EXHIBIT 2.1
PURCHASE AGREEMENT
by and between
THE LIBERTY CORPORATION
and
ROYAL BANK OF CANADA
dated as of
June 19, 2000
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TABLE OF CONTENTS
Page
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ARTICLE I
THE ACQUISITION
SECTION 1.1 The Acquisition...............................................2
SECTION 1.2 Purchase Price................................................3
SECTION 1.3 Payment of Purchase Price.....................................3
SECTION 1.4 Intellectual Property Assignment..............................3
ARTICLE II
THE CLOSING
SECTION 2.1 Closing.......................................................3
SECTION 2.2 Deliveries by Seller to Buyer.................................3
SECTION 2.3 Deliveries by Buyer to Seller.................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER
SECTION 3.1 Organization and Good Standing; Company Subsidiaries..........6
SECTION 3.2 Capitalization................................................7
SECTION 3.3 Corporate Authority; Board Approval...........................8
SECTION 3.4 Governmental Filings and Consents.............................9
SECTION 3.5 No Violations................................................10
SECTION 3.6 Financial and Statutory Statements...........................12
SECTION 3.7 Absence of Certain Changes and Events........................13
SECTION 3.8 Actions; Orders..............................................18
SECTION 3.9 Taxes........................................................18
SECTION 3.10 Employee Benefits; ERISA.....................................21
SECTION 3.11 Labor Matters................................................23
SECTION 3.12 Compliance with Laws; Governmental Authorizations; etc.......23
SECTION 3.13 Real Property................................................27
SECTION 3.14 Contracts; No Default........................................28
SECTION 3.15 Environmental Matters........................................30
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SECTION 3.16 Insurance....................................................32
SECTION 3.17 Brokers and Finders..........................................33
SECTION 3.18 No Undisclosed Liabilities...................................33
SECTION 3.19 Intellectual Property........................................33
SECTION 3.20 Insurance Issued by the Companies............................35
SECTION 3.21 Reinsurance and Coinsurance..................................36
SECTION 3.22 Service Contracts............................................36
SECTION 3.23 Threats of Cancellation......................................37
SECTION 3.24 Actuarial Reports............................................37
SECTION 3.25 Ratings......................................................37
SECTION 3.26 Reserves.....................................................37
SECTION 3.27 Risk-Based Capital; IRIS Ratios..............................38
SECTION 3.28 Company Investment Assets....................................38
SECTION 3.29 Pools and Fronting Arrangements; Service Agreements..........39
SECTION 3.30 Intercompany Accounts........................................39
SECTION 3.31 Assets Sufficient............................................39
SECTION 3.32 Loans........................................................39
SECTION 3.33 Employees....................................................40
SECTION 3.34 Disclosure...................................................40
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 4.1 Organization and Good Standing...............................40
SECTION 4.2 Corporate Authority..........................................40
SECTION 4.3 Governmental Filings and Consents; No Violations.............41
SECTION 4.4 Securities Act...............................................42
SECTION 4.5 Brokers and Finders..........................................42
SECTION 4.6 Financing....................................................42
SECTION 4.7 Litigation...................................................42
ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business..........................................42
SECTION 5.2 Acquisition Proposals........................................43
SECTION 5.3 Access.......................................................45
SECTION 5.4 Required Approvals...........................................46
SECTION 5.5 Reasonable Best Efforts......................................47
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SECTION 5.6 HSR Act......................................................47
SECTION 5.7 Publicity....................................................47
SECTION 5.8 Expenses.....................................................48
SECTION 5.9 Dividend of Shares of Subsidiaries of the Company............48
SECTION 5.10 Advisory Contract Consents...................................48
SECTION 5.11 Further Assurances...........................................49
SECTION 5.12 Notifications................................................49
SECTION 5.13 Non-Competition; Non-Solicitation............................49
SECTION 5.14 Employee and Employee Benefit Matters........................51
SECTION 5.15 Intercompany Agreements and Accounts.........................52
SECTION 5.16 Additional Financial Statements..............................53
SECTION 5.17 Ancillary Agreements.........................................53
SECTION 5.18 Retention of Records.........................................53
SECTION 5.19 Liberty Mark.................................................54
SECTION 5.20 Forbearances of Seller and Buyer.............................54
SECTION 5.21 Environmental Testing........................................55
SECTION 5.22 Shareholder Approval.........................................55
SECTION 5.23 Proxy Statement..............................................56
SECTION 5.24 Maintenance of Insurance.....................................56
SECTION 5.25 Transferred Property.........................................57
SECTION 5.26 Takeover Laws................................................57
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.1 Conditions to Obligations of Buyer...........................58
SECTION 6.2 Conditions to Obligations of Seller..........................60
ARTICLE VII
TAX MATTERS
SECTION 7.1 Liability for Taxes and Related Matters......................62
SECTION 7.2 Tax Returns and Reports......................................64
SECTION 7.3 Contest Provisions...........................................64
SECTION 7.4 Cooperation; Records.........................................65
SECTION 7.5 Disputes.....................................................66
SECTION 7.6 Section 338(h)(10) Election..................................66
SECTION 7.7 Allocation...................................................67
SECTION 7.8 Termination of Tax Allocation Agreements.....................67
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SECTION 7.9 Section 1445.................................................68
SECTION 7.10 Survival of Obligations......................................68
SECTION 7.11 Indemnification for Sections 7702, 7702A, 72, 101(f)
and 817(h) Liability.........................................68
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination..................................................69
SECTION 8.2 Effect of Termination........................................70
SECTION 8.3 Termination Fee..............................................71
ARTICLE IX
INDEMNIFICATION; REMEDIES
SECTION 9.1 Survival.....................................................73
SECTION 9.2 Indemnification and Reimbursement by Seller..................73
SECTION 9.3 Indemnification and Reimbursement by Buyer...................74
SECTION 9.4 Limitations on Amount - Seller...............................75
SECTION 9.5 Limitations on Amount - Buyer................................75
SECTION 9.6 Notice and Payment of Claims.................................76
SECTION 9.7 Procedure for Indemnification - Third Party Claims...........76
SECTION 9.8 Tax Effect of Indemnification Payments.......................78
SECTION 9.9 Remedies Exclusive...........................................78
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Assignments; Successors; No Third Party Rights...............78
SECTION 10.2 Entire Agreement.............................................78
SECTION 10.3 Amendment or Modification....................................79
SECTION 10.4 Notices......................................................79
SECTION 10.5 Governing Law................................................80
SECTION 10.6 Consent to Jurisdiction; Waiver of Jury Trial................80
SECTION 10.7 Severability.................................................81
SECTION 10.8 Waiver of Conditions.........................................82
SECTION 10.9 Actions of the Companies and the Company Subsidiaries........82
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SECTION 10.10 Descriptive Headings; Construction...........................82
SECTION 10.11 Counterparts.................................................82
SECTION 10.12 Knowledge....................................................82
SECTION 10.13 U.S. Dollars.................................................83
Exhibit A Form of Intellectual Property Assignment
Exhibit B Form Title Affidavit
Exhibit C Form Title Affidavit
Exhibit D Form of Lease
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INDEX OF DEFINED TERMS
Page
A.M. Best ..................................................................37
Acquisition .................................................................3
Acquisition Event ..........................................................72
Acquisition Proposal........................................................43
Acquisition Transaction.....................................................72
Actions ....................................................................18
Agreement ...................................................................1
Ancillary Agreement..........................................................5
Annual Statements ..........................................................13
Antitrust Division..........................................................10
Applicable Contract.........................................................11
Asset Sale .................................................................15
Assets ......................................................................3
Benefit Plans ..............................................................21
Business ....................................................................1
Business Day ................................................................3
Buyer .......................................................................1
Buyer Disclosure Schedule...................................................40
Buyer Indemnified Persons...................................................74
CERCLA .....................................................................31
Closing .....................................................................3
Closing Date ................................................................3
Code .......................................................................20
Common Stock ................................................................1
Companies ...................................................................1
Company .....................................................................1
Company Actuarial Analyses..................................................37
Company Investment Assets...................................................38
Company Subsidiaries.........................................................7
Company Subsidiary...........................................................7
Company Welfare Plans.......................................................51
Confidentiality Agreement...................................................79
Consents ...................................................................10
Contract ...................................................................11
Contract Failure ...........................................................68
Covered Transactions.........................................................9
Damages ....................................................................74
Deed .......................................................................57
Disclosure Schedule..........................................................6
Employee Transfer ..........................................................52
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Environmental Law ..........................................................31
ERISA ......................................................................21
Exchange Act ...............................................................26
Excluded Assets ............................................................14
Excluded Subsidiaries.......................................................48
Excluded Subsidiary.........................................................48
Filings ....................................................................10
Final Quarterly Statements..................................................13
Final Year End Statements...................................................13
finally determined..........................................................76
Financial Statements........................................................12
Fortis Agreement ...........................................................45
fronting arrangement........................................................39
FTC ........................................................................10
GAAP .......................................................................12
Governmental Authorization..................................................11
Governmental Entity.........................................................10
Hardware ...................................................................39
Hazardous Substance.........................................................32
HSR Act .....................................................................9
HSR Filing .................................................................10
Indemnifying Party..........................................................76
Indemnitee .................................................................76
Insurance Subsidiaries.......................................................7
Insurance Subsidiary.........................................................7
Intellectual Property.......................................................34
Intellectual Property Assignment.............................................2
Intercompany Agreement......................................................30
Investment Adviser Subsidiary...............................................26
Investment Advisers Act.....................................................26
Investment Company Act......................................................26
IRIS .......................................................................38
Law ........................................................................11
Lease .......................................................................2
Leased Real Property........................................................27
Liability ..................................................................33
Liberty Bermuda .............................................................1
Liberty Bermuda Common Stock.................................................1
Liberty Capital .............................................................1
Liberty Capital Common Stock.................................................1
Liberty Life ................................................................1
Liberty Life Common Stock....................................................1
Liberty Life Dividends......................................................14
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Liberty Life Preferred Stock.................................................1
Liberty Marketing ...........................................................1
Liberty Marketing Common Stock...............................................1
Liberty Marketing Preferred Stock............................................1
Liberty Services ...........................................................1
Liberty Services Common Stock................................................1
Liens .......................................................................8
material ....................................................................5
Material Adverse Effect......................................................5
Material Interest ..........................................................51
NYSE .......................................................................10
Order ......................................................................11
Ordinary Course of Business.................................................14
Organizational Documents.....................................................6
Owned Real Property.........................................................27
Pension Plan ...............................................................22
Permitted Exceptions........................................................27
Person ......................................................................7
Plan Transfer ..............................................................52
Post-Closing Tax Period.....................................................20
Pre-Closing Tax Period......................................................20
Preferred Stock .............................................................1
Producers ..................................................................17
Properties .................................................................30
Property Transfer ...........................................................2
Proxy Statement ............................................................56
Purchase Price ..............................................................3
Quarterly Statements........................................................13
RBC ........................................................................38
Real Property ..............................................................27
Real Property Leases........................................................27
Regular Dividends ..........................................................14
Related Person .............................................................51
Reports .....................................................................9
Representatives ............................................................43
Reserve Standards ..........................................................38
Reserves ...................................................................37
Restricted Area ............................................................50
Restructuring Transactions...................................................2
SAP ........................................................................13
SEC ........................................................................26
Securities Act .............................................................42
Sell-Side Termination.......................................................72
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Seller ......................................................................1
Seller Intellectual Property................................................34
Seller Party ...............................................................17
Seller's Group .............................................................20
Service Contracts ..........................................................36
Services Agreement..........................................................53
Shareholder Approval.........................................................8
Shareholders Meeting........................................................55
Shares ......................................................................1
Software ...................................................................34
South Carolina Law...........................................................8
Special Dividend ...........................................................14
Stated Termination Date.....................................................69
Statutory Statements........................................................13
Subsidiary ..................................................................7
Subsidiary Dividend.........................................................48
Superior Proposal ..........................................................45
Takeover Laws ...............................................................9
Tax ........................................................................20
Tax Liability Allocation Agreement..........................................21
Tax Package ................................................................64
Tax Return .................................................................21
Tax Sharing Amount.........................................................21
Termination Fee ............................................................71
Third Party Claim ..........................................................76
Total Adjusted Capital......................................................15
Transferred Employee........................................................52
Transferred Property........................................................57
UFL ........................................................................45
Voting Agreements ..........................................................57
401(k) Plan ................................................................52
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PURCHASE AGREEMENT (this "Agreement"), dated as of June 19, 2000, by and
between The Liberty Corporation, a South Carolina corporation ("Seller"), and
Royal Bank of Canada, a Canadian chartered bank ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller owns all of the issued and outstanding shares of capital
stock of Liberty Life Insurance Company, a South Carolina corporation ("Liberty
Life"), Liberty Insurance Services Corporation, a South Carolina corporation
("Liberty Services"), The Liberty Marketing Services Corporation, a South
Carolina corporation ("Liberty Marketing"), Liberty Capital Advisors Inc., a
South Carolina corporation ("Liberty Capital") and LC Insurance Limited, a
Bermuda corporation ("Liberty Bermuda") (each hereinafter referred to
individually as a "Company" and, collectively, as the "Companies");
WHEREAS, the Companies and the Company Subsidiaries (as defined in Section
3.1(c) hereof) are engaged in the business (including businesses in run-off) of
(i) life, accident and health insurance, and errors and omissions insurance,
(ii) reinsurance and annuity contracts, (iii) administering and selling
insurance policies for affiliated and unaffiliated third parties, including as
a third-party administrator or otherwise, (iv) fire insurance, and (v)
investment activities (the "Business");
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, all of the shares of common stock, par value $10,000 per share, of
Liberty Life (the "Liberty Life Common Stock"), all of the shares of common
stock, par value $2 per share, of Liberty Services (the "Liberty Services
Common Stock"), all of the shares of common stock, par value $2 per share, of
Liberty Marketing (the "Liberty Marketing Common Stock"), all of the shares of
common stock, par value $1 per share, of Liberty Bermuda (the "Liberty Bermuda
Common Stock"), all of the shares of common stock, par value $2 per share, of
Liberty Capital (the "Liberty Capital Common Stock", together with the Liberty
Life Common Stock, the Liberty Services Common Stock, the Liberty Marketing
Common Stock, and the Liberty Bermuda Common Stock, the "Common Stock"), all of
the shares of preferred stock, par value $100 per share, of Liberty Life (the
"Liberty Life Preferred Stock"), all of the shares of preferred stock, par
value $2 per share, of Liberty Marketing (the "Liberty Marketing Preferred
Stock"), together with the Liberty Life Preferred Stock, the "Preferred Stock",
the Preferred Stock together with the Common Stock, the "Shares"), issued and
outstanding on the Closing Date (as defined in Section 2.1 hereof) upon the
terms and subject to the conditions set forth herein;
WHEREAS, it is the intention of Buyer and Seller that, on the Closing Date
and in connection with the purchase and sale of the Shares, Seller will sell,
transfer and assign to Buyer the Seller Intellectual Property (as defined in
Section 3.19(c) hereof)
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pursuant to an Intellectual Property Assignment and Acknowledgment (the
"Intellectual Property Assignment") in substantially the form attached hereto
as Exhibit A;
WHEREAS, Seller desires, on the Closing Date, to transfer to the Companies
on the terms and conditions set forth in Section 5.25 hereof, and Buyer desires
that the Companies accept, the Transferred Property (as defined in Section 5.25
hereof) (the "Property Transfer") and, collectively with the Intellectual
Property Assignment, the Subsidiary Dividend (as defined in Section 5.9
hereof), the Liberty Life Dividends (as defined in Section 3.7(b) hereof), the
Asset Sale (as defined in Section 3.7(b) hereof), the Plan Transfer (as defined
in Section 5.14(d)) and the Employee Transfer (as defined in Section 5.14(c)
hereof), the "Restructuring Transactions");
WHEREAS, on the Closing Date, Seller desires to transfer to the Companies,
and Buyer desires that the Companies accept, Seller's Transferred Employees (as
defined in Section 5.14(c) hereof); and
WHEREAS, Buyer desires to obtain certain services for the benefit of the
Companies or Company Subsidiaries (as defined in Section 3.1 hereof) after the
Closing pursuant to a Services Agreement (as defined in Section 5.17 hereof),
and Seller desires to provide such services to the Companies and Company
Subsidiaries;
WHEREAS, Seller desires to obtain certain services from the Companies
after the Closing, pursuant to the Services Agreement, and Buyer desires that
the Companies provide such services to the Seller; and
WHEREAS, Seller desires to lease from Liberty Life certain premises after
the Closing pursuant to a lease (the "Lease") in substantially the form
attached hereto as Exhibit D.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements, undertakings and
obligations set forth herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
THE ACQUISITION
SECTION 1.1 The Acquisition. Upon the terms and subject to the conditions
set forth in this Agreement and on the basis of the representations,
warranties, covenants, agreements, undertakings and obligations contained
herein, at the Closing (as defined in Section 2.1 hereof), Seller hereby agrees
to sell to Buyer (or Buyer's permitted assignee or assignees pursuant to
Section 10.1 hereof), and Buyer hereby agrees that it or its
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permitted assignee or assignees shall purchase from Seller, free and clear of
any and all Liens (as defined in Section 3.2(b) hereof), (a) the Shares, and
(b) all of Seller's rights, title and interests in the Seller Intellectual
Property (collectively, the "Assets") for the consideration specified in this
Article I.
SECTION 1.2 Purchase Price. The purchase price for the Assets shall be
$578,700,000 (the "Purchase Price"), provided, however, that to the extent the
Special Dividend (as defined in Section 3.7(b) hereof) is less than
$70,000,000, the Purchase Price shall be increased by the difference between
$70,000,000 and the amount of the Special Dividend.
SECTION 1.3 Payment of Purchase Price. Buyer agrees to pay to Seller the
Purchase Price at the Closing by wire transfer or delivery of other immediately
available funds to an account of Seller designated to Buyer. Seller shall
designate such account at least two (2) Business Days prior to the Closing. For
purposes of this Agreement, the term "Business Day" shall mean any day, other
than a Saturday or a Sunday, that is neither a legal holiday nor a day on which
banking institutions are generally authorized or required by law or regulation
to close in the City of New York and in the City of Toronto, Ontario, Canada.
SECTION 1.4 Intellectual Property Assignment. The Seller and Buyer shall
execute and deliver concurrently with the Closing the Intellectual Property
Assignment.
ARTICLE II
THE CLOSING
SECTION 2.1 Closing. The closing (the "Closing") of the purchase and sale
of the Assets (the "Acquisition") and the other transactions provided for
herein shall take place at the offices of Sullivan & Cromwell, 125 Broad St.,
New York, NY 10004, or such other location as Buyer and Seller agree, as soon
as possible, but in no event later than 10:00 A.M. (New York City time) on the
third Business Day following satisfaction or, if permissible, waiver of the
conditions set forth in Article VI of this Agreement (excluding those
conditions which by their nature are to be satisfied as a part of the Closing,
but subject to the satisfaction or waiver of those conditions) or at such other
place, time or date as the parties hereto may agree (the time and date of the
Closing being herein referred to as the "Closing Date").
SECTION 2.2 Deliveries by Seller to Buyer. On the Closing Date, Seller
shall deliver, or cause to be delivered, to Buyer the following:
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(a) a certificate or certificates evidencing all of the Shares, duly
endorsed in blank or accompanied by stock powers duly executed in blank, in
proper form for transfer, and with any requisite stock transfer tax stamps
properly affixed thereto;
(b) the certificates, opinions and other documents and instruments to be
delivered pursuant to Section 6.1 hereof;
(c) a "good standing" certificate for Seller, each Company and each
Company Subsidiary, and a copy of the Certificate of Incorporation and all
amendments thereto (or equivalent document) of Seller, each Company and each
Company Subsidiary, in each case certified by the Secretary of State (or
equivalent authority) of the jurisdiction of incorporation of each such entity,
each dated as of a date within five (5) days prior to the Closing Date;
(d) copies of the resolutions of the board of directors (or other similar
governing body) of Seller, authorizing the execution, delivery and performance
of this Agreement and the Ancillary Agreements (as defined below) to which it
is a party and a certificate of the secretary or assistant secretary of Seller,
dated as of the Closing Date, to the effect that such resolutions were duly
adopted and are in full force and effect, that each officer of Seller who
executed and delivered this Agreement, any Ancillary Agreement and any other
document delivered in connection with the consummation of the transactions
contemplated by this Agreement or any Ancillary Agreement was at the respective
times of such execution and delivery and is now duly elected or appointed,
qualified and acting as such officer, and that the signature of each such
officer appearing on such document is his or her genuine signature, together
with copies of the Restated Articles of Incorporation and By-laws of Seller
certified by such officers;
(e) copies of resolutions of the board of directors (or other similar
governing body) of each Subsidiary of Seller that is a party to an Ancillary
Agreement authorizing the execution, delivery and performance of such Ancillary
Agreement or Agreements, and certificates of the secretary or assistant
secretary of each such Subsidiary, dated as of the Closing Date, to the effect
that such resolutions were duly adopted and are in full force and effect, that
each officer of such Subsidiary who executed and delivered such Ancillary
Agreement and any other document delivered in connection with the consummation
of the transactions contemplated by this Agreement or any Ancillary Agreement
was at the respective times of such execution and delivery and is now duly
elected or appointed, qualified and acting as such officer, and that the
signature of each such officer appearing on such document is his or her genuine
signature, together with copies of the articles or certificate of incorporation
and by-laws (or equivalent documents) of each such Subsidiary certified by such
officers;
(f) each Ancillary Agreement to which it or any affiliate or Subsidiary is
a party;
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(g) title affidavits in the forms attached hereto as Exhibits B and C;
(h) to the extent requested by the Buyer, resignations of the directors of
each Company and each Company Subsidiary; and
(i) such other closing documents as Buyer and Seller shall reasonably
agree.
The term "Ancillary Agreement" means the Intellectual Property Assignment,
the Lease, the Services Agreement, and any other agreement or instrument to be
entered into in connection with the transactions contemplated by this Agreement
and said other agreements.
SECTION 2.3 Deliveries by Buyer to Seller. On the Closing Date, Buyer
shall deliver, or cause to be delivered, to Seller the following:
(a) the Purchase Price, in accordance with Section 1.3 hereof;
(b) the certificates, opinions and other documents and instruments to be
delivered pursuant to Section 6.2 hereof;
(c) each Ancillary Agreement to which it is a party;
(d) a certificate of confirmation for Buyer, of the Office of the
Superintendent of Financial Institutions of Canada, dated as of a date within
five (5) days prior to the Closing Date;
(e) copies of the resolutions of the board of directors of Buyer,
ratifying the execution, delivery and performance of this Agreement and the
Ancillary Agreements to which it is a party; a certificate of the secretary or
assistant secretary of Buyer dated as of the Closing Date, to the effect that
such resolutions were duly adopted and are in full force and effect, that each
officer of Buyer who executed and delivered this Agreement, any Ancillary
Agreement and any other document delivered in connection with the consummation
of the transactions contemplated by this Agreement or any Ancillary Agreement
was at the respective times of such execution and delivery and is now duly
elected or appointed, qualified and acting as such officer, and that the
signature of each such officer appearing on such document is his genuine
signature; and
(f) such other closing documents as Seller and Buyer shall reasonably
agree.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER
As used herein, (i) any reference to any event, change or effect being
"material" with respect to any Company means an event, change or effect which
is material in relation to the financial condition, properties, business,
operations, assets or results of operations of the Companies and the Company
Subsidiaries, taken as a whole, and (ii) the term "Material Adverse Effect" on
the Companies means (x) a material adverse effect on the financial condition,
properties, business, operations, assets or results of operations of the
Companies and the Company Subsidiaries, taken as a whole, or (y) a material
adverse effect that would materially impair the ability of Seller to perform
its obligations under this Agreement or otherwise materially threaten or
materially impede or delay the consummation of the Acquisition and the other
transactions contemplated by this Agreement and the Ancillary Agreements;
provided, however, that a Material Adverse Effect on the Companies shall not
include an effect resulting from (a) any change in Law (as defined in Section
3.5 hereof) or GAAP (as defined in Section 3.6(b) hereof) or SAP (as defined in
Section 3.6(d) hereof) or interpretations thereof that applies to the
Companies, the Company Subsidiaries or any Company or Company Subsidiary, (b)
any change or condition affecting the life insurance industry generally, (c)
any change in general economic, political, regulatory, business or financial
market conditions or (d) any change or condition resulting from the
announcement of the transactions contemplated by this Agreement and the
Ancillary Agreements; in the case of (a), (b) and (c), not specific to the
Companies, the Company Subsidiaries or any Company or Company Subsidiary and
not having an effect on the Companies and the Company Subsidiaries, taken as a
whole, that is substantially more adverse than the effect on life insurance
companies generally.
Seller hereby represents and warrants to Buyer as set forth in the
Schedules to this Article III (the "Disclosure Schedule") and as follows:
SECTION 3.1 Organization and Good Standing; Company Subsidiaries.
