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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D/A
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)
COTTON STATES LIFE INSURANCE COMPANY
(Name of Issuer)
COMMON STOCK, PAR VALUE $1 PER SHARE
(Title of Class of Securities)
221774102
(CUSIP Number)
COUNTRY LIFE INSURANCE COMPANY
1701 N. Towanda Avenue
Bloomington, Illinois 60701
Attn: Paul M. Harmon
(309) 557-2210
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
Copies To:
Todd R. Eskelsen
Sonnenschein Nath & Rosenthal LLP
1301 K Street, N.W.
Suite 600, East Tower
Washington, D.C. 20005
(202) 408-6424
December 29, 2003
(Date of Event That Requires Filing of This Statement)
If the filing person has previously filed a Statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 240.13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information that would alter disclosures
provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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This Amendment No. 2 to Schedule 13D amends and restates in full, as
set forth below, Items 3, 4, 6 and 7 as originally filed on November 10, 2003
(as amended on November 19, 2003, "Schedule 13D"). Terms not defined in this
Amendment No. 2 shall have the respective meanings given to such terms in
Schedule 13D.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATIONS
In connection with entering into the Merger Agreement (as defined
below), COUNTRY Life has entered into agreements with certain holders of the
Issuer's Common Stock, regarding the purchase of shares of the Issuer's Common
Stock beneficially owned by each holder (with regard to each such holder, the
"Shares"). Under the terms of the Amended and Restated Stockholder Agreement
between COUNTRY Life and Shield Insurance Company ("Shield") dated as of
December 29, 2003 (the "Shield Amended Stockholder Agreement"), COUNTRY Life has
the right, under certain circumstances, to purchase from Shield up to 2,102,385
shares of the Issuer's Common Stock held by Shield (the "Shield Shares") for an
aggregate exercise price of $42.6 million (or $20.25 per share). Under the terms
of the Amended and Restated Stockholder Agreements between COUNTRY Life and each
of PSCO Partners Limited Partnership ("PSCO Partners") and PSCO Fund Limited
("PSCO Fund"), dated as of December 29, 2003 (the "PSCO Partners Amended
Stockholder Agreement" and "PSCO Fund Amended Stockholder Agreement,"
respectively), COUNTRY Life has the right, under certain circumstances, to
purchase from PSCO Partners up to 250,000 shares of the Issuer's Common Stock
held by PSCO Partners (the "PSCO Partners Shares") for an aggregate exercise
price of $5 million (or $20.25 per share) and from PSCO Fund up to 55,000 shares
of the Issuer's Common Stock held by PSCO Fund (the "PSCO Fund Shares") for an
aggregate exercise price of $1.1 million (or $20.25 per share), respectively.
PSCO Partners and PSCO Fund are collectively referred to herein as the
"PSCO Entities." Shield and each of the PSCO Entities are individually referred
to herein as a "Stockholder" and collectively as the "Stockholders." The PSCO
Partners Amended Stockholder Agreement and the PSCO Fund Amended Stockholder
Agreement are collectively referred to herein as the "PSCO Amended Stockholder
Agreements" and, together with the Shield Amended Stockholder Agreement, the
"Amended Stockholder Agreements."
In the event COUNTRY Life exercises its right to acquire the Shield
Shares, the PSCO Partners Shares or the PSCO Fund Shares under the terms of the
respective Amended Stockholder Agreements, it intends to obtain the funds
necessary, directly or indirectly, from internal cash and short term investment
assets.
ITEM 4. PURPOSE OF TRANSACTION
On October 29, 2003, certain companies of COUNTRY(R) Insurance &
Financial Services ("COUNTRY") on the one hand, and Shield, Issuer and other
companies of the Cotton States Insurance Group ("Cotton States") on the other
hand, entered into a letter agreement (the "Letter Agreement"), which outlined
the terms of a proposed transaction that included, among other things, the
acquisition by COUNTRY Life or an affiliate of all outstanding capital stock of
the Issuer, including the stock owned by Shield, a wholly-owned subsidiary of
Cotton States Mutual Insurance Company ("Cotton States Mutual"). COUNTRY Life
and Shield entered into a stockholder agreement, the terms of which granted
COUNTRY Life an option and a proxy with respect to the shares described therein.
COUNTRY Life entered into subsequent stockholder agreements with the PSCO
Entities on substantially identical terms to those under the Shield Stockholder
Agreement. The PSCO Entities are stockholders of the Issuer and are affiliated
with Philo Smith Capital Corporation, which has acted as a financial advisor to
COUNTRY Life. On December 29, 2003, COUNTRY Life, Issuer and COUNTRY Medical
Plans, Inc., a subsidiary of COUNTRY Life ("Acquiror Sub"), entered into an
Agreement and Plan of Merger (the "Merger
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Agreement"). In connection with the execution and delivery of the Merger
Agreement, COUNTRY Life and each of the Stockholders entered into the Amended
Stockholder Agreements. In addition, Cotton States Mutual and Shield entered
into an Alliance Agreement, dated as of December 29, 2003 (the "Alliance
Agreement"), with COUNTRY Mutual Insurance Company ("COUNTRY Mutual"), which
sets forth the affiliation between COUNTRY Mutual and Cotton States Mutual and
adds Cotton States Mutual to the COUNTRY Mutual property/casualty pool.
