shares of Series B Preferred Stock registered
hereunder has not been established. Each share of Series B Preferred Stock
has a stated value of $50.00 and is convertible at any time at the option
of its holder into shares of Common Stock at a conversion price of $22.80
per share of Common Stock, subject to certain adjustments. See "Description
of Capital Stock -- Series B Preferred Stock." Pursuant to Rule 457(i), the
maximum amount that may be received by a holder in connection with the
conversion of a share of Series B Preferred Stock is approximately 2.193
shares of Common Stock. Accordingly, pursuant to Rule 457(c), the offering
price is based upon 2.193 multiplied by the average of the high ($36.25)
and low ($35.625) prices of Common Stock as reported on the New York Stock
Exchange Composite Tape on February 10, 1998. Pursuant to Rule 457(i), no
additional registration fee is required for the shares of Common Stock
registered hereunder.
(3) The Rights to Purchase Series A Junior Participating Preferred Stock will
be attached to and will trade with the shares of Common Stock registered
hereunder. Value attributable to such Rights, if any, will be reflected in
the market price of the shares of the Common Stock. No additional
registration fee is required.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
<PAGE>
Subject to Completion, Dated February 27, 1998
PROSPECTUS
2,200,000 Shares of 7% Series B Cumulative Convertible Preferred Stock
4,824,561 Shares of Common Stock
[LOGO]
LandAmerica Financial Group, Inc.
This Prospectus relates to 2,200,000 shares (the "Series B Preferred
Shares") of the 7% Series B Cumulative Convertible Preferred Stock, no par value
(the "Series B Preferred Stock"), of LandAmerica Financial Group, Inc., a
Virginia corporation (the "Company"). This Prospectus also relates to the
4,824,561 shares (the "Common Shares" and, collectively with the Series B
Preferred Shares, the "Shares") of the Common Stock, no par value (the "Common
Stock"), of the Company, into which the Series B Preferred Shares are initially
convertible, plus such additional currently indeterminate number of shares of
Common Stock as are issuable pursuant to the anti-dilution provisions of the
Series B Preferred Stock . Each Common Share also represents one preferred share
purchase right under the Company's shareholder rights plan. See "Description of
Capital Stock -- Preferred Share Purchase Rights." All of the Series B Preferred
Shares have been issued to, and all of the Shares are being offered and sold by,
the Selling Shareholder identified in this Prospectus under the caption "Selling
Shareholder." The Company will not receive any part of the proceeds from the
sale of the Shares.
Subject to the limitations described in this Prospectus, the Selling
Shareholder may sell all or any portion of the Shares for its own account from
time to time in one or more transactions through brokers or dealers at market
prices then prevailing, in underwritten transactions at prices related to then
current market prices or in individually negotiated transactions at such prices
as may be agreed upon. See "Plan of Distribution."
The Company will pay all expenses in connection with the registration
of the Shares under the Securities Act of 1933, as amended (the "Securities
Act"), including the preparation of this Prospectus. The Selling Shareholder
will pay (i) any fees or disbursements of counsel to the Selling Shareholder or
any underwriter and (ii) all underwriting discounts and commissions and transfer
taxes, if any, and documentary stamp taxes, if any, relating to the sale or
disposition of the Shares. See "Plan of Distribution."
See "Risk Factors" beginning on page 4 for a discussion of certain
factors that should be considered in connection with an investment in the
Shares.
---------------
There currently is no market for the Series B Preferred Stock, and it
is not likely that an active trading market for the Series B Preferred Shares
will develop in the near future. The Common Stock is listed on the New York
Stock Exchange under the symbol "LFG." On February 26, 1998, the closing sales
price of the Common Stock as reported on the New York Stock Exchange Composite
Tape was $43.125 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is February 27, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549-1004, and
at the following Regional Offices of the Commission: New York Regional Office, 7
World Trade Center, Suite 1300, New York, New York 10048 and Chicago Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such materials can also be obtained by mail from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549-1004, at prescribed rates. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy statements and other
information regarding registrants, such as the Company, that file electronically
with the Commission. The Common Stock is listed on the New York Stock Exchange,
Inc. (the "NYSE"), and such reports, proxy statements and other information
relating to the Company can also be inspected at the offices of the NYSE, 20
Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a registration statement on Form
S-3 (the "Registration Statement") filed by the Company with the Commission
under the Securities Act. As permitted by the rules and regulations of the
Commission, this Prospectus omits certain information contained in the
Registration Statement. For further information, reference is hereby made to the
Registration Statement and to the exhibits thereto, which may be inspected and
copied in the manner and at the locations described above. Statements contained
herein concerning provisions of any document filed as an exhibit to the
Registration Statement, incorporated by reference into this Prospectus or
otherwise filed with the Commission are not necessarily complete, and each such
statement is qualified in its entirety by reference to the copy of such document
filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following reports and other documents previously filed by the
Company with the Commission under the Exchange Act are incorporated by reference
into this Prospectus:
(a) the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "Form 10-K"), as amended by Form 10-K/A (Amendment No.
1), filed on January 21, 1998;
(b) the portions of the Company's Proxy Statement for the Annual
Meeting of Shareholders held on May 20, 1997 that have been incorporated by
reference into the Form 10-K;
(c) the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997 and on Form 10-Q/A
for the quarter ended September 30, 1997;
(d) the Company's Current Reports on Form 8-K filed on September 2,
1997, November 20, 1997, December 23, 1997 and February 6, 1998;
(e) (i) the description of the Common Stock and associated
preferred share purchase rights contained in the registration statement on Form
8-A dated September 29, 1995 and filed on October 2, 1995, as amended by
Amendment No. 1 and Amendment No. 2 thereto, dated August 29, 1997 and December
23, 1997, respectively, and on filed September 2, 1997 and December 23, 1997,
respectively; and
(ii) the description of the Series B Preferred Stock
contained in the registration statement on Form 8-A dated and filed on February
27, 1998; and
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<PAGE>
(f) the Company's definitive Proxy Statement for the Special
Meeting of Shareholders held on February 27, 1998, filed on January 29, 1998
(the "Proxy Statement"), except for the information contained therein under the
heading "The Acquisition -- Opinion of the Company's Financial Advisor."
All reports and other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering contemplated hereby
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of filing of such reports and other documents. Any
statement contained herein or in a report or document incorporated or deemed to
be incorporated by reference into this Prospectus shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein (or in any other subsequently filed document that also is
incorporated or deemed to be incorporated by reference into this Prospectus)
modifies or supersedes such previous statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the foregoing documents incorporated by reference into
this Prospectus (other than certain exhibits to such documents). Requests for
such copies should be directed to Russell W. Jordan, III, Esquire, Secretary and
General Counsel, LandAmerica Financial Group, Inc., 6630 West Broad Street,
Richmond, Virginia 23230, telephone number (804) 281-6700.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
Certain information that is included or incorporated by reference into
this Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Among
other things, these statements relate to the financial condition, results of
operations and business of the Company, including statements relating to: (i)
the cost savings and accretion to reported earnings that will be realized from
the Company's acquisition of all of the issued and outstanding shares of the
capital stock of Commonwealth Land Title Insurance Company ("Commonwealth") and
Transnation Title Insurance Company ("Transnation" and, collectively with
Commonwealth, "Commonwealth/Transnation") completed on February 27, 1998 (the
"Acquisition"); and (ii) the potential impact on financial ratios, margins,
revenues and profitability as a result of the Acquisition. These forward-looking
statements are generally identified by phrases such as "the Company expects" or
words of similar import. These forward looking statements involve certain risks
and uncertainties and other factors that may cause the actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Further, any such statement is specifically qualified in its
entirety by the following cautionary statements and the "Risk Factors" appearing
elsewhere in this Prospectus. See "Risk Factors."
In connection with the Acquisition, factors that may cause actual
results to differ materially from those contemplated by such forward-looking
statements include the following: (i) expected cost savings from the Acquisition
cannot be fully realized or realized within the expected time frame; (ii) costs
or difficulties related to the integration of the businesses of the Company and
Commonwealth/Transnation are greater than expected; (iii) revenues following the
Acquisition are lower than expected; (iv) competitive pressure in the title
insurance industry increases significantly; (v) general economic conditions,
either nationally or in one or more of the states in which the Company will
conduct business, are less favorable than expected; or (vi) legislation or
regulatory changes adversely affect the businesses conducted by the Company.
In connection with the title insurance industry in general, factors
that may cause actual results to differ materially from those contemplated by
such forward-looking statements include the following: (i) the
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costs of producing title evidence are relatively high, whereas premium revenues
are subject to regulatory and competitive restraints; (ii) the amount of title
insurance business available is influenced by housing starts, housing resales
and commercial real estate transactions; (iii) real estate activity levels have
historically been cyclical and are influenced by such factors as interest rates
and the condition of the overall economy; (iv) the value of the Company's
investment portfolio is subject to fluctuation based on similar factors; (v) the
title insurance industry may be exposed to substantial claims by large classes
of claimants; and (vi) the industry is regulated by state laws that require the
maintenance of minimum levels of capital and surplus and that restrict the
amount of dividends that may be paid by the Company's insurance subsidiaries
without prior regulatory approval.
The Company cautions that the foregoing list of important factors is
not exclusive. The Company does not undertake to update any forward-looking
statement that may be made from time to time by or on behalf of the Company.
RISK FACTORS
Prospective investors should carefully consider the following factors,
in addition to the other information presented elsewhere in this Prospectus,
before purchasing the Shares offered hereby.
Effect of Competition on Revenues
The title insurance business is very competitive, primarily in the
areas of price, service and expertise. For larger commercial customers and
mortgage originators, the size and financial strength of the title insurer are
also important factors. Although the Company is one of the largest title
insurance organizations in the country, based on premium and fee revenues, at
least five other title insurance underwriters have the size, capital base and
agency networks to compete effectively with the Company. Also, the removal of
regulatory barriers in the future might result in new competitors, including
financial institutions, entering the title insurance business. Intense
competition among the major title insurance companies and any such new entrants
could lower premium and fee revenues for the Company.
Potential Uncertainty of Realization of Expense Savings
While the Company expects to realize recurring annual pre-tax expense
savings of approximately $40.0 million over the four quarters following the
consummation of the Acquisition from reductions in staff and the consolidation
or elimination of duplicative facilities and services, no assurance can be given
that any particular level of savings will, in fact, be realized or that such
savings will be realized over any particular time period.
Susceptibility of Revenues to Change in Economic Conditions
The amount of title insurance business available is dependent upon,
among other things, the volume of commercial and residential real estate
transactions. The volume of such transactions has historically been influenced
by such factors as interest rates and the health of the overall economy. When
interest rates are increasing, real estate activity typically declines and the
title insurance industry tends to experience lower revenues. Accordingly, no
assurance can be given that historical levels of premiums and fees received by
the Company and Commonwealth/Transnation will be available to the Company in the
future.
Increased Leverage and Demands on Available Cash
The Company historically has utilized little or no funded debt. To
finance the Acquisition, the Company entered into a senior credit facility in an
aggregate principal amount of up to $237.5 million with a group of financial
institutions (the "Credit Facility") and borrowed approximately $200.7 million
to finance the cash portion of the purchase price of the Acquisition. This debt,
and the issuance of the Series
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B Preferred Shares in the Acquisition, have created increased demands upon the
available cash of the Company to pay debt service on the Credit Facility and
dividends on the Series B Preferred Stock. No assurance can be given that such
increased debt service and preferred stock dividend requirements will not have
an adverse impact on the Company's liquidity and capital position.
The Credit Facility is available pursuant to a Revolving Credit
Agreement, dated as of November 7, 1997 (the "Credit Agreement"), between the
Company and Bank of America National Trust and Savings Association, individually
and as Administrative Agent for a syndicate of 11 other banks. A copy of the
Credit Agreement has been filed with the Commission on a Current Report on Form
8-K and is incorporated by reference into this Prospectus. See "Incorporation of
Certain Documents by Reference."
Concentration of Share Ownership
The Selling Shareholder holds 4,039,473 shares of Common Stock,
representing approximately 26.8% of the issued and outstanding shares of Common
Stock. As a result, the Selling Shareholder is a substantial shareholder and,
subject to the limitations of a Voting and Standstill Agreement dated February
27, 1998 (the "Voting and Standstill Agreement"), between the Company, the
Selling Shareholder and Reliance Group Holdings, Inc. ("Reliance"), will have
significant influence on the outcome of certain matters requiring a shareholder
vote. To the extent that the Company's Articles of Incorporation (the "Company's
Charter") requires the affirmative vote of the holders of at least 80% of the
Common Stock to approve certain business combination transactions, the Selling
Shareholder and its affiliates will be able to prevent approval of such
transactions so long as they hold at least 20% of the issued and outstanding
shares of Common Stock. See "The Selling Shareholder" and "Description of
Capital Stock -- Certain Provisions of the Company's Charter and Bylaws."
In addition, the Selling Shareholder holds the Series B Preferred
Shares offered hereby, which are initially convertible into the 4,824,561 Common
Shares also offered hereby. Under the terms of the Voting and Standstill
Agreement, unless certain specified events occur, the Selling Shareholder and
its affiliates are prohibited from converting the Series B Preferred Stock into
Common Stock until the Selling Shareholder and its affiliates dispose completely
of the 4,039,473 shares of Common Stock received by the Selling Shareholder in
the Acquisition. See "The Selling Shareholder" and "Description of Capital Stock
- -- Series B Preferred Stock." However, if any of certain specified events were
to occur, then the Selling Shareholder and its affiliates would be able to
convert some or all of the Series B Preferred Stock into Common Stock. If all of
the Series B Preferred Shares were converted into the 4,824,561 Common Shares
following the Acquisition and the Selling Shareholder and its affiliates had not
disposed of any of the 4,039,473 shares of Common Stock received by the Selling
Shareholder in the Acquisition, the Selling Shareholder and its affiliates would
hold in the aggregate 8,864,034 shares of Common Stock, or approximately 44.6%
of the issued and outstanding shares of Common Stock following consummation of
all of the transactions contemplated by the Acquisition. As a result, the
Selling Shareholder and its affiliates would be able to exercise, subject to the
limitations of the Voting and Standstill Agreement, significant influence on the
outcome of matters requiring a shareholder vote. See "The Selling Shareholder"
and "Description of Capital Stock -- Series B Preferred Stock" and "--
Acquisition Covenants Regarding Non-Performance Remedies."
Potential Change of Control upon Certain Events
The Voting and Standstill Agreement provides that the Selling
Shareholder and its affiliates will vote the shares of Common Stock held by them
(i) in accordance with the recommendation of the Company's Board of Directors
with respect to nominees to the Board of Directors (other than the three
directors designated by the Selling Shareholder), (ii) with respect to any
contest for the election of directors in connection with any tender offer, in
the same proportion as the total votes cast by or on behalf of all shareholders
of the Company, (iii) with respect to any matters related to share issuance,
mergers, acquisitions and divestitures, in accordance with the independent
judgment of the Selling Shareholder and its affiliates, and (iv) with respect to
all other matters not otherwise provided, in accordance with the
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recommendation of the Company's Board of Directors. These voting requirements
terminate if certain events occur. See "Description of Capital Stock --
Acquisition Covenants Regarding Non-Performance Remedies."
The provisions of the Series B Preferred Stock provide that, in the
event of certain defaults related primarily to the Company's combined ratio as
it compares to comparable title insurance companies and the Company's
claims-paying ability ratings, the size of the Company's Board of Directors will
be increased by three directors and the Selling Shareholder will be entitled to
designate three additional directors to fill the newly created seats. In
addition, in the event of certain defaults related primarily to dividend
payments on the Series B Preferred Stock, the size of the Company's Board of
Directors will be increased by three directors and the Selling Shareholder will
be entitled to designate three additional directors to fill the newly created
seats. Furthermore, if the Company defaults on any of its material debt
obligations in excess of $15.0 million or the Company fails to pay the stated
dividend on the Series B Preferred Stock on three occasions, whether or not
consecutive, the Company must increase the size of the Board of Directors to
allow additional directors to be designated by the Selling Shareholder such that
the total number of directors designated by the Selling Shareholder will
constitute a majority of the Board of Directors. See "Description of Capital
Stock -- Acquisition Covenants Regarding Non-Performance Remedies."
Holding Company Structure; Reliance on Dividends from Insurance Subsidiaries
As a holding company whose principal assets are the securities of its
insurance subsidiaries, the Company's ability to meet debt service obligations
and pay operating expenses and dividends, if authorized by its Board of
Directors, depends primarily on the receipt of sufficient dividends from such
insurance subsidiaries. The insurance statutes and related regulations of
Virginia, Pennsylvania and Arizona, among other states, require the maintenance
of minimum amounts of statutory capital and place certain restrictions upon the
amount of dividends that the insurance subsidiaries may pay.
The Company's ability to pay dividends on the Common Stock will also be
subject to the dividend priority of the Series B Preferred Stock and certain
financial covenants relating to the Credit Facility. See "Description of Capital
Stock -- Series B Preferred Stock."
Government Regulation of Insurance Subsidiaries
The Company's subsidiaries are subject to regulation by the state
insurance authorities of the various states in which they transact business. The
nature and extent of such regulation vary from jurisdiction to jurisdiction, but
typically involve regulation of dividend payments and other transactions between
affiliates, prior approval of the acquisition and control of an insurance
company or of any company controlling an insurance company, regulation of
certain transactions entered into by an insurance company with any of its
affiliates, approval of premium rates for insurance, standards of solvency and
minimum amounts of capital surplus which must be maintained, limitations on
types and amounts of investments, restrictions on the size of risks which may be
insured by a single company, licensing of insurers and agents, deposits of
securities for the benefit of policyholders, approval of policy forms, methods
of accounting, establishing reserves for losses and loss adjustment expenses,
regulation of underwriting and marketing practices, regulation of reinsurance
and filing of annual and other reports with respect to financial condition and
other matters. These regulations may impede, or impose burdensome conditions on,
rate increases or other actions that the Company might want to take to enhance
its operating results. Such regulation is generally intended for the protection
of policyholders rather than security holders. In addition, state regulatory
examiners perform periodic examinations of insurance companies.
The insurance regulatory framework has recently been subject to
increased scrutiny by the National Association of Insurance Commissioners, state
legislators and insurance regulators in the United States Congress. No assurance
can be given that future legislative or regulatory changes resulting from such
activity will not adversely affect the Company or its subsidiaries.
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Provisions Having Possible Anti-Takeover Effects
The Company's Charter and Bylaws and the Amended and Restated Rights
Agreement (as defined below), as well as Virginia corporation law and the
insurance laws of various states, all contain certain provisions that could have
the effect of discouraging a prospective acquiror from making a tender offer, or
which may otherwise delay, defer or prevent a change in control of the Company.
See "Description of Capital Stock -- Preferred Share Purchase Rights," "--
Certain Provisions of the Company's Charter and Bylaws," "-- Affiliated
Transactions," "-- Control Share Acquisitions."