(a) Each of Seller, the Companies and the Company Subsidiaries is an
entity duly organized, validly existing and in good standing under the laws of
its respective jurisdiction of organization, and each of the Companies and the
Company Subsidiaries has all necessary corporate or similar power and authority
to conduct its business as it is now being conducted and to own or use the
properties or assets that it purports to own or use, and each Company and each
Company Subsidiary is duly qualified to do business as a foreign corporation
and is in good standing as a foreign corporation in each jurisdiction in which
either the ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such qualification or good
standing, except for such failures to be so organized, qualified or in good
standing that, individually or in the
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aggregate, have not had, do not have, and would not reasonably be expected to
have a Material Adverse Effect on the Companies. Schedule 3.1(a) of the
Disclosure Schedule states, with respect to each Company, its jurisdiction of
incorporation and organization and in the case of each Company engaged in the
business of insurance, its jurisdiction of domicile and "commercial domicile",
as applicable.
(b) Seller has made available or delivered to Buyer a true and complete
copy of each Company's and each Company Subsidiary's articles or certificate of
incorporation and by-laws (or equivalent documents), each as amended to date
(together with the Restated Articles of Incorporation and By-laws of Seller,
collectively, the "Organizational Documents").
(c) Schedule 3.1(c) of the Disclosure Schedule sets forth a true and
complete list of all Subsidiaries (as defined below) of each Company (each such
Subsidiary, other than an Excluded Subsidiary (as defined in Section 5.9
hereof), hereinafter referred to individually as a "Company Subsidiary" and,
collectively, as the "Company Subsidiaries") and identifies all Company
Subsidiaries engaged in the issuance of insurance or annuities or otherwise
engaged in the business of reinsurance, including in run-off (each hereinafter
referred to individually as an "Insurance Subsidiary" and collectively as the
"Insurance Subsidiaries"). For purposes of this Agreement, the term
"Subsidiary" shall mean with respect to any Person, any corporation or other
entity of which such Person has, directly or indirectly, ownership of
securities or other interests having the power to elect a majority of such
corporation's or other entity's board of directors (or similar governing body),
or otherwise having the power to direct the business and policies of such
corporation or other entity other than securities or interests having such
power only upon the happening of a contingency that has not occurred. For
purposes of this Agreement, the term "Person" shall mean any individual,
corporation (including any non-profit corporation), general or limited
partnership, limited liability company, Governmental Entity (as defined in
Section 3.4 hereof), joint venture, estate, trust, association, organization or
other entity of any kind or nature.
SECTION 3.2 Capitalization.
(a) The authorized capital stock of each Company is as follows: (i) the
authorized capital stock of Liberty Life consists solely of 1,000 shares of
Liberty Life Common Stock, and 500,000 shares (of which 300,000 have been
previously retired) of Liberty Life Preferred Stock, of which 992 shares of
Liberty Life Common Stock are issued and outstanding and of which no shares of
Liberty Life Preferred Stock are issued and outstanding, (ii) the authorized
capital stock of Liberty Services consists solely of 10,000 shares of Liberty
Services Common Stock, of which 10,000 shares of Liberty Services Common Stock
are issued and outstanding, (iii) the authorized capital stock of Liberty
Marketing consists solely of 40,000 shares of Liberty Marketing Common Stock,
and 10,000 shares of Liberty Marketing Preferred Stock, of which 400 shares of
Liberty Marketing
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Common Stock are issued and outstanding and of which 100 shares of Liberty
Marketing Preferred Stock are issued and outstanding, (iv) the authorized
capital stock of Liberty Bermuda consists solely of 120,000 shares of Liberty
Bermuda Common Stock, of which 120,000 shares of Bermuda Common Stock are
issued and outstanding, and (v) the authorized capital stock of Liberty Capital
consists solely of 50,000 shares of Liberty Capital Common Stock, of which
5,000 shares of Liberty Capital Common Stock are issued and outstanding. All of
the issued and outstanding shares of capital stock of each Company and each
Company Subsidiary have been duly authorized and are validly issued, fully paid
and nonassessable.
(b) Seller is and shall be on the Closing Date the sole record and
beneficial owner and holder of the Shares, free and clear of all Liens. A
Company or a Company Subsidiary is, and on the Closing Date shall be, the sole
record and beneficial owner and holder, free and clear of all Liens, of all of
the issued and outstanding shares of capital stock of each Company Subsidiary.
For purposes of this Agreement, the term "Liens" shall mean any charges,
claims, conditions, conditional sale or other title retention agreements,
covenants, easements, encumbrances, equitable interests, exceptions, liens,
mortgages, options, pledges, reservations, rights of first refusal, building
use restrictions, rights of way, security interests, servitudes, statutory
liens, variances, warrants, or restrictions on use, voting, transfer,
alienation or receipt of income and any restrictions on exercise of any other
attribute of ownership.
(c) There are no shares of capital stock or other securities of any
Company or any Company Subsidiary (i) reserved for issuance or (ii) subject to
preemptive rights or any outstanding subscriptions, options, warrants, calls,
rights, convertible securities or other agreements or other instruments
outstanding or in effect giving any Person the right to acquire or vote any
shares of capital stock or other securities of any Company or any Company
Subsidiary or any commitments relating to the issued or unissued capital stock
or other securities of any Company or any Company Subsidiary. None of the
Companies or Company Subsidiaries has outstanding any bonds, debentures, notes
or other obligations the holders of which have the right to vote (or
convertible into or exercisable for securities having the right to vote) with
the stockholders of such Company or Company Subsidiary on any matter.
SECTION 3.3 Corporate Authority; Board Approval.
(b) Seller and each Subsidiary of Seller has the full legal right,
requisite corporate power and authority and has taken, or, with respect to the
Services Agreement, will have taken prior to the execution thereof, all
corporate action necessary in order to execute, deliver and perform fully its
obligations under (i) this Agreement and each Ancillary Agreement to which it
is or will be a party (in the case of Seller), and (ii) each Ancillary
Agreement to which it is or will be a party (in the case of Subsidiaries of
Seller), and to consummate the transactions contemplated hereby and thereby,
provided that the
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consummation of the Acquisition is at the date hereof subject to obtaining the
requisite shareholder approval (the "Shareholder Approval") pursuant to Section
33-12-102 of the South Carolina Business Corporation Act ("South Carolina
Law").
(c) The execution and delivery by Seller of this Agreement and each
Ancillary Agreement to which it is or will be a party and the consummation by
Seller of the transactions contemplated hereby and thereby have been, or, with
respect to the Services Agreement, will have been prior to the execution
thereof, duly authorized and approved by the board of directors of Seller and
no other corporate proceeding with respect to Seller is necessary to authorize
this Agreement, such Ancillary Agreements or, other than obtaining the
requisite Shareholder Approval in order to consummate the Acquisition, the
transactions contemplated hereby or thereby.
(d) This Agreement has been duly executed and delivered by Seller and
constitutes, and upon the execution and delivery by Seller of the Ancillary
Agreements to which it will be a party, such Ancillary Agreements will
constitute, valid and binding agreements of Seller, enforceable against Seller
in accordance with their respective terms, except to the extent that (x) the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar Laws affecting the
enforcement of creditors' rights generally and (y) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(e) The execution and delivery by each Subsidiary of Seller of each
Ancillary Agreement to which it is or will be a party and the consummation by
each Subsidiary of Seller of the transactions contemplated thereby have been,
or, with respect to the Services Agreement, will have been prior to the
execution thereof, duly authorized and approved by the board of directors of
such Subsidiary of Seller and no other corporate proceeding with respect to
such Subsidiary of Seller is necessary to authorize such Ancillary Agreements
or the transactions contemplated thereby.
(f) Upon the execution and delivery by each Subsidiary of Seller of the
Ancillary Agreements to which it is a party, such Ancillary Agreements will
constitute valid and binding agreements of such Subsidiary of Seller,
enforceable against such Subsidiary of Seller in accordance with their
respective terms, except to the extent that (x) the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar Laws affecting the enforcement of creditors' rights
generally and (y) the availability of equitable remedies may be limited by
equitable principles of general applicability.
(g) The Seller's board of directors has adopted a resolution recommending
approval, by the Seller's shareholders, of this Agreement and the Ancillary
Agreements and the transactions contemplated by this Agreement and the
Ancillary Agreements.
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(h) Seller has taken all action required to be taken by it in order to
exempt this Agreement and the Ancillary Agreements and the transactions
contemplated hereby and thereby from, and this Agreement, the Ancillary
Agreements and the transactions contemplated hereby and thereby (the "Covered
Transactions") are exempt from, the requirements of any "moratorium," "control
share," "fair price," "affiliate transaction," "business combination" or other
antitakeover laws and regulations of the State of South Carolina, and
including, without limitation, Sections 35-2-101 through 35-2-111 of South
Carolina Law and Sections 35-2-201 through 35-2-226 of South Carolina Law
(collectively, "Takeover Laws"). The provisions of Article IX of the Restated
Articles of Incorporation of Seller do not apply to the Covered Transactions.
The Covered Transactions have been approved by two-thirds of the Continuing
Directors then in office (as defined in Article IX of the Restated Articles of
Incorporation of Seller).
SECTION 3.4 Governmental Filings and Consents. Except for (i) the
notification and report forms (the "Reports") required to be filed under the
Hart-Scott- Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act") with the Federal Trade Commission (the "FTC") and the Antitrust Division
of the Department of Justice (the "Antitrust Division") (such filings, the "HSR
Filing"), (ii) filings with the New York Stock Exchange (the "NYSE"), (iii) the
approvals required under the applicable insurance laws of Bermuda and of the
States of Louisiana and South Carolina, (iv) the expiry of waiting periods
required under other applicable insurance Laws, (v) filings under the Exchange
Act (as defined in Section 3.12(e) hereof), including the filing of the Proxy
Statement (as defined in Section 5.23 hereof) with the SEC (as defined in
Section 3.12(e) hereof) under the Exchange Act and the filing of an amended
Form ADV of Liberty Capital with the SEC under the Investment Advisers Act (as
defined in Section 3.12(f) hereof), and (vi) the matters set forth in Schedule
3.4 of the Disclosure Schedule, no notices, reports, submissions or other
filings (collectively, "Filings") are required to be made by Seller or any
Subsidiary of Seller with, nor are any consents, registrations, approvals,
declarations, permits, expiration of any applicable waiting periods or
authorizations other than with respect to the Filings set forth above
(collectively, "Consents") required to be obtained by Seller or any Subsidiary
of Seller from, any foreign, federal, state, local, municipal, county or other
governmental, quasi-governmental, administrative or regulatory authority, body,
agency, court, tribunal, commission or other similar entity (including any
branch, department or official thereof, "Governmental Entity"), in connection
with the execution or delivery by Seller or any Subsidiary of Seller of this
Agreement or any of the Ancillary Agreements to which, in each case, it is or
will be a party, the performance by Seller or any Subsidiary of Seller of its
obligations hereunder or thereunder or the consummation by Seller or any
Subsidiary of Seller of the transactions contemplated hereby or thereby, except
those Filings or Consents the failure of which to make or obtain, individually
or in the aggregate, have not had, do not have, and would not reasonably be
expected to have a Material Adverse Effect on the Companies, it being
understood and agreed that the failure to make the Filings or obtain the
approvals specified under subsection (i), (ii), (iii) and (v) above, and, for
purposes of this Section 3.4 but not for purposes of determining whether the
closing conditions set
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forth in Section 6.1 have been satisfied, the issuance of any Order by a state
insurance department prior to the expiry of the waiting periods specified under
subsection (iv) above imposing any limitations or other adverse conditions on
Buyer, its Subsidiaries, the Companies, the Company Subsidiaries or their
respective businesses, shall be deemed to constitute a Material Adverse Effect
on the Companies.
SECTION 3.5 No Violations. Assuming the making of the Filings and the
obtaining of the Consents set forth in Sections 3.4, 4.3, Schedule 3.4 of the
Disclosure Schedule and Schedule 4.3 of the Buyer's Disclosure Schedule, the
execution and delivery by Seller or any Subsidiary of Seller of this Agreement
and the Ancillary Agreements to which, in each case, it is or will be a party
does not, and the performance and consummation by Seller or any Subsidiary of
Seller of any of the transactions contemplated hereby or thereby will not, with
respect to each of Seller or any Subsidiary of Seller which is a party to an
Ancillary Agreement, including each Company and each Company Subsidiary,
directly or indirectly (with or without the giving of notice or the lapse of
time or both):
(a) contravene, conflict with, or constitute or result in a breach or
violation of, or a default under the Organizational Documents of the
Seller or any Subsidiary of Seller which is a party to this Agreement or
an Ancillary Agreement;
(b) contravene or constitute or result in a breach or violation of,
or a default under, or the cancellation, adverse modification or
termination of, or the acceleration of, or result in the creation of a
Lien on any properties or assets owned or used by any Company or any
Company Subsidiary pursuant to, or require the making of any Filing or the
obtaining of any Consent under, any provision of any agreement, license,
lease, contract, loan, note, mortgage, indenture, undertaking or other
legally binding commitment or obligation (whether written or oral and
whether express or implied) (a "Contract") or any existing Benefit Plan
(as defined in Section 3.10(a) hereof) or any grant or award made under
any of the foregoing, under which Seller, any Company or any Company
Subsidiary is bound or is subject to any obligation or Liability or by
which any of the assets owned or used by any Company or Company Subsidiary
are bound (an "Applicable Contract"), in each case other than as set forth
in Schedule 3.5(b) of the Disclosure Schedule or, individually or in the
aggregate, as have not had, do not have, and would not reasonably be
expected to have a Material Adverse Effect on the Companies; or
(c) contravene, conflict with, or constitute or result in a breach or
violation of any Law (as defined below) or give any Governmental Entity
the right to revoke, withdraw, suspend, cancel, terminate or adversely
modify, any insurance or securities Governmental Authorization (as defined
below) that is held by any Company or any Company Subsidiary or that
otherwise relates to the Business.
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For purposes of this Agreement, the term "Law" shall mean any federal,
state, local, foreign, international, multinational, or other constitution,
law, rule, administrative ruling, Order, ordinance, code, regulation, statute
or treaty. For purposes of this Agreement, the term "Governmental
Authorization" shall mean any approval, franchise, certificate of authority,
Order, consent, judgment, decree, license, permit, waiver or other
authorization issued, granted, given or otherwise made available by or under
the authority of any Governmental Entity or pursuant to any Law. For purposes
of this Agreement, the term "Order" shall mean any award, decision, injunction,
judgment, decree, settlement, order, process, ruling, subpoena or verdict
(whether temporary, preliminary or permanent) entered, issued, made or rendered
by any court, administrative agency, arbitrator, Governmental Entity or other
tribunal of competent jurisdiction.
SECTION 3.6 Financial and Statutory Statements.
(a) Seller has previously furnished or made available (or in the case of
financial statements for periods after the quarter ending March 31, 2000, will
promptly furnish or make available) to Buyer the following financial statements
(collectively, the "Financial Statements"): (i) audited consolidated balance
sheets of Seller, Liberty Marketing and Liberty Services, unaudited
consolidated balance sheets of Liberty Life and of each Company Subsidiary as
at December 31 in each of the years 1997 through 1999, and audited consolidated
balance sheets of Liberty Bermuda as at December 31 in each of the years 1997
and 1998 and unaudited consolidated balance sheets of Liberty Bermuda as at
December 31, 1999, and the related audited statements of income, changes in
stockholders' equity and cash flow for each of the fiscal years then ended,
together with the notes thereto and, in the case of the audited balance
financial statements, the report thereon of Ernst & Young, independent
certified public accountants and (ii) unaudited balance sheets of Seller, each
Company and each Company Subsidiary as at March 31, 2000 and for the quarters
thereafter ending more than 30 days prior to the Closing, for Seller and each
Company and each Company Subsidiary, as the case may be, and the related
unaudited statements of income, changes in stockholders' equity and cash flow
for the three months then ended, including in each case any notes thereto, with
respect to each item in Subsection (ii) only, each to the extent that such
Financial Statements have been prepared in the past in the Ordinary Course of
Business (as defined in Section 3.7 hereof).
(b) The Financial Statements and notes thereto fairly present, or in the
case of Financial Statements subsequent to the date hereof will fairly present,
in each case in all material respects, the financial position and the results
of operations, changes in stockholders' equity and cash flow of Seller (but
only insofar as such relate to the Business), each Company and each Company
Subsidiary as at the respective dates of and for the periods referred to in
such Financial Statements, all in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis (except
as may be indicated in the notes thereto) during the periods presented,
subject, in the case of unaudited financial statements, to notes and normal
year-end adjustments that would not be
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material in amount or effect. As of their respective dates, the Financial
Statements did not, and any Financial Statements subsequent to the date hereof
will not (but in each case with respect to Financial Statements of Seller only
insofar as such relate to the Business), contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading. No financial statements of any Person
other than each Company and each Company Subsidiary and the Excluded
Subsidiaries are required by GAAP to be included in the consolidated Financial
Statements of any Company.
(c) Seller has previously furnished or made available (or in the case of
statutory statements for periods after the quarter ending March 31, 2000, will
promptly furnish or make available) to Buyer, the following statutory
statements, in each case together with all exhibits, interrogatories, notes,
schedules and any actuarial opinions, affirmations or certifications or other
supporting documents filed in connection therewith (collectively, the
"Statutory Statements"): (i) the annual statement of Liberty Life, Liberty
Bermuda and each Insurance Subsidiary as at December 31 in each of the years
ended 1997 through 1999, in each case as filed with the insurance regulatory
authority of the jurisdiction of domicile of Liberty Life, Liberty Bermuda and
each Insurance Subsidiary, as the case may be (the "Annual Statements"), and
(ii) the quarterly statements of Liberty Life, Liberty Bermuda and each
Insurance Subsidiary for each quarterly period from and including the quarterly
period ended March 31, 2000 and the quarters thereafter ending more than 30
days prior to the Closing, in each case as filed with the insurance regulatory
authority of the jurisdiction of domicile of Liberty Life, Liberty Bermuda and
each Insurance Subsidiary, as the case may be (the "Quarterly Statements").
(d) The financial statements, including the notes thereto, included in the
Statutory Statements fairly present (or in the case of financial statements,
including the notes thereto, included in the Statutory Statements subsequent to
the date hereof will fairly present) in each case, in all material respects, in
accordance with SAP (as defined herein) the respective statutory financial
positions and results of operations of Liberty Life, Liberty Bermuda and each
such Insurance Subsidiary, as the case may be, as at the respective dates of
and for the periods therein specified, were (or in the case of Statutory
Statements subsequent to the date hereof will be) prepared in conformity with
statutory accounting principles prescribed or permitted by the applicable
insurance regulatory authority, as in effect as of the date of the respective
statement, applied on a consistent basis during the periods presented ("SAP"),
except as expressly set forth within the subject financial statements. The
Statutory Statements were (or in the case of Statutory Statements subsequent to
the date hereof, will be) complete in all material respects and complied (or in
the case of Statutory Statements subsequent to the date hereof, will comply) in
all material respects with all applicable Laws when filed and no material
deficiencies have been asserted to any Company or Insurance Subsidiary by any
insurance authority. The Annual Statements for the year ending December 31,
1999, together with the Financial Statements for the year ending December 31,
1999, are referred to collectively as the "Final Year End Statements",
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and the most recent Quarterly Statements prior to the Closing for Liberty Life,
Liberty Bermuda and each Insurance Subsidiary, as the case may be, together
with the Financial Statements for the same three months are referred to herein
as the "Final Quarterly Statements". Seller has delivered or made available to
Buyer true and complete copies of all examination reports of insurance
departments and any insurance regulatory agencies relating to Liberty Life
since January 1, 1995 and relating to Liberty Bermuda and the Insurance
Subsidiaries since January 1, 1997.
(e) Except as set forth on Schedule 3.6(e) of the Disclosure Schedule, at
the Closing, all of those books and records of each Company and each Company
Subsidiary shall be in the possession or under the control of each Company and
each Company Subsidiary.