STOCKHOLDER AGREEMENTS.
Option. Under the terms of the Amended Stockholder Agreements, each of
Shield, PSCO Partners and PSCO Fund has granted to COUNTRY Life an irrevocable
option (each an "Option," and, collectively, the "Options") to purchase the
Shield Shares, PSCO Partners Shares and PSCO Fund Shares, respectively, at a
price of $20.25 per share, payable in cash. Subject to the terms of the Amended
Stockholder Agreements, each such Option is exercisable at any time after (i)
the occurrence of any Acquisition Proposal (as defined below); (ii) the
occurrence of any event entitling COUNTRY or COUNTRY Life to the fee referred to
in Section 7.03 of the Merger Agreement; or (iii) the Stockholder breaches any
of its agreements in Section 3(a), 3(b) or 3(d) of the Amended Stockholder
Agreement relating, among other things, to the voting and transfer of shares and
to Stockholder's non-solicitation obligations. Each such Option expires on the
earliest of: (i) December 31, 2004; (ii) the date that is thirty (30) days after
the later of the date that all approvals to the Merger required under applicable
insurance regulatory laws have been obtained or a final non-appealable
determination or order has been made that such approvals will not be granted;
all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 required for the purchase of the Shares upon such exercise shall have
expired or been terminated or a final non-appealable determination or order has
been made that such approval will not be granted; and all other conditions to
closing have been satisfied; and (iii) the date a final non-appealable order of
a federal or state court in effect preventing the exercise of the Option or
consummation of the Merger or any law or order enacted, promulgated or issued or
deemed applicable to the Option or the Merger by any governmental entity that
would make exercise of the Option or consummation of the Merger illegal. Under
the terms of the Amended Stockholder Agreements, the term "Acquisition Proposal"
means any proposal or offer made by any person or group other than COUNTRY or
COUNTRY Life (in each case, whether or not in writing and whether or not
delivered to the stockholders of the Issuer generally) relating to: (i) any
direct or indirect acquisition or purchase which is structured to permit such
person or group to acquire beneficial ownership of at least 10% of the assets of
the Issuer or any of its subsidiaries or of over 10% of any class of equity
securities of the Issuer or any of its subsidiaries; (ii) any tender offer or
exchange offer that, if consummated, would result in any person, other than
COUNTRY, COUNTRY Life, their affiliates or any group of which any of them is a
member beneficially owning 10% or more of any class of equity securities of the
Issuer or any of its subsidiaries; or (iii) any merger, consolidation, business
combination, sale of substantially all the assets, recapitalization,
liquidation, dissolution or similar transaction involving the Issuer or any of
its subsidiaries.
Voting of Shares. Under the Amended Stockholder Agreements, each of
Shield, PSCO Partners and PSCO Fund has agreed that, during the term of the
Option, Shield, PSCO Partners and PSCO Fund shall, at any meeting of the
stockholders of the Issuer, however called, or in connection with any written
consent of the stockholders of the Issuer, vote (or cause to be voted) all
Shares then held of record or beneficially owned by such respective Stockholder,
(i) in favor of approval of the Merger Agreement and the Merger, the execution
and delivery by the Issuer of the agreements related to approval of the Merger
Agreement and the Merger and the approval of the terms thereof and each of the
other actions contemplated by such agreements and the Amended Stockholder
Agreements and any actions required in furtherance thereof; and (ii) against any
proposal relating to an Acquisition Proposal or any action or agreement that
would impede, frustrate, prevent or nullify the Amended Stockholder Agreements
or result in a breach in any respect of any covenant, representation or warranty
or any other obligation or
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agreement of the Issuer under the Merger Agreement or other definitive
agreements with respect to the Merger; provided, however, that the Stockholder
shall continue to have the right to vote in its sole discretion at an annual
meeting on all matters not involving or related to the Merger or an Acquisition
Proposal. Under the Amended Stockholder Agreements, each of Shield, PSCO
Partners and PSCO Fund also, subject to any regulatory approval, if any,
required to be obtained from a governmental agency under insurance regulatory
laws, irrevocably granted to and appointed COUNTRY Life and any of its designees
(and each of them individually) a proxy and attorney-in-fact (with full power of
substitution) for and in the respective Stockholder's name, place and stead, to
vote the Shares beneficially owned by each such Stockholder, or to grant a
consent or approval in respect of such Shares, in the manner specified above.
Each such proxy is coupled with an interest and is therefore irrevocable.