Uncertainties Relating to Integration of Operations
The Company expects that the Acquisition will result in operating and
strategic benefits. The anticipated benefits of the Acquisition may not be
achieved unless the operations of the Company are successfully combined with
those of Commonwealth/Transnation in a coordinated, timely and efficient manner,
and there can be no assurance that this will occur. The transition to a combined
company will require substantial attention from management. Any diversion of the
attention of management and any difficulties encountered in the transition
process could have an adverse impact on the revenues and operating results of
the Company. The combination of the two operations will also require integration
of the two organizations' product offerings and systems and the coordination of
their sales and marketing efforts. Difficulties in assimilation may be increased
by the necessity of integrating personnel with different business backgrounds
and combining two different corporate cultures. In addition, the process of
combining the Company and Commonwealth/Transnation could cause the interruption
of, or a loss of momentum in, the activities of either or both of the
organizations' businesses, which could have an adverse effect on their combined
operations. There can be no assurance that either organization will retain its
key management, technical, sales and marketing personnel or that the Company
will realize any of the other anticipated benefits of the Acquisition. Failure
to achieve the anticipated benefits of the Acquisition or to successfully
integrate the operations of Commonwealth/Transnation with those of the Company
could have a material adverse effect upon the business, operating results and
financial condition of the Company.
Limited Market for Series B Preferred Shares
There is no public market for the Series B Preferred Shares offered
hereby, and it is not likely that an active trading market will develop for the
Series B Preferred Shares in the near future. Investors, therefore, should not
expect to be able to liquidate readily their investment in shares of Series B
Preferred Stock. Likewise, there is no guarantee that the Series B Preferred
Shares can be resold for the price paid for them.
THE COMPANY
The Company was organized in 1991 under the name "Lawyers Title
Corporation" to serve as a holding company for Lawyers Title Insurance
Corporation ("Lawyers Title"). On February 27, 1998, the Company completed the
Acquisition from the Selling Shareholder. The Company, through its Lawyers
Title, Commonwealth/Transnation and other subsidiaries, is one of the largest
companies in the United States issuing title insurance policies and performing
other real estate-related services for both residential and commercial real
estate transactions based upon title operating revenues (premiums and title
search, escrow and other fees). Title insurance is generally accepted as the
most efficient means of determining title to, and priority of interests in, real
estate in nearly all parts of the United States.
Lawyers Title markets through its nationwide branch office network,
consisting of 14 National Division offices and approximately 260 branch and
closing/escrow offices, and through approximately 3,800 independent agents and
36,000 approved attorneys. Lawyers Title has two wholly owned non-insurance
subsidiaries devoted to computer automation of various aspects of the title
insurance business, including on-line title plants, policy issuance, and closing
documentation and support functions. In 1996, Lawyers Title further diversified
its business by engaging in two separate joint ventures with third parties
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to provide employee relocation and flood certification services. Lawyers Title
conducts business in 49 states (Iowa does not authorize title insurance) and in
the District of Columbia, Puerto Rico, the U.S. Virgin Islands, the Bahamas and
a number of Canadian provinces.
Founded in 1876, Commonwealth/Transnation is the oldest title insurance
underwriter for residential and commercial real estate in the United States.
Commonwealth/Transnation, through its respective subsidiaries and divisions,
provides a complete range of title and closing services through an extensive
network of more than 4,000 policy-issuing locations nationwide, including branch
offices, independent agents and approved attorneys. Commonwealth/Transnation is
organized into five regions with approximately 340 offices in 49 states, as well
as the District of Columbia, Puerto Rico and the U.S. Virgin Islands.
The Company's executive offices are located at 6630 West Broad Street,
Richmond, Virginia 23230, and its telephone number is (804) 281-6700.
USE OF PROCEEDS
All of the Shares covered by this Prospectus are being offered by the
Selling Shareholder. As a consequence, the Company will not receive any of the
proceeds from the sale of any of the Shares.
RATIO OF EARNINGS TO FIXED CHARGES
For the years 1992 through 1996, and for the period ended September 30,
1997, the Company's borrowings under its credit lines have not been material,
and interest expense has not exceeded $1.1 million. In addition, there have been
no shares of the Company's preferred stock outstanding during any of the periods
indicated above. Therefore, the ratio of earnings to fixed charges data for the
Company are not meaningful and have not been provided.
THE SELLING SHAREHOLDER
The Selling Shareholder is Reliance Insurance Company, a Pennsylvania
corporation. The Selling Shareholder and its property and casualty insurance
subsidiaries underwrite a broad range of commercial lines of property and
casualty insurance. The Selling Shareholder has conducted business since 1817,
making it one of the oldest property and casualty insurance companies in the
United States. The Selling Shareholder is a wholly owned subsidiary of Reliance
Financial Services Corporation, a Delaware corporation, which is a wholly owned
subsidiary of Reliance. Reliance is a publicly held company whose principal
business is the ownership of property and casualty and title insurance companies
and an information technology consulting company. The common stock of Reliance
is traded on the NYSE under the symbol "REL."
Prior to the Company's acquisition of Commonwealth and Transnation, the
Selling Shareholder did not own any shares of Common Stock. Pursuant to a Stock
Purchase Agreement by and among the Company, Lawyers Title, the Selling
Shareholder and Reliance dated as of August 20, 1997, as amended and restated by
an Amended and Restated Stock Purchase Agreement by and among such parties,
dated as of December 11, 1997 (the "Stock Purchase Agreement"), the Company
acquired all of the issued and outstanding shares of the capital stock of
Commonwealth and Transnation. Upon the consummation of the Acquisition, the
Selling Shareholder received the 2,200,000 Series B Preferred Shares offered
hereby, which shares are initially convertible into the 4,824,561 Common Shares
also offered hereby, as part of the purchase price paid by the Company. The
Selling Shareholder also received in the Acquisition (i) 4,039,473 shares of
Common Stock, (ii) $65.9 million in cash, representing the net proceeds from the
sale of 1,750,000 shares of Common Stock offered to the public by the Company,
and (iii) approximately $200.7 million in cash. The 4,039,473 shares of Common
Stock (collectively with the Series B Preferred Shares and Common Shares offered
hereby, the "Acquisition Shares") are being registered by the Company under the
Securities Act, pursuant to a separate registration statement and prospectus,
for resale by the
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Selling Shareholder simultaneously with the registration of the Series B
Preferred Shares and Common Shares offered hereby.
In connection with the Acquisition, the Company, the Selling
Shareholder and Reliance entered into the Voting and Standstill Agreement. The
Voting and Standstill Agreement, among other things, (i) provides for the
designation by the Selling Shareholder of three directors to be nominated and
recommended for election to the Company's Board of Directors, (ii) prohibits the
Selling Shareholder and Reliance and their affiliates from acquiring any
additional shares of Common Stock or Series B Preferred Stock (except as
permitted under the Voting and Standstill Agreement), (iii) requires that the
Selling Shareholder and Reliance and their affiliates vote their shares of
Common Stock in a certain manner depending upon the matter that is subject to a
vote of the Company's shareholders, (iv) requires the sale of the 4,039,473
shares of Common Stock received by the Selling Shareholder in the Acquisition
within 6 1/2 years after the effective date of the registration statement for
such shares (subject to extension as provided in the Voting and Standstill
Agreement), (v) requires the Selling Shareholder, with respect to the 2,200,000
Series B Preferred Shares offered hereby and any Common Shares received upon
conversion of such Series B Preferred Shares, to sell so many of the Series B
Preferred Shares or Common Shares received upon conversion thereof held by it or
its affiliates as is necessary to reduce the Selling Shareholder Ownership
Percentage (as defined below) to less than 20% of the Adjusted Outstanding
Shares (as defined below) by not later than 8 1/2 years after the effective date
of the Registration Statement (subject to extension as provided in the Voting
and Standstill Agreement), (vi) restricts the ability of the Selling Shareholder
and its affiliates to convert the Series B Preferred Shares then held by them
until all of the 4,039,473 shares of Common Stock received by the Selling
Shareholder in the Acquisition (and certain additional shares that may be issued
with respect to such shares) have been sold to persons that are not, at the time
of the sale, conveyance or transfer, an affiliate of the Selling Shareholder,
provided that such restriction shall not apply upon the occurrence of certain
specified events set forth in the Voting and Standstill Agreement, and (vii)
prohibits the knowing transfer of any of the Acquisition Shares to any person or
group if, as a result of such transfer, such person or group would have
beneficial ownership of Common Stock representing in the aggregate more than
9.9% of the issued and outstanding shares of Common Stock (subject to exceptions
set forth in the Voting and Standstill Agreement).
The Voting and Standstill Agreement also permits the Selling
Shareholder to transfer the Shares to its affiliates under certain
circumstances. Any affiliate of the Selling Shareholder that acquires such
Shares under the terms of the Voting and Standstill Agreement shall, upon such
acquisition, be deemed to be a Selling Shareholder hereunder and may offer and
sell such Shares pursuant to and in accordance with the "Plan of Distribution"
set forth below.
"Selling Shareholder Ownership Percentage" means, at any time, the
percentage of the Adjusted Outstanding Shares that is beneficially owned in the
aggregate by the Selling Shareholder and its affiliates. "Adjusted Outstanding
Shares" means, at any time and with respect to the determination of the Selling
Shareholder Ownership Percentage as it relates to the Selling Shareholder and
its affiliates, the total number of shares of Common Stock then issued and
outstanding together with the total number of shares of Common Stock not then
issued and outstanding that would be outstanding if (x) all then existing shares
of Series B Preferred Stock had been converted and (y) all then existing
warrants and options exercisable into shares of Common Stock had been exercised
(other than underwriters' over-allotment options and stock options granted under
benefit plans of the Company or any of its affiliates), but excluding any rights
that may be exercisable under the Company's shareholder rights plan. As of
February 27, 1998, the Selling Shareholder Ownership Percentage was 44.6%, and
the Adjusted Outstanding Shares was 19,869,154.
Copies of the Stock Purchase Agreement and the Voting and Standstill
Agreement have been filed with the Commission as part of the Proxy Statement and
are incorporated by reference into this Prospectus. See "Incorporation of
Certain Documents by Reference."
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PLAN OF DISTRIBUTION
The Company has no specific information concerning whether or when any
offers or sales of Shares covered by this Prospectus will be made, or if made,
concerning the price, terms or conditions of any such offers or sales. The
Selling Shareholder and its agents and representatives may, from time to time,
offer and sell the Shares by one or more of the following methods: (i) ordinary
brokerage transactions on the NYSE by one or more brokers acting as agent for
the Selling Shareholder, at a price or prices related to the then current market
price of the Common Stock, with such commissions to be paid by the Selling
Shareholder to the broker as shall be agreed upon by them; (ii) underwritten
transactions or purchases by a broker or dealer as principal and resale by such
broker or dealer for its own account at a price or prices related to the then
current market price of the Common Stock, less such discount, if any, as shall
be agreed upon by the Selling Shareholder and such broker or dealer; (iii) by a
combination of the methods described above; or (iv) in privately negotiated
transactions. Sales of the Shares may also be made pursuant to Rule 144 under
the Securities Act, where applicable. The underwriters in an underwritten
offering, if any, and the terms and conditions of any such offering will be
described in a supplement to this Prospectus. This Prospectus also covers sales
by any affiliates of the Selling Shareholder that acquire such Shares under the
terms of the Voting and Standstill Agreement.
In connection with the distribution of the Shares, the Selling
Shareholder may enter into hedging or other option transactions with
broker-dealers in connection with which, among other things, such broker-dealers
may engage in short sales of the Shares pursuant to this Prospectus in the
course of hedging the positions they may assume with the Selling Shareholder.
The Selling Shareholder may also sell Shares short pursuant to this Prospectus
and deliver the Shares to close out such short positions. The Selling
Shareholder may also enter into option or other transactions with broker-dealers
which may result in the delivery of Shares to such broker-dealers which may sell
such Shares pursuant to this Prospectus. The Selling Shareholder may also pledge
the Shares to a broker-dealer or financial institution and upon default the
broker-dealer or financial institution may effect the sales of the pledged
Shares pursuant to this Prospectus.
The distribution of the Shares by the Selling Shareholder is not
currently subject to any underwriting agreement. Any underwriters, dealers,
brokers or agents participating in the distribution of the Shares may receive
compensation in the form of underwriting discounts, concessions, commissions or
fees from the Selling Shareholder and/or purchasers of Shares, for whom they may
act. Such discounts, concessions, commissions or fees will not exceed those
customary for the type of transactions involved. In addition, the Selling
Shareholder and any such underwriters, dealers, brokers or agents that
participate in the distribution of Shares may be deemed to be "underwriters"
under the Securities Act, and any profits on the sale of Shares by them and any
discounts, commissions or concessions received by any of such persons may be
deemed to be underwriting discounts and commissions under the Securities Act.
Those who act as underwriter, broker, dealer or agent in connection with the
sale of the Shares will be selected by the Selling Shareholder and may have
other business relationships with the Company and its subsidiaries or affiliates
in the ordinary course of business.
There is no assurance that the Selling Shareholder will sell any or all
of the Shares described herein and may transfer, devise or gift such securities
by other means not described herein.
The Shares covered by this Prospectus have been registered under the
Securities Act pursuant to a Registration Rights Agreement between the Company
and the Selling Shareholder dated February 27, 1998 (the "Registration Rights
Agreement"). Pursuant to the Registration Rights Agreement, the Company agreed
to file one or more registration statements, including the Registration
Statement, with the Commission to register the resale of the Acquisition Shares
under the Securities Act and, after such registration statement(s) become
effective, use its best efforts to maintain the effectiveness of any such
registration statement(s) for specified time periods.
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The Registration Rights Agreement contains provisions under which the
Company may require the Selling Shareholder and its affiliates to temporarily
refrain from effecting public sales of the Acquisition Shares (a "Holdback
Period"). For each Holdback Period, the specified time period for which the
Company is required to maintain the effectiveness of any registration
statement(s) related to the Acquisition Shares will be extended for a period of
time equal to the Holdback Period. In addition, upon the issuance of a stop
order suspending the effectiveness of any registration statement(s), or any
order suspending or preventing the use of any related Prospectus or suspending
the registration or qualification of any Acquisition Shares for sale in any
jurisdiction, the Selling Shareholder and its affiliates, upon written notice,
will discontinue all transfers and sales of the Acquisition Shares
("Discontinuance Period") and the specified time period for which the Company is
required to maintain the effectiveness of any Registration Statement(s) related
to the Acquisition Shares will be extended for a period of time equal to the
Discontinuance Period.
The Company will pay all expenses in connection with all registrations
of the Acquisition Shares and the Selling Shareholder will pay (i) any fees or
disbursements of counsel to the Selling Shareholder or any underwriter and (ii)
all underwriting discounts and commissions and transfer taxes, if any, and
documentary stamp taxes, if any, relating to the sale or disposition of the
Acquisition Shares. In the case of an underwritten offering of Acquisition
Shares, the Selling Shareholder will have the right to select a lead managing
underwriter or underwriters and the Company will have the right to select a
co-managing underwriter or underwriters.
Under the Registration Rights Agreement, the Company will indemnify the
Selling Shareholder against certain liabilities, including liabilities arising
under the federal securities laws.
The Acquisition Shares will no longer be subject to the Registration
Rights Agreement when (i) a Registration Statement covering such Acquisition
Shares has been declared effective under the Securities Act and such Acquisition
Shares have been sold pursuant to such effective Registration Statement, (ii)
such Acquisition Shares are distributed to the public pursuant to Rule 144 under
the Securities Act, (iii) such Acquisition Shares have been otherwise
transferred or disposed of and new certificates have been issued without a
legend that restricts further transfer or disposition and, at such time, any
subsequent transfer or disposition of such securities will not require
registration or qualification under the Securities Act or any similar state law
then in force, or (iv) such Acquisition Shares have ceased to be outstanding.
A copy of the Registration Rights Agreement has been filed with the
Commission as part of the Proxy Statement and is incorporated by reference into
this Prospectus. See "Incorporation of Certain Documents by Reference."
DESCRIPTION OF CAPITAL STOCK
The following summary description of the capital stock of the Company
is qualified in its entirety by reference to applicable provisions of Virginia
law and the Company's Articles of Incorporation (the "Company's Charter") and
Bylaws, the complete text of which are on file with the Commission.
Authorized and Outstanding Capital Stock
The Company's authorized capital stock consists of 45,000,000 shares of
Common Stock, without par value, and 5,000,000 shares of preferred stock,
without par value (the "Preferred Stock"). At February 27, 1998, there were
15,044,593 shares of Common Stock and 2,200,000 shares of Series B Preferred
Stock issued and outstanding. No additional shares of Preferred Stock have been
issued.
Common Stock
The holders of Common Stock are entitled to one vote for each share on
all matters voted on by shareholders, including elections of directors, and,
except as otherwise required by law or provided in any
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resolution adopted by the Board of Directors with respect to any series of
Preferred Stock, the holders of such shares exclusively possess all voting
power. The Company's Charter does not provide for cumulative voting in the
election of directors. Subject to any preferential rights of any outstanding
series of Preferred Stock created by the Board of Directors from time to time,
the holders of Common Stock are entitled to such dividends as may be declared
from time to time by the Board of Directors from funds available therefor, and
upon liquidation are entitled to receive pro rata all assets of the Company
available for distribution to such holders.
Preferred Stock
Under the Company's Charter, the Board of Directors, without
shareholder approval, is authorized to issue shares of Preferred Stock in one or
more series and to designate, with respect to each such series of Preferred
Stock, the number of shares in each such series, the dividend rates, preferences
and date of payment, voluntary and involuntary liquidation preferences, the
availability of redemption and the prices at which it may occur, whether or not
dividends shall be cumulative and, if cumulative, the date or dates from which
the same shall be cumulative, the sinking fund provisions, if any, for
redemption or purchase of shares, the rights, if any, and the terms and
conditions on which shares can be converted into or exchanged for shares of any
other class or series, and the voting rights, if any. Any Preferred Stock issued
may be senior to the Common Stock as to dividends and as to distribution in the
event of liquidation, dissolution or winding up of the Company. The ability of
the Board of Directors to issue Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could, among
other things, adversely affect the voting power of holders of Common Stock.
The Board of Directors has authorized and reserved 200,000 shares of
Series A Junior Participating Preferred Stock, without par value (the "Series A
Preferred Stock"), for issuance upon the exercise of the preferred share
purchase rights (the "Rights") described below. See "-- Preferred Share Purchase
Rights." The Board of Directors has further authorized 2,200,000 shares of
Series B Preferred Stock, all of which were issued to the Selling Shareholder in
the Acquisition. See "-- Series B Preferred Stock."