SECTION 3.7 Absence of Certain Changes and Events. Except as set forth in
Schedule 3.7 of the Disclosure Schedule and except for the transactions
contemplated by this Agreement and the Ancillary Agreements, including without
limitation the Restructuring Transactions and the execution of the Ancillary
Agreements, since the date of the Final Year End Statements, each Company and
each Company Subsidiary has conducted the Business only in, and has not engaged
in any transaction other than according to the ordinary and usual course of
such business in a manner consistent with its past practice ("Ordinary Course
of Business"), and there has not been any:
(a) change in the business, operations, properties, assets, or
financial condition of any Company or any Company Subsidiary that,
individually or in the aggregate, has had, does have or would reasonably
be expected to have a Material Adverse Effect on Companies;
(b) (i) change in the authorized or issued capital stock of any
Company or any Company Subsidiary; (ii) grant of any new or amendment of
any existing stock option, warrant, or other right to purchase shares of
capital stock of any Company or any Company Subsidiary; (iii) issuance of
any security convertible into the capital stock of any Company or any
Company Subsidiary; (iv) grant of any registration rights in respect of
the capital stock of any Company or any Company Subsidiary; (v)
reclassification, combination, split, subdivision, purchase, redemption,
retirement, issuance, sale, or any other acquisition or disposition,
directly or indirectly, by any Company or any Company Subsidiary of any
shares of the capital stock of any Company or any Company Subsidiary; (vi)
amendment of any material term of any outstanding security of any Company
or any Company Subsidiary; (vii) except as permitted by subsection 3.7(n),
declaration, setting aside or payment of any dividend (whether in cash,
securities or other property) or other distribution or payment in respect
of the shares of the capital stock of any Company or any Company
Subsidiary except that (x) during the period between the date hereof and
prior to the Closing, Liberty Life may, to the extent permitted by
applicable Law,
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declare and pay normal quarterly dividends in an amount not to exceed
$5,500,000, or a prorated portion thereof (it being understood that, in
the event Liberty Life declares and pays with respect to any given quarter
a quarterly dividend in an amount less than $5,500,000, including, without
limitation, because of the restrictions imposed on such declarations or
payments set forth below in this subsection 3.7(b), Liberty Life shall be
permitted to include in any subsequent quarterly dividends the difference
between $5,500,000 and the amount of the quarterly dividend actually paid
if at the time of the subsequent quarterly dividend such additional amount
would be permissible under this subsection) (collectively, the "Regular
Dividends") and (y) immediately prior to the Closing, Liberty Life may, to
the extent permitted by applicable Law, declare and pay a single special
dividend (the "Special Dividend", and together with the Regular Dividends,
the "Liberty Life Dividends") in an amount of up to $70,000,000, it being
further understood that the Special Dividend shall consist first, of the
assets listed on Schedule 3.7(b) of the Disclosure Schedule, including all
distributions, dividends and other payments declared with respect to such
assets from and after March 31, 2000 (collectively, the "Excluded
Assets"), which assets shall be valued in the aggregate, for purposes of
this Section 3.7(b), at $16,793,522, and second, cash in the amount of the
difference between the total amount permitted to be included in the
Special Dividend pursuant to applicable Law and $16,793,522; the parties
further agree that (i) the cash component of the Special Dividend may be
funded by the sale, to be effectuated concurrently with the Closing, of
assets of Liberty Life (the "Asset Sale"), which assets shall be mutually
agreed upon by Seller and the Buyer at least 20 days prior to the Closing
Date and (ii) that the Regular Dividends may be paid (I) only to the
extent that, after giving effect to such payment, the Total Adjusted
capital as defined in South Carolina Code Ann. Section 38-9-310 ("Total
Adjusted Capital"), of Liberty Life shall be no less than $157,500,000;
(II) only out of current earnings as recorded by Liberty Life in
accordance with SAP (but not including in any calculation of current
earnings pursuant to this Section 3.7(b), any earnings resulting from any
changes in Liberty Life's allocation of its assets other than in the
Ordinary Course of Business, it being understood that any such change in
asset allocation shall be made in good faith and not for the purpose of
increasing the permitted Regular Dividend); and (III) only to the extent
that Seller in good faith projects (including projected earnings) that the
Total Adjusted Capital of Liberty Life, after giving effect to the Regular
Dividend, will be no less than 730 percent of Liberty Life's Authorized
Control Level, as defined in South Carolina Code Ann. Section 38-9-310,
for the quarter end prior to the quarter in which the Regular Dividend is
declared and paid; or (viii) sale or pledge of any stock or other equity
interests owned by any Company in the Company Subsidiaries;
(c) amendment or other change in any Company's or Company
Subsidiary's Organizational Documents;
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(d) (i) acquisition or divestiture (including by way of bulk
reinsurance, merger, consolidation or acquisition of stock or assets) by
any Company or any Company Subsidiary of any Person or any division
thereof or portion of the assets thereof (other than Company Investment
Assets (as defined in Section 3.28 hereof), which are addressed in
Subsection 3.7(g)(ii) hereof) that is material to the Companies and the
Company Subsidiaries, taken as a whole, it being understood that any
reinsurance transaction pursuant to which $2,000,000 or more in annual
written premiums are ceded or assumed, or any renewal, extension or
modification thereto, shall be considered material for purposes of this
subsection; (ii) liquidation, dissolution or winding up of, or disposition
of a portion of the assets (including by way of bulk reinsurance, whether
on an indemnity or assumption basis) of, any Company or any Company
Subsidiary that is material to the Companies and the Company Subsidiaries,
taken as a whole; or (iii) organization of any new Company Subsidiary or
joint venture by any Company or any Company Subsidiary;
(e) change in any material respect in the underwriting, investment,
actuarial, reserving, financial reporting or accounting practices,
principles or policies of any Company or Company Subsidiary, other than as
required by a change in Regulation S-X under the Exchange Act, GAAP, SAP
or applicable Law;
(f) except for any non-recurring payments by Seller which do not or
would not result in any current or future Liability to the Companies,
Company Subsidiaries or Buyer and, for such payments made subsequent to
the date hereof, of which Buyer has received prior written notice, (i)
increase in salary, bonus or other compensation (other than compensation
increases not exceeding five (5) percent per annum and otherwise made in
the Ordinary Course of Business) of any employee or director of any
Company or any Company Subsidiary or of any Transferred Employee; (ii)
increase in benefits or increase in severance for the benefit of any
employee or director of any Company or any Company Subsidiary or of any
Transferred Employee, in each case in excess of $50,000 per annum, or any
material waiver or material variation for the benefit of any such Person;
(iii) amendments to, or payments or grants of awards that were not made
pursuant to the terms, as of the date of this Agreement, of any Benefit
Plan existing as of the date hereof, or adoption or execution of any new
Benefit Plan (other than any such events in the Ordinary Course of
Business); or (iv) establishment or adoption of, or amendment to, any
collective bargaining agreement;
(g) (i) damage to or destruction or loss of any asset or property,
including the Owned Real Property (as defined in Section 3.13(a) hereof)
of the Seller, of any Company or any Company Subsidiary, whether or not
covered by insurance, that has had, does have or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on the Companies; (ii) sale, lease or other disposition of any
Company Investment Asset of any Company or any Company
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Subsidiary reflected on the relevant Final Year End Statement, or any
other assets of any Company or any Company Subsidiary which are "admitted
assets" for purposes of SAP, in each case other than (I) in accordance
with Liberty Life's Investment Policy Statement as previously furnished to
Buyer, (II) in the Ordinary Course of Business and (III) of aggregate book
value of less than $5,000,000; or (iii) mortgage, pledge or imposition of
any Lien upon any Company Investment Asset or other asset of any Company
or any Company Subsidiary;
(h) payment of, or accrual or commitment for, capital expenditures
other than (I) as set forth on Schedule 3.7(h) of the Disclosure Schedule,
(II) pursuant to a Contract for the provision of services by Liberty
Services or (III) in an amount not in excess of $250,000;
(i) incurrence of any new, or increase in any existing, indebtedness
for borrowed money;
(j) (i) cancellation or waiver of any claims or rights with a value
to any Company or any Company Subsidiary in excess of $1,000,000 or (ii)
settlement or compromise of any Action (as defined in Section 3.8(a)
hereof), other than settlement or compromise of Actions in which the
amount paid in settlement or compromise, including the cost to each
Company and each Company Subsidiary of complying with any provision of
such settlement or compromise other than cash payments, does not exceed
$1,000,000 and when the settlement or compromise does not create a
precedent for claims, actions or proceedings that are reasonably likely to
be material and adverse to the Companies and Company Subsidiaries, taken
as a whole;
(k) except in the Ordinary Course of Business, change in (i) any
contract or arrangement of any Company or any Company Subsidiary with any
agent, broker, third party administrator, telemarketer, other marketer,
vendor, distributor or similar entity ("Producers"), that is material to
the Companies and the Company Subsidiaries, taken as a whole; (ii) any
relationship with a policyholder, reinsurer or other Person having a
business relationship with any Company or any Company Subsidiary that is
material to the Companies and the Company Subsidiaries, taken as a whole;
or (iii) existing levels of insurance coverage of any Company or any
Company Subsidiary or cancellation or termination of any insurance policy
naming any Company or any Company Subsidiary as a beneficiary or
loss-payable payee that is material to the Companies and the Company
Subsidiaries, taken as a whole;
(l) Tax election made or changed, settlement of any material audit,
filing of any amended Tax Returns (as defined in Section 3.9(j) hereof);
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(m) other than in the Ordinary Course of Business, entrance into or
amendment, renewal or extension of, any Contract which would be required
to be listed on Schedule 3.14(a) or 3.14(c) of the Disclosure Schedule;
(n) other than on an arm's-length basis, amendment of any
Intercompany Agreement (as defined in Section 3.14(c) hereof); except as
disclosed in or permitted by Section 3.7(b)(vii), payment of any cash or
other consideration (including, without limitation, via an intercompany
charge) to Seller or any Subsidiary or Related Person (as defined in
Section 5.13(d) hereof) of Seller, other than a Company or Company
Subsidiary (each, a "Seller Party") for any purpose other than pursuant to
an Intercompany Agreement and in the Ordinary Course of Business, except
that Liberty Life may make payments to Seller, in the aggregate, of up to
$3,963,000 in respect of Taxes (as defined in Section 3.9 hereof) for
periods prior to January 1, 1999 (but only to the extent that the payment
thereof complies in all respects with all applicable Laws and is permitted
under and done in a manner that complies in all respects with GAAP and
SAP); other than as set forth above payment of an amount of cash or other
consideration (including, without limitation, via intercompany charges) to
a Seller Party under any Intercompany Agreement that is computed in
accordance with methodology (including, without limitation, unit costs and
rates) that is not consistent with such methodology used to compute the
payments under such Intercompany Agreement between the date of the Final
Year End Statements and the date of this Agreement; or, other than as
permitted pursuant to this Section 3.7(n), purchase of assets from, sale
of assets to, or entry into any other transaction of any kind with, any
Seller Party, by any Company or Company Subsidiary, other than on an
arm's-length basis and involving no more than $250,000; or
(o) agreement (whether written or oral and whether express or
implied) by any Company or any Company Subsidiary to do any of the
foregoing.
SECTION 3.8 Actions; Orders. Except for claims against any Company or
Company Subsidiary for contract benefits under insurance Contracts in the
Ordinary Course of Business or as set forth in Schedule 3.8 of the Disclosure
Schedule, there are no civil, criminal, administrative, investigative or
informal actions, audits, suits, claims, arbitrations, hearings, assessments,
litigations, investigations or other proceedings of any kind or nature
("Actions") or Orders issued, pending or, to the knowledge of Seller or any
Company, threatened, against Seller, any Company or any Company Subsidiary or
any of their respective assets (including, without limitation, the Shares, the
Owned Real Property and the Seller Intellectual Property), at law, in equity or
otherwise, in, before, by, or otherwise involving, in each case, any
Governmental Entity, arbitrator or other similar Person that, individually or
in the aggregate, (i) have had, do have or would reasonably be expected to have
a Material Adverse Effect on the Companies or (ii) question or challenge the
validity or legality of this Agreement, any Ancillary Agreement or the
consummation of the transactions contemplated hereby or thereby. To the
knowledge of Seller and the
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Companies, no event has occurred or circumstance exists that would reasonably
be expected to give rise to or serve as a basis for the commencement of any
such Action or the issuance of any such Order.
SECTION 3.9 Taxes.
(a) Except as set forth in Schedule 3.9(a) of the Disclosure Schedule, (i)
all material Tax Returns that are or were required to be filed by or with
respect to each Company and each Company Subsidiary, either separately or as a
member of an affiliated, combined, consolidated or unitary group of
corporations, have been filed on a timely basis (taking into account all
extensions of due dates) in accordance with applicable Law, (ii) as of the time
of filing, all Tax Returns referred to in clause (i) were true and complete in
all material respects, (iii) all Taxes shown to be due on such Tax Returns, and
any Taxes payable pursuant to any assessment made by the Internal Revenue
Service or other relevant taxing authority in respect of such periods, have
been paid in full, and (iv) all estimated Taxes required to be paid in respect
of each Company and each Company Subsidiary have been paid in full when due in
accordance with applicable Law. Seller has delivered or made available to Buyer
true and complete copies of all Tax Returns filed by each Company, each Company
Subsidiary, and any affiliated, combined, consolidated or unitary group of
which any Company or any Company Subsidiary is or was a member (insofar as such
Tax Returns relate to any Company or any Company Subsidiary) for all open Tax
years.
(b) Except as set forth in Schedule 3.9(b) of the Disclosure Schedule, (i)
the Tax Returns referred to in Section 3.9(a) hereof for all years through 1996
have been examined by the Internal Revenue Service or the appropriate state,
local or foreign taxing authority, or the period for assessment of the Taxes in
respect of which such Tax Returns were filed has expired under the applicable
statute of limitations (after giving effect to all extensions and waivers),
(ii) all deficiencies asserted or assessments made as a result of such
examinations have been paid in full, and no issues that were raised by the
Internal Revenue Service or other relevant taxing authority in connection with
any such examination are currently pending, and (iii) none of Seller, the
Companies or the Company Subsidiaries has given or been requested to give a
waiver or extension (or is or could be subject to a waiver or extension given
by any other Person) of any statute of limitations relating to the payment of
Taxes of any Company or any Company Subsidiary or for which any Company or any
Company Subsidiary is or is reasonably likely to be liable. Schedule 3.9(b) of
the Disclosure Schedule contains a true and complete list of all examinations
of all Tax Returns referred to in Section 3.9(a) hereof that relate to open tax
years, including a detailed description of the nature and result of each
examination.
(c) Except as set forth in Schedule 3.9(c) of the Disclosure Schedule,
none of the Companies or the Company Subsidiaries has ever been a member of an
affiliated, combined, consolidated or unitary Tax group for purposes of filing
any Tax Return other
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than for purposes of filing consolidated U.S. Federal income tax returns, a
group of which the Seller was the common parent.
(d) As a result of Buyer's purchase of the Shares or any termination of
employment of any "disqualified individual" (as referenced below) within a
fixed period of time following such purchase of Shares, neither Buyer, the
Companies nor any Company Subsidiary will be obligated to make any payment to
any Person that would be a "parachute payment" to a "disqualified individual"
as those terms are defined in Section 280G of the Code (as defined in Section
3.9(j) hereof) without regard to whether such payment is reasonable
compensation for personal services performed or to be performed in the future.
(e) All Taxes that any Company or any Company Subsidiary is or was
required by Law to withhold or collect have been duly withheld or collected
and, to the extent required by applicable Law, have been paid to the proper
Governmental Entity or other Person.
(f) Seller has provided Buyer with copies of all record retention
agreements currently in effect between any Company or any Company Subsidiary
and any taxing authority.
(g) The insurance reserves set forth in all U.S. Federal income tax
returns filed by or on behalf of Liberty Life, Liberty Bermuda and each
Insurance Subsidiary were determined substantially in accordance with Section
807 or Section 846 of the Code, as applicable.
(h) Except as set forth in Schedule 3.9(h) of the Disclosure Schedule,
none of the Companies or the Company Subsidiaries will be required, as a result
of a change in accounting method for a Tax period beginning on or before the
Closing or any "closing agreement" as described in Section 7121 of the Code (or
any similar provision of state, local or foreign Tax law) to include any
adjustment under Section 481(c) of the Code (or any similar provision of state,
local or foreign law) in taxable income for any Tax period beginning on or
after the Closing Date.
(i) Except as set forth in Schedule 3.9(i) of the Disclosure Schedule,
since December 31, 1998 no closing agreements, private letter rulings,
technical advice memoranda or similar agreements or rulings have been entered
into or issued by any taxing authority with respect to Seller or any affiliate
with respect to the Companies or the Company Subsidiaries.
(j) For purposes of this Agreement, the following terms shall have the
following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
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"Post-Closing Tax Period" means any taxable year or period that begins
after the Closing Date and, with respect to any taxable year or period
beginning before and ending after the Closing Date, the portion of such taxable
year or period beginning after the Closing Date.
"Pre-Closing Tax Period" means any taxable year or period that ends on or
before the Closing Date and, with respect to any taxable year or period
beginning before and ending after the Closing Date, the portion of such taxable
year or period ending on and including the Closing Date.
"Seller's Group" shall mean any "affiliated group" (as defined in Section
1504(a) of the Code without regard to the limitations contained in Section
1504(b) of the Code) that includes the Seller or a predecessor of or successor
to Seller (or another such predecessor or successor).
"Tax" means any Federal, state, local or foreign income, gross receipts,
license, severance, occupation, capital gains, premium, environmental
(including Taxes under Section 59A of the Code), customs, duties, profits,
disability, registration, alternative or add-on minimum, estimated,
withholding, payroll, employment, unemployment, insurance, social security (or
similar), excise, production, sales, use, value-added, occupancy, franchise,
real property, personal property, business and occupation, mercantile, windfall
profits, capital stock, stamp, transfer, workmen's compensation or other tax,
fee, levy or imposition of any kind whatsoever, including any interest,
penalties, additions, assessments or deferred liability with respect thereto,
or with respect to any information reporting requirements imposed by the Code
or any similar provisions of state, local or foreign law, and any interest in
respect of such penalties, additions, assessments or deferred liability,
whether or not disputed.
"Tax Return" means any return, report, notice, form, declaration, claim
for refund, estimate, election, or information statement or other document
relating to any Tax, including any schedule or attachment thereto, and any
amendment thereof and any documentation required to be retained by the
Companies or Company Subsidiaries in respect of information reporting
requirements imposed by the Code or any similar provisions of foreign, state or
local law.
"Tax Sharing Amount" means the Companies' share of any federal, state or
local income Tax liabilities reported on a consolidated, combined or unitary
basis with Seller with respect to all Pre-Closing Tax Periods and for which no
Tax Return has yet been filed as determined in a manner that is consistent with
past practice and in accordance with the principles of the Consolidated U.S.
Tax Liability Allocation Agreement among Seller, Liberty Life, Cosmos
Broadcasting Corporation and all other affiliated companies dated February 10,
1988 (the "Tax Liability Allocation Agreement"), provided that such amount
shall not take into account any Tax resulting from a Section 338(h)(10)
election (or any
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similar provision of state or local law and including any Taxes on Phase III
income as a result of an election made under Section 338), any dividend of
shares pursuant to Section 5.9 of this Agreement or the dividends contemplated
by Section 3.7(b) of this Agreement or the sale of any assets for the purpose
of funding the Special Dividend contemplated by Section 3.7(b) (other than in
the Ordinary Course of Business). Furthermore, such liability shall be
determined as if Seller has not taken any position, entered into any agreement
or settled any contest in a way that would be more favorable to Seller or a
member of Seller's consolidated group (other than any Company or Company
Subsidiary) and less favorable to any of the Companies or the Company
Subsidiaries.
SECTION 3.10 Employee Benefits; ERISA.
(a) Schedule 3.10(a) of the Disclosure Schedule sets forth a true and
complete list of each material, written profit-sharing, stock option,
restricted stock option, deferred compensation, pension, severance, thrift,
savings, incentive, change of control, employment, retirement, bonus, or
equity-based, group life and health insurance or other employee benefit plan,
agreement, arrangement or commitment, which is maintained, contributed to or
required to be contributed to by any Company or any Company Subsidiary on
behalf of any current or former employee, director or consultant of any Company
or any Company Subsidiary, or by Seller on behalf of any Transferred Employee,
or pursuant to which any current or former employee, director or consultant of
any Company or Company Subsidiary or any Transferred Employee is eligible to
receive benefits on account of service with Seller, its Subsidiaries, any
Company or any Company Subsidiary (all of which are hereinafter referred to as
the "Benefit Plans"). Schedule 3.10(a) of the Disclosure Schedule identifies
each of the Benefit Plans which constitutes an "employee benefit plan" as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") and identifies each of the Benefit Plans that are
sponsored by or are otherwise obligations of the Company or any Company
Subsidiary. None of the Companies or Company Subsidiaries has any formal
commitment or intention communicated to employees, to create any additional
Benefit Plan or materially modify or change any existing Benefit Plan.
(b) With respect to each of the Benefit Plans, Seller has made available
to Buyer true and complete copies of each of the following documents, if
applicable: (i) the plan document (including all amendments thereto); (ii)
trust documents and insurance contracts; (iii) the annual report filed on Form
5500 for the last two years, if any; (iv) the actuarial report for the last two
years, if any; (v) the most recent summary plan description, together with each
summary of material modifications; (vi) the most recent determination letter
received from the Internal Revenue Service; and (vii) any Form 5310 or Form
5330 filed with the Internal Revenue Service.
(c) Each Benefit Plan has been operated and administered substantially in
accordance with its terms and with applicable law including, but not limited
to, ERISA and
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the Code, and all notices, filings and disclosures required by ERISA or the
Code (including notices under Section 4980B of the Code) have been timely made.
Each Benefit Plan which is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA (a "Pension Plan") and which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service for "TRA" (as defined in
Rev. Proc. 93-39), and, to the knowledge of Seller or the Companies, there are
no circumstances that are likely to result in revocation of any such favorable
determination letter. There is no pending or, to the knowledge of Seller or the
Companies, threatened litigation relating to any of the Benefit Plans. None of
Seller, any affiliate of Seller, the Companies or the Company Subsidiaries has
engaged in a transaction with respect to any Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, could subject
any Company or any Company Subsidiary or any Benefit Plan to a Tax or penalty
imposed by either Section 4975 of the Code or Section 502(i) of ERISA in an
amount which could be material. No action has been taken with respect to any of
the Benefit Plans to either terminate any of such Benefit Plans or to cause
distributions, other than in the Ordinary Course of Business to participants
under such Benefit Plans.
(d) No Benefit Plan is, and no benefit plan of any entity which is
considered one employer with any Company or any Company Subsidiary under
Section 4001 of ERISA or Section 414 of the Code is, or has been for the past
six years, subject to Title IV of ERISA. No notice of a "reportable event",
within the meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any Benefit
Plan or by any ERISA Affiliate within the 12-month period ending on the date
hereof.
(e) All contributions required to be made under the terms of any Benefit
Plan have been timely made when due or have been reflected on the Final Year
End Statements.
(f) Except as set forth in Schedule 3.10(f) of the Disclosure Schedule,
none of the Companies nor any Company Subsidiary has any obligations for
retiree health or life benefits other than coverage mandated by applicable law.
The amounts accrued as of the date hereof by each Company and each Company
Subsidiary in respect of such obligations as of the date hereof are adequate to
satisfy such obligations, and the amounts accrued as of the Closing Date by
each Company and each Company Subsidiary in respect of such obligations as of
the Closing Date will be adequate to satisfy such obligations as of the Closing
Date. There are no restrictions on the rights of any Company or any Company
Subsidiary to amend or terminate any Benefit Plan without incurring Liability
thereunder.
(g) Except as set forth in Schedule 3.10(g) of the Disclosure Schedule,
neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby will (or will upon termination of employment
prior to or after the date hereof) (i) entitle any employee, director or
consultant of any Company or any Company
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Subsidiary to severance pay or increase in severance pay, unemployment
compensation or any other payment; (ii) accelerate the time of payment or
vesting or funding (through a grantor trust or otherwise) or increase the
amount of payment with respect to any compensation due to any employee,
director or consultant; or (iii) meet the definition of a "Change in Control
Event" or otherwise accelerate vesting of any award granted under the Seller's
Performance Incentive Compensation Program.
SECTION 3.11 Labor Matters.
(a) No material labor disturbance by the employees of any Company or any
Company Subsidiary exists or, to the knowledge of Seller and the Companies,
after due inquiry, is threatened.
(b) Except as set forth in Schedule 3.11 of the Disclosure Schedule, no
Company or Company Subsidiary has been a party to, or is bound by, any
collective bargaining agreement or other similar labor Contract, nor is any
collective bargaining agreement or other similar labor Contract currently being
negotiated, nor, to the knowledge of Seller and the Companies, are there any
activities or proceedings of any labor union or labor organization to organize
any of the employees of any Company or any Company Subsidiary.
(c) To the knowledge of the Seller and the Companies, as of the date of
this Agreement, none of the officers of Liberty Life or Liberty Services
specified on Schedule 3.11 has advised Seller or any Company of his or her
intention to terminate his or her employment.
SECTION 3.12 Compliance with Laws; Governmental Authorizations; etc.
(a) Except as set forth in Schedule 3.12(a) of the Disclosure Schedule:
(i) each of Seller, but only with respect to its operation of the
Companies, the Companies and the Company Subsidiaries complies, and at all
times since January 1, 1995 has complied, in all material respects, with
each Law that is or was at the time thereof applicable to it or to the
conduct or operation of the Business or the ownership or use of any of its
assets; and
(ii) none of the Seller, the Companies or any Company Subsidiary has
received, at any time since January 1, 1997, any notice or other
communication (whether oral or written) from any Governmental Entity
regarding any actual or alleged violation of, or failure on the part of
Seller, with respect to its operation of the Companies, or any Company or
any Company Subsidiary to comply with, any Law;
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except in each case for such failures to comply or notifications or
communications regarding events that, individually or in the aggregate, have
not had, do not have and would not reasonably be expected to have a Material
Adverse Effect on the Companies.
(b) Except as set forth in Schedule 3.12(b) of the Disclosure Schedule,
Seller, with respect to its operation of the Companies, and each Company and
each Company Subsidiary holds and maintains in full force and effect all
Governmental Authorizations required to conduct the Business in the manner and
in all such jurisdictions as it is currently conducted. Except as set forth in
Schedule 3.12(b) of the Disclosure Schedule:
(i) no event has occurred or circumstance exists that (with or
without the giving of notice or the lapse of time or both) has resulted or
would result in the revocation, withdrawal, suspension, cancellation, or
termination of, or any limitation on the ability of any Company or Company
Subsidiary to do business under, any such Governmental Authorization; and
(ii) none of the Seller, with respect to its operation of the
Companies, the Companies nor any Company Subsidiary has received, at any
time since January 1, 1997, any notice or other communication (whether
oral or written) from any Governmental Entity or any other Person
regarding any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to
any Governmental Authorization;
except for those, the absence of which, individually or in the aggregate, have
not had, do not have, and would not reasonably be expected to have a Material
Adverse Effect on the Companies.
(c) Seller and the Companies have made available for inspection by Buyer
all Filings made by Seller, with respect to its operation of the Companies, and
by each Company and each Company Subsidiary, with any Governmental Entity since
January 1, 1997. No deficiencies have been asserted by any such Governmental
Entity with respect to such material Filings that have not been cured or
satisfied.
(d) (i) Each of Liberty Life, Liberty Bermuda and each Insurance
Subsidiary is, where required, (A) duly licensed or authorized as an insurance
company in its jurisdiction of incorporation, (B) duly licensed or authorized
as an insurance company and, where applicable, to engage in the business of
reinsurance, in each other jurisdiction where it is required to be so licensed
or authorized, and (C) duly licensed or authorized in its jurisdiction of
incorporation and each other applicable jurisdiction to write or conduct each
line of business reported as being written in the Statutory Statements, except
in any such case where the failure to be so licensed or authorized,
individually or in the aggregate, has not had, does not have and would not
reasonably be expected to have a Material Adverse
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Effect on the Companies. Each Company and Company Subsidiary is, where
required, duly licensed or authorized and appointed as a third party
administrator, insurance agency, managing general agency, or similar service
provider, in its jurisdiction of incorporation and in each other jurisdiction
where it is required to be so licensed or authorized except in any case where
the failure to be so licensed, authorized or appointed, individually or in the
aggregate, has not had, does not have and would not reasonably be expected to
have a Material Adverse Effect on the Companies. Each Company and each Company
Subsidiary and, to the knowledge of Seller or the Companies, its Producers,
have marketed, serviced, administered, sold and issued insurance products in
compliance, in all material respects, with all applicable consumer protection
Laws, whether federal or state, and all insurance Laws applicable to it or the
conduct or operation of the Business, including, without limitation, in
compliance with (i) all applicable prohibitions on withdrawal of business
lines, (ii) all applicable requirements relating to the disclosure of the
nature of insurance products as policies of insurance, (iii) all applicable
requirements relating to insurance product projections and illustrations, (iv)
all applicable prohibitions against "churning" and (v) all applicable
anti-discrimination Laws, except where any such non-compliance, individually or
in the aggregate, has not had, does not have and would not reasonably be
expected to have a Material Adverse Effect on the Companies. To the knowledge
of Seller and the Companies, substantially all Producers of each Company and
Company Subsidiary, at the time such Producer wrote, sold or produced business
for the relevant Company or Company Subsidiary, were duly licensed for the type
of business written, sold or produced by such Producers in the particular
jurisdiction in which such Producers wrote, sold or produced such products,
except for such failures to be licensed that, individually or in the aggregate,
have not had, do not have and would not reasonably be expected to have a
Material Adverse Effect on the Companies. To the knowledge of Seller and the
Companies, no proceeding or customer complaint has been filed with the
insurance regulatory authorities with respect to possible violations of any
applicable Laws which would reasonably be expected to lead to the revocation,
failure to renew, limitation, fine, suspension or restriction of any such
Governmental Authorization by any Governmental Entity, where such revocation,
failure to renew, limitation, fine, suspension or restriction would reasonably
be expected to have a Material Adverse Effect on the Companies.