Covenants. Under the terms of the Amended Stockholder Agreements, each
of Shield, PSCO Partners and PSCO Fund also has agreed that it will not:
(a) offer to transfer (which term shall include, without
limitation, any sale, tender, gift, pledge, assignment or
other disposition), transfer, or consent to any transfer of,
any or all of the Shares beneficially owned by such
Stockholder or any interest therein,
(b) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of
such Shares or any interest therein,
(c) grant any proxy, power-of-attorney or other authorization or
consent in or with respect to such Shares,
(d) deposit such Shares into a voting trust or enter into a voting
agreement or arrangement with respect to such Shares, or
(e) take any other action that would make any representation or
warranty of the Stockholder contained in the Amended
Stockholder Agreement to which it is a party untrue or
incorrect or in any way restrict, limit or interfere with the
performance of its obligations under such Amended Stockholder
Agreement or the transactions contemplated thereby.
Additionally, under the terms of the Amended Stockholder Agreements,
each of Shield, PSCO Partners and PSCO Fund has agreed that it will not,
directly or indirectly:
(a) solicit, encourage or initiate inquiries, offers or proposals
from, or participate in any discussions or negotiations with,
any person or entity concerning any Acquisition Proposal; or
(b) except as required by law, disclose any information not
customarily disclosed to any person or entity concerning the
business and properties of any of the companies in Cotton
States or any of their affiliates, or afford to any person or
entity access to the properties, books or records of any of
the companies in Cotton States or any of their affiliates or
otherwise assist or encourage any person or entity in
connection with the foregoing.
MERGER AGREEMENT.
Pursuant to the Merger Agreement, subject to the terms and conditions
set forth therein, Acquiror Sub will merge with and into Issuer, with Issuer as
the surviving corporation (the "Merger"). The effectiveness of the Merger is
conditioned upon certain events, including, among other things, (i) the approval
of the Merger Agreement by holders of a majority of the outstanding shares of
Issuer's Common Stock at a special meeting of Issuer's shareholders called to
vote on the Merger Agreement, (ii) receipt of all required permits, approvals,
consents and authorizations of governmental authorities and third parties,
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and (iii) satisfaction of the conditions to closing contained in the Alliance
Agreement. If such conditions are met, upon the effectiveness of the Merger (i)
each issued and outstanding share of Issuer's Common Stock, other than shares
held by Issuer or its subsidiaries, and shares held by shareholders properly
perfecting their dissenters' rights, will be cancelled and converted into the
right to receive $20.25 per share in cash, without interest, (ii) shares held by
shareholders properly perfecting their dissenters' rights will be cancelled, and
such shareholders will be paid in accordance with Georgia law, and (iii) each
outstanding share of Acquiror Sub common stock will be converted into a share of
Issuer's Common Stock.
Under certain circumstances, a termination fee of $6.5 million is
payable to COUNTRY Life by Issuer if the Merger Agreement is terminated.
The foregoing descriptions are qualified in their entirety by reference
to the text of the Amended Stockholder Agreements and the Merger Agreement, a
copy of each of which is filed as an exhibit to this Schedule 13D.
ITEM 6 CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS, OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER
See Item 4.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
See Exhibit Index appearing elsewhere herein, which is incorporated
herein by reference.
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SIGNATURE
After reasonable inquiry and to the best of the undersigned's knowledge
and belief, the undersigned certifies that the information set forth in this
statement is true, complete, and correct.
Date: January 5, 2004
COUNTRY LIFE INSURANCE COMPANY
By: /s/ DAVID A. MAGERS
-------------------------------------
David A. Magers, Senior Vice
President and CFO
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------------------------------------------------------------
99.1+ Stockholder Agreement, dated as of October 29, 2003, between COUNTRY
Life Insurance Company and Shield Insurance Company.
99.2+ Letter Agreement, dated as of October 29, 2003, by and between certain
companies of COUNTRY Insurance & Financial Services and Cotton States
Mutual Insurance Company, Shield Insurance Company, Cotton States Life
Insurance Company and their affiliates.
99.3++ Stockholder Agreement, dated as of November 11, 2003 between COUNTRY
Life Insurance Company and PSCO Partners Limited Partnership.
99.4++ Stockholder Agreement, dated as of November 11, 2003 between COUNTRY
Life Insurance Company and PSCO Fund Limited.
99.5 Amended and Restated Stockholder Agreement, dated as of December 29,
2003 between COUNTRY Life Insurance Company and Shield Insurance
Company.
99.6 Amended and Restated Stockholder Agreement, dated as of December 29,
2003, between COUNTRY Life Insurance Company and PSCO Partners Limited
Partnership.
99.7 Amended and Restated Stockholder Agreement, dated as of December 29,
2003, between COUNTRY Life Insurance Company and PSCO Fund Limited.
99.8+++ Agreement and Plan of Merger, dated as of December 29, 2003, among
COUNTRY Life Insurance Company, COUNTRY Medical Plans, Inc. and Cotton
States Life Insurance Company.
+ Incorporated by reference to the Schedule 13D filed by COUNTRY Life
with Securities and Exchange Commission on November 10, 2003 (File No.
005-32040).
++ Incorporated by reference to Amendment No. 1 to Schedule 13D filed by
COUNTRY Life with the Securities and Exchange Commission on November
19, 2003 (File No. 005-32040).
+++ Incorporated by reference to the Current Report on Form 8-K (File No.
1112-39729) filed by Cotton States Life Insurance Company with the
Securities and Exchange Commission on December 30, 2003.