The creation and issuance of any other series of Preferred Stock, and
the relative rights and preferences of such series, if and when established,
will depend upon, among other things, the future capital needs of the Company,
then-existing market conditions and other factors that, in the judgment of the
Board of Directors, might warrant the issuance of Preferred Stock.
Preemptive Rights
No holder of any share of Common Stock or Preferred Stock has any
preemptive right to subscribe to any securities of the Company of any kind or
class.
Series B Preferred Stock
General. The following summary is a brief description of the terms of
the Series B Preferred Stock. The description of the Series B Preferred Stock is
qualified in its entirety by reference to the exhibit to the Articles of
Amendment to the Company's Charter that contain the designation of the Series B
Preferred Stock (the "Preferred Stock Designation"), the complete text of which
is on file with the Commission.
Dividend Rights. The holders of Series B Preferred Stock will be
entitled to receive when and as declared by the Board of Directors, out of funds
legally available therefor, quarterly cumulative cash dividends at an annual
rate of 7% of the stated value of $50 per share, or $3.50 per share. Such
dividends will be payable on the last day of March, June, September and December
of each year, commencing on the
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date on which shares of the Series B Preferred Stock are initially issued by the
Company (the "Initial Issuance Date").
Dividends on the Series B Preferred Stock will be cumulative. As a
result, if the Board of Directors chooses not to declare a dividend on the
Series B Preferred Stock for a particular dividend period, holders of the Series
B Preferred Stock will retain the right to receive that dividend in the future.
The Board of Directors may declare dividends that are in arrears at any time.
The Series B Preferred Stock will be senior to the Common Stock and the
Series A Preferred Stock. Accordingly, no dividends may be declared, paid or set
aside, on the Common Stock and the Series A Preferred Stock unless all dividends
on the Series B Preferred Stock, including all unpaid dividends for past
periods, have been paid in cash or cash sums sufficient therefor have been set
aside.
Each dividend on the Series B Preferred Stock will be payable to
holders of record as of the 15th day of the month in which the dividend is
payable or such other date as may be fixed by the Board of Directors, which date
shall not be less than 10 days or more than 30 days prior to the date of
payment.
Holders of the Series B Preferred Stock will not be entitled to receive
any dividends in excess of the dividends described above and, except as provided
in the provisions of the Series B Preferred Stock, will not be entitled to
participate in the earnings or assets of the Company.
Conversion Rights. Shares of the Series B Preferred Stock will be
convertible at any time at the option of the holder into fully-paid and
nonassessable shares of Common Stock at a conversion price of $22.80 per share
of Common Stock (equivalent to a Conversion Ratio of approximately 2.193 shares
of Common Stock for each share of Series B Preferred Stock), subject to
adjustment as described below (the "Conversion Price").
To protect against dilution, the Conversion Price will be subject to
adjustment from time to time upon certain events, including the issuance of
Common Stock as a dividend or distribution on shares of Common Stock, splits or
combinations of outstanding shares of Common Stock, the issuance to holders of
Common Stock generally of options, rights or warrants to subscribe for Common
Stock or other securities of the Company at less than the current market price
of the Common Stock, or the issuance of Common Stock upon the exercise of the
Rights.
If the Company (i) consolidates with or merges into any other person
and is not the continuing or surviving corporation of such consolidation or
merger, (ii) permits any other person to consolidate with or merge into the
Company and the Company is the continuing or surviving person but, in connection
with such consolidation or merger, the Common Stock is changed into or exchanged
for stock or other securities of any other person or cash or any other property,
(iii) transfers all or substantially all of the assets or property of the
Company to any other person, or (iv) effects a capital reorganization or
reclassification of the Common Stock (other than a capital reorganization or
reclassification resulting in the issue of additional shares of Common Stock for
which adjustment in the Conversion Price is required to be made), then there
will be no adjustment of the Conversion Price, but each holder of Series B
Preferred Stock, upon the conversion thereof at any time after the consummation
of such consolidation, merger, exchange, sale, transfer, reorganization or
reclassification, shall be entitled to receive (at the Conversion Price in
effect at the time of such consummation) the kind and amount of shares of stock
and other securities, cash and property that the holder would have owned or been
entitled to receive immediately after such consolidation, merger, exchange,
sale, transfer, reorganization or reclassification if such share had been
converted immediately before such event.
Upon conversion of any shares of Series B Preferred Stock, the holder
thereof shall remain entitled to receive any unpaid dividends in respect of the
shares so converted, provided that such holder held such shares on the date for
determination of holders of the Series B Preferred Stock entitled to receive
payment of such dividends.
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Fractional shares of Common Stock will not be delivered upon
conversion. Instead, a cash adjustment will be paid in respect of such
fractional interest, in an amount equal to the Conversion Price as of the date
of conversion multiplied by such fractional interest.
Limitation on the Selling Shareholder's Conversion Rights. The right of
the Selling Shareholder and its affiliates to convert shares of Series B
Preferred Stock into shares of Common Stock will be subject to additional
restrictions. The Series B Preferred Stock held by the Selling Shareholder and
its affiliates shall not be convertible into shares of Common Stock until such
time as the Selling Shareholder and its affiliates have sold, conveyed or
transferred all of the 4,039,473 Shares of Common Stock offered hereby and such
additional shares of Common Stock that the Company may issue with respect to
such shares pursuant to any stock splits, stock dividends, recapitalizations,
restructurings, reclassifications or similar transactions or pursuant to the
exercise of any Rights. The Selling Shareholder and its affiliates shall not be
subject to such restriction in the event that (i) the Company calls for the
redemption of the Series B Preferred Stock held by the Selling Shareholder or
(ii) either the Company declares a regular quarterly dividend on the Common
Stock of $.40 or more per share during any calendar year, or the Company
declares one or more non-regular dividends on the Common Stock during any
calendar year in an aggregate amount of $.50 or more per share, or the Company
declares dividends on the Common Stock, whether regular or non-regular, in an
aggregate amount of $1.60 or more per share during any calendar year. If the
Company calls for redemption less than all of the Series B Preferred Stock held
by the Selling Shareholder and its affiliates, then the Selling Shareholder and
its affiliates shall be entitled to convert into shares of Common Stock only
that number of the Series B Preferred Stock that have been so called for
redemption.
Furthermore, in the event that the Board of Directors has approved any
negotiated tender or exchange offer with a third party or approved any merger,
consolidation, share exchange, business combination, restructuring,
recapitalization or similar transaction involving the Company in which the
holders of Common Stock are entitled to tender or exchange their holdings of
Common Stock for, or to otherwise receive for their holdings of Common Stock,
other consideration (whether cash, non-cash or some combination thereof), the
Company will either (i) permit the Selling Shareholder and its affiliates to
convert all of the Series B Preferred Stock then held by them contingent upon,
and effective as of, the closing of such transaction and without the right of
the Selling Shareholder or any of its affiliates to vote the shares of Common
Stock received upon any such conversion on any matter in connection with such
transaction, or (ii) make appropriate provision to provide to the Selling
Shareholder and any of its affiliates holding Series B Preferred Stock as of the
closing date of such transaction the same kind and amount of consideration
receivable by the holders of the Common Stock in such transaction. If the
Company elects to make such appropriate provision, the Selling Shareholder and
its affiliates shall not be entitled thereafter to receive any shares of stock,
other securities, cash or property with respect to such shares of the Series B
Preferred Stock with respect to which full payment of the consideration has been
received.
Redemption. At any time on or after the fifth anniversary of the
Initial Issuance Date, the Company, at the option of the Board of Directors, may
redeem all or part of the outstanding shares of the Series B Preferred Stock
upon the specified notice. If less than all of the outstanding shares of Series
B Preferred Stock are to be redeemed, the Company shall redeem a pro rata
portion from each holder of Series B Preferred Stock.
If the Company elects to redeem the Series B Preferred Stock on or
after the fifth anniversary of the Initial Issuance Date, the Company shall pay
the stated value of $50.00 per share plus a premium over such $50.00, which
premium shall be 4.0% on the fifth anniversary of the Initial Issuance Date and
decline by 1.0% per year over the next five years. At that time and thereafter,
the Series B Preferred Stock may be redeemed at $50.00 per share. The Company
shall also pay upon redemption all accrued and unpaid dividends to and including
the dated fixed for redemption. The Series B Preferred Stock places no limits on
the source of funds to be used for any redemption of the Series B Preferred
Stock.
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No shares of Series B Preferred Stock may be redeemed, unless all
dividends on the Series B Preferred Stock have been declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all prior dividend periods and the current dividend period; provided, however,
that the foregoing shall not prevent the purchase or acquisition of shares of
Series B Preferred Stock by the Company pursuant to a purchase or acquisition
made on the same terms to holders of all outstanding shares of Series B
Preferred Stock.
Liquidation. In the event of any voluntary or involuntary dissolution,
liquidation, or winding up of the Company, the holders of shares of Series B
Preferred Stock shall be entitled to be paid, out of the assets of the Company
available for distribution to its shareholders, before any payment shall be made
in respect of the Common Stock or any other class of stock of the Company
ranking junior to the Series B Preferred Stock, a liquidation preference equal
to $50.00 per share plus accrued and unpaid dividends to the date of such
payment. If, upon such dissolution, liquidation or winding up, the amounts
payable as the liquidation preference to holders of Series B Preferred Stock and
any other shares of stock ranking as to such distribution on a parity with the
Series B Preferred Stock are not paid in full, the holders of Series B Preferred
Stock and of such other shares will share ratably in any such distribution of
assets in proportion to the liquidation preference that each holder is entitled
to receive.
Voting. The holders of Series B Preferred Stock will not be entitled to
vote at any meeting of the Company's shareholders, except as required by the
Virginia Stock Corporation Act (the "Virginia Act") and as described below.
Whenever dividends on any shares of Series B Preferred Stock shall be
in arrears for six or more quarterly periods, whether or not consecutive, the
holders of such shares, voting separately as a class, will be entitled to vote
for the election of two additional directors to the Company's Board of Directors
at a special meeting called by the holders of record of at least 10% of the
Series B Preferred Stock so in arrears or at the next annual meeting of
shareholders, if such request is received less than 60 days before the date
fixed for the next annual meeting of the shareholders. Such holders will
continue to be entitled to vote for the election of two additional directors at
each subsequent annual meeting until all dividends accumulated on such shares of
Series B Preferred Stock for past dividend periods and the then current dividend
period shall have been fully paid in cash. Each such director elected as
described above shall be elected by the affirmative vote of the holders of
record of a majority of the shares of Series B Preferred Stock present and
voting at such meeting, which has been called, held and conducted in accordance
with the terms of the Series B Preferred Stock. Each such director shall serve
as a director until all dividends accumulated on such shares of Series B
Preferred Stock for past dividend periods and the then current dividend period
shall have been fully paid in cash, at which time the term of each such director
shall terminate and the number of directors shall be reduced accordingly.
The holders of Series B Preferred Stock will be entitled to one vote
per share on matters subject to a vote by such holders.
Preferred Share Purchase Rights
Each outstanding share of Common Stock has associated with it one
preferred share purchase right (a "Right"). Each Right entitles the registered
holder to purchase from the Company one one-hundredth of a share of Series A
Preferred Stock at a price of $85 per one one-hundredth of a shares of Series A
Preferred Stock (the "Purchase Price"), subject to adjustment. The terms of the
Rights are set forth in a Rights Agreement, dated October 1, 1991, between the
Company and Sovran Bank, N.A., as Rights Agent, as amended by the Amendment to
Rights Agreement, dated June 22, 1992, between the Company, NationsBank, N.A.
(formerly Sovran Bank, N.A.) and Wachovia Bank of North Carolina, N.A., as
successor Rights Agent (the "Rights Agreement"). In connection with the
execution of the original Stock Purchase Agreement on August 20, 1997 and the
Amended and Restated Stock Purchase Agreement on December 11, 1997, the Company
executed an Amended and Restated Rights Agreement, dated August 20, 1997, and a
First Amendment to Amended and Restated Rights Agreement, dated December 11,
1997, with
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Wachovia Bank, N.A., as Rights Agent (collectively, the "Amended and Restated
Rights Agreement"), copies of which have been filed with the Commission on
Current Reports on Form 8-K and are incorporated by reference into this
Prospectus. The following summary of certain terms of the Rights is qualified in
its entirety by reference to the Amended and Restated Rights Agreement. See
"Incorporation of Certain Documents by Reference."
The Rights will become exercisable only if a person or group of
affiliated or associated persons has acquired beneficial ownership of, or has
announced a tender offer for, 20% or more of the outstanding shares of Common
Stock. Under certain circumstances, the Board of Directors may reduce this
threshold percentage to 10%. If a person or group of affiliated or associated
persons has acquired beneficial ownership of, or has announced a tender offer
for, the threshold percentage, each Right will entitle the registered holder,
other than such person or group, to buy shares of Common Stock or Series A
Preferred Stock having a market value equal to twice the exercise price. If the
Company is acquired in a merger or other business combination, each Right will
entitle the registered holder, other than such person or group, to purchase
securities of the surviving company having a market value equal to twice the
Purchase Price. The Rights will expire on August 20, 2007, and may be redeemed
or exchanged by the Company at any time before they become exercisable.
Until the Rights become exercisable, they are evidenced by the Common
Stock certificates and are transferred with and only with such certificates.
Pursuant to the Amended and Restated Rights Agreement, the Rights are
not, and will not become, exercisable by virtue of the approval, execution,
delivery or performance of the Stock Purchase Agreement or the Voting and
Standstill Agreement, or by the acquisition of shares of Common Stock or Series
B Preferred Stock by the Selling Shareholder or any affiliate of the Selling
Shareholder as contemplated by the Stock Purchase Agreement or the Voting and
Standstill Agreement.
Certain Provisions of the Company's Charter and Bylaws
The Company's Charter and Bylaws contain provisions which may have the
effect of delaying or preventing a change in control of the Company. The
Company's Charter and Bylaws provide: (i) for division of the Board of Directors
into three classes, with one class elected each year to serve a three-year term;
(ii) that directors may be removed only for cause and only upon the affirmative
vote of the holders of at least 80% of the outstanding shares entitled to vote;
(iii) that a vacancy on the Board of Directors shall be filled by the remaining
directors; and (iv) that the affirmative vote of the holders of at least 80% of
the outstanding shares entitled to vote is required to alter, amend or repeal
the foregoing provisions. The Company's Bylaws require advance notification for
a shareholder to bring business before a shareholders' meeting or to nominate a
person for election as a director. The Company's Charter and Bylaws provide
that, subject to the rights of holders of any series of Preferred Stock, special
meetings of shareholders may be called only by the Chairman of the Board or a
majority of the total number of directors which the Board of Directors would
have if there were no vacancies, and may not be called by the shareholders. The
business permitted to be conducted at any special meeting of shareholders is
limited to the business brought before the meeting by or at the direction of the
Board of Directors.
The Company's Charter also contains an "affiliated transaction
provision" that provides that, in the event that holders of Common Stock are
entitled to vote on certain transactions, a supermajority of at least 80% of all
the votes that the holders of Common Stock are entitled to cast thereon shall be
required for the approval of such transactions. Such supermajority approval
would be required for (i) a merger or consolidation involving any person or
entity who directly or indirectly owns or controls 10% or more of the voting
power of the Company (an "Interested Shareholder") at the record date for
determining shareholders entitled to vote and (ii) a sale, lease or exchange of
substantially all of the Company's assets or property to or with an Interested
Shareholder, or for the approval of a sale, lease or exchange of substantially
all of the assets or property of an Interested Shareholder to or with the
Company. In addition, the Company's Charter provides that the same 80% vote
shall be required for the approval of certain transactions including
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<PAGE>
a reclassification of securities, recapitalization or other transaction designed
to decrease the number of holders of Common Stock after any person or entity has
become an Interested Shareholder. Notwithstanding the foregoing, the
supermajority approval requirement does not apply to any transaction that is
approved by the Board of Directors prior to the time that the Interested
Shareholder becomes an Interested Shareholder. Upon consummation of the
Acquisition, the Selling Shareholder and its affiliates became Interested
Shareholders within the meaning of these provisions. However, the supermajority
approval requirement does not apply to the Acquisition because of its prior
approval by the Board of Directors.
The shares of Common Stock and Preferred Stock authorized by the
Company's Charter provide the Board of Directors with as much flexibility as
possible in using such shares for corporate purposes. However, these additional
shares may also be used by the Board of Directors to deter future attempts to
gain control of the Company. The Board of Directors has sole authority to
determine the terms of any series of the Preferred Stock, including voting
rights, conversion rates and liquidation preferences. As a result of the ability
to fix voting rights for a series of Preferred Stock, the Board of Directors has
the power to issue a series of Preferred Stock to persons friendly to management
in order to attempt to block a post-tender offer merger or other transaction by
which a third party seeks a change in control of the Company.
The foregoing provisions of the Company's Charter and Bylaws are
intended to prevent inequitable shareholder treatment in a two-tier takeover and
to reduce the possibility that a third party could effect a sudden or surprise
change in majority control of the Board of Directors without the support of the
incumbent Board of Directors, even if such a change were desired by, or would be
beneficial to, a majority of the Company's shareholders. Such provisions
therefore may have the effect of discouraging certain unsolicited offers for the
Company's capital stock.
Liability and Indemnification of Directors and Officers
As permitted by the Virginia Act, the Company's Charter contains
provisions that indemnify directors and officers of the Company to the full
extent permitted by Virginia law and seek to eliminate the personal liability of
directors and officers for monetary damages to the Company or its shareholders
for breach of their fiduciary duties, except to the extent such indemnification
or elimination of liability is prohibited by the Virginia Act. These provisions
do not limit or eliminate the rights of the Company or any shareholder to seek
an injunction or any other non-monetary relief in the event of a breach of a
director's or officer's fiduciary duty. In addition, these provisions apply only
to claims against a director or officer arising out of his role as a director or
officer and do not relieve a director or officer from liability for violations
of statutory law, such as certain liabilities imposed on a director or officer
under the federal securities laws.
In addition, the Company's Charter provides for the indemnification of
both directors and officers for expenses incurred by them in connection with the
defense or settlement of claims asserted against them in their capacities as
directors and officers. In certain cases, this right of indemnification extends
to judgments or penalties assessed against them. The Company has limited its
exposure to liability for indemnification of directors and officers by
purchasing directors and officers liability insurance coverage.
The purpose of these provisions is to assist the Company in retaining
qualified individuals to serve as directors by limiting their exposure to
personal liability for serving as such.
The Company is not aware of any pending or threatened action, suit or
proceeding involving any of its directors, officers, employees or agents for
which indemnification from the Company may be sought. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Company, or of an affiliate of the
Company pursuant to the Company's Charter or otherwise, the Board of Directors
has been advised that, in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
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<PAGE>
Affiliated Transactions
The Virginia Act contains provisions governing "Affiliated
Transactions." Affiliated Transactions include certain mergers and share
exchanges, material dispositions of corporate assets not in the ordinary course
of business, any dissolution of the corporation proposed by or on behalf of an
Interested Shareholder (as defined below), or reclassifications, including
reverse stock splits, recapitalizations or mergers of the corporation with its
subsidiaries which have the effect of increasing the percentage of voting shares
beneficially owned by an Interested Shareholder by more than 5%. For purposes of
the Virginia Act, an Interested Shareholder is defined as any beneficial owner
of more than 10% of any class of the voting securities of a Virginia
corporation.