(ii) Except as otherwise, individually or in the aggregate, has not had,
does not have and would not reasonably be expected to have a Material Adverse
Effect on the Companies, (u) all policy and contract forms issued by Liberty
Life, Liberty Bermuda and each Insurance Subsidiary, and all policies, binders,
slips, and certificates, and all amendments, applications, brochures,
illustrations and certificates pertaining thereto, and any and all marketing
materials, are, to the extent required under applicable Law, on forms approved
by applicable Governmental Entities or filed with and not objected to by such
Governmental Entities within the period provided by applicable Law for
objection, and (v) all such forms comply in all respects with applicable
insurance Law. Any premium rates of Liberty Life, Liberty Bermuda or any
Insurance Subsidiary which are required to be filed with or approved by any
Governmental Entity have been so filed or approved and the
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premiums charged conform thereto, in all respects, and such premiums comply in
all respects with all applicable anti-discrimination Laws, federal or state,
and all applicable insurance Laws, except where any such failure to be so filed
or approved or to so conform or comply, individually or in the aggregate, has
not had, does not have and would not reasonably be expected to have a Material
Adverse Effect on the Companies.
(iii) Except as set forth in Schedule 3.12(d) of the Disclosure Schedule
and except for regular periodic assessments in the Ordinary Course of Business
consistent with prior practice or assessments based on developments that are
publicly known within the insurance industry, no claim or assessment that is
peculiar or unique to Liberty Life or any Insurance Subsidiary is pending or,
to the knowledge of Seller and the Companies, threatened against Liberty Life
or any Insurance Subsidiary, by any state insurance guaranty association in
connection with such association's fund relating to insolvent insurers, and
none of the Companies nor any Insurance Subsidiary has received notice of any
such claim or assessment, except such claims or assessments that, if determined
adversely, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on the Companies.
(e) No Company or Company Subsidiary conducts activities that would
require it to register as a broker or dealer, as such terms are defined in
Section 3(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), with the United States Securities and Exchange Commission or any
successor agency (the "SEC") or any other Governmental Entity.
(f) (i) Each Company and each Company Subsidiary that conducts activities
of an investment adviser, as such term is defined in Section 2(a)(20) of the
Investment Company Act of 1940, as amended, and the rules and regulations of
the SEC promulgated thereunder (the "Investment Company Act") and Section
202(a)(11) of the Investment Advisers Act of 1940, as amended, and the rules
and regulations of the SEC promulgated thereunder (the "Investment Advisers
Act"), whether or not registered under the Investment Advisers Act (each, an
"Investment Adviser Subsidiary") is listed in Schedule 3.12(f) of the
Disclosure Schedule.
(ii) (A) Each Investment Adviser Subsidiary that is required to be
registered as an investment adviser under the Investment Advisers Act or under
applicable state Laws is so registered; (B) each investment adviser
representative (as defined in the Investment Advisers Act), if any, who is
required to be registered as such under applicable state Laws is so registered;
and (C) to the knowledge of Seller and the Companies, no third- party client of
any Investment Adviser Subsidiary has asserted, or threatened to assert, any
claim against such Investment Adviser Subsidiary or the Companies relating to
the investment advisory services performed for such third-party client, the
adverse resolution of which, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect on the Companies.
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(g) No Company or Company Subsidiary is an "investment company" or an
adviser to an "investment company" as that term is defined under the Investment
Company Act.
(h) Other than in respect of licensing under applicable insurance Laws,
and, except as has not had, does not have and would not reasonably be expected
to have a Material Adverse Effect on the Companies, (i) each Company and each
Company Subsidiary that is required and each other affiliate of any Company
that is required and each of the officers, independent contractors, subagents,
and employees of any of the foregoing who are required by reason of the nature
of their employment by a Company, a Company Subsidiary or affiliate, to be
registered or appointed as a sales person, broker or producer or real estate
broker or salesman with any self-regulatory body or other Governmental Entity,
is duly registered or appointed as such and such registration or appointment is
in full force and effect and (ii) to the knowledge of Seller and the Companies,
none of the Companies, any Company Subsidiary or any officer or director of any
Company or Company Subsidiary has been enjoined, indicted, convicted or made
the subject of any consent decree or administrative order on account of any
material violation of applicable Law in connection with such Person's actions
in any of the foregoing capacities or, to the knowledge of Seller and the
Companies, is the subject of any enforcement or disciplinary proceeding
alleging any such violation since January 1, 1995.
SECTION 3.13 Real Property.
(a) The Transferred Property (as defined in Section 5.25 hereof) includes
all of each parcel of real property owned by Seller and located, in whole or in
part, in Greenville County, South Carolina. Schedule 3.13 (a) of the Disclosure
Schedule contains a true and complete list of (i) each parcel of real property
owned by any Company or any Company Subsidiary (together with the Transferred
Property, the "Owned Real Property"), and (ii) each parcel of real property
leased or subleased by any Company or any Company Subsidiary as tenant or
subtenant (the "Leased Real Property"; together with the Owned Real Property,
the "Real Property") together with a true and complete list of all such leases,
subleases or other similar agreements and any amendments, modifications or
extensions thereto (the "Real Property Leases").
(b) Seller has good, marketable and insurable fee simple title to the
Transferred Property, and a Company or a Company Subsidiary has good,
marketable and insurable fee simple title to the Owned Real Property (other
than the Transferred Property), in each case free and clear of all Liens, other
than Permitted Exceptions. "Permitted Exceptions" shall mean (i) Liens
described on Schedule 3.13(b) of the Disclosure Schedule, (ii) easements,
quasi-easements, restrictive covenants, public roads and rights-of-way, and
other similar restrictions that do not materially interfere with the existing
use of the Real Property, (iii) liens for taxes, assessments and other
governmental charges affecting real property not then delinquent or being
contested in good faith and shown as reserves on the
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Financial Statements, (iv) zoning, building and other similar restrictions, (v)
mechanics', workmen's, repairmen's, warehousemen's, carriers' or other like
liens arising or incurred in the Ordinary Course of Business consistent with
past practice, (vi) easements, restrictive covenants, public roads and
rights-of-way, rights of third parties to minerals lying in and under the Owned
Real Property and other similar restrictions that do not materially interfere
with the existing use of the Real Property and other minor restrictions,
defects, irregularities and clouds on title as normally exist with respect to
real property similar to the Owned Real Property and, individually or in the
aggregate, have not had, do not have and would not reasonably be expected to
have a Material Adverse Effect on the Companies.
(c) Except as set forth on Schedule 3.13(c) of the Disclosure Schedule
there are no leases, subleases or other similar agreements by any Company or
any Company Subsidiary as landlord or sublandlord affecting the Real Property
and no Person has any right to possession of the Real Property or any part
thereof.
(d) To the knowledge of Seller and the Companies, there are no
condemnation or appropriation proceedings pending or threatened against any
Real Property or the improvements thereon.
(e) To the knowledge of Seller and the Companies, the major structural
elements of the improvements located on the Real Property, including without
limitation the roof, curtain wall, mechanical, electrical, heating, ventilating
and air conditioning systems and plumbing systems, are in good working order
taking into consideration the age of the buildings and normal wear and tear.
SECTION 3.14 Contracts; No Default.
(a) Except as set forth in Schedule 3.14(a) of the Disclosure Schedule,
and other than this Agreement and the Ancillary Agreements, no Company or
Company Subsidiary is a party to or is bound by any Contract (excluding in each
case policies of insurance, reinsurance or coinsurance treaties or agreements,
including retrocessional agreements, and third party administrator contracts
issued or entered into in the Ordinary Course of Business), nor is the Seller a
party to or bound by any Contract relating to the Transferred Property or the
Seller Intellectual Property or the Transferred Employees:
(i) evidencing indebtedness for borrowed money in excess of
$1,000,000 or pursuant to which any Company or any Company Subsidiary has
guaranteed (including guarantees by way of acting as surety, co-signer,
endorser, co-maker, indemnitor or otherwise) any obligation in excess of
$1,000,000 of any other Person;
(ii) (other than licenses under applicable insurance Laws)
prohibiting or limiting the ability of any Company or any Company
Subsidiary (A) to engage in any line of business, (B) to compete with,
obtain products or services from, or
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provide services or products to, any other Person, or (C) to carry on or
expand the nature or geographical scope of the Business anywhere in the
world;
(iii) with any stockholder (including Seller), director or officer of
Seller or of any Company or any Company Subsidiary (or any of their
respective family members or Related Persons or with any employee, agent,
consultant, advisor, leased employee or representative for employment or
for consulting or similar services or containing any severance or
termination pay obligations other than such Contracts (A) which may be
terminated upon no more than thirty (30) days' notice by, and in any case
without penalty or cost to, any Company or any Company Subsidiary other
than for services rendered or costs incurred through the date of
termination, (B) with respect to such Contracts with employees, agents,
advisors, leased employees or representatives, which provide for payments
and benefits aggregating, in any one year, no more than $300,000 or (C)
with respect to such Contracts with consultants, which provide for
payments and benefits aggregating, over the life of the applicable
Contract, no more than $500,000.
(iv) pursuant to which it (A) leases from or to any other Person any
tangible personal property or real property other than the Leased Real
Property or (B) purchases or sells materials, supplies, equipment or
services and which, in the case of clauses (A) and (B), calls for future
payments in excess of $1,000,000 in any year and requires more than thirty
(30) days' notice in order to terminate without payment by the relevant
Company or Company Subsidiary of any material penalty;
(v) which is a partnership agreement, joint venture agreement or
other Contract (however named) involving a sharing of profits, losses,
costs or Liabilities by any Company or any Company Subsidiary with any
other Person;
(vi) other than Contracts of the types set forth in any of
subsections (i) through (v) above, involving a payment after the date
hereof of an amount of money in excess of $1,000,000 and continuing
(including mandatory renewals or extensions which do not require the
consent of any Company or any Company Subsidiary) more than one year from
its date and not made in the Ordinary Course of Business;
(vii) relating to a mortgage, pledge, security agreement, deed of
trust or other document granting a Lien, other than Permitted Exceptions,
over any real or personal asset or property (including Company Investment
Assets but not including Real Property, which is addressed in Section
3.13) owned by any Company or any Company Subsidiary, in each case
securing indebtedness (or the deferred purchase price of property) in an
amount in excess of $250,000; or
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(viii) other than Contracts of the types set forth in any of
subsections (i) through (vii) above, that is material to the Companies and
the Company Subsidiaries, taken as a whole.
(b) Seller has delivered or made available to Buyer true, correct and
complete copies of all of the Contracts set forth on Schedule 3.14(a) of the
Disclosure Schedule. Except as set forth in Schedule 3.14(b) of the Disclosure
Schedule and except for such circumstances that, individually or in the
aggregate, have not had, do not have, and would not reasonably be expected to
have a Material Adverse Effect on the Companies:
(i) each of the Contracts listed in Schedule 3.14(a) of the
Disclosure Schedule hereof is in full force and effect and is a valid and
binding obligation of the applicable Company or Company Subsidiary; and
(ii) neither any Company or Company Subsidiary party thereto, nor, to
the knowledge of Seller and the Companies, any other party to such
Contract, is in violation, breach or default of any such Contract.
(c) Except as set forth in Schedule 3.14(c) of the Disclosure Schedule and
other than the Ancillary Agreements, there are no Contracts between Seller or
any Seller Party, on the one hand, and any of the Companies or Company
Subsidiaries, on the other hand (each, an "Intercompany Agreement").
SECTION 3.15 Environmental Matters.
(a) Except as set forth in Schedule 3.15 of the Disclosure Schedule and
except for such circumstances that, individually or in the aggregate, have not
had, do not have, and would not reasonably be expected to have a Material
Adverse Effect on the Companies:
(i) each Company and each Company Subsidiary is and has been in full
compliance with all applicable Environmental Laws (as defined in Section
3.15(b) hereof), including having all permits, licenses and other
approvals and Governmental Authorizations necessary or appropriate for the
Business under any Environmental Law;
(ii) no Real Property contains any Hazardous Substances (as defined
in Section 3.15(b) hereof), and no other properties currently or formerly
owned or operated by any Company or any Company Subsidiary (including
soil, groundwater or surface water on, under or emanating from the Real
Property, such other properties, and buildings thereon) (the "Properties")
contain (with respect to currently owned), or contained during the period
of such ownership or operation (with respect to formerly owned), any
Hazardous Substances in violation of, or
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which would reasonably be expected to result in liability under any,
Environmental Law;
(iii) no Company or Company Subsidiary has received any notice,
demand letter, claim, notice of violation, noncompliance letter or request
for information from any Governmental Entity or any third party relating
to a violation of, or liability under, any Environmental Law;
(iv) no Company or Company Subsidiary is subject to any order,
decree, injunction or compliance agreement with any Governmental Entity
relating to liability under any Environmental Law or otherwise relating to
any Hazardous Substance;
(v) there are no Actions pending or, to the knowledge of Seller and
the Companies, threatened against any Company or any Company Subsidiary
with respect to any Company, any Company Subsidiary or the Properties
relating to any violation or alleged violation of or liability under any
Environmental Law;
(vi) no Hazardous Substance or any waste has been disposed of,
transferred, released or transported from any of the Properties during the
time such Property was owned or operated by any Company or any Company
Subsidiary, in violation of or in a manner that would reasonably be
expected to result in liability under, applicable Environmental Law; and
(vii) there have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, in the possession
of, or otherwise available to Seller, any Company or any Company
Subsidiary relating to any Company, any Company Subsidiary or any Real
Property that have not been delivered to Buyer prior to the date hereof.
(b) "Environmental Law" means (i) any Law or Governmental Authorization,
(x) relating to the protection, preservation or restoration of the environment
(including air, water vapor, surface water, groundwater, drinking water supply,
surface land, subsurface land, structures or any natural resource), or to human
health or safety as it relates to any hazardous substance, or (y) the exposure
to, or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of chemical
waste or hazardous substances, in each case as now in effect, and solely in the
case of Laws enacted by the State of South Carolina, those Laws enacted after
the date hereof that were pending as of the date hereof. The term Environmental
Law includes, without limitation, the federal Comprehensive Environmental
Response Compensation and Liability Act of 1980 ("CERCLA"), the Superfund
Amendments and Reauthorization Act, the Federal Water Pollution Control Act of
1972, the federal Clean Air Act, the federal Clean Water Act, the federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous
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and Solid Waste Amendments thereto), the federal Solid Waste Disposal and the
federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, the Federal Occupational Safety and Health Act of 1970 and any
similar state or local law, in each case as now in effect, and solely in the
case of Laws enacted by the State of South Carolina, those laws enacted after
the date hereof that were pending as of the date hereof and (ii) any common law
or equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability)
that may impose Liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any chemical waste or
hazardous substance, in each case as now in effect, and in the case of South
Carolina Law, also including those pending as of the date hereof.
"Hazardous Substance" means any substance listed, defined, designated or
classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, under any Environmental Law, whether by type or by quantity,
including any substance containing any such substance as a component. Hazardous
Substance includes, without limitation, any carcinogen, mutagen, teratogen,
etiologic agent, waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material, asbestos,
asbestos containing material, urea formaldehyde foam insulation, mold, lead and
polychlorinated biphenyl.
SECTION 3.16 Insurance.
(a) Seller has delivered or made available to Buyer (i) true and complete
copies of all material insurance policies or binders of fire, liability,
workmen's compensation, motor vehicle, directors' and officers' liability,
agents' errors and omissions, property, casualty, flood hazard, life and other
forms of insurance owned, held by or applied for or on behalf of, or the
premiums for which are paid by or on behalf of any Company or any Company
Subsidiary; and (ii) any statement by the auditors of the Financial Statements
or the Statutory Statements, as the case may be, with regard to the adequacy of
the coverage or the reserve for claims. Notwithstanding anything to the
contrary contained herein, the assets of the Companies and the Company
Subsidiaries shall include any proceeds of any such policy and any benefits
thereunder (except to the extent such proceeds have been used by such Company
or Company Subsidiary to repair such damage or pay out such claims), and any
claims by any Company or any Company Subsidiary in respect thereof, to the
extent arising out of any such casualty to any asset of any Company or any
Company Subsidiary occurring after the date hereof and prior to the Closing,
and no such proceeds shall be dividended, distributed or otherwise paid out of
any Company or any Company Subsidiary (except to the extent such proceeds have
been used by such Company or Company Subsidiary to repair such damage or pay
out such claims).
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(b) (i) Since January 1, 1997, each Company and each Company Subsidiary
is, and has been, covered on an uninterrupted basis by valid and effective
insurance policies or binders which are in the aggregate reasonable in scope
and amount in light of the risks attendant to the business in which any Company
or any Company Subsidiary is or has been engaged, except where the failure to
be so covered, individually or in the aggregate, has not had, does not have and
would not reasonably be expected to have a Material Adverse Effect on the
Companies, (ii) all such policies or binders are in full force and effect, no
notice of cancellation, termination, revocation or limitation or other
indication that any insurance policy is no longer in full force or effect or
that the issuer of any policy is not willing or able to perform its obligations
thereunder, has been received by Seller, any Company or any Company Subsidiary
with respect to any such policy and all premiums due and payable thereon have
been paid, (iii) there are no pending or, to the knowledge of Seller and the
Companies, threatened, claims against such insurance by any Company or any
Company Subsidiary as to which the insurers have denied liability, and (iv) to
the knowledge of Seller and the Companies, there exist no material claims under
such insurance policies or binders that are directors' and officers' insurance,
errors and omissions insurance or any omnibus form of insurance coverage that
have not been properly and timely submitted by any Company or any Company
Subsidiary to its insurers.
SECTION 3.17 Brokers and Finders. Except for the Persons set forth in
Schedule 3.17 of the Disclosure Schedule, whose fees, if any, shall be paid by
Seller, no agent, broker, investment banker, intermediary, finder, Person or
firm that has been retained by or is authorized to act on behalf of Seller or
any Company or any Company Subsidiary or that, to the knowledge of Seller and
the Companies, is acting on behalf of Seller or any Company or any Company
Subsidiary is or would be entitled to any broker's or finder's fee or any other
commission or similar fee, directly or indirectly, from any of the parties
hereto in connection with the execution of this Agreement or the Ancillary
Agreements or upon consummation of the transactions contemplated hereby or
thereby.
SECTION 3.18 No Undisclosed Liabilities. Except as set forth in Schedule
3.18 of the Disclosure Schedule, none of the Companies and none of the Company
Subsidiaries has any Liabilities (and to the knowledge of the Seller and the
Companies there are no manifest facts or circumstances that would reasonably be
expected to result in any present or future Action against any of them giving
rise to any Liability) except for (i) Liabilities or obligations reflected or
reserved against in the applicable Final Year End Statements, including the
notes thereto; (ii) Liabilities incurred in the Ordinary Course of Business
since the date thereof; (iii) Liabilities that in the aggregate have not, do
not and would not reasonably be expected to have a Material Adverse Effect on
the Companies; and (iv) Liabilities incurred under this Agreement or disclosed
elsewhere in this Agreement. For purposes of this Agreement, the term
"Liability" shall mean any debt, liability, commitment or obligation of any
kind, character or nature whatsoever, whether known or unknown, choate or
inchoate, secured or unsecured, accrued, fixed, absolute, contingent or
otherwise, and whether due or to become due.
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SECTION 3.19 Intellectual Property. (a) Schedule 3.19 of the Disclosure
Schedule identifies all: (i) patents and pending patent applications; (ii)
trademark, service mark and trade name registrations and applications therefor;
(iii) material unregistered trademarks, service marks and trade names; (iv)
copyright registrations and applications therefor; (v) material unregistered
copyrights; (vi) domain name registrations; (vii) proprietary and/or
custom-designed computer software necessary for use in connection with the
Business (but excluding commercially available off-the-shelf software subject
to shrink-wrap licences) (the "Software"); and (viii) licenses and similar
agreements for the use of any item of intellectual property (including, without
limitation, patents, unpatented inventions and technology, trademarks, service
marks and trade names, domain names, copyrights, know-how and trade secrets to
which Seller or any of the Companies or Company Subsidiaries is a party, either
as licensee or licensor, but excluding, in each case, computer software, which
is addressed in clause (vii)) used by Seller or any Company or Company
Subsidiary in connection with the Business as currently conducted
(collectively, (i) through (viii), other than Seller Intellectual Property,
being referred to herein as "Intellectual Property").
(b) Except as set forth in Schedule 3.19(b) of the Disclosure Schedule,
each Company and each Company Subsidiary owns or has legally enforceable rights
to use all (and the right to exercise all rights appurtenant thereto)
Intellectual Property, except for any such failures to own, be licensed or
possess that, individually or in the aggregate, have not had, do not have and
would not reasonably be expected to have a Material Adverse Effect on the
Companies. To the knowledge of Seller and the Companies, rights to all material
Intellectual Property necessary for the conduct of the Business as currently
conducted are valid and subsisting. To the knowledge of Seller and the
Companies, the use of the Intellectual Property by any Company or Company
Subsidiary does not infringe, violate or misappropriate the rights of any third
party. None of the Seller, the Companies or the Company Subsidiaries has
received any written notice from any other Person or any other source
pertaining to or challenging the right of any Company or any Company Subsidiary
to use any Intellectual Property or any trade secrets, proprietary information,
inventions, know- how, processes and procedures owned or used by or licensed to
any Company or any Company Subsidiary, nor is Seller, any Company or any
Company Subsidiary aware of any valid basis for any such notice. There is
currently, to the knowledge of Seller and the Companies, no material
infringement of the Intellectual Property by any third party.
(c) Seller owns or has legally enforceable rights to use and transfer all
(and the right to exercise all rights appurtenant thereto) the intellectual
property set forth in Schedule 3.19(c) of the Disclosure Schedule ("Seller
Intellectual Property"), except for any such failures to own, be licensed or
possess that, individually or in the aggregate, have not had, do not have and
would not reasonably be expected to have a Material Adverse Effect on the
Companies. To the knowledge of Seller and the Companies, rights to all material
Seller Intellectual Property are valid and subsisting. To the knowledge of
Seller and the Companies, the use of the Seller Intellectual Property by the
Seller, any Company or any
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Company Subsidiary does not infringe, violate or misappropriate the rights of
any third party. Neither Seller nor any Company has received any written notice
from any other Person or any other source pertaining to or challenging the
right of Seller or any affiliates to use any Seller Intellectual Property nor
is Seller or any Company aware of any valid basis for such notice. There is
currently, to the knowledge of Seller and the Companies, no material
infringement of the Seller Intellectual Property by any third party.
SECTION 3.20 Insurance Issued by the Companies.
(a) The practice of Liberty Life, Liberty Bermuda and each Insurance
Subsidiary has been to pay, in the Ordinary Course of Business, benefits
payable by Liberty Life, Liberty Bermuda or any Insurance Subsidiary (whether
pursuant to the terms of the underlying contract or at the request of the
policyholder) under the terms of the in-force insurance Contracts under which
they arose, except for such benefits of which there is, in the reasonable
opinion of the Seller and the Companies, a reasonable basis to contest (or the
relevant Company or Company Subsidiary is reviewing whether there exists a
reasonable basis to contest).
(b) The underwriting standards utilized and ratings applied by Liberty
Life, Liberty Bermuda and each Insurance Subsidiary with respect to insurance
Contracts outstanding as of the date hereof are in compliance with the
applicable written underwriting standards of Liberty Life, Liberty Bermuda and
each Insurance Subsidiary, as applicable, which have been previously disclosed
to Buyer and, with respect to any such Contract reinsured in whole or in part,
conform in all material respects to the standards and ratings required pursuant
to the terms of the related reinsurance, coinsurance or other similar
Contracts.