Subject to certain exceptions discussed below, the provisions governing
Affiliated Transactions require that, for three years following the date upon
which any shareholder becomes an Interested Shareholder, a Virginia corporation
cannot engage in an Affiliated Transaction with such Interested Shareholder
unless approved by the affirmative vote of the holders of two-thirds of the
outstanding shares of the corporation entitled to vote, other than the shares
beneficially owned by the Interested Shareholder, and by a majority (but not
less than two) of the "Disinterested Directors." A Disinterested Director means,
with respect to a particular Interested Shareholder, a member of a corporation's
board of directors who (i) was a member before the later of January 1, 1988 and
the date on which an Interested Shareholder became an Interested Shareholder and
(ii) was recommended for election by, or was elected to fill a vacancy and
received the affirmative vote of, a majority of the Disinterested Directors then
on the corporation's board of directors. At the expiration of the three year
period, these provisions require approval of Affiliated Transactions by the
affirmative vote of the holders of two-thirds of the outstanding shares of the
corporation entitled to vote, other than those beneficially owned by the
Interested Shareholder.
The principal exceptions to the special voting requirement apply to
Affiliated Transactions occurring after the three-year period has expired and
require either that the transaction be approved by a majority of the
Disinterested Directors or that the transaction satisfy certain fair price
requirements of the statute. In general, the fair price requirements provide
that the shareholders must receive the highest per share price for their shares
as was paid by the Interested Shareholder for his shares or the fair market
value of their shares, whichever is higher. The fair price requirements also
require that, during the three years preceding the announcement of the proposed
Affiliated Transaction, all required dividends have been paid and no special
financial accommodations have been accorded the Interested Shareholder, unless
approved by a majority of the Disinterested Directors.
None of the foregoing limitations and special voting requirements
applies to an Affiliated Transaction with an Interested Shareholder whose
acquisition of shares making such a person an Interested Shareholder was
approved by a majority of the corporation's Disinterested Directors. Upon
consummation of the Acquisition, the Selling Shareholder and its affiliates
became Interested Shareholders whose acquisition of shares has been approved by
a majority of the Board of Directors, each of whom was a Disinterested Director.
These provisions were designed to deter certain takeovers of Virginia
corporations. In addition, the statute provides that, by affirmative vote of a
majority of the voting shares other than shares owned by any Interested
Shareholder, a corporation may adopt, by meeting certain voting requirements, an
amendment to its articles of incorporation or bylaws providing that the
Affiliated Transactions provisions shall not apply to the corporation. The
Company has not adopted such an amendment.
Control Share Acquisitions
The Virginia Act also contains provisions regulating certain "control
share acquisitions," which are transactions causing the voting strength of any
person acquiring beneficial ownership of shares of a public corporation in
Virginia to meet or exceed certain threshold percentages (20%, 33 1/3% or 50%)
of the total
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<PAGE>
votes entitled to be cast for the election of directors. Shares acquired in a
control share acquisition have no voting rights unless (i) the voting rights are
granted by a majority vote of all outstanding shares other than those held by
the acquiring person or any officer or employee director of the corporation, or
(ii) the articles of incorporation or bylaws of the corporation provide that
these Virginia law provisions do not apply to acquisitions of its shares. The
acquiring person may require that a special meeting of the shareholders be held
to consider the grant of voting rights to the shares acquired in the control
share acquisition. The Company's Charter make these provisions inapplicable to
acquisitions of shares of the Company.
Acquisition Covenants Regarding Non-Performance Remedies
The provisions of the Series B Preferred Stock contain covenants that
entitle the Selling Shareholder to certain rights in specific default
situations. These covenants may affect the rights of the Selling Shareholder,
Reliance and their affiliates in a manner that could be adverse to the rights of
holders of Common Stock. As described below, upon the occurrence of certain
events, the Selling Shareholder will be entitled to additional seats on the
Company's Board of Directors, and the Selling Shareholder, Reliance and their
affiliates will no longer be subject to certain restrictions under the Voting
and Standstill Agreement.
Such rights are cumulative and are available only until the earlier of
(i) the date that the Selling Shareholder Ownership Percentage is less than 20%
or (ii) the expiration of the time in which the Selling Shareholder is required
to dispose of all shares of Series B Preferred Stock pursuant to the Voting and
Standstill Agreement. In addition, such rights are exercisable solely and
exclusively by the Selling Shareholder, whether the Selling Shareholder holds
all shares of the Series B Preferred Stock or the Selling Shareholder and any of
its affiliates hold any shares of Series B Preferred Stock. The rights are not
transferable or assignable to subsequent holders of the Series B Preferred
Stock. Any sale, conveyance or transfer of shares of the Series B Preferred
Stock by the Selling Shareholder to any person who is not an affiliate of the
Selling Shareholder at the time of such sale, conveyance or transfer shall
render these rights null and void as to the shares of Series B Preferred Stock
so sold, conveyed or transferred.
Industry-Related Defaults. In the event that (i) the Company's combined
ratio exceeds the weighted average of the combined ratios of certain
predetermined comparable title insurance companies by more than five percentage
points for any twelve month period (beginning with the twelve month period
commencing January 1, 1998), with such calculation to be determined as of March
31, June 30, September 30 and December 31 of each year for the previous twelve
months, and (ii) any two of Standard & Poors Corporation, Duff & Phelps Credit
Rating Co. ("Duff & Phelps") or A.M. Best Company, Inc. have downgraded the
Company's claims-paying ability rating to or below a rating of "BBB -" (or its
equivalent), the Company will take such action as may be necessary to increase
the size of the Board of Directors by three directors, fill the three vacancies
created thereby with directors designated by the Selling Shareholder
("Designated Directors") and recommend such Designated Directors for election as
directors at the next annual meeting of the Company's shareholders. Furthermore,
in the event of the defaults described in this paragraph, the Selling
Shareholder and its affiliates will no longer be required to (i) sell the shares
of Common Stock that the Selling Shareholder acquired in the Acquisition within
the time period set forth in the Voting and Standstill Agreement, (ii) sell the
shares of Series B Preferred Stock that the Selling Shareholder acquired in the
Acquisition within the time period set forth in the Voting and Standstill
Agreement, (iii) refrain from taking certain actions prohibited by the
standstill provisions of the Voting and Standstill Agreement (other than the
prohibition on acquiring additional shares of Common Stock), (iv) vote the
shares of Common Stock held by them in the manner required by the Voting and
Standstill Agreement or (v) sell the shares of Common Stock held by them before
converting shares of Series B Preferred Stock into additional shares of Common
Stock ((i) through (v) collectively, the "Restriction Releases").
The title insurance companies to be included in the combined ratio
analysis described above are Chicago Title Insurance Company, First American
Title Insurance Company, Fidelity National Title
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<PAGE>
Insurance Company and Old Republic Title Insurance Company. As of February 26,
1998, the Company's claims-paying ability rating was "A-" as determined by Duff
& Phelps.
Dividend Payment Defaults. In the event that the Selling Shareholder or
any affiliate of the Selling Shareholder beneficially owns shares of the Series
B Preferred Stock and the Company fails to pay in cash the full amount of the
dividend on the Series B Preferred Stock on one occasion within five days of the
applicable dividend payment date, the Company will take such action as may be
necessary to increase the size of the Board of Directors of the Company by three
directors and fill the three vacancies created thereby with Designated Directors
and recommend such Designated Directors for election as directors at the next
annual meeting of the Company's shareholders. Furthermore, in the event of the
default described in this paragraph, the Selling Shareholder and its affiliates
will be entitled to the Restriction Releases.
In the event that the Selling Shareholder or any affiliate of the
Selling Shareholder beneficially owns shares of the Series B Preferred Stock and
the Company fails to pay in cash the full amount of the dividend on the Series B
Preferred Stock on two occasions, whether or not consecutive, within five days
of the applicable dividend payment dates, the Selling Shareholder and its
affiliates will no longer be required to (i) refrain from acquiring additional
shares of Common Stock or (ii) refrain from selling shares of Common Stock or
Series B Preferred Stock to any person or group if, as a result of the sale,
such person or group would beneficially own on a fully diluted basis more than
9.9% of the issued and outstanding shares of Common Stock.
In the event that the Selling Shareholder or any affiliate of the
Selling Shareholder beneficially owns shares of the Series B Preferred Stock and
the Company fails to pay in cash the full amount of the dividend on the Series B
Preferred Stock on three occasions, whether or not consecutive, within five days
of the applicable dividend payment dates, the Company will take such action as
may be necessary to increase the size of the Board of Directors to a number that
will permit the addition of a sufficient number of Designated Directors such
that the total number of Designated Directors will constitute a majority of the
Board of Directors, fill the vacancies created thereby with additional
Designated Directors and recommend such additional Designated Directors for
election as directors at the next annual meeting of the Company's shareholders.
Furthermore, in the event of the default described in this paragraph, the
Selling Shareholder and its affiliates will no longer be subject to any of the
restrictions placed on them in the Voting and Standstill Agreement.
Material Obligation Defaults. In the event that the Company defaults on
any of its material debt obligations in excess of $15.0 million (individually or
at any one time in the aggregate) (a "Material Default"), and the Material
Default is not cured or waived within the time period and manner prescribed by
the applicable agreements or instruments and results in the acceleration of the
amounts due thereunder, the Company will take such action as may be necessary to
increase the size of the Board of Directors to a number that will permit the
addition of a sufficient number of Designated Directors such that the total
number of Designated Directors will constitute a majority of the Board of
Directors, fill the vacancies created thereby with additional Designated
Directors and recommend such additional Designated Directors for election as
directors at the next annual meeting of the Company's shareholders. Furthermore,
in the event of the default described in this paragraph, the Selling Shareholder
and its affiliates will no longer be subject to any of the restrictions placed
on them in the Voting and Standstill Agreement.
SHARES ELIGIBLE FOR FUTURE SALE
As of February 27, 1998, the Company had outstanding 15,044,593 shares
of Common Stock, all of which are freely tradable. As of February 27, 1998, the
Company had outstanding options to purchase 730,997 shares of Common Stock, of
which 548,285 were exercisable, at an average exercise price of $13.72 per
share.
Approximately 9,433,124 shares of Common Stock (which includes
4,039,473 shares of Common Stock issued to the Selling Shareholder in the
Acquisition and 4,824,561 shares of Common Stock into
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<PAGE>
which the Series B Preferred Shares offered hereby are convertible) and the
Series B Preferred Shares offered hereby are or will be held by persons who may
be deemed to be "affiliates" of the Company under the Securities Act and may be
resold by them only in transactions registered under the Securities Act or
permitted by the provisions of Rule 144. Persons who may be deemed to be
affiliates include individuals or entities that control, are controlled by, or
are under common control with such party and may include certain officers,
directors and principal shareholders of such party. In general, under Rule 144
as currently in effect, a person (or persons whose shares are aggregated) who
has beneficially owned "restricted securities" for at least one year may, under
certain circumstances, resell within any three-month period such number of
shares as does not exceed the greater of 1% of the then outstanding shares or
the average weekly trading volume during the four calendar weeks prior to such
resale. Rule 144 also permits, under certain circumstances, the resale of shares
without any quantity limitation by a person who has satisfied a two-year holding
period and who is not, and has not been for the preceding three months, an
affiliate of the Company. In addition, holding periods of successive
non-affiliate owners are aggregated for purposes of determining compliance with
these one and two-year holding period requirements.
Pursuant to the Registration Rights Agreement, the Company has filed
registration statements (including the Registration Statement of which this
Prospectus is a part) under the Securities Act to register the Acquisition
Shares for resale to the public. Pursuant to such registration statements,
4,039,473 shares of Common Stock and the Series B Preferred Shares offered
hereby, as well as the 4,824,561 shares of Common Stock offered hereby into
which such Series B Preferred Shares are convertible, will be available for
resale in either public of private offerings and offered hereby will be freely
transferable.
The availability of shares for sale or actual sales under Rule 144,
pursuant to an effective registration statement under the Securities Act or
otherwise, may have an adverse effect on the market price of the Common Stock.
Sales pursuant to an effective registration statement or under Rule 144 or
otherwise also could impair the Company's ability to market additional equity
securities.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Williams, Mullen, Christian & Dobbins, P.C.,
Richmond, Virginia. Theodore L. Chandler, Jr., a principal in Williams, Mullen,
Christian & Dobbins, is a director of the Company and beneficially owns an
aggregate of 19,000 shares of Common Stock as of February 20, 1998. Other
attorneys of that firm beneficially owned an aggregate of approximately 21,182
shares of Common Stock as of that date.
EXPERTS
The consolidated financial statements and schedules appearing in
Lawyers Title Corporation's Annual Report (Form 10-K) for the year ended
December 31, 1996, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated by
reference herein. Such consolidated financial statements and schedules are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The combined financial statements of Commonwealth and Transnation as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 incorporated in this Prospectus by reference from the Proxy
Statement for the Special Meeting of the Shareholders of Lawyers Title
Corporation filed on January 29, 1998 have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report, which is incorporated
herein by reference, and have been so incorporated in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
========================================================= =======================================================
No dealer, salesperson or other person has been
authorized to give any information or to make any
representation other than those contained in this 2,200,000 Shares
Prospectus and, if given or made, such information or 7% Series B Cumulative
representation must not be relied upon as having been Convertible Preferred Stock
authorized by the Company or any sales agent. This
Prospectus does not constitute an offer to sell or a 4,824,561 Shares
solicitation of an offer to buy any securities other Common Stock
than the securities to which it relates, nor does it
constitute an offer to sell or the solicitation of an
offer to buy any of the securities offered hereby in [LOGO]
any jurisdiction in which such offer or solicitation is
not authorized, or in which the person making such
offer or solicitation is not qualified to do so, or to
any person to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any
circumstances, create any implication that the LandAmerica
information contained herein is correct as of any time Financial Group, Inc.
subsequent to the date hereof or that there has been no
change in the affairs of the Company since the date
hereof.
--------------------------
TABLE OF CONTENTS _________________
Page
Available Information...............................2 PROSPECTUS
Incorporation of Certain Documents _________________
by Reference.....................................2
Forward-Looking and Cautionary Statements...........3
Risk Factors........................................4
The Company.........................................7
Use of Proceeds.....................................8
Ratio of Earnings to Fixed Charges..................8
The Selling Shareholder.............................8
Plan of Distribution...............................10 February 27, 1998
Description of Capital Stock.......................11
Shares Eligible for Future Sale....................20
Legal Matters......................................21
Experts............................................21
========================================================= =======================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission Registration Fee........................... $ 51,152*
Printing Expenses............................................................. 5,000
Accounting Fees and Expenses.................................................. 10,000
Legal Fees and Expenses....................................................... 20,000
Miscellaneous Expenses........................................................ 348
----------
Total.................................................................. $ 86,500
==========
</TABLE>
_______________
* Represents actual expenses. All other expenses are estimates.
Item 16. Exhibits
The following exhibits are filed on behalf of the Registrant as part of
this Registration Statement:
2.1 Amended and Restated Stock Purchase Agreement, dated December 11, 1997,
by and among the Registrant, Lawyers Title Insurance Corporation,
Reliance Insurance Company and Reliance Group Holdings, Inc.,
incorporated by reference to Appendix A to the Registrant's definitive
Proxy Statement for its Special Meeting of Shareholders to be held on
February 27, 1998, filed with the Commission on January 29, 1998.
4.1 Articles of Incorporation, incorporated by reference to Exhibit 3A of
the Registrant's registration statement on Form 10, File No. 0-19408.
4.2 Articles of Amendment of the Articles of Incorporation of the
Registrant.
4.3 Bylaws, incorporated by reference to Exhibit 3A of the Registrant's
registration statement on Form 10, File No. 0-19408.
4.4 Amended and Restated Rights Agreement, dated as of August 20, 1997,
between the Registrant and Wachovia Bank, N.A., as Rights Agent, which
Amended and Restated Rights Agreement includes an amended Form of
Rights Certificate, incorporated by reference to Exhibit 4.1 of the
Registrant's Current Report on Form 8-K dated August 20, 1997.
4.5 First Amendment to Amended and Restated Rights Agreement, dated as of
December 11, 1997, between the Registrant and Wachovia Bank, N.A., as
Rights Agent, incorporated by reference to Exhibit 4.1 of the
Registrant's Current Report on Form 8-K dated December 11, 1997.
4.6 Form of Common Stock certificate.
4.7 Form of 7% Series B Cumulative Convertible Preferred Stock certificate.
5.1 Opinion of Williams Mullen Christian & Dobbins.*
23.1 Consent of Williams Mullen Christian & Dobbins (included in Exhibit
5.1).*
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Deloitte & Touche LLP.
24.1 Powers of Attorney (included on signature page).*
_________________
* Previously filed
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Richmond, Commonwealth of Virginia, on February
26, 1998.
LAWYERS TITLE CORPORATION
By: /s/ Charles H. Foster, Jr.
------------------------------------
Charles H. Foster, Jr.
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Charles H. Foster, Jr. Chairman and February 26, 1998
- ------------------------------------------- Chief Executive Officer and Director
Charles H. Foster, Jr. (Principal Executive Officer)
* Vice President and Treasurer
- ------------------------------------------- (Principal Financial Officer)
G. William Evans
* Controller
- -------------------------------------------
John R. Blanchard (Principal Accounting Officer)
* President and
- ------------------------------------------- Chief Operating Officer and Director
Janet A. Alpert
Director
- -------------------------------------------
Theodore L. Chandler, Jr.
Director
- -------------------------------------------
Michael Dinkins
Director
- -------------------------------------------
James Ermer
<PAGE>
* Director
- -------------------------------------------
John P. McCann
* Director
- -------------------------------------------
J. Garnett Nelson
* Director
- -------------------------------------------
Robert F. Norfleet, Jr.
* Director
- -------------------------------------------
Eugene P. Trani
* Director
- -------------------------------------------
Marshall B. Wishnack
</TABLE>
* Russell W. Jordan, III, by signing his name hereto, signs this
document on behalf of each of the persons indicated by an asterisk above
pursuant to powers of attorney duly executed by such persons and previously
filed with the Securities and Exchange Commission as part of the Registration
Statement.
Date: February 26, 1998
By: /s/ Russell W. Jordan, III
-------------------------------
Russell W. Jordan, III
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit
No. Document
--- --------
2.1 Amended and Restated Stock Purchase Agreement, dated December
11, 1997, by and among the Registrant, Lawyers Insurance
Corporation, Reliance Insurance Company and Reliance Group
Holdings, Inc., incorporated by reference to Appendix A to
the Registrant's definitive Proxy Statement for its Special
Meeting of Shareholders to be held on February 27, 1998,
filed with the Commission on January 29, 1998.
4.1 Articles of Incorporation, incorporated by reference to
Exhibit 3A of the Registrant's registration statement on Form
10, File No. 0-19408.
4.2 Articles of Amendment of the Articles of Incorporation of the
Registrant.
4.3 Bylaws, incorporated by reference to Exhibit 3A of the
Registrant's registration statement on Form 10, File
No.0-19408.
4.4 Amended and Restated Rights Agreement, dated as of August 20,
1997, between the Registrant and Wachovia Bank, N.A., as
Rights Agent, which Amended and Restated Rights Agreement
includes an amended Form of Rights Certificate, incorporated
by reference to Exhibit 4.1 of the Registrant's Current
Report on Form 8-K dated August 20, 1997.
4.5 First Amendment to Amended and Restated Rights Agreement,
dated as of December 11, 1997, between the Registrant and
Wachovia Bank, N.A., as Rights Agent, incorporated by
reference to Exhibit 4.1 of the Registrant's Current Report
on Form 8-K dated December 11, 1997.
4.6 Form of Common Stock certificate.
4.7 Form of 7% Series B Cumulative Convertible Preferred Stock
certificate.
5.1 Opinion of Williams Mullen Christian & Dobbins.*
23.1 Consent of Williams Mullen Christian & Dobbins (included in
Exhibit 5.1).*
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Deloitte & Touche LLP.
23.4 Powers of Attorney (included on signature page).*
_____________________
* Previously filed
Exhibit 4.2
ARTICLES OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
LAWYERS TITLE CORPORATION
1. The name of the Corporation is Lawyers Title Corporation (the
"Corporation").
2. On August 20, 1997, the Board of Directors of the Corporation
found that the following proposed amendment of its Articles of Incorporation was
in the best interests of the Corporation and directed that it be submitted to a
vote of the shareholders:
RESOLVED, that the Corporation's Articles of Incorporation shall
be amended to change the name of the Corporation by deleting the
reference to "Lawyers Title Corporation" in Article First of the
Articles of Incorporation and substituting therefor "LandAmerica
Financial Group, Inc."
The amendment proposed by the Board of Directors as set forth above was
adopted by the shareholders at a special meeting on February 27, 1998. Only
holders of shares of the Corporation's common stock were entitled to vote on the
amendment. The number of shares of common stock of the Corporation outstanding
on the record date, the number of shares entitled to vote on the proposed
amendment and the number of shares voted for and against the amendment were as
follows:
Number of shares outstanding: 8,983,020
Number of shares entitled to vote: 8,983,020
Number of shares voted: For - 6,530,020; Against - 69,144
3. The Corporation's Articles of Incorporation shall be amended to
increase the number of authorized shares of the Series A Junior Participating
Preferred Stock by deleting the reference to "50,000" in the first sentence of
Section 1 of Subsection A of Article Fourth of the Articles of Incorporation and
substituting therefor "200,000." Pursuant to Section 13.1-639 of the Virginia
Stock Corporation Act, the Corporation's Articles of Incorporation permit the
Corporation's Board of Directors to amend the Articles of Incorporation in order
to establish the preferences, limitations and relative rights of one or more
series of the Corporation's authorized class of Preferred Stock without the
approval of the Corporation's shareholders. The Corporation has not issued any
shares of the Series A Junior Participating Preferred Stock prior to the filing
hereof. The amendments to the Articles of Incorporation were adopted on August
20, 1997, by resolution of the Corporation's Board of Directors.
4. The Corporation's Articles of Incorporation shall be amended to
provide for the issuance, and to fix the preferences, limitations and relative
rights, within the limits permitted by applicable law, of 2,200,000 shares of
the Corporation's 7% Series B Cumulative Convertible Preferred Stock, all as set
forth in the attached Exhibit A. Pursuant to Section 13.1-639 of the Virginia
Stock Corporation Act, the Corporation's Articles of Incorporation permit the
Corporation's Board of
<PAGE>
Directors to amend the Articles of Incorporation in order to establish the
preferences, limitations and relative rights of one or more series of the
Corporation's authorized class of Preferred Stock without the approval of the
Corporation's shareholders. The Corporation has not issued any shares of the 7%
Series B Cumulative Convertible Preferred Stock prior to the filing hereof. The
amendments to the Articles of Incorporation were adopted on August 20, 1997 by
resolution of the Corporation's Board of Directors.
The undersigned, Chairman and Chief Executive Officer of the
Corporation, declares that the facts herein stated are true as of February 27,
1998.
LAWYERS TITLE CORPORATION
By: /s/ Charles H. Foster, Jr.
------------------------------------
Charles H. Foster, Jr., Chairman and
Chief Executive Officer
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<PAGE>
Exhibit A
7% SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
(Without Par Value)
OF
LAWYERS TITLE CORPORATION
1. Designation and Number. A series of the Preferred Stock,
designated the 7% Series B Cumulative Convertible Preferred Stock, without par
value (the "Series B Preferred Stock"), is hereby established, consisting of
2,200,000 shares, each having a stated value of $50 per share (the "Stated
Value"), issuable by the Corporation pursuant to authority granted to the Board
of Directors by Article Fourth of the Articles of Incorporation, which
authorizes a Preferred Stock Designation.
All shares of Series B Preferred Stock which shall have been
issued and reacquired in any manner by the Corporation (including shares
purchased or redeemed and retired, shares converted pursuant to Section 5 hereof
and shares exchanged for any other security of the Corporation) shall not be
reissued and shall, upon their cancellation, become authorized but unissued
shares of the Corporation's Preferred Stock, without designation as to series,
and thereafter may be issued in any Preferred Stock Designation or as otherwise
required by law, but not as shares of Series B Preferred Stock.
2. Relative Seniority. The Series B Preferred Stock shall, with
respect to dividend rights and rights on liquidation, winding-up and dissolution
of the Corporation, rank senior to the Corporation's Series A Junior
Participating Preferred Stock, Common Stock and all other series and classes of
stock of the Corporation now or hereafter authorized, issued or outstanding,
other than any capital stock of the Corporation ranking on parity with the
Series B Preferred Stock as to dividend rights or rights upon liquidation,
winding-up or dissolution of the Corporation. The Corporation shall be permitted
to authorize and issue junior securities and securities on a parity with the
Series B Preferred Stock to the extent not expressly prohibited by this
Preferred Stock Designation.
3. Dividends.
3.1 General. The Series B Preferred Stock shall pay, and the
holders of the then outstanding shares of Series B Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors out of any
funds legally available therefor under the provisions of the Virginia Stock
Corporation Act, cumulative cash dividends at the rate of seven percent (7%) of
the Stated Value of the Series B Preferred Stock (equivalent to $3.50 per share)
per annum (subject to appropriate adjustment for stock splits, stock dividends,
combinations and similar recapitalizations affecting such shares), and, as
nonparticipating shares, no more, as long as shares of Series B Preferred Stock
remain outstanding. Such dividends shall be payable quarterly in arrears in cash
on the last day, or the next succeeding Business Day, of March, June, September
and December of each year, beginning on the first such date to occur after the
Initial Issuance Date (each such day being hereinafter called a "Dividend
Payment Date" and each period beginning on the day next following a Dividend
Payment Date being hereinafter called a "Dividend Period"). Such dividends shall
be paid to each
<PAGE>
shareholder of record at the close of business on the fifteenth day of the
calendar month in which the applicable Dividend Payment Date falls or such other
date as shall be fixed by the Board of Directors at the time of declaration of
the dividend (in any case as required by any securities exchange or market on
which the Series B Preferred Stock is listed or traded) (the "Dividend Record
Date"), which shall be not less than ten (10) nor more than thirty (30) days
preceding the Dividend Payment Date. The amount of any dividend payable for the
initial Dividend Period and for any other partial Dividend Period shall be
computed on the basis of a 360-day year consisting of twelve (12) 30-day months.
Dividends on the shares of Series B Preferred Stock shall accrue and be
cumulative from and including the date of original issue thereof, whether or not
(i) the Corporation has earnings, (ii) dividends on such shares are declared or
(iii) on any Dividend Payment Date there shall be funds legally available for
the payment of such dividends.
3.2 Preference of Series B Preferred Stock. When dividends
are not paid in full upon the shares of Series B Preferred Stock and the shares
of any other series of preferred stock ranking on a parity as to dividends with
the Series B Preferred Stock (or a cash sum sufficient for such full payment is
not set apart therefor), all dividends declared upon shares of Series B
Preferred Stock and any other series of preferred stock ranking on a parity as
to dividends with the Series B Preferred Stock shall be declared pro rata so
that the amount of dividends declared per share on the Series B Preferred Stock
and such other series of preferred stock shall in all cases bear to each other
the same ratio that accrued dividends per share on the shares of Series B
Preferred Stock and such other series of preferred stock bear to each other.
Unless Full Cumulative Dividends on the Series B Preferred Stock
have been or contemporaneously are declared and paid in cash or declared and a
cash sum sufficient for the payment thereof set apart for payment on the Series
B Preferred Stock for all past dividend periods and the then current dividend
period, no dividends shall be declared or, prior to payment of Full Cumulative
Dividends, paid or set apart for payment on the Common Stock or any other
capital stock of the Corporation ranking, as to dividends or liquidation rights,
junior to or, except as provided in the immediately preceding paragraph, on a
parity with the Series B Preferred Stock for any period, nor shall any Common
Stock or any other capital stock of the Corporation ranking on a parity with or
junior to the Series B Preferred Stock be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available for a
sinking fund for the redemption of any shares of such stock) by the Corporation
(except by conversion into or exchange for Common Stock).
3.3 Declaration and Accrual of Cumulative Dividends. No
dividends on shares of Series B Preferred Stock shall be declared by the Board
of Directors of the Corporation or paid or set apart for payment by the
Corporation (i) at such time as the terms and provisions of any agreement of the
Corporation which existed on or prior to the Initial Issuance Date, including
any such agreement relating to its indebtedness, prohibits such declaration,
payment or setting apart for payment or provides that such declaration, payment
or setting apart for payment would constitute a breach thereof or a default
thereunder and such breach or default would result in an acceleration of amounts
due thereunder, or (ii) if such declaration or payment shall be restricted or
prohibited by law.
Dividends in arrears may be declared and paid at any time,
without reference to any Dividend Payment Date, to holders of record on such
date as shall be fixed by the Board of Directors
-2-
<PAGE>
of the Corporation, as long as such date does not exceed sixty (60) days
preceding the payment date of such dividends. The amount of any dividends
accrued on any shares of Series B Preferred Stock at any Dividend Payment Date
shall be the amount of any unpaid dividends accumulated thereon, to and
including such Dividend Payment Date, whether or not earned or declared, and the
amount of dividends accrued on any shares of Series B Preferred Stock at any
date other than a Dividend Payment Date shall be equal to the sum of the amount
of any unpaid dividends accumulated thereon, to and including the last preceding
Dividend Payment Date, whether or not earned or declared, plus an amount
calculated on the basis of the annual dividend rate for the period after such
last preceding Dividend Payment Date to and including the date as of which the
calculation is made, based on a 360-day year of twelve (12) 30-day months. No
interest or sum of money in lieu of interest shall be payable in respect of any
dividend payment or payments which may be in arrears. Any dividend payment made
on shares of the Series B Preferred Stock shall first be credited against the
earliest accrued but unpaid dividend due with respect to such shares which
remains payable.
Holders of shares of the Series B Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or stock, in excess
of Full Cumulative Dividends. Except as provided in this Preferred Stock
Designation, the Series B Preferred Stock shall not be entitled to participate
in the earnings or assets of the Corporation.
4. Liquidation Rights.
(a) Upon the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the holders of shares of the
Series B Preferred Stock then outstanding shall be entitled to receive and to be
paid out of the assets of the Corporation legally available for distribution to
its shareholders, before any distribution shall be made to the holders of Common
Stock or any other capital stock of the Corporation ranking junior to the Series
B Preferred Stock upon liquidation, dissolution or winding-up, a liquidation
preference equal to the Stated Value, plus accrued and unpaid dividends thereon
(whether or not declared by the Board of Directors) to the date of payment.
(b) If, upon any voluntary or involuntary dissolution,
liquidation, or winding up of the Corporation, the amounts payable with respect
to the liquidation preference of the shares of the Series B Preferred Stock and
any other shares of stock of the Corporation ranking as to any such distribution
on a parity with the shares of the Series B Preferred Stock are not paid in
full, the holders of the shares of the Series B Preferred Stock and of such
other shares will share ratably in any such distribution of assets of the
Corporation in proportion to the full respective liquidation preferences to
which they are entitled.
(c) After the payment to the holders of the shares of
the Series B Preferred Stock of the full liquidation preference provided for in
this Section 4, the holders of the Series B Preferred Stock will have no right
or claim to participate in any distribution of the remaining assets of the
Corporation.
(d) For the purposes of this Section 4, a distribution
of assets in any dissolution, winding up, liquidation or reorganization shall
not include (i) any consolidation or merger of the Corporation with or into any
other corporation, (ii) any dissolution, liquidation, winding up or
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<PAGE>
reorganization of the Corporation immediately followed by reincorporation of
another corporation or (iii) a sale or other disposition of all or substantially
all of the Corporation's assets to another corporation; provided, that in each
case, effective provision is made in the articles of incorporation or
certificate of incorporation of the resulting and surviving corporation or
otherwise for the protection of the rights of the holders of shares of Series B
Preferred Stock.
5. Conversion Rights.
5.1 General; Mechanics of Conversion.
(a) At any time or from time to time, the holder of any
share of Series B Preferred Stock may, without the payment of additional
consideration by such holder, convert pursuant to this Section 5 all or any part
(in whole number of shares only) of the Series B Preferred Stock into shares of
Common Stock. The number of shares of Common Stock into which each share of
Series B Preferred Stock may at any time be converted shall be equal to the
amount determined by dividing the Stated Value of such shares by the Conversion
Price (as such price may from time to time be determined pursuant to the
provisions of Sections 5.2 and 5.3 hereof).
(b) Each conversion of Series B Preferred Stock shall
be effected by the surrender of the certificate or certificates representing the
shares to be converted at the principal office of the Transfer Agent (as
designated by written notice to the holder or holders of the Series B Preferred
Stock) at any time during its usual business hours, together with written notice
by the holder of the Series B Preferred Stock stating that such holder desires
to convert the shares, or a stated number of the shares, represented by such
certificate or certificates, which notice also shall specify the name or names
(with addresses) and denominations in which the certificate or certificates for
Common Stock (and any remaining Series B Preferred Stock, if appropriate) shall
be issued and shall include instructions for delivery thereof. Such conversion
shall be deemed to have been effected as of the close of business on the date on
which such notice shall have been received and such certificate or certificates
shall have been surrendered in blank or with a proper assignment of such
certificate or certificates to the Corporation (the "Conversion Date").
(c) On the Conversion Date, the rights of the holder of
such Series B Preferred Stock (or specified portion thereof) as to the converted
shares of Series B Preferred Stock shall cease, and the person or persons
entitled to receive a certificate or certificates for shares of Common Stock
upon conversion of such shares shall be treated for all purposes as having
become the holder or holders of record of the shares of Common Stock represented
thereby at the beginning of the Trading Day next following the Conversion Date.
(d) As soon as practicable after the Conversion Date
(and in no event more than three (3) Business Days after the Conversion Date
with respect to the certificate(s) specified in (i) below, nor more than five
(5) Business Days after the Conversion Date with respect to all other
materials), the Corporation shall deliver or cause to be delivered to the
converting holder, or, with respect to the certificate(s) specified in (i)
below, as specified by such converting holder:
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<PAGE>
(i) a certificate or certificates representing
the number of shares of Common Stock issuable by reason of such conversion
registered in its name or such nominee name or names and in such denomination or
denominations as the converting holder shall have specified;
(ii) payment of the amount, if any, payable
under Section 5.1(e) in lieu of any fractional shares of Common Stock otherwise
issuable by reason of such conversion; and
(iii) a certificate representing any unconverted
shares of Series B Preferred Stock which constituted part of the certificate or
certificates for shares of Series B Preferred Stock so surrendered.
(e) If any fractional interest in a share of Common
Stock would be deliverable upon any conversion, the Corporation, in lieu of
delivering such fractional share interest, shall pay or cause to be paid by a
duly appointed paying agent with respect to the Series B Preferred Stock an
amount equal to the Conversion Price multiplied by such fractional interest as
of the date of conversion.
(f) The Corporation will pay any and all taxes that may
be payable in connection with the issuance or delivery of certificates for
shares of Common Stock upon conversion of shares of Series B Preferred Stock
pursuant hereto. The Corporation shall not, however, be required to pay any tax
which may be payable in connection with any transfer involved in the delivery of
shares registered in a name other than that of the holder of the converted
Series B Preferred Stock, and no such issue or delivery shall be made unless and
until the person requesting such issue or delivery has paid to the Corporation
the amount of any such tax, or has established, to the satisfaction of the
Corporation, that such tax has been paid.
(g) The Corporation will not close its books against
the transfer of any shares of Series B Preferred Stock or of any shares of
Common Stock issued or issuable upon the conversion of such shares of Series B
Preferred Stock in any manner which interferes with the timely conversion of
such shares.
5.2 Initial Conversion Price. The initial Conversion Price shall be
$22.80. In order to prevent dilution of the conversion rights granted under this
Section 5, adjustments shall be made from time to time in the Conversion Price
pursuant to Section 5.3.
5.3 Adjustment of Conversion Price.
5.3.1 Dividends and Distributions.
(a) In case the Corporation at any time or from
time to time after the Initial Issuance Date shall pay or make, or fix a Record
Date for the determination of holders of Common Stock entitled to receive, a
dividend or other distribution of shares of Common Stock, the Conversion Price
in effect at the opening of business on the Business Day next following the
Record Date shall be reduced by multiplying the Conversion Price by a fraction
of which the numerator shall be the total number of shares of Common Stock
issued and outstanding at the close of business on the
-5-
<PAGE>
Record Date and the denominator shall be the sum of such number of shares and
the total number of shares constituting such dividend or distribution, such
reduction to become effective immediately after the opening of business on the
Business Day following the Record Date. Such adjustment shall be made
successively whenever any event specified above shall occur.
(b) In case the Corporation at any time or from
time to time after the Initial Issuance Date shall make or issue, or fix a
Record Date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the
Corporation other than shares of Common Stock (the "Specified Date"), the
holders of the Series B Preferred Stock shall receive upon conversion thereof,
in addition to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation that such holders would have received
had the Series B Preferred Stock been converted into Common Stock on the
Specified Date (the "Other Securities") and had they thereafter, during the
period from the Specified Date to and including the Conversion Date, retained
such Other Securities receivable by them during such period, giving application
to all adjustments called for during such period under this Section with respect
to the rights of the holders of the Series B Preferred Stock. The holders of
Series B Preferred Stock shall also receive, upon conversion, all dividends,
interest, distributions or other payments made on or with respect to the Other
Securities from and including the Specified Date to and including the Conversion
Date.