(c) Except as set forth in Schedule 3.20(c) of the Disclosure Schedule to
the knowledge of Seller and the Companies: (i) each Company and each Company
Subsidiary has substantially complied with all applicable reporting,
withholding and disclosure requirements under the Code, ERISA and other Laws
including, but not limited to, state insurance laws regulating credit insurance
and those regarding distributions with respect to life insurance Contracts and
annuity Contracts issued, entered into, reinsured or sold by Liberty Life,
Liberty Bermuda or any Insurance Subsidiary and have reported the distributions
under such Contracts substantially in accordance with Sections 72, 101(f),
7702, and 7702A and any other applicable sections of the Code; (ii) the tax
treatment under the Code of all insurance or annuity policies, plans or
contracts, all financial products and any similar related policy, contract,
plan or product, whether individual, group or otherwise, if any, issued,
entered into, or sold by Liberty Life, Liberty Bermuda or any Insurance
Subsidiary is and at all times has been in all material respects the same or
more favorable to the purchaser, policyholder or intended beneficiaries thereof
as the tax treatment under the Code for which such policies, plans or contracts
qualified or purported to qualify at the time of their issuance or purchase,
except for changes resulting from changes to the Code which
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do not affect such policies, plans or contracts due to the effective date
thereof; (iii) each hardware, software and other product used by Liberty Life,
Liberty Bermuda or any Insurance Subsidiary to maintain such contracts'
qualification (but only as to Contracts which were entered into prior to, or in
effect as of, in each case, the Closing Date) for tax treatment under the Code
for which such policies, plans or contracts qualified or purported to qualify
at the time of their issuance or purchase has been properly designed and
implemented to maintain such qualification; (iv) other than to an insignificant
extent no Company or insurance Subsidiary has issued any life insurance or
annuity Contract provided under or connected with either a plan described in
Section 401(a), 403(a), 403(b), 408 or 457 or any similar provision of the Code
or any employee benefit plan within the meaning of ERISA; (v) neither the
Companies nor the Company Subsidiaries are party to any "hold harmless", Tax
sharing or indemnification agreements respecting the Tax qualification or
treatment of any product or plan sold, issued, entered into or administered by
any Company or any Company Subsidiary (whether developed by, administered by,
or reinsured with any unrelated third party), and (vi) there are no currently
pending federal, state, local or foreign audits or other administrative or
judicial proceedings with regard to the Tax treatment of any life insurance
Contract, annuity Contract or benefit plan issued, entered into, reinsured or
sold by any Company or any Company Subsidiary to which any Company or Company
Subsidiary is a party or in which any Company or Company Subsidiary is
participating. The aggregate statutory reserves established by Liberty Life,
Liberty Bermuda and each Insurance Subsidiary for costs arising in the event of
the failure of any contract to qualify under Sections 7702, 7702A, 101(f) and
817(h) of the Code as of the date of this Agreement are set forth in Schedule
3.20(c) of the Disclosure Schedule.
SECTION 3.21 Reinsurance and Coinsurance. All reinsurance or coinsurance
treaties or agreements, including retrocessional agreements, to which Liberty
Life, Liberty Bermuda or any Insurance Subsidiary is a party or under which
Liberty Life, Liberty Bermuda or any Insurance Subsidiary has any existing
rights, obligations or liabilities are in full force and effect. Except as set
forth in Schedule 3.21 of the Disclosure Schedule, none of the Companies or
Company Subsidiaries, nor, to the knowledge of Seller or any Company, any other
party to a reinsurance or coinsurance treaty or agreement to which Liberty
Life, Liberty Bermuda or any Insurance Subsidiary is a party and representing
annual premiums reinsured in excess of $100,000, is in default in any material
respect as to any provision thereof, and no such agreement representing annual
premiums reinsured in excess of $2,000,000 contains any provision providing
that the other party thereto may terminate such agreement by reason of the
transactions contemplated by this Agreement or the Ancillary Agreements.
SECTION 3.22 Service Contracts. Schedule 3.22 of the Disclosure Schedule
contains a true and complete list of all third party administrator contracts
pursuant to which Liberty Services, Liberty Marketing or Liberty Life provides
administrative, sales, management or other services and representing annual
revenues in excess of $300,000 (the "Service Contracts"). All such Service
Contracts are in full force and effect. Except as set
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forth in Schedule 3.22 of the Disclosure Schedule, neither Liberty Services,
Liberty Marketing or Liberty Life nor, to the knowledge of Seller or any
Company, any other party to such Service Contract, is in default in any
material respect as to any provision thereof, and no such agreement contains
any provision providing that the other party thereto may terminate such
agreement by reason of the transactions contemplated by this Agreement or the
Ancillary Agreements.
SECTION 3.23 Threats of Cancellation.
(a) Except as set forth in Schedule 3.23(a) of the Disclosure Schedule, no
policyholder, group of policyholders holding policies acquired pursuant to a
program sponsored or promoted by a single institution, or Persons representing,
writing, selling, or producing, either directly or through reinsurance assumed,
insurance business that individually or in the aggregate for each such
policyholder, group or Person, respectively, accounted for five (5) percent or
more of the annual premium income (as determined in accordance with SAP) of
Liberty Life, Liberty Bermuda and the Insurance Subsidiaries, in the aggregate
for the twelve-month period ended December 31, 1999, has terminated or, in the
aggregate, to the knowledge of Seller, threatened to terminate its relationship
with any Company or any Insurance Subsidiary either as a result of the
transactions contemplated by this Agreement or the Ancillary Agreements or
otherwise.
(b) Except as set forth in Schedule 3.23(b) of the Disclosure Schedule, no
Person receiving third party administration services from Liberty Services,
individually or in conjunction with affiliated Persons in the aggregate,
accounted for ten (10) percent or more of the annual fee revenue of Liberty
Services in each case at or for the twelve-month period ended December 31,
1999, has terminated or, to the knowledge of Seller, threatened to terminate
its relationship with Liberty Services either as a result of the transactions
contemplated by this Agreement or the Ancillary Agreements or otherwise.
SECTION 3.24 Actuarial Reports. The Seller has, or has caused to be,
delivered or made available to Buyer a true and complete copy of any actuarial
reports prepared by actuaries, independent or otherwise, with respect to
Liberty Life, Liberty Bermuda or any Insurance Subsidiary in the last two (2)
years, and all attachments, addenda, supplements and modifications thereto (the
"Company Actuarial Analyses"). To the knowledge of Seller and the Companies,
the information and data furnished by the Companies to their independent
actuaries in connection with the preparation of the Company Actuarial Analyses
were accurate in all material respects. Furthermore, each Company Actuarial
Analysis was based upon an inventory of policies in force for Liberty Life,
Liberty Bermuda and each Insurance Subsidiary, as the case may be, that at the
relevant time of preparation, was materially accurate, and was prepared using
appropriate assumptions accurately applied and in conformity with generally
accepted actuarial practices and standards consistently applied, and the
projections contained therein were properly prepared in accordance with the
assumptions stated therein.
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SECTION 3.25 Ratings. As of the date hereof, the financial strength or
claims-paying ability of Liberty Life is rated at least "A" by A.M. Best
Company ("A.M. Best").
SECTION 3.26 Reserves. The reserves for payment of future insurance policy
benefits, losses, claims, expenses and similar purposes (including claims
litigation) under all presently issued insurance policies and other material
policy-related Liabilities of Liberty Life, Liberty Bermuda or any Insurance
Subsidiary reflected in, or included with, the Statutory Statements or the
Financial Statements ("Reserves") were determined in accordance with generally
accepted actuarial standards and practices consistently applied throughout the
specified period and the immediately prior period, utilized actuarial
assumptions which are appropriate for the risks of the relevant policy and
contract provisions, are fairly stated in accordance with sound actuarial
principles and are in compliance, in all material respects, with the
requirements of applicable Laws, including, meeting all applicable statutory
and regulatory requirements as to reserve amounts for each line of business in
which such Company operates, and such reserves were appropriate in the
aggregate to cover the total amount of all reasonably anticipated Liabilities
of each Company and each Insurance Subsidiary under all outstanding insurance,
reinsurance and other applicable agreements as of the respective dates of such
Statutory Statements and Financial Statements and as of the Closing Date
("Reserve Standards"). In addition, Seller has, or has caused to be, delivered
to Buyer copies of the actuarial valuation reports delivered to the insurance
department of the domiciliary jurisdiction of each such company for the years
ended at December 31, 1998 and December 31, 1999, respectively.
SECTION 3.27 Risk-Based Capital; IRIS Ratios. The Seller has delivered to
Buyer true and complete copies of all analyses, reports and other data prepared
by or on behalf of Liberty Life, Liberty Bermuda or any Insurance Subsidiary or
submitted by Liberty Life, Liberty Bermuda or any Insurance Subsidiary to any
insurance regulatory authority or other Governmental Entity relating to
risk-based capital ("RBC") calculations, Insurance Regulatory Information
System ("IRIS") ratios of the National Association of Insurance Commissioners
or other solvency or liquidity standards.
SECTION 3.28 Company Investment Assets. Schedule 3.28 of the Disclosure
Schedule sets forth a true and complete list of (i) all Company Investment
Assets (as defined below) as of the date of the applicable Final Year End
Statement with information included therein as to the cost of each such Company
Investment Asset and the market value thereof as of the date of the applicable
Final Year End Statement and (ii) all Company Investment Assets sold (or
otherwise disposed of) or purchased (or otherwise acquired) since the date of
the applicable Final Year End Statement with information included therein as to
the sale price or cost of each such Company Investment Asset. To the knowledge
of Seller and the Companies, except as set forth in Schedule 3.28 of the
Disclosure Schedule, none of the Company Investment Assets is in default in the
payment of principal or interest or dividends or have been, or, to Seller's or
any Company's knowledge,
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should have been, classified as non-accrual, as restructured, as 90 days past
due, as still accruing and doubtful of collection, as in foreclosure or any
comparable classification, or are permanently impaired to any extent, except to
the extent that such circumstance has not had, does not have and would not be
reasonably expected to have a Material Adverse Effect. For purposes of this
Agreement, "Company Investment Assets" means any investment assets (whether or
not required by GAAP or SAP to be reflected on a balance sheet) beneficially
owned (within the meaning of Rule 13d-3 under the Exchange Act) by any Company
or any Company Subsidiary, including, without limitation, bonds, notes,
debentures, mortgage loans, real estate, life insurance policies, collateral
loans and all other instruments of indebtedness, stocks, partnership or joint
venture interests and all other equity interests, certificates issued by or
interests in trusts, derivatives and all other assets acquired for investment
purposes. Except as set forth in Schedule 3.28 of the Disclosure Schedule, none
of the Company Investment Assets is subject to any Lien other than Permitted
Exceptions.
SECTION 3.29 Pools and Fronting Arrangements; Service Agreements. Schedule
3.29 of the Disclosure Schedule sets forth a true and complete list of all
pools and fronting arrangements and agreements providing for insurance services
to which Liberty Life, Liberty Bermuda or any Insurance Subsidiary has been a
party from January 1, 1995 to the date of this Agreement, copies of which have
been provided to Buyer. "Fronting arrangement" shall mean, for purposes of this
Section 3.29, an arrangement pursuant to which a Person issues insurance
policies or annuity contracts on behalf of another Person and such other Person
assumes one hundred (100) percent of the insurance liabilities arising under
such policies or contracts.
SECTION 3.30 Intercompany Accounts. Schedule 3.30 of the Disclosure
Schedule sets forth a true and complete list of all intercompany account
balances as of the date of the Final Year End Statements, between Seller or any
Seller Party, on the one hand, and any Company or any Company Subsidiary, on
the other hand. Except (a) as disclosed in Schedule 3.30 of the Disclosure
Schedule or (b) in the Ordinary Course of Business and on an arm's-length
basis, since the date of the applicable Final Year End Statements, there has
not been any incurrence or accrual of any Liability (as a result of allocations
or otherwise) by any Company or any Company Subsidiary to Seller or any Seller
Party nor has there been any other transaction between any Company or any
Company Subsidiary, on the one hand, and Seller or any Seller Party, on the
other hand.
SECTION 3.31 Assets Sufficient. After giving effect to the Restructuring
Transactions and the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements, and to the extent, in each case, third
party Consents have been obtained, the Buyer, the Companies or the Company
Subsidiaries, as applicable, will have all of Seller's rights and interests in
all the assets of Seller or of any of Seller's Subsidiaries or affiliates that
are used in the Business, as currently conducted (other than Excluded Assets),
including, without limitation, all of Seller's rights and interests in computer
hardware necessary for use in connection with the Business ("Hardware").
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SECTION 3.32 Loans. (a) The documentation relating to the loans made by
any Company or any Company Subsidiary and relating to all security interests,
mortgages and other liens with respect to all collateral for such loans, taken
as a whole, are adequate for the enforcement of the material terms of such
loans and of the related security interests, mortgages and other liens, and the
terms of such loans and of the related security interests, mortgages and other
liens comply in all material respects with all applicable Law (including,
without limitation, Laws relating to the extension of credit), except for any
inadequacies and noncompliance that, individually or the aggregate, has not
had, does not have and would not reasonably be expected to have a Material
Adverse Effect on the Companies.
(b) Other than in the Ordinary Course of Business, there are no agreements
or commitments binding any Company or any Company Subsidiary to extend credit
to any borrower or affiliated borrowers, except as set forth on Schedule 3.32
of the Disclosure Schedule.
SECTION 3.33 Employees. Schedule 3.33 of the Disclosure Schedule sets
forth a list of all Persons employed by Seller itself as of the date of this
Agreement. As of the date of this Agreement, no employees of Seller or its
Subsidiaries, other than the Companies or Company Subsidiaries, provide
services to any of the Companies or any Company Subsidiaries except as set
forth on Schedule 3.33 of the Disclosure Schedule.
SECTION 3.34 Disclosure. No representation or warranty by Seller or any
Company herein or in any Ancillary Agreement, the Disclosure Schedule, nor any
certificate or exhibit furnished or to be furnished by either pursuant to this
Agreement or the Ancillary Agreements or in connection with the transactions
contemplated hereby or thereby, contains or will contain any untrue statement
of a material fact. No notice given pursuant to Section 5.12 hereof will
contain any untrue statement of a material fact.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as set forth in the
Schedules to this Article IV (the "Buyer Disclosure Schedule") and as follows:
SECTION 4.1 Organization and Good Standing. Buyer is a bank duly
organized, validly existing and in good standing under the laws of Canada.
SECTION 4.2 Corporate Authority. Buyer has the full legal right, requisite
corporate power and authority and has taken all corporate action necessary in
order to execute, deliver and perform fully, its obligations under this
Agreement and each Ancillary Agreement to which it is a party and to consummate
the transactions contemplated hereby
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and thereby. The execution and delivery by Buyer of this Agreement and each
Ancillary Agreement to which it is a party and the consummation by Buyer of the
transactions contemplated hereby and thereby have been duly authorized and
approved by the board of directors of Buyer and no other corporate proceeding
with respect to Buyer is necessary to authorize this Agreement, such Ancillary
Agreements or the transactions contemplated hereby or thereby. This Agreement
has been duly executed and delivered by Buyer and constitutes, and upon the
execution and delivery by Buyer of the Ancillary Agreements to which it is a
party, such Ancillary Agreements will constitute, valid and binding agreements
of Buyer, enforceable against Buyer in accordance with their respective terms,
except to the extent that (x) the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar Laws affecting the enforcement of creditors' rights generally and
(y) the availability of equitable remedies may be limited by equitable
principles of general applicability.
SECTION 4.3 Governmental Filings and Consents; No Violations.
(a) Except for (i) the approval of the Minister of Finance, Canada, to the
investment, whether direct or indirect, by Buyer in the Companies, (ii) the HSR
Filing, (iii) the approvals required under the applicable insurance laws of
Bermuda and of the States of South Carolina and Louisiana, (iv) the expiry of
waiting periods required under other applicable insurance Laws, and (v) except
as set forth in Schedule 4.3 of the Buyer Disclosure Schedule, no Filings are
required to be made by Buyer with, nor are any Consents required to be obtained
by Buyer from, any Governmental Entity in connection with the execution or
delivery by Buyer of this Agreement or the Ancillary Agreements to which it is
or will be a party, the performance by Buyer of its obligations hereunder or
thereunder or the consummation by Buyer of the transactions contemplated hereby
or thereby, except those Filings or Consents the failure of which to make or
obtain, individually or in the aggregate, have not had, do not have, and would
not reasonably be expected to have a Material Adverse Effect on the Companies,
it being understood and agreed that the failure to make the filings or obtain
the approvals specified under subsection (i), (ii), (iii) and (v) above, and,
for purposes of this Section 4.3 but not for purposes of determining whether
the closing conditions set forth in Article VI have been satisfied, the
issuance of any order by a state insurance department prior to the expiry of
the waiting periods specified under subsection (iv) above imposing any
limitations or other adverse conditions on Buyer, its Subsidiaries, the
Companies, the Company Subsidiaries or their respective businesses shall be
deemed to constitute a Material Adverse Effect on the Companies for purposes of
this Section 4.3(a).
(b) Assuming the making of the Filings and the obtaining of the Consents
set forth in Sections 3.4, 4.3(a), Schedule 3.4 of the Disclosure Schedule and
Schedule 4.3 of the Buyer Disclosure Schedule, the execution and delivery by
Buyer of this Agreement and the Ancillary Agreements to which it is or will be
a party does not, and the performance and consummation by Buyer of any of the
transactions contemplated hereby or thereby will not,
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with respect to Buyer, directly or indirectly (with or without the giving of
notice or the lapse of time or both):
(i) contravene, conflict with, or constitute or result in a breach or
violation of, or a default under (A) any provision of the letters patent
or By-laws of Buyer or (B) any resolution adopted by the board of
directors or the stockholders of Buyer;
(ii) require Buyer to make any Filing with or obtain any Consent from
any Person under any Contract binding upon Buyer; or
(iii) contravene, conflict with, or constitute or result in a breach
or violation of, any Law to which Buyer, or any of the assets owned or
used by Buyer, are subject.
SECTION 4.4 Securities Act. Buyer is acquiring the Shares for its own
account and not with a view to, or for sale in connection with, their
distribution within the meaning of Section 2.11 of the Securities Act of 1933,
as amended (the "Securities Act") in any manner that would be in violation of
the Securities Act. Without limiting any of the representations, warranties or
covenants of the Seller hereunder, Buyer acknowledges that it has conducted
such investigation as it deems necessary to enable it to make an intelligent
decision with respect to the execution, delivery and performance of this
Agreement and the Ancillary Agreements.
SECTION 4.5 Brokers and Finders. No agent, broker, investment banker,
intermediary, finder, Person or firm acting on behalf of Buyer or which has
been retained by or is authorized to act on behalf of Buyer is or would be
entitled to any broker's or finder's fee or any other commission or similar
fee, directly or indirectly, from any of the parties hereto in connection with
the execution of this Agreement or the Ancillary Agreements or upon
consummation of the transactions contemplated hereby or thereby.
SECTION 4.6 Financing. Buyer has available, and on the Closing Date will
have available, sufficient funds, available lines of credit or other sources of
immediately available funds to enable it to purchase the Assets on the terms
and conditions of this Agreement. Buyer's obligations hereunder are not subject
to any conditions regarding Buyer's ability to obtain financing for the
consummation of the transactions contemplated hereby.
SECTION 4.7 Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer threatened against or
affecting, Buyer before any Governmental Entity which in any manner challenges
or seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement or the Ancillary Agreements.
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ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business. From and after the date hereof until the
Closing, except as requested or consented to by Buyer in writing, and except as
otherwise expressly contemplated in this Agreement including, without
limitation, in connection with the Restructuring Transactions, Seller shall,
and covenants and agrees to cause each Company and each Company Subsidiary to,
conduct the Business only in the Ordinary Course of Business (it being
understood and agreed that nothing contained herein shall permit any Company or
any Company Subsidiary to enter into or engage (through acquisition, product
extension or otherwise), in any material respect, in any new line of business),
to confer with Buyer concerning operational matters of a material nature and to
use their respective reasonable best efforts to (i) preserve intact the current
business organization of each Company and each Company Subsidiary, (ii) keep
available the services of the current officers, employees, Producers, managers,
and reinsurance intermediaries of each Company and each Company Subsidiary and
the services of the Transferred Employees, and (iii) maintain the relationships
and goodwill with policyholders, employees, Producers, managers, reinsurance
intermediaries, and others having business relationships with each Company and
each Company Subsidiary and with the Transferred Employees, provided that
neither party, nor any Company or any Company Subsidiary, will be required to
incur any additional out-of-pocket expense in connection with carrying out its
obligations under this sentence. Without limiting the generality of the
foregoing, from and after the date of this Agreement and until the Closing
Date, Seller will not, and will cause each Company and Company Subsidiary not
to, take any affirmative action, or fail to take any reasonable action within
its or their control, as a result of which any of the changes or events listed
in Section 3.7 hereof would be reasonably expected to occur. Seller shall
promptly furnish Buyer with copies of notices or other communications received
by Seller or any Company or any Company Subsidiary from any non-Governmental
Entity third party with respect to the transactions contemplated hereby or by
the Ancillary Agreements, and all material filings, submissions and
correspondence made to or received from any Governmental Entity, other than
those made or received in the Ordinary Course of Business.
SECTION 5.2 Acquisition Proposals.
(a) Seller agrees that it shall not, and shall cause its Subsidiaries,
including each Company and each Company Subsidiary, and each of their
respective directors, officers, employees, not to, and shall use its reasonable
best efforts to cause the agents, consultants, advisors, Related Persons or
other representatives of such Person, including legal counsel, accountants and
financial advisors (collectively, "Representatives") not to, directly or
indirectly:
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(i) solicit, initiate, encourage, or otherwise facilitate, any
inquiries or the making of any proposals or offers from, or
(ii) except to the extent permitted by Subsection 5.2(b), (A) discuss
with, (B) negotiate with, (C) provide any confidential information or data
to, or (D) consider the merits of, any unsolicited inquiries, proposals or
offers from,
any Person (other than Buyer) relating to any transaction directly or
indirectly involving the sale of the Business or, other than in the Ordinary
Course of Business, five (5) percent or more of the consolidated assets of the
Companies and the Company Subsidiaries, or any of the Shares or any shares of
stock of the Company Subsidiaries, the Transferred Property or the Seller
Intellectual Property, or any merger, consolidation, business combination or
similar transaction involving Seller, any Company or any Company Subsidiary, or
the acquisition of twenty-five (25) percent or more of the issued and
outstanding shares of common stock of Seller (any such inquiry, proposal or
offer being hereinafter referred to as an "Acquisition Proposal"); provided
that nothing contained herein shall prevent the Seller from complying with
Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal. Seller shall, and shall cause its Subsidiaries, each
Company and each Company Subsidiary to, and each shall use its reasonable best
efforts to, cause each Related Person and each of their respective
Representatives to, immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. Seller shall promptly notify Buyer if any
such inquiries, proposals or offers are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with or about any Acquisition Proposal and shall
promptly request each Person which has heretofore executed a confidentiality
agreement in connection with its consideration of acquiring any Company or any
Company Subsidiary or the Business or assets (other than in the Ordinary Course
of Business) of any Company or any Company Subsidiary to return all
confidential information heretofore furnished to such Person by or on behalf of
any Company or any Company Subsidiary.
(b) At any time prior to the time its shareholders shall have voted to
approve this Agreement, if Seller is not otherwise in violation of Section 5.22
hereof, of the first sentence of Section 5.23(a) hereof and of this Section
5.2, Seller may:
(i) if it receives an unsolicited bona fide written proposal from a
third party regarding an Acquisition Proposal and the board of directors
of Seller, after consultation with its financial adviser and outside
counsel, determines that pursuing such Acquisition Proposal is reasonably
likely to lead to a Superior Proposal (as defined below), engage in the
activities specified in Subsection 5.2(a)(ii)(A) and (D), if, in the
opinion of the outside counsel to Seller, such action is required for the
board of directors of Seller to comply with its fiduciary duties under
applicable Law for the purpose of determining whether such Acquisition
Proposal is a Superior Proposal,
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(ii) further engage in the activities specified in Subsection
5.2(a)(ii)(C) if Seller has received from such third party an executed
confidentiality agreement with confidentiality terms at least as stringent
as those contained in the Confidentiality Agreement (as defined in Section
10.2 hereof), and if in the opinion of outside counsel to Seller, such
action is required for the board of directors of Seller to comply with its
fiduciary duties under applicable Law for the purpose of determining
whether such Acquisition Proposal is a Superior Proposal, and
(iii) further engage in the activities specified in Section
5.2(a)(ii)(B) regarding such an unsolicited bona fide written proposal
that its board of directors has determined is a Superior Proposal, if, in
the opinion of outside counsel to Seller, such action is required for the
board of directors of Seller to comply with its fiduciary duties under
applicable Law and Seller has received from such third party an executed
confidentiality agreement with confidentiality terms at least as stringent
as those contained in the Confidentiality Agreement.
Seller will keep Buyer fully and currently informed of the status and
details of any such unsolicited bona fide written proposal or Superior Proposal
and any related discussions or, in the case of a Superior Proposal,
negotiations. A "Superior Proposal" is a bona fide Acquisition Proposal that
the board of directors of Seller determines in good faith after reasonable
investigation, including receiving the opinion of its financial advisor and
consulting with outside legal counsel to Seller and taking into account all the
terms and conditions of the Acquisition Proposal, including any break-up fees
or similar devices, expense reimbursement provisions and conditions to
consummation (i) is more favorable and provides greater value to all of
Seller's shareholders than this Agreement and the Acquisition, taken as a
whole, and (ii) is reasonably capable of being, and is reasonably likely to be,
consummated.