(c) In case the Corporation shall, by dividend or
otherwise, distribute to all holders of its Common Stock or any other class of
capital stock of the Corporation evidences of its indebtedness or assets
(including securities, but excluding (x) any options, rights, warrants or
convertible or exchangeable securities referred to in Section 5.3.3 below, and
(y) any dividend or distribution referred to in Section 5.3.1 (a) or (b) above),
the Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the close of business on the date fixed for the determination of shareholders
entitled to receive such distribution by a fraction of which the numerator shall
be the Current Market Price of the Common Stock on the date fixed for such
determination less the then fair market value (as reasonably determined by the
Board of Directors, whose determination shall be set forth in a written
resolution) of the portion of evidences of indebtedness or assets so distributed
applicable to one share of Common Stock and the denominator shall be such
Current Market Price of the Common Stock, such adjustment to become effective
immediately prior to the opening of business on the date following the date
fixed for the determination of shareholders entitled to receive such
distribution.
5.3.2 Stock Splits, Combinations, Etc. In case the outstanding
shares of Common Stock shall be subdivided into a greater number of shares of
Common Stock, the Conversion Price in effect at the opening of business on the
Business Day next following the date on which such subdivision becomes effective
shall be proportionately reduced. Conversely, in case outstanding shares of
Common Stock shall be combined into a smaller number of shares of Common Stock,
the Conversion Price in effect at the opening of business on the Business Day
next following the date upon which such combination becomes effective shall be
proportionately increased. Such reductions or increases in the Conversion Price,
as the case may be, shall become effective immediately after the opening of
business on the Business Day next following the day upon which such subdivision
or combination becomes effective.
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<PAGE>
5.3.3 Options, Rights, Warrants, Etc. If the Corporation
shall, after the Initial Issuance Date, issue options, rights, warrants or
convertible or exchangeable securities, in each case other than the Rights, to
all holders of its Common Stock entitling them to subscribe for or purchase or
acquire upon conversion or exchange any shares of Common Stock at a price per
share less than the Current Market Price of the Common Stock on the Record Date
for the determination of shareholders entitled to receive such options, rights,
warrants or convertible or exchangeable securities, then in each case the
Conversion Price shall be adjusted by multiplying the Conversion Price in effect
on such Record Date by a fraction of which the numerator shall be the number of
shares of Common Stock issued and outstanding on the date of issuance of such
options, rights, warrants or convertible or exchangeable securities, immediately
prior to such issuance, plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock so
offered for subscription or purchase pursuant to such options, rights, warrants
or convertible or exchangeable securities, would purchase at the Current Market
Price (determined by multiplying such total number of shares by the exercise
price of such options, rights, warrants or convertible or exchangeable
securities, and dividing the product by such Current Market Price), and of which
the denominator shall be the number of shares of Common Stock issued and
outstanding on the date of issuance of such options, rights, warrants or
convertible or exchangeable securities, immediately prior to such issuance, plus
the number of additional shares of Common Stock offered for subscription or
purchase or acquisition pursuant to such options, rights, warrants or
convertible or exchangeable securities. Such adjustment shall become effective
at the opening of business on the Business Day next following the Record Date
for the determination of shareholders entitled to receive such options, rights,
warrants or convertible or exchangeable securities. To the extent that shares of
Common Stock are not delivered after the expiration of such options, rights,
warrants or convertible or exchangeable securities, the Conversion Price shall
be readjusted to the Conversion Price which would then be in effect had the
adjustments made upon the issuance of such options, rights, warrants or
convertible or exchangeable securities been made upon the basis of the actual
number of shares of Common Stock delivered in connection with the issuance of
such options, rights, warrants or convertible or exchangeable securities.
5.3.4 Issuance Pursuant to Exercise of Rights. If, after the
Initial Issuance Date, the Corporation shall issue or sell shares of Common
Stock upon exercise of the Rights, or the Board of Directors exchanges all or
part of the then outstanding and exercisable Rights for shares of Common Stock,
pursuant to the terms of the Rights (the "Rights Exercise Event"), then, and in
such event, the Conversion Price shall be adjusted by multiplying the Conversion
Price in effect at the time of the Rights Exercise Event by a fraction of which
(i) the numerator shall be the sum of (a) the total number of shares of Common
Stock issued and outstanding immediately prior to the Rights Exercise Event and
(b) the number of shares of Common Stock obtained by dividing the aggregate
consideration received by the Corporation for shares of Common Stock issued,
sold or exchanged in connection with the Rights Exercise Event by the Current
Market Price and (ii) the denominator shall be the sum of (x) the total number
of shares of Common Stock issued and outstanding immediately prior to the Rights
Exercise Event and (y) the number of shares of Common Stock issued, sold or
exchanged in the Rights Exercise Event. Such adjustment shall become effective
upon the consummation of the issuance, sale or exchange.
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<PAGE>
5.4 Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, Etc. If the Corporation, after the Initial Issuance Date, (a)
consolidates with or merges into any other person and is not the continuing or
surviving corporation of such consolidation or merger, or (b) permits any other
person to consolidate with or merge into the Corporation and the Corporation is
the continuing or surviving person but, in connection with such consolidation or
merger, the Common Stock is changed into or exchanged for stock or other
securities of any other person or cash or any other property, or (c) transfers
all or substantially all of the assets or property of the Corporation to any
other person, or (d) effects a capital reorganization or reclassification of the
Common Stock (other than a capital reorganization or reclassification resulting
in the issue of additional shares of Common Stock for which adjustment in the
Conversion Price is required to be made), then, and in each such case, proper
provision shall be made so that, upon the basis and the terms and in the manner
provided in this Section 5, each holder of Series B Preferred Stock, upon the
conversion thereof at any time after the consummation of such consolidation,
merger, exchange, sale, transfer, reorganization or reclassification, shall be
entitled to receive (at the Conversion Price in effect at the time of such
consummation) the kind and amount of shares of stock and other securities, cash
and property receivable upon such consolidation, merger, exchange, sale,
transfer, reorganization or reclassification by a holder of the number of shares
of Common Stock into which such shares of Series B Preferred Stock so converted
might have been converted immediately prior to such consolidation, merger,
exchange, sale, transfer, reorganization or reclassification, subject to
adjustments, which, for events subsequent to the effective date of such
consolidation, merger, exchange, sale, transfer, reorganization or
reclassification, shall be as nearly equivalent as possible to the adjustments
provided for in Section 5. The above provisions of this Section 5.4 shall
similarly apply to successive consolidations, mergers, exchanges, sales,
transfers, reorganizations or reclassifications.
5.5 Discretionary Adjustments. The Corporation may make such
reduction in the Conversion Price, in addition to those required by this Section
5, as it considers to be advisable in order that any event treated for federal
income tax purposes as a dividend of stock or stock rights, other than the
Rights, shall not be taxable to the recipients. In case any event shall occur as
to which the provisions of Section 5 are not strictly applicable but the failure
to make any adjustment would not fairly protect the conversion rights of the
holders of Series B Preferred Stock in accordance with the essential intent and
principles of such Section, then, in each such case, the Board of Directors of
the Corporation shall by resolution give their opinion upon the adjustment, if
any, on a basis consistent with the essential intent and principles established
in this Section 5, necessary to preserve, without dilution, the conversion
rights represented herein. The Corporation will promptly make the adjustments
described therein.
5.6 Minimum Adjustment of Conversion Price. No adjustment in the
Conversion Price pursuant to this Section 5 shall be required unless such
adjustment would require an increase or decrease of at least one percent (1%) in
such price; provided, however, that any adjustments which by reason of this
Section 5.6 are not required to be made shall be carried forward and adjustment
with respect thereto made at the time of and together with any adjustment which,
together with such amount and any other amount of amounts so carried forward,
shall aggregate at least one percent (1%) of such Conversion Price. All
calculations under this Section 5 shall be made to the nearest cent or to the
nearest one-hundredth (1/100) of a share, as the case may be.
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<PAGE>
5.7 Notices of Adjustment. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Section 5, the Corporation
at its sole expense shall:
(a) promptly compute the adjusted Conversion Price or other
adjustment in accordance with the terms hereof and shall prepare a report, which
shall be certified by an officer of the Corporation, setting forth the adjusted
Conversion Price or other adjustment and showing in reasonable detail the facts
upon which all such adjustments are based, and copies of such report forthwith
shall be delivered to the duly appointed Transfer Agent then acting as such with
respect to the Series B Preferred Stock, and shall be kept at the office of such
Transfer Agent;
(b) make a timely public announcement stating that the
Conversion Price has been adjusted and setting forth the adjusted Conversion
Price; and
(c) promptly mail a notice setting forth such adjusted
Conversion Price or other adjustment in accordance with the terms hereof to the
holders of record of shares of Series B Preferred Stock, at their last addresses
as they shall appear upon the books of the Corporation; provided, however, that
if within ten (10) days after the completion of mailing of such a notice an
additional notice is required, such additional notice shall be deemed to be
required pursuant to this clause (c) as of the opening of business on the tenth
day after such completion of mailing and shall set forth the adjustment as at
such opening of business and, upon the completion of mailing of such additional
notice, no other notice need be given of any such adjustments occurring at or
prior to such opening of business and after the time that the next preceding
notice given by mail became required.
5.8 Notices of Actions. In the event:
(a) the Corporation declares a dividend (or any other
distribution) payable otherwise than in cash; or
(b) the Corporation shall authorize the granting to holders
of Common Stock of options, rights, warrants or convertible or exchangeable
securities, in each case other than the Rights, to subscribe for or purchase any
shares of capital stock of any class or of any other rights; or
(c) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its outstanding shares
of Common Stock or a stock dividend or stock distribution thereon), or of any
consolidation or merger of the Corporation into or with another corporation, or
of the sale of all or substantially all of the assets of the Corporation;
(d) of the involuntary or voluntary dissolution, liquidation
or winding up of the Corporation; or
(e) the Corporation makes any distribution of the type
contemplated by Section 5.3.1(c) above or issues shares of Common Stock in
connection with a Rights Exercise Event as set forth in Section 5.3.4 above;
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the Corporation shall as promptly as practicable cause to be filed at the office
of the Transfer Agent of the Series B Preferred Stock and cause to be mailed to
the holders of shares of the Series B Preferred Stock at their last addresses as
shown on the records of the Corporation or such Transfer Agent, at least thirty
(30) days (or twenty (20) days in any case specified in clause (a) or (b) above)
prior to the Record Date hereinafter specified, a notice stating:
(i) the Record Date of such dividend, distribution,
options, rights, warrants or convertible or exchangeable securities, or, if a
record is not be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, options, rights, warrants
or convertible or exchangeable securities are to be determined; or
(ii) the date on which such reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up is expected
to become effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such reclassification,
consolidation, merger, sale, dissolution or winding up.
6. Redemption.
6.1 Right of Optional Redemption. Unless previously
converted pursuant to Section 5, and subject to the limitations of this Section
6, on and after February 27, 2003, the Corporation shall have the right, at its
option and by resolution of its Board of Directors, to redeem at any time all
or, from time to time, part of the Series B Preferred Stock at a price per share
(the "Series B Redemption Price") set forth below, payable in cash, together
with all accrued and unpaid dividends to and including the date fixed for
redemption (the "Series B Redemption Date"), without interest. In case of
redemption of less than all shares of Series B Preferred Stock at the time
outstanding, the shares of Series B Preferred Stock to be redeemed shall be
selected pro rata from the holders of record of such shares in proportion to the
number of shares of Series B Preferred Stock held by such holders (as nearly as
may be practicable without creating fractional shares) or by any other equitable
method determined by the Corporation.
The Series B Redemption Price on and after February 27, 2003,
shall be as follows:
Time Period Series B Redemption Price
February 27, 2003 through February 26, 2004 $52.00
February 27, 2004 through February 26, 2005 $51.50
February 27, 2005 through February 26, 2006 $51.00
February 27, 2006 through February 26, 2007 $50.50
February 27, 2007 and thereafter $50.00
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6.2 Procedures for Redemption.
(a) Until such time as the shares of Series B
Preferred Stock are listed on the New York Stock Exchange or another national
securities exchange, notice of any redemption (the "Redemption Notice") will be
mailed by the Corporation, postage prepaid, not less than thirty (30) nor more
than sixty (60) days prior to the Series B Redemption Date, addressed to the
respective holders of record of the Series B Preferred Stock to be redeemed at
the address for such holder last shown on the records of the Transfer Agent.
After such time as the Series B Preferred Stock may be listed on the New York
Stock Exchange or another national securities exchange, the Redemption Notice
also will be given by publication in a newspaper of general circulation in New
York, New York, such publication to be made once a week for two (2) successive
weeks commencing not less than thirty (30) nor more than sixty (60) days prior
to the Series B Redemption Date and in any case in accordance with the
applicable rules of such exchange. No failure to give the Redemption Notice or
any defect therein or in the mailing thereof shall affect the validity of the
proceedings for the redemption of any Series B Preferred Stock except as to the
holder to whom the Corporation has failed to give notice or except as to the
holder to whom the Redemption Notice was defective. In addition to any
information required by law or by the applicable rules of any exchange upon
which Series B Preferred Stock may be listed or admitted to trading, such
Redemption Notice shall state: (a) the Series B Redemption Date; (b) the Series
B Redemption Price; (c) the number of shares of Series B Preferred Stock to be
redeemed; (d) the place or places where certificates for such shares are to be
surrendered for payment of the Series B Redemption Price; (e) that dividends on
the shares to be redeemed will cease to accumulate on the Series B Redemption
Date; and (f) with respect to the convertibility of such shares, (i) the name
and address of the Transfer Agent, (ii) the Conversion Price, (iii) the date and
time when the conversion period will expire, including the dates when conversion
cannot be effected, if any, and (iv) if any dividend declared or accrued on or
before the Series B Redemption Date remains unpaid on such shares of Series B
Preferred Stock, whether or not shares issued upon conversion will be entitled
to receive such dividend. If less than all the shares of Series B Preferred
Stock held by any holder are to be redeemed, the Redemption Notice mailed to
such holder shall also specify the number of shares of Series B Preferred Stock
held by such holder to be redeemed.
(b) If the Redemption Notice of any shares of Series
B Preferred Stock has been mailed, and if published (if appropriate), in
accordance with Section 6.2(a) above and provided that on or before the Series B
Redemption Date specified in such Redemption Notice all funds necessary for such
redemption shall have been irrevocably delivered to the bank or trust company
described in Section 6.3 below, separate and apart from its other funds in trust
for the benefit of any holders of the shares of Series B Preferred Stock so
called for redemption, so as to be, and to continue to be available therefor,
then, from and after the Series B Redemption Date, dividends on such shares of
Series B Preferred Stock shall cease to accrue, and such shares shall no longer
be deemed to be outstanding and shall not have the status of Series B Preferred
Stock and all rights of the holders thereof as shareholders of the Corporation
(except the right to receive the Series B Redemption Price and to convert the
number of shares of Series B Preferred Stock specified in the Redemption Notice
into Common Stock) shall terminate. Upon surrender, in accordance with said
Redemption Notice, of the certificate for any shares of Series B Preferred Stock
so redeemed (properly endorsed or assigned for transfer, if the Corporation
shall so require and the Redemption Notice shall so state), such shares of
Series B Preferred Stock shall be redeemed by the Corporation at the Series B
Redemption Price.
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In case less than all the shares of Series B Preferred Stock represented by any
such certificate are redeemed, a new certificate or certificates shall be issued
representing the unredeemed shares of Series B Preferred Stock without cost to
the holder thereof.
6.3 Deposit of Redemption Price. On or before the Series B
Redemption Date, the Corporation shall deposit with a bank or trust company in
New York, New York, having a capital and surplus of at least $50,000,000, in a
trust to be applied to the redemption of the shares of Series B Preferred Stock
so called for redemption, the funds necessary for such redemption. The deposit
of funds with a bank or trust company for the purpose of redeeming Series B
Preferred Stock shall be irrevocable except that:
(a) the Corporation shall be entitled to receive
from such bank or trust company the interest or other earnings, if any, earned
on any money so deposited in trust and invested into one (1) or more of the
following obligations or securities, to which interest or other earnings the
holders of any shares redeemed shall have no claim:
(i) direct obligations of, and obligations
fully guaranteed by, the United States of America, or any agency thereof, the
obligations of which are backed by the full faith and credit of the United
States Government;
(ii) certificates of deposit, time deposits,
commercial paper and bankers' acceptances issued by any bank (or its holding
company) whose senior secured debt has the highest rating given by Standard &
Poor's Corporation, a New York corporation, or any successor thereto by merger,
consolidation, sale of substantially all of its assets or otherwise; and
(iii) deposits which are fully insured by the
Federal Deposit Insurance Corporation of the Federal Savings and Loan Insurance
Corporation;
provided, that prior to the Series B Redemption Date, such investments shall be
made in such manner as to mature by their terms not later than the day preceding
the Series B Redemption Date; and
(b) any balance of moneys so deposited by the
Corporation and unclaimed by the holders of the Series B Preferred Stock
entitled thereto at the expiration of one (1) year from the applicable Series B
Redemption Date shall be repaid, together with any interest or other earnings
earned thereon, to the Corporation, and after any such repayment, the holders of
the shares entitled to the funds so repaid to the Corporation shall look only to
the Corporation for payment without interest or other earnings. Any interest
accrued on funds so deposited shall be paid to the Corporation at such times as
the Corporation may request.
6.4 Source of Funds. The Series B Redemption Price may be
paid, to the extent permitted by applicable law, from any source, including sale
proceeds of other capital stock of the Corporation.
6.5 Rights to Dividends on Shares Called for Redemption. If
the Series B Redemption Date is after a Dividend Record Date and before the
related Dividend Payment Date, the
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dividend payable on such Dividend Payment Date shall be paid to the holder in
whose name the shares of Series B Preferred Stock to be redeemed are registered
at the close of business on such Dividend Record Date notwithstanding the
redemption thereof between such Dividend Record Date and the related Dividend
Payment Date. Except as provided in this Section 6, the Corporation will make no
payment or allowance for unpaid dividends, whether or not in arrears, on called
Series B Preferred Stock.
6.6 Limitation on Redemption. Unless Full Cumulative
Dividends on all shares of Series B Preferred Stock shall have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past Dividend Periods and the then
current Dividend Period (or portion thereof), no Series B Preferred Stock shall
be redeemed (unless all outstanding shares of Series B Preferred Stock are
simultaneously redeemed) or purchased or otherwise acquired directly or
indirectly (except by exchange for Common Stock); provided, however, that the
foregoing shall not prevent the redemption of Series B Preferred Stock pursuant
to Section 4 or the purchase or acquisition of Series B Preferred Stock pursuant
to an offer made on the same terms to holders of all outstanding shares of
Series B Preferred Stock.
7. Voting Rights.
7.1 General. Except as required by the Virginia Stock
Corporation Act and except as otherwise provided in this Section 7, the holders
of the Series B Preferred Stock shall not be entitled to vote at any meeting of
the shareholders for election of directors or for any other purpose or otherwise
to participate in any action taken by the Corporation or the shareholders
thereof, or to receive notice of any meeting of shareholders. On matters subject
to a vote by holders of the Series B Preferred Stock, such holders are entitled
to one (1) vote per share.
7.2 Right to Elect Directors. Whenever dividends on any
shares of Series B Preferred Stock shall be in arrears for six (6) or more
quarterly periods whether or not consecutive (a "Default"), the holders of such
shares of Series B Preferred Stock, voting separately as a class, will be
entitled to vote for the election of two (2) additional directors of the
Corporation at a special meeting called by the holders of record of a least 10%
of the Series B Preferred Stock so in arrears or at the next annual meeting of
shareholders, if such request is received less than 60 days before the date
fixed for the next annual meeting of the shareholders, and at each subsequent
annual meeting until all dividends accumulated on such shares of Series B
Preferred Stock for the past Dividend Periods and the then current Dividend
Period shall have been fully paid in cash. In such case, the Board of Directors
of the Corporation will be increased by two (2) directors. Each such director
elected pursuant to this Section 7.2 (a "Preferred Stock Director") shall be
elected by the affirmative vote of the holders of record of a majority of the
shares of Series B Preferred Stock present and voting at such meeting, at a
meeting called, held and conducted as provided in Section 7.3 through 7.5 below.
Each Preferred Stock Director shall serve as a director until the Default is
cured, at which time the term of each such Preferred Stock Director shall
terminate and the number of directors shall be reduced accordingly.
7.3 Removal of Directors; Vacancies. Any Preferred Stock
Director may be removed at any time, either with or without cause, by (and only
by) an affirmative vote of the holders
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of record of a majority of the shares of Series B Preferred Stock present and
voting at a special meeting of such shareholders called for such purpose, and
any vacancy created by such removal may also be filled at such meeting. Any
vacancy caused by the death or resignation of a Preferred Stock Director may be
filled by only the holders of record of Series B Preferred Stock at a meeting
called for such purpose. The quorum at any such meeting shall be a majority of
the outstanding shares of Series B Preferred Stock. The holders of a majority of
the Series B Preferred Stock present and voting at such meeting shall select a
chairman of such meeting. A meeting for the removal of a Preferred Stock
Director and the filling of the vacancy created thereby or by the death of a
Preferred Stock Director shall be called by the Secretary of the Corporation
within ten (10) days after receipt of a written request signed by the holders of
record of at least ten percent (10%) of the outstanding shares of Series B
Preferred Stock by sending, in each case, written notice of such meeting to each
holder of Series B Preferred Stock at his or her registered address on the books
of the Corporation. Such notice shall state the purposes of the meeting and the
place and time for the meeting, which shall be held in New York, New York, at
the earliest practicable date thereafter. The giving of such notice shall
constitute the only obligation of the Corporation pursuant to this Section 7.3.
7.4 Failure to Call Meeting. If the calling of any meeting
of the holders of Series B Preferred Stock required by this Section 7 shall not
have been called by the Secretary of the Corporation within ten (10) days after
personal service of a written request therefor, or within fifteen (15) days
after the mailing of a written request therefor within the United States of
America by registered mail addressed to him or her at the principal office of
the Corporation, then the holders of record of at least ten percent (10%) of the
outstanding shares of Series B Preferred Stock may designate in writing one of
their number to give notice of such meeting at the expense of the Corporation
and such meeting may be called by such person so designated. Any holders of
Series B Preferred Stock so designated shall have access to the stock books of
the Corporation for the purpose of causing meetings of holders of Series B
Preferred Stock to be called pursuant to these provisions.
7.5 Written Consents. Notwithstanding anything contained
herein to the contrary, any action required or permitted to be taken by the
holders of record of Series B Preferred Stock at any annual or special meeting
of shareholders may be taken without a meeting, at any time without prior notice
and without a vote, by a consent in writing setting forth the action so taken,
signed by holders of Series B Preferred Stock holding a sufficient number of
shares of Series B Preferred Stock to vote in favor of such action at any annual
or special meeting of shareholders.
7.6 Termination of Voting Rights. The foregoing voting
provisions will not apply if, at or prior to the time when the act with respect
to which such vote would otherwise be required shall be effected, all
outstanding shares of Series B Preferred Stock shall have been redeemed and the
applicable Series B Redemption Price paid.
8. Listing of Shares; Other Covenants Relating to Conversion.
8.1 Listing of Shares. The Corporation will, as permitted by
the rules of the New York Stock Exchange, cause to be listed and keep listed on
such exchange, upon official notice of issuance, all shares of Common Stock
issuable upon conversion of the Series B Preferred Stock. If any shares of
Common Stock required to be reserved for purposes of conversions of shares of
the Series B
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Preferred Stock hereunder require, as a result of any change in law or
regulation after the Initial Issuance Date, registration with or approval of any
governmental authority under any federal or state law (other than any
registration under the Securities Act of 1933, as then in effect, or any similar
federal statute then in force, or any state securities law, required by reason
of any transfer involved in such conversion), or listing on any national
securities exchange, the Corporation will in good faith, at its own expense and
as expeditiously as possible endeavor to cause such shares to be duly registered
or approved for listing or listed on such national securities exchange, as the
case may be.
8.2 Reservation of Shares. The Corporation will at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, or otherwise, solely for the purpose of issue upon the conversion of the
Series B Preferred Stock as provided in Section 5, such number of shares of
Common Stock as shall then be issuable upon the conversion of all outstanding
shares of Series B Preferred Stock.
8.3 Authorized Shares of Common Stock. The Corporation will
not take any action which results in any adjustment of the number of shares of
Common Stock acquirable upon conversion of a share of Series B Preferred Stock
if the total number of shares of Common Stock issuable after such action upon
conversion of the Series B Preferred Stock then outstanding, together with the
total number of shares of Common Stock and other securities of the Corporation
convertible or exchangeable into Common Stock then outstanding, would exceed the
total number of shares of Common Stock then authorized under Article Fourth of
the Corporation's Articles of Incorporation, as amended.
8.4 Shares Issued on Conversion to be Validly Issued, Etc.
The shares of Common Stock issuable upon conversion of the shares of Series B
Preferred Stock, when the same shall be issued in accordance with the terms
hereof, are hereby declared to be and shall be duly and validly authorized and
issued and fully paid and nonassessable shares of Common Stock in the hands of
the holders thereof.
8.5 No Fractional Shares. No fractional shares or scrip
representing fractional shares of Common Stock shall be issued upon conversion
of Series B Preferred Stock. Instead of any fractional share of Common Stock
that would otherwise be issuable upon conversion of any shares of Series B
Preferred Stock, the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to the same fraction of the Closing Price
of a share of Common Stock (or, if there is no such Closing Price, the Current
Market Price of a share of Common Stock, as determined or prescribed in good
faith by the Board of Directors) at the close of Business on the Trading Day
immediately preceding the Conversion Date.
8.6 Other Action. If the Corporation shall take any action
affecting the Common Stock, other than action described in Section 5, that in
the opinion of the Board of Directors would materially adversely affect the
conversion rights of the holders of the shares of Series B Preferred Stock, the
Conversion Rate for the Series B Preferred Stock may be adjusted, to the extent
permitted by law, in such manner, if any, and at such time, as the Board of
Directors may determine to be equitable in the circumstances.
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9. Preferred Stock Alterations and Restrictions.
9.1 Amendments to Articles of Incorporation. Except as set
forth in Section 9.2 of this Section 9, the Articles of Incorporation of the
Corporation shall not be changed so as to alter in an adverse manner the powers,
preferences or special rights of the Series B Preferred Stock without the
consent, either in writing or by a vote at a meeting called for that purpose, of
the holders of at least three-fourths (3/4) of the number of shares outstanding
of the Series B Preferred Stock. In giving such consent, the holders of the
Series B Preferred Stock shall vote as a single class. Any meeting for such
purpose shall be called, held and conducted as provided in Sections 7.3 through
7.5 above except that the Corporation may call a meeting for such purpose
without having received a written request signed by the holders of ten percent
(10%) of the outstanding shares of Series B Preferred Stock.
9.2 Changes to Preferred Stock. Without the consent of the
holders of at least nine-tenths (9/10) of the number of shares of the Series B
Preferred Stock at the time outstanding, either in writing or by a vote at a
meeting called for that purpose at which the holders of the Series B Preferred
Stock shall vote as a single class, neither by modification of the Articles of
Incorporation of the Corporation nor by written action of the Board of Directors
shall the Corporation:
(a) change the rate at which dividends accrue on the
Series B Preferred Stock;
(b) change the times at which dividends accrue on
the Series B Preferred Stock;
(c) change, reclassify or extinguish the shares of
Series B Preferred Stock, whether pursuant to (i) a merger or consolidation of
the Corporation with or into another corporation or corporations, (ii) a
transfer of all or substantially all of the assets of the Corporation to another
corporation or corporations or (iii) a plan of exchange; or
(d) change the initial Conversion Price set forth in
Section 5.2 or any provision for adjusting the Conversion Price in Section 5.3;
(e) change the Series B Redemption Price, or the
time or times when the Series B Preferred Stock may be redeemed; or
(f) change Section 11 hereof; or
(g) change the percentage of the number of shares of
the Series B Preferred Stock outstanding required to approve any act described
in (a)-(f) above.
Any meeting for such purpose shall be called, held and conducted as provided in
Sections 7.3 through 7.5 above except that the Corporation may call a meeting
for such purpose without having received a written request signed by the holders
of ten percent (10%) of the outstanding shares of Series B Preferred Stock.
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9.3 No Preemptive Rights. No holder of shares of the
Corporation of any class, now or hereafter authorized, shall as such holder have
any preemptive right to subscribe to, purchase, or receive any shares of the
Corporation of any class, now or hereafter authorized.
10. Definitions. For purposes of this Preferred Stock Designation of
Series B Preferred Stock, the following terms shall have the meanings indicated:
10.1 "Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close or a day which is
declared a national or New York state holiday.
10.2 "Closing Price" with respect to any securities on any
day shall mean the closing sale price regular way on such day on the New York
Stock Exchange or, if such security is not listed or admitted to trading on such
exchange, on the principal national securities exchange or quotation system on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, the average of the closing bid and asked prices of such
security on over-the-counter market on the day in question as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System, or
a similarly generally accepted reporting service, or if not so available, in
such manner as furnished by any New York Stock Exchange member firm independent
of the Corporation selected from time to time in good faith by the Board of
Directors for that purpose.
10.3 "Common Stock" shall mean the Corporation's common
stock, without par value.
10.4 "Conversion Date" shall have the meaning set forth in
Section 5.1.
10.5 "Conversion Price" shall have the meaning set forth in
Section 5.2.
10.6 "Current Market Price" shall mean the average of the
daily Closing Prices per share of Common Stock for the ten (10) consecutive
Trading Days (on which sales of shares have occurred) immediately prior to the
date in question; provided, however, that if any event that results in an
adjustment of the Conversion Price occurs during the period beginning on the
first day of such ten-day period and ending on the applicable Conversion Date,
the Current Market Price as determined pursuant to the foregoing shall be
appropriately adjusted to reflect the occurrence of such event.
10.7 "Default" shall have the meaning set forth in Section
7.2.
10.8 "Dividend Payment Date" shall have the meaning set forth
in Section 3.1.
10.9 "Dividend Period" shall have the meaning set forth in
Section 3.1.
10.10 "Dividend Record Date" shall have the meaning set forth
in Section 3.1.
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10.11 "Full Cumulative Dividends" shall mean, with respect to
the Series B Preferred Stock, or any other capital stock of the Corporation, as
of any date the aggregate amount of all then accumulated, accrued and unpaid
dividends payable on such shares of Series B Preferred Stock, or other capital
stock, as the case may be, in cash, whether or not earned or declared and
whether or not there shall be funds legally available for the payment thereof.
10.12 "Initial Issuance Date" shall mean the date on which
shares of Series B Preferred Stock are initially issued by the Corporation.
10.13 "Preferred Stock" shall mean the Corporation's preferred
stock, without par value.
10.14 "Preferred Stock Director" shall have the meaning set
forth in Section 7.2.
10.15 "Preferred Stock Designation" shall mean a resolution or
resolutions adopted by the Board of Directors providing for the issue of a
series of the Corporation's Preferred Stock.
10.16 "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Stock
have the right to receive the cash, securities or other property granted by the
Corporation, or in which the Common Stock (or other applicable security) is
exchanged or converted into any combination of cash, securities or other
property, the date fixed for determination of shareholders entitled to receive
such cash, securities or other property (whether such date is fixed by the Board
of Directors or by statute, contract or otherwise), and with respect to any
subdivision or combination of the Common Stock, the effective date of such
subdivision or combination.
10.17 "Redemption Notice" shall have the meaning set forth in
Section 6.2.
10.18 "RIC" shall mean Reliance Insurance Company, a
Pennsylvania corporation.
10.19 "Rights" shall mean the rights of the Corporation which
are issuable under the Amended and Restated Rights Agreement, dated August 20,
1997, between the Corporation and Wachovia Bank of North Carolina, N.A., as the
Rights Agent, as such may be amended from time from time, or rights to purchase
any capital stock of the Corporation under any successor shareholder rights plan
or plan adopted in replacement of the Amended and Restated Rights Agreement.
10.20 "Series B Preferred Stock" shall have the meaning set
forth in Section 1.
10.21 "Series B Redemption Date" shall have the meaning set
forth in Section 6.1.
10.22 "Series B Redemption Price" shall have the meaning set
forth in Section 6.1.
10.23 "Stated Value" shall have the meaning set forth in
Section 1.
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10.24 "Trading Day" shall mean (a) if the applicable security
is listed or admitted for trading on the New York Stock Exchange or another
national securities exchange, a day on which such exchange is open for business
or (b) if the applicable security is quoted on the National Market System of the
National Association of Securities Dealers Automated Quotation System, a day on
which trades may be made on such National Market System or (c) if the applicable
security is not so listed, admitted for trading or quoted, any day other than a
Saturday or Sunday or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to close.
10.25 "Transfer Agent" shall mean Wachovia Bank, N.A., or any
other national or state bank or trust company having combined capital and
surplus of at least $50,000,000 and designated by the Corporation as the
transfer agent and/or registrar of the Series B Preferred Stock, or if no such
designation is made, the Corporation.
11. Certain Non-Performance Remedies Exercisable Solely by RIC and
its Affiliates.
11.1. Exclusivity of Remedies, Non-Transferability. On August
20, 1997, the Corporation and its subsidiary, Lawyers Title Insurance
Corporation, entered into a certain Stock Purchase Agreement with Reliance
Insurance Company ("RIC") and Reliance Group Holdings, Inc. ("Reliance"), as
amended and restated by an Amended and Restated Stock Purchase Agreement dated
December 11, 1997 (the "Agreement"), in connection with the acquisition by the
Corporation of all of the issued and outstanding capital stock of RIC's two
subsidiaries, Commonwealth Land Title Insurance Company ("Commonwealth") and
Transnation Title Insurance Company. As part of the transactions contemplated by
that Agreement, the parties agreed that RIC shall be issued all 2,200,000 shares
of the Series B Preferred Stock ("RIC Series B Preferred Shares") authorized
hereby and shall have certain remedies upon the occurrence of the events set
forth in Section 11.3 below. The remedies contained in Section 11.3 are
exercisable solely and exclusively by RIC, to the extent RIC holds all of the
RIC Series B Preferred Shares at the time any of such remedies become
exercisable, or by RIC and its Affiliates as a Group, to the extent RIC and any
Affiliate of RIC hold any of the RIC Series B Preferred Shares at the time any
of such remedies become exercisable. With respect to holdings of RIC Series B
Preferred Shares by RIC and its Affiliates as a Group, the exercise of any
remedy set forth in Section 11.3 shall be by RIC, who is hereby designated as
the "representative" of the Group for purposes of exercising any such remedy,
and any such exercise by RIC shall preclude the exercise of such remedy by any
other member of the Group. The remedies hereunder are not transferable or
assignable to subsequent holders of the shares of the Series B Preferred Stock.
Any sale, conveyance or transfer of shares of the Series B Preferred Stock by
RIC to any Person not an Affiliate of RIC at the time of such sale, conveyance
or transfer shall render the provisions of this Section 11 null and void as to
the shares of Series B Preferred Stock so sold, conveyed or transferred.
11.2 Definitions. For purposes of this Section 11, the
following terms shall have the following meanings:
11.2.1 "Adjusted Outstanding Shares" shall mean, at any
time and with respect to the determination of (i) the RIC Ownership Percentage
as it relates to RIC and its Affiliates, and (ii) any other percentage of the
beneficial ownership of Common Stock as it relates to a Person or
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Group, the total number of shares of Common Stock then issued and outstanding
together with the total number of shares of Common Stock not then issued and
outstanding that would be outstanding if (x) all then existing shares of Series
B Preferred Stock had been converted and (y) all then existing warrants and
options exercisable into shares of Common Stock had been exercised (other than
underwriters' overallotment options and stock options granted under benefit
plans of the Corporation or its Affiliates), but excluding any Rights which may
be exercisable under the Amended and Restated Rights Agreement, dated August 20,
1997, between the Corporation and Wachovia Bank, N.A, as such may be amended
from time to time, or any successor shareholder rights plan or agreement.
11.2.2 "Affiliate" shall have the meaning ascribed to
such term in Rule 12b-2 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as in effect on the date of the Standstill Agreement, and
shall include, with respect to a determination of the Affiliates of RIC, any
Affiliate of Reliance.
11.2.3 "Beneficial ownership," "beneficial owner" and
"beneficially own" shall have the meanings ascribed to such terms in Rule 13d-3
under the Exchange Act as in effect on the date of the Standstill Agreement;
provided that RIC and each of its Affiliates and any Person or Group shall be
deemed to be the beneficial owners of any shares of Common Stock that such RIC,
Affiliate, Person and/or Group has the right to acquire within one year pursuant
to any agreement, arrangement or understanding or upon the exercise of
conversion or exchange rights, warrants, options or otherwise, including but not
limited to any right to acquire shares of Common Stock through the conversion of
the Series B Preferred Stock.
11.2.4 "Combined Ratio" of any entity shall mean, for
any given period, all Title Insurance-Related Expenses divided by all Title
Insurance-Related Gross Operating Revenues, expressed as a percentage; provided,
however, that the Corporation's Combined Ratio also shall be net of any
transaction-related or reorganization expenses incurred within twelve (12)
months of the closing of the transactions contemplated by the Agreement.