(c) Seller hereby agrees that (i) it shall deliver, or cause to be
delivered, to United Family Life Insurance Company ("UFL") pursuant to Section
13.02(b) of the Administrative Services Agreement, dated November 13, 1997,
between UFL, Fortis, Inc., the Seller and Liberty Services (as amended, the
"Fortis Agreement"), no more than 20 days prior to the Closing, a notice of
change of control of Liberty Services; (ii) it shall not deliver and shall
cause the Companies and the Company Subsidiaries not to deliver, any notice
pursuant to Section 13.02(c) of the Fortis Agreement, offering a right of first
refusal to UFL to acquire the issued and outstanding shares of Liberty
Services; and (iii) it shall not deliver any notices arising out of, resulting
from, relating to, or in connection with this Agreement (including the notice
referred to in clause (i) above) to UFL without the prior written approval of
Buyer, which approval shall not be unreasonably withheld.
SECTION 5.3 Access. Between the date of this Agreement and the Closing
Date, Seller shall, and shall cause its Subsidiaries, including each Company
and each Company Subsidiary and each of their respective Representatives, to,
(i) afford Buyer
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and its Representatives reasonable access, at all reasonable times during
normal business hours, to each Company and each Company Subsidiary's personnel,
premises, properties, Contracts, books and records, and other documents and
data, (ii) furnish Buyer and its Representatives with copies of all such
Contracts, books and records, and other documents and data as have not
previously been furnished to Buyer and as Buyer may reasonably request, (iii)
furnish Buyer and its Representatives with such additional financial,
operating, and other data and information as Buyer may reasonably request, but
only to the extent such data or information exists or can be generated or
produced without disproportionate expense, and (iv) authorize the Companies'
independent certified public accountants to permit Buyer and its independent
actuaries, auditors, tax consultants and certified public accountants to
examine all accounting records and working papers pertaining to the Financial
Statements and Statutory Statements. No investigation pursuant to this Section
5.3 shall affect or be deemed to modify any representation or warranty made by
Seller. Any investigation pursuant to this Section 5.3 shall be conducted in
such manner as not to interfere unreasonably with the conduct of the business
of Seller, the Companies or the Company Subsidiaries. Notwithstanding the
foregoing, Buyer shall not have access to personnel records of the Companies
and the Company Subsidiaries relating to medical histories or other information
the disclosure of which would subject Seller, any Company or any Company
Subsidiary to liability. The foregoing shall not require Seller or any Company
to permit any inspection, or to disclose any information, that in the
reasonable judgment of Seller would reasonably be expected to result in the
disclosure of any trade secrets of third parties or violate any of its
obligations with respect to confidentiality if Seller or such Company, as the
case may be, shall have used reasonable efforts to obtain the consent of such
third party to such inspection or disclosure. All requests for information made
pursuant to this Section 5.3 shall be directed to an executive officer of
Seller or any Company or such other Persons as may be designated by Seller.
SECTION 5.4 Required Approvals.
(a) Each party hereto hereby agrees to cooperate with the other party and
use its reasonable best efforts promptly to prepare and file all necessary
Filings and other documents and to obtain as promptly as practicable all
necessary Consents of all third parties and Governmental Entities in each case
necessary or, solely with respect to consents of Governmental Entities,
advisable, to consummate the transactions contemplated hereby and by the
Ancillary Agreements. Buyer shall have the right to review in advance, subject
to applicable Laws relating to the exchange of information, any Filing made by
Seller or any Company or Company Subsidiary with, or other written materials
submitted by Seller or any Company or Company Subsidiary to, any third party or
Governmental Entity in connection with the transactions contemplated by this
Agreement and the Ancillary Agreements. Buyer will consult with Seller about
the status of any Consents required to be obtained by Buyer from any third
party or Governmental Entity in connection with the transactions contemplated
by this Agreement. Buyer shall, and covenants and agrees to, promptly notify
Seller of all filings, submissions and correspondence made to or received from
any
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Governmental Entity in connection with the transactions contemplated hereby and
by the Ancillary Agreements (and the substance thereof, to the extent relating
to the transactions contemplated hereby and by the Ancillary Agreements). Prior
to the Closing, Seller shall, and covenants and agrees to cause each Company
and each Company Subsidiary to, provide promptly to Buyer copies of all
filings, submissions and correspondence made to or received from any
Governmental Entity in connection with the transactions contemplated hereby and
by the Ancillary Agreements, and all other material filings, submissions and
correspondence made to or received from any Governmental Entity. In exercising
the foregoing rights, each of Buyer and Seller shall act reasonably and as
promptly as practicable. Buyer and Seller agree that they will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated by this Agreement and the Ancillary Agreements.
(b) Without limiting the generality of Section 5.4(a), Buyer agrees to
furnish Seller with true and accurate information concerning itself, its
Subsidiaries, directors, officers and shareholders and such other matters as
may be reasonably necessary or advisable in connection with the Proxy Statement
(as defined in Section 5.23 hereof) or any other statement, filing, notice or
application made by or on behalf of Seller or any of its Subsidiaries to any
third party and/or any Governmental Entity in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements.
(c) Without limiting the generality of Section 5.4(a), Seller agrees to
furnish Buyer with true and accurate information concerning itself, the
Companies and the Company Subsidiaries and such other matters as may be
reasonably necessary or advisable in connection with any statement, filing,
notice or application made by or on behalf of Buyer to any third party and/or
any Governmental Entity in connection with the transactions contemplated by
this Agreement and the Ancillary Agreements.
(d) Seller agrees to use its reasonable best efforts to, and Buyer shall
reasonably cooperate with Seller to, obtain the required Consents to assignment
to Buyer or its designee, effective as of the Closing Date, of all licenses in
the name of Seller or any Seller Party for any Software or Hardware that are
assignable under the applicable licensing agreement, and consents of all
licensors for any Software or Hardware as required under any applicable
licensing agreement or, at the request of Buyer, new licensing agreements or
leases for any Software or Hardware.
(e) Without limiting the generality of Section 5.4(a):
(i) Seller agrees to use its reasonable best efforts to obtain the
waiver or consent to the transactions contemplated by this Agreement and
the Ancillary Agreements required pursuant to the Credit Agreement among
Seller, Wachovia Bank, N.A., The Bank of New York and First Union National
Bank, dated as of May 1, 1998 or to cause all of the Seller's, the
Companies' and the Company Subsidiaries' obligations thereunder to be
satisfied concurrently with the Closing,
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and to provide to Buyer documentation in a form reasonably satisfactory to
Buyer so attesting; and
(ii) Buyer shall reimburse Seller for 50 percent of the aggregate
amount of any payments to counterparties of Contracts when such payments
are necessary to obtain the Consent of such counterparty to the
transactions contemplated by this Agreement.
SECTION 5.5 Reasonable Best Efforts. Between the date of this Agreement
and the Closing Date, each of the parties hereto shall use their respective
reasonable best efforts to cause the conditions in Sections 6.1 and 6.2 hereof,
as applicable, to be satisfied.
SECTION 5.6 HSR Act. Without limiting the generality of Section 5.4(a),
Buyer and Seller each agree to promptly prepare and file the Report with the
FTC and the Antitrust Division. Each such party hereby covenants to request
early termination of the waiting period required by the HSR Act and Buyer and
Seller agree to cooperate to the extent reasonably necessary to assist in
making reasonable supplemental presentations to the FTC or the Antitrust
Division, and if requested by the FTC or the Antitrust Division, to promptly
amend or furnish additional information thereunder.
SECTION 5.7 Publicity. The initial press release announcing the
transactions contemplated by this Agreement and the Ancillary Agreements shall
be released jointly after consultation between the parties hereto and
thereafter the parties hereto shall consult with each other prior to issuing
any press releases or otherwise making public announcements with respect to the
transactions contemplated hereby or thereby and prior to making any filings
with any national securities exchange with respect thereto, except as may be
otherwise required by Law or by obligations pursuant to any listing agreement
with or rules of any national securities exchange.
SECTION 5.8 Expenses. Except as otherwise expressly provided herein,
whether or not the transactions contemplated hereby are consummated, all costs
and expenses incurred in connection with this Agreement, the Ancillary
Agreements and the transactions contemplated hereby and thereby shall be paid
by the party incurring such expense. Without limiting the generality of the
foregoing, each party shall pay all legal, accounting and investment banking
fees and other fees to consultants and advisors incurred by it relating to this
Agreement, the Ancillary Agreements and the transactions contemplated hereby
and thereby. Seller shall cause each Company and each Company Subsidiary not to
incur any out-of-pocket expenses in connection with this Agreement, the
Ancillary Agreements and the transactions contemplated hereby and thereby. In
the event of termination of this Agreement, the obligation of each party to pay
its own expenses will be subject to any rights of such party arising from a
breach of this Agreement by the other party. Seller shall be liable for all
transfer taxes arising from the Acquisition.
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SECTION 5.9 Dividend of Shares of Subsidiaries of the Company. Seller
covenants that it will cause Liberty Life to dividend to Seller (the
"Subsidiary Dividend"), concurrently with the Closing, all of the outstanding
shares of capital stock held by Liberty Life of the Subsidiaries identified in
Schedule 5.9 hereto (each an "Excluded Subsidiary" and collectively the
"Excluded Subsidiaries").
SECTION 5.10 Advisory Contract Consents. As promptly as practicable,
Seller shall cause the advisory clients of the Companies or Company
Subsidiaries engaged in asset management to be informed of the transactions
contemplated by this Agreement and the Ancillary Agreements and shall give such
clients an opportunity to terminate their advisory contracts with such
Companies or Company Subsidiaries. Unless written consent is required by the
terms of such advisory contracts, Seller shall satisfy this obligation to the
extent that applicable Law permits insofar as it relates to advisory clients by
providing them with the notice contemplated by the first sentence of this
Section 5.10 and obtaining such clients' consent in the form of actual or
implied consent by way of informing such clients of such subsidiary's intention
to continue the advisory services, pursuant to the existing contracts of such
Company or Company Subsidiary with such clients, subject to such clients' right
to terminate such contracts within sixty (60) days of receipt of such notice,
and that each such client's consent will be implied if it continues to accept
the services without rejection during such specified sixty-day period.
SECTION 5.11 Further Assurances. At any time after the Closing Date, the
parties hereto agree to (a) furnish upon request to each other such further
assurances, information, documents, instruments of transfer or assignment,
files and books and records, (b) promptly execute, acknowledge, and deliver any
such further assurances, documents, instruments of transfer or assignment,
files and books and records, and (c) subject to the provisions of Section 5.4
and Section 5.6 hereof, do all such further acts and things, including
providing access to officers, directors and employees and records of Seller,
the Companies and the Company Subsidiaries, all as such other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the Ancillary Agreements and the documents referred to herein and therein.
SECTION 5.12 Notifications. Between the date of this Agreement and the
Closing Date, Seller shall promptly notify Buyer in writing if, to the
knowledge of Seller and the Companies, there is any fact or condition that
causes or constitutes a breach of any of Seller's representations and
warranties as of the date of this Agreement, or if, to the knowledge of Seller
and the Companies, there is the occurrence after the date of this Agreement of
any fact or condition that would (except as expressly contemplated hereby)
cause or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition, other than representations made as of a specified
time. To the knowledge of Seller and the Companies, should any such fact or
condition require any change in the Disclosure Schedule if the Disclosure
Schedule were dated the date of the occurrence or discovery of any such
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fact or condition, Seller shall promptly deliver to Buyer a supplement to the
Disclosure Schedule specifying such change. During the same period, each party
shall promptly notify the other party if, to the knowledge of such first party,
there is the occurrence of any breach of any covenant, agreement, undertaking
or obligation of such first party in this Agreement or of the occurrence of any
event that may make the satisfaction of the conditions in Section 6.1, in the
case of Seller, and Section 6.2, in the case of Buyer, hereof not reasonably
likely. No supplement to the Disclosure Schedule or notification to Buyer made
pursuant to the requirements of this Section 5.12 shall have the effect of
satisfying the conditions in Section 6.1 hereof, nor shall any such supplement
or notification have any effect for the purpose of determining the right of
Buyer to claim or obtain indemnification from Seller under Sections 7.1 or 7.11
or under Article IX hereof.
SECTION 5.13 Non-Competition; Non-Solicitation.
(a) Non-Competition. In consideration of the benefits of this Agreement to
Seller and in order to induce Buyer to enter into this Agreement, Seller hereby
covenants and agrees that for a period of five (5) years following the Closing
Date neither it nor any of its Subsidiaries or Related Persons shall, without
the prior written consent of Buyer, directly or indirectly (i) cause or
encourage any officer, director, employee, consultant, or Producer of any
Company or any Company Subsidiary to terminate or sever his or her employment
or other relationship with such Company or Company Subsidiary for the purpose
of competing with any Company or any Company Subsidiary, or for the purpose of
damaging any Company or any Company Subsidiary in any way, (ii) cause or
encourage any customer of Liberty Services to terminate, modify or fail to
renew any third party administration agreement or other Contract or other
relationship with Liberty Services, (iii) other than as permitted by clause
(iv), act in concert with any Person, for purposes of competing, directly or
indirectly, or aiding another to compete, directly or indirectly, with the
Business or of damaging any Company or any Company Subsidiary in any way other
than according to the ordinary and usual course of Seller's broadcasting
business conducted in a manner consistent with its past practice, or (iv)
engage in, or have a greater than five (5) percent of the equity interest in
any company engaged in any business in the Restricted Area (as defined in
Section 5.13(b) hereof), which competes with the Business; provided that the
restrictions of clause (iv) shall not apply to any company which derives less
than ten (10) percent of its aggregate revenues from engaging in business in
the Restricted Area which competes with the Business; and provided further that
any Person that is not currently a Related Person of Seller that acquires an
interest in Seller or any of its Subsidiaries subsequent to the Closing Date
shall not be subject to clauses (iii) or (iv) of this Section 5.13(a) (it being
understood that such restrictions shall continue to apply to Seller and its
Subsidiaries). Seller specifically agrees that this covenant is an integral
part of the inducement of Buyer to purchase the Shares and that Buyer (or its
successors or assigns) shall be entitled to injunctive relief in addition to
all other legal and equitable rights and remedies available to it in connection
with any breach by Seller of any provision of this Section 5.13 and that,
notwithstanding the foregoing, no right, power or remedy conferred upon or
reserved or
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exercised by Buyer in this Section 5.13 is intended to be exclusive of any
other right, power or remedy, each and every one of which (now or hereafter
existing at law, in equity, by statute or otherwise) shall be cumulative and
concurrent. Each of Seller and Buyer agrees that in the event that either the
length of time or Restricted Area set forth herein is deemed too restrictive by
any Governmental Entity of competent jurisdiction, the covenants and agreements
in this Section 5.13 shall be enforceable for such time and within such
geographical area as such Governmental Entity may deem reasonable or acceptable
under the circumstances.
(b) Restricted Area. The covenants contained in Section 5.13(a) hereof
shall be construed as a series of separate covenants, one for each county or
state of the United States of America and one for each country in which any
Company or any Company Subsidiary conducted business on or prior to the Closing
Date (together, the "Restricted Area").
(c) Non-Solicitation. Seller hereby covenants and agrees that from the
date hereof neither it nor any of its Subsidiaries or Related Persons shall,
without the prior written consent of Buyer, directly or indirectly, solicit for
employment (it being understood that general employment advertisements in media
of wide distribution, including the Internet and participation in job fairs not
directed to employees of the Companies or Company Subsidiaries, shall not be a
violation of this Section 5.13(c)), or, until after the first anniversary of
the date of such individual's termination of employment or service, hire any
current employee or Producer of any Company or any Company Subsidiary or any of
the Transferred Employees.
(d) For purposes of this Agreement, the term "Related Person" shall mean,
with respect to any Person, (i) any Person which, directly or indirectly,
controls, is controlled by, or is under common control with, such Person, (ii)
each Person that serves as a director, officer, partner, executor, or trustee
of such Person (or in any other similar capacity), (iii) any Person with
respect to which such Person serves as a general partner or trustee (or in any
other similar capacity), and (iv) any Person that has direct or indirect
beneficial ownership (as defined in Rule 13d-3 of the Exchange Act) of voting
securities or other voting interests representing at least 20 percent of the
outstanding voting power or equity securities or other equity interests
representing at least 20 percent of the outstanding equity interests (a
"Material Interest") in such Person and (v) any Person in which such Person
holds a Material Interest.
SECTION 5.14 Employee and Employee Benefit Matters.
(a) Buyer shall, or shall cause each Company and each Company Subsidiary
to, during the period commencing at the Closing Date and ending on the first
anniversary thereof, provide to their active and former employees employee
benefit plans, programs, policies and arrangements (other than stock option or
other plans involving the
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potential issuance of securities) which in the aggregate are substantially
comparable to those provided under the applicable employee benefit plans,
programs, policies and arrangements of each Company and each Company Subsidiary
in effect as of the Closing; provided, however, that the requirements of this
sentence shall not apply to employees who are covered by a collective
bargaining agreement; provided, further, that no specific plans, programs,
policies or arrangements shall be required to be provided, except as required
by applicable Law. Employees of each Company and each Company Subsidiary shall
be given credit for purposes of eligibility and vesting under each employee
benefit plan, program, policy or arrangement (and for purposes of benefit
accrual under each vacation or severance benefit plan, program or arrangement)
of Buyer or any of its Related Persons in which the employees are eligible to
participate for all service with any Company or any Company Subsidiary or any
predecessor employer (if such credit was given by Seller).
(b) If employees of any Company or any Company Subsidiary become eligible
to participate in the year in which the Closing occurs in a medical, dental or
health plan of Buyer or its Related Persons, Buyer shall cause such plan to (i)
waive any pre- existing condition limitations for conditions covered under the
applicable medical, health or dental plans of any Company or any Company
Subsidiary (the "Company Welfare Plans") to the same extent such pre-existing
condition was waived under the Company Welfare Plans and (ii) honor any
deductible and out-of-pocket expenses incurred by the employees and their
beneficiaries under the Company Welfare Plans during the portion of the plan
year preceding the Closing. If employees of any Company or any Company
Subsidiary become eligible to participate in the year in which the Closing
occurs in a group term life insurance plan maintained by Buyer or its Related
Persons, Buyer shall cause such plan to waive any medical certification for
such employees up to the amount of coverage the employees had elected under the
life insurance plan of any Company or any Company Subsidiary (but subject to
any limits on the maximum amount of coverage under Buyer's life insurance
plan).
(c) On the Closing Date, Seller shall cause each employee set forth on
Schedule 5.14 (each, a "Transferred Employee") to cease to be an employee of
Seller and shall use its reasonable best efforts to cause each Transferred
Employee to become an employee, on substantially the same terms and conditions
as he or she is currently employed by Seller, of the Company listed on Schedule
5.14 with respect to such Transferred Employee (the "Employee Transfer"), it
being understood that Seller shall not be required to offer any monetary
inducement to such employees to so cause such employees to become employees of
a Company. Seller shall retain responsibility for (i) all claims incurred with
respect to Transferred Employees and (ii) any benefit accrued under a Benefit
Plan, or any other obligation of Seller arising, in each case, with respect to
Transferred Employees, in each case (i) and (ii) for claims incurred, benefits
accrued or obligations arising for the period prior to the Closing Date; it
being understood that Seller may satisfy such liability by transferring to
Liberty Life assets equal in market value to the Liabilities related to the
Transferred Employees. For purposes of this Section 5.14(c), a claim shall be
deemed to be
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incurred with respect to any employee benefit welfare plan, when the medical or
other service giving rise to the claim is performed, except that disability
claims shall be deemed to have been incurred on the date the employee becomes
disabled.
(d) As soon as practicable following the date hereof, Seller shall (i)
change the sponsorship of any Benefit Plans designated by Buyer, including The
Liberty Corporation Retirement and Savings Plan, as amended and restated (the
"401(k) Plan"), so that such plans become sponsored by the Company designated
by Buyer not later than the Closing and so that Seller and its remaining
affiliates shall cease to be participating employers in any such plan effective
as of the Closing; (ii) amend the 401(k) Plan so as to preclude any new
contributions to or investments in the Seller stock fund following the Closing
(the "Plan Transfer"); (iii) develop with Buyer employee communications
regarding such changes; and (iv) transfer to the Companies and Company
Subsidiaries, all payroll and personnel records relating to current and former
employees of each Company and Company Subsidiary, including Transferred
Employees, and such related information as may be reasonably required by Buyer.
(e) All outstanding stock options held by employees of any Company and any
Company Subsidiary and the Transferred Employees will become fully exercisable
as of the Closing and all other equity based awards of such Persons will fully
vest, and Seller shall take such action as is necessary to accomplish the
foregoing.
SECTION 5.15 Intercompany Agreements and Accounts. Except as otherwise
provided in this Agreement or set forth in Schedule 5.15 of the Disclosure
Schedule, Seller shall take all actions necessary to terminate prior to or
concurrent with the Closing all Intercompany Agreements. From and after the
date hereof, all Seller Parties shall conduct all transactions with any Company
or any Company Subsidiary only in the Ordinary Course of Business. At least ten
(10) Business Days prior to the Closing, Seller shall prepare and deliver to
Buyer a preliminary statement setting out in reasonable detail the calculation
of all accounts (including all amounts owed or owing) between any Company or
any Company Subsidiary, on the one hand, and Seller or any Seller Party, on the
other hand, as of the Closing and, to the extent reasonably requested by Buyer,
provide Buyer with supporting documentation to verify the underlying
intercompany accounts and transactions. At the Closing Seller shall deliver a
final statement of the calculation of such accounts determined as of the
Closing Date. Subject to Section 5.25, the net amount of such intercompany
accounts as shown on such final statement shall be paid in full by cash payment
from Seller to one or more of the Companies or from one or more of the
Companies to Seller, as the case may be, prior to or concurrent with the
Closing.
SECTION 5.16 Additional Financial Statements. As soon as reasonably
practicable after they become available, Seller or a Company shall furnish to
Buyer any Financial Statements or Statutory Statements with respect to any
period ending subsequent to March 31, 2000 and more than thirty (30) days prior
to the Closing Date.
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SECTION 5.17 Ancillary Agreements.
(a) Seller shall, and shall cause each Company and each Company Subsidiary
and other relevant Seller Subsidiaries, as appropriate, to, execute and deliver
(at the Closing) the Ancillary Agreements to be executed and delivered at the
Closing by Seller and by such Subsidiary of Seller and shall perform, and cause
its Subsidiaries to perform, their respective obligations under each Ancillary
Agreement.
(b) Buyer shall execute and deliver (at the Closing) the Ancillary
Agreements to be executed and delivered by it at the Closing and shall perform,
and cause its Subsidiaries to perform, its obligations under each Ancillary
Agreement.
(c) The parties hereto agree to work together from the date hereof through
the Closing Date to reach agreement on the terms and conditions of a
transitional services agreement (the "Services Agreement") pursuant to which
Buyer shall cause the Companies and the Company Subsidiaries to provide to the
Seller and its Subsidiaries, and Seller and its Subsidiaries (other than the
Companies and Company Subsidiaries) shall provide to the Company and the
Company Subsidiaries, certain transitional services for the period from and
after the Closing Date to December 31, 2001.
SECTION 5.18 Retention of Records.
(a) Seller may retain (i) one copy of the materials included in the data
room organized by Seller in connection with the Acquisition, together with a
copy of all documents referred to in such materials, (ii) all internal
correspondence and memoranda, valuations, investment banking presentations and
bids received from others in connection with the Acquisition, (iii) a copy of
all consolidating and consolidated financial information and all other
accounting records prepared or used in connection with the preparation of the
Financial Statements or the Statutory Statements and (iv) one copy of any
documentation relating to any action or suit involving both (x) a Company or
Company Subsidiary and (y) the Seller or any of its Subsidiaries other than the
Companies and Company Subsidiaries. Seller shall deliver to Buyer all other
books and records relating to each Company and each Company Subsidiary and in
its possession or control, and such books and records shall include all
actuarial investigations, studies, audits, tests, reviews or other analyses
conducted by, or relating to, Liberty Life, Liberty Bermuda or any Insurance
Subsidiary, if any, in its possession or control.
(b) Notwithstanding this Section 5.18, the parties' agreement with respect
to books, records and files relating to Taxes is set forth in Section 7.4(b)
hereof.
SECTION 5.19 Liberty Mark. (a) Seller agrees that, from and after the date
of this Agreement until the Closing Date, it will not (without the prior
written consent of Buyer):
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(i) Enter into, terminate or make any adverse change in any Contract
relating to the use of the Liberty mark as used in the Business; or
(ii) Settle or authorize, commit or enter into any agreement to
settle any claim, action or proceeding involving any restrictions with
respect to the use of the Liberty mark.
(b) Seller agrees that it will, and will cause its affiliates to, use its
reasonable best efforts, but only to the extent consistent with Seller's past
practices with respect to the Liberty mark, or if not consistent with Seller's
past practices, then, upon request and at the expense of Buyer (so long as such
steps do not adversely affect the use of the Liberty mark by the Seller other
than in the Business), take all steps necessary to protect the value of the
Liberty mark prior to the Closing Date, including maintaining all registrations
relating to the Liberty mark, prosecution of all pending applications for
trademark or service mark registration relating to the Liberty mark, opposing
or continuing to oppose all third party applications for registration of
confusingly similar trademarks or service marks and pursuing actions against
all third parties that are infringing, misappropriating or diluting the Liberty
mark, provided that Seller will not be required to register any unregistered
trademarks or trade names unless such application to register is upon request
and at the expense of Buyer and so long as such registration would not
adversely affect the use of the Liberty mark by the Seller other than in the
Business.
SECTION 5.20 Forbearances of Seller and Buyer. Neither Buyer nor Seller
shall knowingly take any action intended or reasonably likely to (i) result in
any of the representations and warranties set forth in this Agreement and any
Ancillary Agreement or any certificate delivered in connection with the Closing
being or becoming untrue in any material respect at any time at or prior to the
Closing, (ii) result in any of the conditions to the Acquisition set forth in
Section 6.1 not being satisfied, (iii) materially breach any of its covenants
under this Agreement or any Ancillary Agreement, (iv) materially impede or
delay the receipt of any approval or consent referred to in Section 5.4, or
(v), subject to the provisions of Sections 5.2 and 5.22 hereof, adversely
affect the ability of either party to perform its obligations under this
Agreement or any Ancillary Agreement.
SECTION 5.21 Environmental Testing. Seller shall permit and assist Buyer
in the performance of any environmental surveys, sampling and assessments of
the Real Property and of the soil from the Real Property it deems appropriate
for the purpose of identifying the presence on or in the Real Property of any
Hazardous Substance in violation of any Environmental Law. Buyer shall pay all
costs associated with such surveys, sampling and assessments.
SECTION 5.22 Shareholder Approval.
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(a) Seller shall take, in accordance with South Carolina Law and the
Restated Articles of Incorporation and By-Laws of Seller, all action necessary
to convene an appropriate meeting of shareholders of Seller to consider and
vote upon the approval of this Agreement and any other matters required to be
approved by shareholders of the Seller for consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements (including any
adjournment or postponement thereof, the "Shareholders Meeting") as promptly as
practicable after the Proxy Statement (as hereinafter defined) is cleared by
the SEC.
(b) Except as expressly permitted by this Section 5.22, the board of
directors of Seller (i) shall at all times recommend approval of the
Acquisition (and any other matters necessary for consummation of the
transactions contemplated hereby and by the Ancillary Agreements) by Seller's
shareholders and shall not withdraw or modify or propose publicly to withdraw,
modify or qualify in a manner adverse to Buyer such recommendation and shall
take all reasonable, lawful action to solicit such approval by the shareholders
of Seller, (ii) shall not approve or recommend, or propose publicly to approve
or recommend, any Acquisition Proposal, (iii) shall cause Seller not to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar undertaking with respect to an Acquisition Proposal and (iv)
promptly after clearance of the Proxy Statement by the SEC, Seller shall mail
the Proxy Statement to the shareholders of Seller. In connection with a bona
fide Acquisition Proposal that is a Superior Proposal, the board of directors
of Seller shall be excused from its obligations under clauses (i) to (iii) of
this Subsection 5.22(b) and shall be permitted to withdraw, modify or qualify
its recommendation to its shareholders if, but only if, (w) in the opinion of
Seller's outside counsel, such withdrawal, modification or qualification is
required in order for the board of directors of Seller to comply with its
fiduciary duties under applicable Law, (x) Seller has given Buyer five (5)
Business Days' prior notice of the receipt of such Acquisition Proposal and
Seller's board of directors has considered in good faith and consistent with
its fiduciary duties any proposed changes to this Agreement (if any) proposed
by Buyer, (y) after taking into account any such proposed changes by Buyer,
such Acquisition Proposal remains a Superior Proposal, and (z) Seller has fully
and completely complied with its obligations under this Section 5.22, Sections
5.2 and the first sentence of Section 5.23(a) hereof; provided that nothing
contained in this Section 5.22(b) shall permit Seller's board of directors to
withdraw the proposal of this Agreement and the Acquisition to the shareholders
of Seller.
SECTION 5.23 Proxy Statement.
(a) Seller shall prepare a proxy statement to be filed with the SEC in
connection with this Agreement (the "Proxy Statement"). Each of Buyer and
Seller agrees to cooperate, and to cause its Subsidiaries to cooperate, with
the other, its counsel and its accountants, in preparation of the Proxy
Statement.
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(b) Each of Buyer and Seller agrees, as to itself and its Subsidiaries,
that none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in the Proxy Statement and any amendment or
supplement thereto will, at the date of mailing to shareholders of Seller and
at the time of the Shareholders Meeting, contain any statement, which, at the
time and in the light of the circumstances under which it is made, is false or
misleading with respect to any material fact, or which omits to state any
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in the Proxy Statement or any
amendment or supplement thereto. Each of Buyer and Seller further agrees that
if it shall become aware prior to the Closing Date of any information furnished
by it that would cause any of the statements in the Proxy Statement to be false
or misleading with respect to any material fact, or to omit to state any
material fact necessary to make the statements therein not false or misleading,
to promptly inform the other party thereof and Seller shall take the necessary
steps to amend or supplement the Proxy Statement.
(c) Buyer shall have the right to review in advance and to approve all the
information relating to Buyer and any of its Subsidiaries proposed to appear in
the Proxy Statement or any amendment or supplement thereto submitted to the SEC
in connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, Buyer shall act reasonably and as promptly as
practicable.
SECTION 5.24 Maintenance of Insurance.
(a) From the date hereof through the Closing Date, Seller shall, with
respect to the Companies and the Company Subsidiaries, and shall cause each of
the Companies and Company Subsidiaries to, maintain in force (including
necessary renewals thereof) the insurance obtained directly in its name or
otherwise covering the Companies, the Company Subsidiaries and their respective
officers and directors on the date hereof, except to the extent that such
insurance may be replaced with materially equivalent policies appropriate to
insure the assets, properties and business of the Companies and Company
Subsidiaries to the same extent as currently insured.
(b) Seller shall have provided written notice to all insurance companies
providing insurance coverage as specified in Subsection (a) above of all
circumstances or events that have or are likely to give rise to any claim under
such coverage prior to Closing, with copies provided to Buyer.
(c) For a period of three years following the Closing Date, Seller shall
maintain the insurance coverage as specified in Section 5.24(a) for the benefit
of the Companies, the Company Subsidiaries and their respective officers,
directors and agents. In the event directors' and officers' liability coverage
is terminated prior to the Closing or during the three year period, Seller
shall obtain a run-off policy or policies providing
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coverage comparable thereto for the period to cover acts or omissions occurring
prior to the Closing Date.
SECTION 5.25 Transferred Property. Immediately prior to the Closing, (i)
Seller shall convey to Liberty Life (or, if so notified by Buyer, to Buyer or
Buyer's designee), by documents reasonably satisfactory to Buyer (including,
without limitation, a special warranty deed (the "Deed")), good and marketable
fee simple title, free of all liens and encumbrances other than Permitted
Exceptions, to all plots, pieces and parcels of land located in whole or in
part in the County of Greenville, State of South Carolina, and owned by Seller,
together with all of Seller's easements, rights of way, privileges,
appurtenances and other rights pertaining thereto, all buildings and
improvements and fixtures thereon and in a separate bill of sale, together with
all machinery, equipment and other articles of personal property located
therein on the date hereof and used in relation to the Business or attached or
appurtenant thereto, or located therein on the date hereof and used in
connection therewith (collectively, the "Transferred Property") and (ii)
Liberty Life shall deliver to Seller a satisfaction and release of the mortgage
and any other security document held by Seller and encumbering the Transferred
Property. The Deed shall be in recordable form, duly executed and acknowledged,
shall have affixed thereto, at the Seller's sole cost and expense, any
requisite surtax and documentary tax stamps, in proper amount, and shall be
accompanied by a duly executed and sworn affidavit of title in the form
attached hereto as Exhibit C.
SECTION 5.26 Takeover Laws. No party hereto shall take any action with the
intent or for the purpose of causing the transactions contemplated by this
Agreement, the Ancillary Agreements, or any Voting Agreements (as defined
below) to be subject to requirements imposed by any Takeover Law and each of
them shall take all necessary and reasonable steps within its control to exempt
(or ensure the continued exemption of) the transactions contemplated by this
Agreement, the Ancillary Agreements from, or if necessary challenge the
validity or applicability of, any Takeover Law, as now or hereafter in effect.
The term "Voting Agreements" means the voting agreements to be entered into
between Buyer and certain shareholders of Seller.
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.1 Conditions to Obligations of Buyer. The obligation of Buyer to
consummate the Acquisition and to take the other actions contemplated by this
Agreement and the Ancillary Agreements to be taken by Buyer at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived in whole or in part by Buyer):
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(a) Representations and Warranties. Each of the representations and
warranties of Seller set forth in this Agreement shall be true and correct as
of the date of this Agreement and as of the Closing Date, with the same effect
as though such representations and warranties had been made on and as of the
Closing Date (except to the extent any such representation or warranty
expressly speaks as of an earlier date), without giving effect to any
supplement to the Disclosure Schedule (delivered to Buyer in accordance with
Section 5.12 hereof) except for such failures and exceptions which, when taken
together with all such other failures, have not had, do not have and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Companies. All references to the terms "material",
"materially", "materiality", "in all material respects", "Material Adverse
Effect" and similar qualifications as to materiality contained in any
representation or warranty of Seller shall be ignored for purposes of applying
the first sentence of this Section 6.1(a).
(b) Covenants. All of the covenants, agreements, undertakings and
obligations that Seller is required to perform or to comply with pursuant to
this Agreement at or prior to the Closing (considered collectively), and each
of the covenants, agreements, undertakings and obligations (considered
individually), shall have been duly performed and complied with in all material
respects.
(c) Officer's Certificate. Seller shall have delivered to Buyer a
certificate, dated as of the Closing Date and signed by a senior executive
officer or officers of Seller, representing that the conditions referred to in
Sections 6.1(a) and 6.1(b) hereof have been satisfied and the changes set forth
in Section 6.1(j) hereof have not occurred.
(d) No Action or Order. No Action shall have been brought by any
Governmental Entity and no Order shall have been issued, which:
(i) seeks to or does prohibit, prevent, restrain, delay or make
illegal the Closing;
(ii) seeks or imposes damages on Buyer, any Subsidiary of Buyer, or
on any Company or Company Subsidiary in connection with the Closing or the
consummation of any of the transactions contemplated hereby;
(iii) questions the validity or legality of the Closing or of any of
the transactions contemplated hereby; or
(iv) seeks to impose conditions upon the ownership or operations of
any Company or any Company Subsidiary or the operations of Buyer or any
Subsidiary of Buyer (as a result of the consummation of the transactions
contemplated hereby) that (x) has had, does have or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on the Companies or (y) materially
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impairs (or would reasonably be expected to materially impair) the ability
of Buyer to consummate the transactions contemplated hereby or (z) would
reasonably be expected to have a material adverse effect on the economic
benefits to Buyer arising from this Agreement.
(e) Absence of Claims. There shall not have been made or threatened by any
Person any claim (other than a frivolous claim) asserting that such Person is
the holder or the beneficial owner of, or has the right to acquire or to obtain
beneficial ownership of, any stock of, or any other voting, equity, or
ownership interest in, any Company or any Company Subsidiary.
(f) Ministerial Approval; HSR Act; Consents. The approval of the Minister
of Finance, Canada, to the investment, whether direct or indirect, by Buyer in
the Companies shall have been obtained, the waiting period required by the HSR
Act, and any extensions thereof obtained by request or other action by the FTC
and/or the Antitrust Division, shall have expired or been terminated by the FTC
and the Antitrust Division, the applicable waiting periods under any insurance
Laws shall have expired, and each of the Filings and Consents set forth in
Sections 3.4 and 4.3, and in Schedule 3.4 of the Disclosure Schedule and
Schedule 4.3 of the Buyer Disclosure Schedule or otherwise required for
consummation of the transactions contemplated by this Agreement or the
Ancillary Agreements shall have been obtained and must be in full force and
effect; provided that Buyer shall not be required to consummate the
transactions contemplated hereby and in the Ancillary Agreements if, in the
reasonable judgment of Buyer, any conditions or restrictions imposed by any
Governmental Entity in connection with any such Consent (other than normal
statutory conditions or restrictions imposed upon life insurance companies)
materially impair (or could reasonably be expected to materially impair) the
ability of Buyer to consummate the transactions contemplated hereby or thereby
or could reasonably be expected to have a material adverse effect on the
economic benefits to Buyer arising therefrom.
(g) Third Party Consents. All consents of third parties (other than
consents of Governmental Entities) to the transactions contemplated by this
Agreement and the other Ancillary Agreements shall have been obtained and all
applicable assignments effected, except for consents of such third parties the
absence of which have not had, do not have and would not reasonably be expected
to have a Material Adverse Effect on the Companies.
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(h) Opinion of Counsel. Buyer shall have received an opinion, dated as of
the Closing Date, of Martha Williams, Esq., counsel for Seller and the
Companies, concerning such legal matters relating to Seller, the Companies and
the Acquisition as are customarily obtained in transactions of a type similar
to the Acquisition and the other transactions contemplated by the Ancillary
Agreements as Buyer may reasonably request.
(i) No Material Adverse Effect. There shall not have occurred any change
in the business, operations, properties, assets, or financial condition of any
Company or any Company Subsidiary since the date of the Final Year End
Statements that has had, does have or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Companies,
and no event has occurred or circumstance exists that, individually or in the
aggregate, has had, does have or reasonably would be expected to have a
Material Adverse Effect on the Companies.
(j) Ratings. (i) The financial strength or claims-paying ability of
Liberty Life shall be rated at least "A" by A.M. Best, and (ii) A.M. Best shall
not have added the rating modifier "u" or otherwise have publicly announced
that it has under surveillance or review its rating of the financial strength
or claims-paying ability of Liberty Life due to a recent event or abrupt change
in its financial condition which may have negative rating implications, but to
the extent the failure of the conditions set forth in clauses (i) and (ii) to
be satisfied is caused by or resulting from either the proposal to declare or
pay, or the declaration or payment of the Special Dividend or the announcement
of the transactions contemplated hereby, such conditions shall be deemed to
have been satisfied.
(k) Shareholder Approval. This Agreement shall have been duly approved by
two-thirds of all the votes entitled to be cast at the Shareholders Meeting in
accordance with all applicable provisions of the South Carolina Law, other
applicable Laws and the Restated Articles of Incorporation and By-Laws of
Seller.
(l) Ancillary Agreements. Seller shall have executed and delivered, or
caused its affiliates or Subsidiaries to execute and deliver, to Buyer each of
the Ancillary Agreements to which Seller or such affiliate or Subsidiary is a
party.
(m) Resignations of Directors. Buyer shall have received written
resignations of each of the directors of each Company and each Company
Subsidiary requested to do so in accordance with Section 2.2 hereof.
(n) Other Documentation. Buyer shall have received such other documents,
certificates, opinions or statements as Buyer and Seller shall reasonably
agree.
SECTION 6.2 Conditions to Obligations of Seller. The obligation of Seller
to consummate the Acquisition and to take the other actions contemplated by
this Agreement and the Ancillary Agreements to be taken by Seller at the
Closing is subject to the
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satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived in whole or in part by Seller):
(a) Representations and Warranties. Each of the representations and
warranties of Buyer set forth in this Agreement shall be true and correct as of
the date of this Agreement and as of the Closing Date, with the same effect as
though such representations and warranties had been made on and as of the
Closing Date (except to the extent any such representation or warranty
expressly speaks of an earlier date), without giving effect to any supplement
to the Buyer Disclosure Schedule, except for such failures and exceptions
which, when taken together with all such other failures, have not had, do not
have and would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the ability of Buyer to fulfill its
obligations under this Agreement and the Ancillary Agreements. All references
to the terms "material", "materially", "materiality", "in all material
respects", "Material Adverse Effect" and similar qualifications as to
materiality contained in any representation or warranty of Buyer shall be
ignored for purposes of applying the first sentence of this Section 6.2(a).
(b) Covenants. All of the covenants, agreements, undertakings and
obligations that Buyer is required to perform or to comply with pursuant to
this Agreement at or prior to the Closing (considered collectively), and each
of the covenants, agreements, undertakings and obligations (considered
individually), shall have been duly performed and complied with in all material
respects.
(c) Officer's Certificate. Buyer shall have delivered to Seller a
certificate, dated as of the Closing Date and signed by a senior executive
officer or officers of Buyer, representing that the conditions referred to in
Sections 6.2(a) and 6.2(b) hereof have been satisfied.
(d) No Action or Order. No Action shall have been brought by any
Governmental Entity and no Order shall have been issued, which:
(i) seeks to or does prohibit, prevent, restrain, delay or make
illegal the Closing;
(ii) seeks or imposes damages on Seller or any Subsidiary of Seller
(other than a Company or Company Subsidiary) in connection with the
Closing or the consummation of any of the transactions contemplated
hereby; or
(iii) questions the validity or legality of the Closing or of any of
the transactions contemplated hereby.
(e) Ministerial Approval; HSR Act; Consents. The approval of the Minister
of Finance, Canada, to the investment, whether direct or indirect, by Buyer in
the
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Companies shall have been obtained, the waiting period required by the HSR Act,
and any extensions thereof obtained by request or other action by the FTC
and/or the Antitrust Division, shall have expired or been terminated by the FTC
and/or the Antitrust Division, the applicable waiting periods under any
insurance Laws shall have expired, and each of the Filings and Consents set
forth in Sections 3.4, 4.3, and in Schedule 3.4 of the Disclosure Schedule and
Schedule 4.3 of the Buyer Disclosure Schedule or otherwise required for
consummation of the transactions contemplated by this Agreement shall have been
obtained and must be in full force and effect.
(f) Shareholder Approval. This Agreement shall have been duly approved by
the two-thirds of all the votes entitled to be cast at the Shareholders Meeting
required in accordance with all applicable provisions of the South Carolina
Law, other applicable Laws and the Restated Articles of Incorporation and
By-Laws of Seller.
(g) Ancillary Agreements. Buyer shall have executed and delivered to
Seller each of the Ancillary Agreements to which Buyer is a party.
(h) Other Documentation. Seller shall have received such other documents,
certificates, opinions or statements as Seller and Buyer may reasonably agree.
ARTICLE VII
TAX MATTERS
SECTION 7.1 Liability for Taxes and Related Matters.
(a) Seller shall be liable for and shall indemnify Buyer and each Buyer
Indemnified Person (as defined in Section 9.2 hereof) for all Taxes (including,
without limitation, any obligation to contribute to the payment of a Tax
determined on a consolidated, combined or unitary basis with respect to a group
of corporations that includes or included any Company or any Company Subsidiary
and Taxes resulting from any Company or any Company Subsidiary ceasing to be a
member of any affiliated, combined or consolidated group of which such Company
or such Company Subsidiary is now a member or attributable to the election to
be made under Section 338(h)(10) of the Code and any state, local or foreign
law equivalents) (i) imposed on any Company or any Company Subsidiary, or for
which any Company or any Company Subsidiary may otherwise be liable, for any
Pre- Closing Tax Period, including without limitation, any Taxes triggered by a
dividend of shares pursuant to Section 5.9 of this Agreement, the dividends
contemplated by Section 3.7(b) of this Agreement or pursuant to Section
338(h)(10) of the Code (and including any Taxes on Phase III income as a result
of an election made under Section 338), provided that with respect to Taxes for
Pre-Closing Tax Periods not reported on a consolidated, combined or unitary
basis with Seller, Seller shall be obligated to indemnify
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Buyer and the Buyer Indemnified Persons only to the extent such Taxes are in
excess of the respective Liability for such Taxes as set forth in the Financial
Statements of the Companies and Company Subsidiaries as of December 31, 1999,
(ii) imposed with respect to any corporation (other than any Company or any
Company Subsidiary) that was a member of an affiliated, combined or
consolidated group of which any Company or any Company Subsidiary was a member
prior to the Closing Date, for any taxable year, or (iii) attributable to
Seller's breach of any representation, warranty or covenant contained in
Section 3.9 hereof or this Article VII of this Agreement, provided that Seller
shall be obligated to indemnify Buyer and the Buyer Indemnified Persons for
matters covered by the indemnity provisions of Section 7.11 hereof only to the
extent provided in and pursuant to Section 7.11 hereof. Seller shall be
entitled to any refund of Taxes of any Company or any Company Subsidiary (net
of Taxes payable by such Company or such Company Subsidiary thereon) received
in respect of any Pre-Closing Tax Period except to the extent such refund (i)
relates to Taxes for Pre-Closing Tax Periods not reported on a consolidated,
combined or unitary basis with Seller, and (ii) is not in excess of the
respective Tax Liability set forth on the Financial Statements provided
pursuant to Section 3.6 hereof.
(b) Buyer shall be liable for and shall indemnify Seller for all Taxes of
any Company or any Company Subsidiary (other than Taxes for which Seller is
responsible pursuant to Section 7.1(a) hereof) for any Post-Closing Tax Period.
Buyer shall be entitled to any refund of Taxes of any Company or any Company
Subsidiary received in respect of any Post-Closing Tax Period except to the
extent such refund relates solely to Taxes for which Seller has indemnified
Buyer or a Buyer Indemnified Party.
(c) Whenever it is necessary for purposes of this Section 7.1 to determine
the liability for Taxes of any Company or any Company Subsidiary for a taxable
year or period that begins on or before and ends after the Closing Date, the
determination shall be made by assuming that such Company or such Company
Subsidiary had a taxable year or period which ended at the close of business on
the Closing Date, except that exemptions, allowances or deductions that are
calculated on an annual basis (such as the deduction for depreciation) shall be
apportioned on a time basis.
(d) Any payment by Buyer to Seller, or by Seller to Buyer, under this
Agreement (other than interest payments) shall be treated by the parties as an
adjustment to the Purchase Price paid to or received by such party, as the case
may be.
(e) Buyer shall be liable for all transfer, documentary, sales, use,
stamp, registration and similar taxes arising from the Acquisition and the
transactions contemplated herein, other than transfer taxes arising from the
transfer of the Real Property pursuant to Section 5.25 of this Agreement.
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(f) The indemnities provided in this Section 7.1 shall continue until the
expiration of the applicable statute of limitations and are not subject to any
limitations on time for notice of claim set forth in Article IX.
SECTION 7.2 Tax Returns and Reports.
(a) Seller shall prepare and file or cause to be filed (i) all Tax Returns
that are required to be filed on or before the Closing Date with respect to
each Company and each Company Subsidiary for taxable periods ending on or
before the Closing Date, and (ii) all income Tax Returns that are required to
be filed after the Closing Date on a combined or consolidated basis with
Seller, with respect to each Company and each Company Subsidiary for taxable
periods ending on or before the Closing Date. Unless otherwise required by
applicable Law, any such Tax Return shall be prepared on a basis consistent
with past practice.
(b) Buyer shall prepare and file or cause to be filed all Tax Returns that
are required to be filed by or with respect to each Company and each Company
Subsidiary after the Closing Date other than income Tax Returns described in
Section 7.2(a) hereof and shall remit any Taxes due in respect of such Tax
Returns. With respect to any Tax Return that covers a taxable year or period
beginning before and ending after the Closing Date, Buyer shall provide a copy
of such Tax Return to Seller at least thirty (30) days prior to the due date
(including applicable extensions) for the filing thereof, and Seller shall have
the right to approve (which approval shall not be unreasonably withheld or
delayed) such Tax Return to the extent that it relates to the portion of the
taxable year or period ending on the Closing Date. Seller shall pay Buyer the
amount of any Taxes for which Seller is liable pursuant to Section 7.1(a)
hereof but which are payable with Tax Returns to be filed by Buyer pursuant to
this Section 7.2(b) within ten (10) days prior to the due date for the filing
of such Tax Returns.
(c) With respect to the taxable year of each Company and each Company
Subsidiary ending on December 31, 1999 and any subsequent taxable year of any
Company or any Company Subsidiary ending on or prior to the Closing Date, Buyer
shall promptly cause the Companies to prepare and provide to Seller a package
of tax information materials (the "Tax Package"), which shall be completed in
accordance with past practice including past practice as to providing the
information, schedules and work papers and as to the method of computation of
separate taxable income or other relevant measure of income of each Company and
each Company Subsidiary.
(d) Nothing in this Section 7.2 shall reduce Seller's obligations under
Section 7.1(a) hereof.
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SECTION 7.3 Contest Provisions.