11.2.5 "Debt Obligations" shall mean (i) indebtedness
or liability for borrowed money; (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments; (iii) obligations under letters
of credit; and (iv) all guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
insure a creditor against loss.
11.2.6 "Group" shall have the meaning comprehended by
Section 13(d)(3) of the Exchange Act as in effect on the date of the Standstill
Agreement.
11.2.7 "RIC Director" shall mean a person designated by
RIC for nomination and election to the Board of Directors of the Corporation
pursuant to the Standstill Agreement, but shall not include Herbert Wender, the
Chief Executive Officer of Commonwealth.
11.2.8 "RIC Ownership Percentage" shall mean, at any
time, the percentage of the Adjusted Outstanding Shares that is beneficially
owned in the aggregate by RIC and its Affiliates.
-20-
<PAGE>
11.2.9 "Peer Combined Ratio" shall mean the Weighted
Average of Combined Ratios of Chicago Title Insurance Company and its affiliated
title insurance companies, First American Title Insurance Company and its
affiliated title insurance companies, Fidelity National Title Insurance Company
and its affiliated title insurance companies and Old Republic Title Insurance
Company and its affiliated title insurance companies; provided that if the
Combined Ratio of any title insurance company in the Peer Combined Ratio is no
longer obtainable due to merger, consolidation, dissolution or otherwise, the
Corporation, with the agreement in writing of RIC, may substitute another title
insurance company that, at the time of such substitution, ranks in the top ten
of United States title insurance companies in terms of title insurance revenues.
In order to estimate the Combined Ratio for companies in the Peer Combined Ratio
where the information is not specifically available, certain adjustments will be
made as deemed reasonable by both the Corporation and RIC. To the extent that
the Combined Ratio for companies in the Peer Combined Ratio are affected by the
operating structure of the company, certain adjustments will be made as deemed
reasonable by both the Corporation and RIC. Should the Corporation and RIC be
unable to agree on any adjustments pursuant to this Section 11.2.9, a decision
regarding such adjustment will be made promptly by an independent "Big Six"
accounting firm selected by the Corporation and RIC.
11.2.10 "Person" shall have the meaning set forth in
Section 3(a)(9) of the Exchange Act as in effect on the date of the Standstill
Agreement.
11.2.11 "Preferred Shares Sales Period" shall mean the
period between the closing date of the Agreement and the date which is eight
years and six months after such closing date (subject to extension as described
in the Standstill Agreement).
11.2.12 "Standstill Agreement" shall mean the Voting and
Standstill Agreement, dated February 27, 1998, by and between the Corporation,
RIC and Reliance.
11.2.13 "Title Insurance-Related Expenses" shall mean
the sum of an entity's provision for losses, net of extraordinary claims, and
all operating expenses associated with the conduct of such entity's title
insurance business, including an allocation of the entity's general and
administrative expense which reasonably reflects the proportion of the entity's
overall business that is comprised of title insurance operations, all determined
in accordance with generally accepted accounting principles.
11.2.14 "Title Insurance-Related Gross Operating
Revenues" shall mean all gross premiums and fees resulting from the conduct of
an entity's title insurance business, net of assumed and ceded reinsurance
premiums, all determined in accordance with generally accepted accounting
principles.
11.2.15 "Weighted Average of Combined Ratios" shall mean
the number determined by dividing (a) the sum of the amounts calculated by
multiplying the Combined Ratio of each company comprising the Peer Combined
Ratio by their respective title insurance revenues by (b) the sum of the title
insurance revenues for all such companies.
-21-
<PAGE>
11.3 Remedies Upon Certain Defaults. Until the earlier of (i)
the date the RIC Ownership Percentage is less than twenty percent (20%) or (ii)
the expiration of the Preferred Shares Sales Period:
(a) in the event that (1) the Corporation's Combined Ratio
exceeds the Peer Combined Ratio by more than five (5) percentage points
for any twelve month period (beginning with the twelve month period
commencing January 1, 1998), with such calculation to be determined as
of March 31, June 30, September 30 and December 31 of each year for the
previous twelve months, and (2) any two of Standard & Poors
Corporation, Duff & Phelps Corporation or A.M. Best have downgraded the
Corporation's claims paying ability rating to or below a rating of BBB
- (or its equivalent),
(i) the Corporation will (a) take such action as may
be necessary to increase the size of the Board of Directors of
the Corporation by three (3) directors, (b) fill the three (3)
vacancies created thereby with additional RIC Directors and (c)
recommend such additional RIC Directors for election as
directors at the next annual meeting of the Corporation's
shareholders. Such additional RIC Directors shall have the same
rights and obligations as the RIC Directors appointed or elected
in accordance with Article II of the Standstill Agreement except
that such additional RIC Directors shall not be subject to
approval of the Continuing Directors (as defined in the
Standstill Agreement). Of the three (3) RIC Directors, one shall
be appointed to Class I, one shall be appointed to Class II and
one shall be appointed to Class III, as such classes are
designated in the Standstill Agreement; and
(ii) the provisions of Article III (other than
Section 3.1(a)(i)) and Section 4.1 of the Standstill Agreement
and Section 12 hereof shall no longer apply to RIC or its
Affiliates.
(b) in the event that RIC or any Affiliate of RIC
beneficially owns shares of the Series B Preferred Stock and the
Corporation fails to pay in cash the full amount of the dividend on the
Series B Preferred Stock on one (1) occasion within five (5) days of
the applicable Dividend Payment Date,
(i) the Corporation will (a) take such action as may
be necessary to increase the size of the Board of Directors of
the Corporation by three (3) directors and (b) fill the three
(3) vacancies created thereby with additional RIC Directors and
(c) recommend such additional RIC Directors for election as
directors at the next annual meeting of the Corporation's
shareholder. Such additional RIC Directors shall have the same
rights and obligations as the RIC Directors appointed or elected
in accordance with Article II of the Standstill Agreement except
that such additional RIC Directors shall not be subject to
approval of the Continuing Directors (as defined in the
Standstill Agreement). Of the three (3) RIC Directors, one shall
be
-22-
<PAGE>
appointed to Class I, one shall be appointed to Class II and one
shall be appointed to Class III, as such classes are designated
in the Standstill Agreement; and
(ii) the provisions of Article III (other than
Section 3.1(a)(i)) and Section 4.1 of the Standstill Agreement
and Section 12 hereof shall no longer apply to RIC or its
Affiliates.
(c) in the event that RIC or any Affiliate of RIC
beneficially owns shares of the Series B Preferred Stock and the
Corporation fails to pay in cash the full amount of the dividend on the
Series B Preferred Stock on two (2) occasions, whether or not
consecutive, within five (5) days of the applicable Dividend Payment
Dates, the provisions of Section 3.1(a)(i) of Article III and Section
4.2 of Article IV of the Standstill Agreement shall no longer apply to
RIC or its Affiliates.
(d) in the event that (1) the Corporation defaults on any of
its Debt Obligations in excess of $15,000,000 (individually or at any
one time in the aggregate)(a "Material Default"), and the Material
Default is not cured or waived within the time period and manner
prescribed by the applicable agreements or instruments, and which
Material Default results in the acceleration of the amounts due
thereunder, or (2) RIC or any Affiliate of RIC beneficially owns shares
of the Series B Preferred Stock and the Corporation fails to pay in
cash the full amount of the dividend on the Series B Preferred Stock on
three (3) occasions, whether or not consecutive, within five (5) days
of the applicable Dividend Payment Dates,
(i) the Corporation will (a) take such action as may
be necessary to increase the size of the Board of Directors to a
number that will permit the addition of sufficient RIC Directors
such that the total number of RIC Directors will constitute a
majority of the Board of Directors, (b) fill the vacancies
created thereby with additional RIC Directors and (c) recommend
such additional RIC Directors for election as directors at the
next annual meeting of the Corporation's shareholders. Such
additional RIC Directors shall have the same rights and
obligations as the RIC Directors appointed or elected in
accordance with Article II of the Standstill Agreement except
that such additional RIC Directors shall not be subject to
approval of the Continuing Directors (as defined in the
Standstill Agreement). The number of additional RIC Directors
appointed or elected pursuant hereto shall be divided among the
three (3) classes of directors designated in the Standstill
Agreement so that such classes are as nearly equal in number as
reasonably possible; and
(ii) the provisions of Article III and Article IV of
the Standstill Agreement and Section 12 hereof shall no longer
apply to RIC or its Affiliates.
11.4 Provisions in Case Series B Preferred Stock is No Longer
Outstanding. If, prior to the expiration of the Preferred Shares Sales Period,
all of the shares of the Series B Preferred Stock shall have been redeemed or
converted and are no longer outstanding but the RIC
-23-
<PAGE>
Ownership Percentage is at least twenty percent (20%), then until the earlier of
(i) the date by which the RIC Ownership Percentage is less than twenty percent
(20%) or (ii) the expiration of the Common Shares Sales Period (as defined in
the Standstill Agreement), RIC and its Affiliates shall be entitled to the
remedies set forth in Sections 11.3(a) and 11.3(d)(1) hereof.
12. Condition to RIC's Conversion of Series B Preferred Stock.
Unless (i) the Corporation should call for redemption of the Series B Preferred
Stock held by RIC in accordance with Section 6 hereof, or (ii) any one of the
following events shall occur: (x) the Corporation should declare a regular
quarterly dividend on the Common Stock of $.40 or more during any calendar year,
(y) the Corporation should declare one or more non-regular dividends on the
Common Stock during any calendar year in an aggregate amount of $.50 or more, or
(z) the Corporation should declare dividends on the Common Stock, whether
regular or non-regular, in an aggregate amount of $1.60 or more during any
calendar year, the Series B Preferred Stock held by RIC and its Affiliates shall
not be convertible and RIC and its Affiliates will refrain from converting, or
taking any steps to convert, any of the Series B Preferred Stock then held by
each of them, respectively, into shares of the Common Stock of the Corporation
pursuant to Section 5 hereof until such time as RIC and its Affiliates have
sold, conveyed or transferred all of the 4,039,473 shares of Common Stock
received by RIC from the Corporation in connection with the Agreement (as
defined in Section 11.1 hereof) and such additional shares of Common Stock that
the Corporation may issue with respect to such shares pursuant to any stock
splits, stock dividends, recapitalizations, restructurings, reclassifications or
similar transactions or pursuant to the exercise of any Rights (as defined in
Section 10.19 hereof) to a Person (as defined in Section 11.2.10 hereof) that is
not, at the time of the sale, conveyance or transfer of such shares of Common
Stock, an Affiliate (as defined in Section 11.2.2 hereof) of RIC; provided,
however, that if the Corporation should call less than all of the Series B
Preferred Stock held by RIC and its Affiliates for redemption pursuant to clause
(i) above, then RIC and its Affiliates shall be entitled to convert into shares
of Common Stock only that number of the Series B Preferred Stock that have been
so called for redemption; and provided further that, in the event that the Board
of Directors has approved any negotiated tender or exchange offer with a third
party or approved any merger, consolidation, share exchange, business
combination, restructuring, recapitalization or similar transaction involving
the Corporation in which the holders of Common Stock are entitled to tender or
exchange their holdings of Common Stock for, or to otherwise receive for their
holdings of Common Stock, other consideration (whether cash, non-cash or some
combination thereof), the Corporation agrees that it will, in its sole
discretion, either (x) permit RIC and its Affiliates to convert all of the
Series B Preferred Stock then held by them contingent upon, and effective as of,
the closing of such transaction and without the right of RIC or any of its
Affiliates to vote the shares of Common Stock received upon any such conversion
on any matter in connection with such transaction, or (y) make appropriate
provision to provide to RIC and any of its Affiliates holding Series B Preferred
Stock as of the closing date of such transaction the same kind and amount of
consideration receivable by the holders of the Common Stock in such transaction
(the amount of such consideration to be received by RIC and any of its
Affiliates holding Series B Preferred Stock to be determined by reference to the
number of shares of Common Stock that RIC and its Affiliates would have been
entitled to receive had the Series B Preferred Stock been converted immediately
prior to consummation of such transaction), except that, if the Corporation
elects to comply with clause (y) of this proviso, RIC and its Affiliates shall
-24-
<PAGE>
not be entitled thereafter to receive any shares of stock, other securities,
cash or property pursuant to Section 5.4 above with respect to such of the
Series B Preferred Stock as has received full payment of the consideration set
forth in clause (y) above.
-25-
Exhibit 4.6
<TABLE>
<CAPTION>
<S> <C>
COMMON STOCK
NUMBER THIS CERTIFICATE IS TRANSFERABLE SHARES
LA IN WINSTON-SALEM, N.C., BOSTON, MA. [PICTURE OF WOMAN
AND NEW YORK, N.Y. HOLDING GLOBE]
INCORPORATED UNDER THE LAWS CUSIP 514936 10 3
OF THE COMMONWEALTH OF VIRGINIA SEE REVERSE FOR CERTAIN DEFINITIONS
LANDAMERICA FINANCIAL GROUP, INC.
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK (WITHOUT PAR VALUE) OF
[CORPORATE SEAL LandAmerica Financial Group, Inc. (the "Corporation") transferable on the books
OF LANDAMERICA of the Corporation, by the owner hereof in person or by duly authorized attorney
FINANCIAL upon surrender of this certificate properly endorsed. This certificate and the
GROUP, INC.] shares represented hereby are subject to all of the terms, conditions and
limitations of the Articles of Incorporation of the Corporation and all
amendments thereto.
This Certificate is not valid until countersigned by the Transfer Agent
and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
COUNTERSIGNED AND REGISTERED:
WACHOVIA BANK, N.A.
(WINSTON-SALEM, NC) TRANSFER AGENT
AND REGISTRAR
BY /s/ Russell W. Jordan, III /s/ Charles H. Foster, Jr.
AUTHORIZED SIGNATURE SECRETARY CHAIRMAN AND CHIEF EXECUTIVE OFFICER
</TABLE>
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC.
THE CORPORATION WILL FURNISH TO ANY SHAREHOLDER UPON WRITTEN REQUEST, AND
WITHOUT CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS,
AND RELATIVE RIGHTS OF EACH CLASS OF STOCK AND THE VARIATIONS IN RIGHTS,
PREFERENCES, AND LIMITATIONS DETERMINED FOR EACH SERIES OF STOCK WHICH THE
CORPORATION IS AUTHORIZED TO ISSUE. REQUESTS MAY BE DIRECTED TO LANDAMERICA
FINANCIAL GROUP, INC., 6630 WEST BROAD STREET RICHMOND, VIRGINIA 23230.
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS
AS SET FORTH IN AN AMENDED AND RESTATED RIGHTS AGREEMENT BETWEEN THE CORPORATION
AND WACHOVIA BANK, N.A., DATED AS OF AUGUST 20, 1997 (AS SUCH MAY BE AMENDED
FROM TIME TO TIME, THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE HEREBY
INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE CORPORATION. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH
IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES
AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. THE CORPORATION WILL MAIL
TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE
AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES, AS SET
FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO ANY PERSON WHO BECOMES AN
ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) MAY BECOME NULL AND VOID.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ___________Custodian____________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as Act_____________
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_____________________________________
| |
|_____________________________________|_________________________________________
________________________________________________________________________________
Please print or typewrite name and address including postal zip code of assignee
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint______________________________________________
________________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated_________________________________
_______________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
SIGNATURE(S) GUARANTEED: _______________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCK-BROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
Exhibit 4.7
NUMBER SHARES
LAP
THIS CERTIFICATE IS TRANSFERABLE 7% SERIES B CUMULATIVE
IN WINSTON-SALEM, N.C., BOSTON, MA. CONVERTIBLE PREFERRED STOCK
AND NEW YORK, N.Y.
CUSIP 514936 20 2
INCORPORATED UNDER THE LAWS
OF THE COMMONWEALTH OF VIRGINIA SEE REVERSE FOR CERTAIN DEFINITIONS
LANDAMERICA FINANCIAL GROUP, INC.
THIS CERTIFIES that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE 7% SERIES B CUMULATIVE CONVERTIBLE
PREFERRED STOCK (WITHOUT PAR VALUE) OF
LANDAMERICA FINANCIAL GROUP, INC.
<TABLE>
<CAPTION>
<S> <C>
(the "Corporation") transferable on the books of the Corporation by the owner COUNTERSIGNED AND REGISTERED:
hereof in person or by duly authorized attorney upon surrender of this WACHOVIA BANK, N.A.
certificate properly endorsed. This certificate and the shares represented (WINSTON-SALEM, N.C.) TRANSFER AGENT
hereby are subject to all of the terms, conditions and limitations of the AND REGISTRAR
Articles of Incorporation of the Corporation and all amendments thereto. BY:
This Certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar. AUTHORIZED SIGNATURE
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
[CORPORATE SEAL
/s/ Russell W. Jordan, III OF LANDAMERICA /s/ Charles H. Foster, Jr.
FINANCIAL
SECRETARY GROUP, INC.] CHAIRMAN AND CHIEF EXECUTIVE OFFICER
</TABLE>
<PAGE>
LANDAMERICA FINANCIAL GROUP, INC.
THE CORPORATION WILL FURNISH TO ANY SHAREHOLDER UPON WRITTEN REQUEST, AND
WITHOUT CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS,
AND RELATIVE RIGHTS OF EACH CLASS OF STOCK AND THE VARIATIONS IN RIGHTS,
PREFERENCES, AND LIMITATIONS DETERMINED FOR EACH SERIES OF STOCK WHICH THE
CORPORATION IS AUTHORIZED TO ISSUE. REQUESTS MAY BE DIRECTED TO LANDAMERICA
FINANCIAL GROUP, INC., 6630 WEST BROAD STREET, RICHMOND, VIRGINIA 23230.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ___________Custodian____________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as Act_____________
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_____________________________________
| |
|_____________________________________|_________________________________________
________________________________________________________________________________
Please print or typewrite name and address including postal zip code of assignee
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint______________________________________________
________________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated_________________________________
_______________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
SIGNATURE(S) GUARANTEED: _______________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCK-BROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (S-3 No. 333-46211) and related Prospectus of Lawyers
Title Corporation for the registration of 2,200,000 shares of its 7% Series B
Cumulative Convertible Preferred Stock and 4,824,561 shares of its Common Stock
and to the incorporation by reference therein of our report dated February 19,
1997, with respect to the consolidated financial statements and schedules of
Lawyers Title Corporation and subsidiaries included in its Annual Report (Form
10-K) for the year ended December 31, 1996, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
February 26, 1998
Richmond, Virginia
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Lawyers Title Corporation on Form S-3 of our report dated February 12, 1997
(August 20, 1997 as to Note 10), appearing in the Proxy Statement for the
Special Meeting of the Shareholders of Lawyers Title Corporation filed on
January 29, 1998 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
February 27, 1998