(a) Buyer shall promptly (and in any event within fifteen (15) Business
Days) notify Seller in writing upon receipt by Buyer, any of its affiliates or
any Company or any Company Subsidiary of notice of any pending or threatened
Federal, state, local or foreign audits or assessments relating to Taxes which
may affect the Tax liabilities of any Company or any Company Subsidiary for
which Seller would be required to indemnify Buyer pursuant to Section 7.1(a)
hereof; provided, however, that no failure or delay in giving any such notice
shall relieve Seller of its obligations under this Agreement. Seller shall have
the sole right to represent the Companies' interests in any audit or
administrative or court proceeding relating to taxable periods ending on or
before the Closing Date, and to employ counsel of its choice at its expense;
provided that with respect to any Company or Company Subsidiary for which Buyer
and Seller have not made a valid election under Code Section 338(h)(10), Buyer
shall be given notice of, and have the right to monitor all proceedings and to
review in advance and comment on all submissions made by Seller in connection
therewith. Notwithstanding the foregoing, Seller agrees not to take any
position or enter into any agreement, settlement or arrangement related to the
treatment under the Code of any insurance or annuity policies, plans, or
contracts, any financial products and any similar related policies, contracts,
plans or products, whether individual, group or otherwise issued, entered into
or sold by Liberty Life, Liberty Bermuda or any Insurance Subsidiary that is
inconsistent with the intended treatment under the Code of such polices, plans,
contracts or products or take any other action that would affect their intended
treatment under the Code without the consent of Buyer, which consent shall not
be unreasonably withheld.
(b) Seller shall be entitled to participate at its own expense in the
defense of any claim for Taxes for a year or period ending after the Closing
Date which may be the subject of indemnification by Seller pursuant to Section
7.1(a) hereof and, with the written consent of Buyer, and at its sole expense,
may assume the entire defense of such claim. None of Buyer, the Companies or
the Company Subsidiaries may agree to settle any claim for Taxes for the
portion of the year or period ending on the Closing Date which may be the
subject of indemnification by Seller under Section 7.1(b) hereof without the
prior written consent of Seller, which consent shall not be unreasonably
withheld or delayed.
SECTION 7.4 Cooperation; Records.
(a) After the Closing Date, each of Seller and Buyer shall:
(i) assist (and cause their respective affiliates to assist) the
other party as necessary in preparing any Tax Returns which such other
party is responsible for preparing and filing in accordance with Section
7.2 hereof;
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(ii) cooperate fully in preparing for any audits of, or disputes with
taxing authorities regarding, any Tax Returns of any Company or any
Company Subsidiary and in administering this Agreement;
(iii) make available to the other party and to any taxing authority
as reasonably requested all books and records, documents, financial,
operating and accounting data and other information relating to Taxes of
each Company and each Company Subsidiary;
(iv) provide timely notice to the other party in writing of any
pending or threatened audits or assessments of any Company or any Company
Subsidiary for taxable periods for which the other party may have a
liability under this Article VII;
(v) furnish the other party with copies of all correspondence
received from any taxing authority in connection with any Tax audit or
information request with respect to any such taxable period; and
(vi) execute and deliver such powers of attorney and other documents
as are necessary to carry out the intent of this Article VII.
(b) Each of Seller, Buyer and its Subsidiaries, the Companies and the
Company Subsidiaries shall retain or cause to be retained all Tax Returns,
schedules, workpapers, and all material books and records or other documents
relating thereto, until the expiration of the applicable statute of limitations
(including any waivers or extensions thereof) for the taxable years to which
such Tax Returns and other documents relate or as otherwise required by any
record retention agreement with any taxing authority that relates to any
Company or any Company Subsidiary. Prior to transferring, discarding or
destroying any such Tax Returns, records or other documents relating to any
Pre-Closing Tax Period, Seller or Buyer as the case may be shall notify the
other and, if the other so requests, provide the other with the opportunity to
take possession of such Tax Returns, records or documents solely at the other's
expense.
SECTION 7.5 Disputes. If Seller and Buyer cannot agree on any calculation
required to be made under this Article VII with respect to any Pre-Closing Tax
Period, such calculation shall be made by an independent public accounting firm
of national standing selected by Seller and reasonably acceptable to Buyer. The
decision of such firm shall be final and binding, and the fees and expenses
charged or incurred by it in connection with such calculation shall be shared
equally by Seller and Buyer.
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SECTION 7.6 Section 338(h)(10) Election.
(a) At the request of Buyer, Seller shall make a joint election with Buyer
under Section 338(h)(10) of the Code (and under any similar provisions of
state, local or foreign law) with respect to the purchase of the Shares of
those Companies and Company Subsidiaries for which Buyer wishes to make such an
election. Seller represents that its sale of the Shares is eligible for, and
Buyer represents that it is qualified to make, such election. If the election
will be made, Seller and Buyer shall, on the Closing Date (or such later date
as may be determined by Buyer), exchange completed and executed copies of
Internal Revenue Service Form 8023-A, required schedules thereto, and any
similar state, local or foreign forms. If any changes are required in these
forms as a result of information that is first available after the Closing
Date, the parties will promptly agree on such changes.
(b) If an election will be made under Section 338(h)(10) of the Code,
Buyer shall, as promptly as practical following the Closing Date, prepare a
schedule showing the allocation of the purchase price among the assets of each
of the Companies and Company Subsidiaries that are deemed to have been acquired
pursuant to Section 338(h)(10) of the Code (or any corresponding election under
state, local or foreign law), after giving effect to the allocations described
in Section 7.7 below. Buyer shall provide Seller with a reasonable opportunity
to review and comment upon the allocation schedule. Such allocation shall be
made in accordance with all relevant provisions of the Code and shall be
subject to the consent of Seller, which shall not be unreasonably withheld or
delayed. Seller and Buyer shall use the asset values determined from such
allocation for purposes of all reports and returns with respect to Taxes,
including Internal Revenue Service Form 8594 or any equivalent statement.
SECTION 7.7 Allocation. The Purchase Price shall be allocated among the
Shares and the Seller Intellectual Property, as specified by Buyer and agreed
to by Seller and attached hereto as Schedule 7.7. Seller and Buyer shall use
such allocation (after giving effect to the allocations under Section 7.6(b))
for purposes of all reports and returns with respect to Taxes.
SECTION 7.8 Termination of Tax Allocation Agreements.
(a) Any tax allocation or sharing agreement or arrangement, whether or not
written, that may have been entered into by Seller or any member of Seller's
Group and any of the Companies or the Company Subsidiaries shall be terminated
as to the Companies and the Company Subsidiaries as of the Closing Date, and no
payments which are owed by or to any of the Companies or the Company
Subsidiaries pursuant thereto shall be made thereunder.
(b) From the date hereof until Closing, the Companies shall pay to Seller
their share of any quarterly estimated income Taxes related to any federal,
state or local
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income Tax Liabilities reported on a consolidated, combined or unitary basis
with Seller with respect to Pre-Closing Tax Periods. The amount of such share
of estimated taxes shall be calculated on a basis that is consistent with past
practice and the principles of the Tax Liability Allocation Agreement, provided
that such estimate shall not take into account the effects of any Section
338(h)(10) election (or any similar provision of state or local law and
including any Taxes on Phase III income as a result of an election under
Section 338) made with respect to any of the Companies or Company Subsidiaries,
any dividend of shares pursuant to Section 5.9 of this Agreement, or the
dividends contemplated by Section 3.7(b) of this Agreement or the sale of any
assets for the purpose of funding the Special Dividend contemplated by Section
3.7(b) (other than in the Ordinary Course of Business). With respect to any Tax
Returns for Pre-Closing Tax Periods beginning no earlier than January 1, 1999
that are to be filed by Seller prior to the Closing Date, the Companies and
Company Subsidiaries shall pay to Seller the Tax Sharing Amount for such
period. Within ten (10) Business Days after filing a final income Tax Return
for the Pre-Closing Period, Seller shall provide Buyer with its calculation of
the Companies' and Company Subsidiaries' Tax Sharing Amount and all
documentation reasonably necessary for Buyer to confirm such calculations. With
respect to Tax Returns for Pre-Closing Tax Periods that are to be filed by
Seller after the Closing Date, within ten (10) Business Days after filing a
final income Tax Return for the Pre-Closing Period, Seller shall provide Buyer
with its calculation of the Companies' and Company Subsidiaries' Tax Sharing
Amount and all documentation reasonably necessary for Buyer to confirm such
calculations. If Buyer disagrees with Seller's calculation, it must so notify
Seller within fifteen (15) Business Days of receiving all of the required
documentation. If Buyer so notifies Seller, Buyer and Seller shall promptly
choose an independent accounting firm, reasonably acceptable to both parties,
to calculate the Tax Sharing Amount. The cost of such services shall be
allocated equally between the parties. Each of Buyer and Seller shall cooperate
with and provide all necessary information to the accounting firm and the
determination of the accounting firm shall be final and binding on the parties.
If Buyer does not notify Seller of its disagreement within the prescribed time,
Seller's determination shall be final and binding on Buyer. If the total amount
paid for estimated Taxes by the Companies and Company Subsidiaries exceeds the
Tax Sharing Amount, Seller shall pay to Buyer the difference between the amount
paid for estimated Taxes and the Tax Sharing Amount within five (5) business
days of when a determination has become final. If the total amount paid for
estimated Taxes is less than the Tax Sharing Amount, Buyer shall pay to Seller
an amount equal to the difference between the amount paid for estimated Taxes
and the Tax Sharing Amount within five (5) business days of when a
determination has become final.
SECTION 7.9 Section 1445. At the Closing, Seller shall deliver to Buyer an
affidavit of Seller, in a form reasonably satisfactory to Buyer, stating under
penalties of perjury the Seller's U.S. taxpayer identification number and that
Seller is not a foreign person within the meaning of Section 1445(b)(2) of the
Code.
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SECTION 7.10 Survival of Obligations. Except as otherwise provided in
Section 7.1(f) the obligations of the parties set forth in this Article VII
shall be unconditional and absolute and shall remain in effect until all
applicable statutes of limitations have expired. The limitations contained in
Section 9.4 shall not apply to any indemnification obligations under Section
7.1 or 7.11.
SECTION 7.11 Indemnification for Sections 7702, 7702A, 72, 101(f) and
817(h) Liability. Seller shall indemnify Buyer and each Buyer Indemnified
Person from, against and in respect of one half of all costs arising from or in
connection with (i) any life insurance Contract or annuity Contract issued,
entered into, reinsured, or sold by Liberty Life, Liberty Bermuda or any
Insurance Subsidiary failing, at any time prior to Closing, to qualify as a
life insurance contract or annuity contract as applicable under the federal Tax
laws including, without limitation, under Sections 72, 101(f), 817(h) and 7702
of the Code and their underlying regulations, and (ii) any life insurance
Contract issued, entered into, reinsured, or sold by Liberty Life, Liberty
Bermuda or any Insurance Subsidiary qualifying at any time prior to Closing as
a modified endowment contract within the meaning of 7702A of the Code (each
event described in clause (i) or (ii) hereinafter referred to as a "Contract
Failure"). For purposes of this Section 7.11 costs arising from or in
connection with a Contract Failure include, without limitation, all amounts
paid or incurred to remedy any such Contract Failure including: (a) all amounts
paid pursuant to any closing agreements entered into with the Internal Revenue
Service (or any other taxing authority) with respect to any Contract Failure as
well as all related expenses (including reasonable legal fees and expenses of
counsel), (b) to the extent that Buyer is unable or unwilling to enter into a
closing agreement with the Internal Revenue Service (or any other taxing
authority) that eliminates the Tax liability of its policyholders arising from
such Contract Failure, all amounts paid to policyholders to reimburse them for
their Tax liability arising from such Contract Failure as well as all expenses
incurred to arrange and administer such payments (including reasonable legal
fees and expenses of counsel) and (c) the costs of any other reasonable method
by which Buyer may choose to compensate such policyholders for Taxes arising
from a Contract Failure, provided that (i) Seller shall only be obligated to
indemnify Buyer and the Buyer Indemnified Persons under this Section 7.11 to
the extent that such costs exceed the amount set forth in Schedule 7.11 of the
Disclosure Schedule and (ii) Seller's maximum liability under this Section 7.11
shall be limited to $2,500,000. The parties hereto acknowledge and agree that,
notwithstanding anything to the contrary set forth in this Agreement, the
indemnity provided in this Section 7.11 shall be the sole remedy of the Buyer
and the Buyer Indemnified Persons for any costs arising from or in connection
with a Contract Failure, including without limitation, any damages arising from
or in connection with the breach of any of the representations and warranties
set forth in Section 3.20(c)(ii), (iii), (v) or (vi) and, solely to the extent
any such damages arise from or in connection with a Contract Failure and
therefore are indemnifiable under this Section 7.11 (or would be indemnifiable
under this Section but for the limitation in the proviso to the preceding
sentence), a breach of any of the representations and warranties set forth in
Section 3.20(c)(i) and Section 3.12.
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ARTICLE VIII
TERMINATION
SECTION 8.1 Termination. Notwithstanding anything in this Agreement to the
contrary, this Agreement and the Acquisition contemplated hereby will be
terminated, in cases (a) through (f) below, by written notice given at any time
prior to the Closing (whether before or after the date of approval by the
shareholders of Seller), and automatically, in case (g) below:
(a) by mutual written consent of Buyer and Seller;
(b) by either Buyer or Seller, if the Closing has not occurred on or
before December 31, 2000 (the "Stated Termination Date"); provided that
the Stated Termination Date shall be automatically extended for three
months if, on December 31, 2000 (i) any of the Consents of Governmental
Entities described in Section 3.4 have not been obtained or waived, (ii)
each of the other conditions to the consummation of the Acquisition has
been satisfied or waived or remains capable of satisfaction and (iii) any
such Consent that has not yet been obtained is being pursued diligently
and in good faith; provided further that the right to terminate this
Agreement shall not be available to any party whose breach of any
provision of this Agreement shall have proximately contributed to the
failure of the Closing to have occurred by such time;
(c) by either Buyer or Seller, if a material breach of any provision
of this Agreement has been committed by the other party, such breach has
not been waived and, if such breach is capable of being cured, the other
party has not cured such breach fifteen (15) Business Days following
receipt of notice of such breach from either Buyer or Seller, as the case
may be; provided, however, that termination pursuant to this Section
8.1(c) shall not relieve the breaching party of liability for such breach
or otherwise;
(d) by either Buyer or Seller, if any Governmental Entity shall have
issued, enacted, entered, promulgated or enforced any Order, or taken any
other action restraining, enjoining, disapproving, denying or otherwise
prohibiting the Acquisition or the consummation of any other transactions
contemplated by this Agreement and such Order or other action shall have
become final and non-appealable, provided that the right to terminate
this Agreement pursuant to this Section 8.1(d) shall not be available to
any party that has failed to fully comply with its obligations hereunder
in any manner that shall have proximately contributed to the occurrence of
such Order;
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(e) by either Buyer or Seller, if the approval of the shareholders of
Seller shall not have been obtained at the Shareholders Meeting;
(f) by Buyer, if the board of directors of Seller shall have failed
to recommend or shall have withdrawn or adversely modified or qualified
its recommendation of this Agreement, shall have failed to reconfirm its
recommendation of this Agreement within five business days after a written
request by Buyer to do so, or shall have recommended to shareholders of
Seller an Acquisition Proposal; or
(g) at any time prior to the shareholder approval of this Agreement,
automatically if (i) Seller is not then in violation of Sections 5.2 and
5.22 and of the first sentence of Section 5.23 (a) and (ii) Seller is
entering into a legally binding agreement to give effect to a Superior
Proposal.
SECTION 8.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1 of this Agreement, this
Agreement (other than Section 5.8 (Expenses), Section 8.3 (Termination Fee),
Section 10.5 (Governing Law) and Section 10.6 (Consent to Jurisdiction; Waiver
of Jury Trial) hereof which shall remain in full force and effect) shall
forthwith become null and void and no party hereto (or any of their respective
Representatives or Related Persons) shall have any Liability or further
obligation to any other party hereto, except as provided in this Section 8.2;
provided, however, that if this Agreement is terminated by a party because of
the deliberate or intentional breach of this Agreement by the other party or
because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's
deliberate or intentional failure to fully comply with its obligations under
this Agreement, the terminating party's rights to pursue all legal remedies
will survive such termination unimpaired.
SECTION 8.3 Termination Fee.
(a) Seller will pay Buyer a fee (the "Termination Fee") as follows:
(i) $20,000,000, if (i) Buyer terminates this Agreement pursuant to
Section 8.1(f) or (ii) this Agreement is terminated pursuant to Section
8.1(g), in each case payable within three (3) Business Days of such
termination.
(ii) $20,000,000, if, after an Acquisition Proposal has been made or
an Acquisition Event has occurred, this Agreement is terminated (other
than as a Sell- Side Termination (as defined below)), and within one year
after such termination an Acquisition Transaction (as defined below)
occurs, as long as such Acquisition Transaction has the effect of
transferring, directly or indirectly, a material portion of, any of the
Business, the aggregate assets of the Companies and the Company
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Subsidiaries, or the Shares, which fee shall be payable immediately upon
such occurrence.
(iii) $5,000,000, if no Acquisition Proposal has been made and no
Acquisition Event has occurred prior to this Agreement being terminated,
this Agreement is terminated (other than as a Sell-Side Termination) and
within one year after such termination, in each case, an Acquisition
Transaction occurs, as long as such Acquisition Transaction has the effect
of transferring, directly or indirectly, a material portion of, any of the
Business, the aggregate assets of the Companies and the Company
Subsidiaries, or the Shares, which fee shall be payable immediately upon
such occurrence.
It is understood that Seller shall not be required to pay Buyer under more
than one of Subsections 8.3(a) (i), 8.3(a)(ii) and 8.3(a)(iii).
(b) Seller will also reimburse Buyer for Buyer's actual out-of-pocket
expenses incurred in connection with this Agreement upon receipt of reasonable
supporting documentation and the transactions contemplated hereby, up to a
maximum of $3,000,000, such reimbursement being due upon termination of this
Agreement pursuant to Section 8.1(e). The amount of reimbursement will be
credited against any fee that becomes payable pursuant to Subsections (a)(i),
(a)(ii) or (a)(iii).
(c) For purposes of this Section 8.3, the following definitions apply:
"Acquisition Event" means:
(i) Seller or any of the Seller Subsidiaries without having received
Buyer's prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction with any person (the term "person"
for purposes of this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act and the rules and
regulations thereunder) other than Buyer or any of the Buyer Subsidiaries
or the board of directors of Seller shall have recommended that the
shareholders of Seller approve, accept or tender their shares in response
to any Acquisition Transaction or Acquisition Proposal with any person
other than Buyer or any Buyer Subsidiary.
(ii) (A) Any person (other than Buyer or any Buyer Subsidiary) shall
have acquired beneficial ownership or the right to acquire beneficial
ownership of twenty (20) percent or more of the outstanding shares of
Seller Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the
Exchange Act, and the rules and regulations thereunder), or (B) any group
(as such term "group" is defined in Section 13(d)(3) of the Exchange Act),
other than a group of which Buyer or any Buyer Subsidiary is a
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member, shall have been formed that beneficially owns ten (10) percent or
more of the Seller Common Stock then outstanding; or
(iii) Any person (other than Buyer or any Buyer Subsidiary) shall
have made a proposal to engage in an Acquisition Transaction (including,
without limitation, any situation in which any person other than Buyer or
any Buyer Subsidiary shall have commenced, or shall have filed a
registration statement under the Securities Act with respect to, a tender
offer or exchange offer to purchase any issued and outstanding shares of
common stock of Seller such that, upon consummation of such offer, such
person would own or control twenty (20) percent or more of the then
outstanding shares of Seller Common Stock).
"Acquisition Transaction" means any transaction or series of related
transactions described or referred to in the definition of "Acquisition
Proposal" in Section 5.2 hereof.
"Sell-Side Termination" means a termination of this Agreement (x) by
Seller pursuant to Section 8.1(c) or (y) by Seller pursuant to Section 8.1(d)
as a result of Buyer's failure fully to comply with its obligations described
in the proviso to such Section.
ARTICLE IX
INDEMNIFICATION; REMEDIES
SECTION 9.1 Survival. Notwithstanding (a) any investigation or examination
conducted with respect to, or any knowledge acquired (or capable of being
acquired) about the accuracy or inaccuracy of or compliance with, any
representation, warranty, covenant, agreement, undertaking or obligation made
by or on behalf of the parties hereto, (b) the waiver of any condition based on
the accuracy of any representation or warranty, or on the performance of or
compliance with any covenant, agreement, undertaking or obligation, or (c) the
Closing hereunder:
(i) All of the representations and warranties of the parties
contained in this Agreement, any Ancillary Agreement, the Disclosure
Schedule, and any other certificate or document delivered pursuant to this
Agreement or any Ancillary Agreement shall survive the Closing until March
31, 2002, except for the representations and warranties contained in (A)
Section 3.2 (Capitalization) and Section 3.34 (Disclosure) (as it relates
to the foregoing Section), each of which shall survive the execution and
delivery of this Agreement and the Closing indefinitely, and (B) Section
3.9 (Taxes) and Section 3.34 (Disclosure) (as it relates to the foregoing
Section), which shall survive the execution and delivery of this Agreement
and the Closing until the expiration of all relevant statutes of
limitations.
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(ii) All of the covenants, agreements, undertakings and obligations
of the parties contained in this Agreement, any Ancillary Agreement, the
Disclosure Schedule, and any other certificate or document delivered
pursuant to this Agreement shall survive until fully performed or
fulfilled, unless non-compliance with such covenants, agreements,
undertakings or obligations is waived in writing by the party or parties
entitled to such performance.
No claim for indemnification, reimbursement or any other remedy pursuant
to Section 9.2 or 9.3 hereof may be brought with respect to breaches of
representations or warranties contained herein after the applicable expiration
date set forth in clause (i) of this Section 9.1; provided, however, that if,
prior to such applicable date, a party hereto shall have notified the other
party hereto in writing (setting forth in reasonable detail the factual and
contractual bases upon which such party is entitled to indemnification under
this Agreement) of a claim for indemnification under this Article IX (whether
or not formal legal action shall have been commenced based upon such claim),
such claim shall continue to be subject to indemnification in accordance with
this Article IX notwithstanding such expiration date.
SECTION 9.2 Indemnification and Reimbursement by Seller. Subject to
Section 7.1, Section 7.11 and Section 9.4 hereof, from and after the Closing,
Seller shall indemnify and hold harmless Buyer, each Company and each Company
Subsidiary, and their respective successors, assigns, stockholders, controlling
Persons, Related Persons and the Representatives of each of them (collectively,
the "Buyer Indemnified Persons") from and against, and shall reimburse Buyer
and the Buyer Indemnified Persons for, any and all losses, Liabilities,
Actions, deficiencies, diminution of value, expenses (including costs of
investigation and defense and reasonable attorneys' and accountants' fees and
expenses), or damages (including punitive damages) of any kind or nature
whatsoever, whether or not involving a third-party claim (collectively,
"Damages"), incurred thereby or caused thereto, directly or indirectly, based
on, arising out of, resulting from, relating to, or in connection with (but in
each case excluding (i) any such Damages relating to Taxes (as to which
indemnification is provided under Section 7.1), (ii) indemnification for any
facts or circumstances as to which indemnification is provided pursuant to
Section 7.11 hereof and (iii) the amount of any such Damages to the extent that
such Damages do not exceed a reserve established in respect thereof as
reflected in the March 31, 2000 Quarterly Statements):
(a) Any breach of or inaccuracy in any representation or warranty
made by Seller in this Agreement, any Ancillary Agreement, the Disclosure
Schedule, or any other certificate or document delivered by, or on behalf
of, Seller pursuant to this Agreement or any Ancillary Agreement, other
than those, if any, that have been waived in writing by Buyer;
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(b) Any breach or violation of or failure to fully perform any
covenant, agreement, undertaking or obligation of Seller or a Company or
Company Subsidiary set forth in this Agreement or any Ancillary Agreement,
other than those, if any, that have been waived in writing by Buyer; and
(c) Any Damages relating to an Excluded Subsidiary, including without
limitation, arising out of a Company or Company Subsidiary's ownership,
prior to the Closing, of any securities of an Excluded Subsidiary.
For purposes of this Article IX and for purposes of determining whether Buyer
is entitled to indemnification from Seller pursuant to Section 9.2(a) hereof,
any breach of or inaccuracy in any representation or warranty of Seller shall
be determined without regard to any materiality qualifications set forth in
such representation or warranty, and all references to the terms "material",
"materially", "materiality", "Material Adverse Effect" or any similar terms
shall be ignored for purposes of determining whether such representation or
warranty was true and correct when made.
SECTION 9.3 Indemnification and Reimbursement by Buyer.
(a) From and after the Closing, Buyer shall indemnify and hold harmless
Seller from and against, and shall reimburse Seller for, any and all Damages
incurred thereby or caused thereto, directly or indirectly, based on, arising
out of, resulting from, relating to, or in connection with: (i) any breach of
or inaccuracy in any representation or warranty made by Buyer in this
Agreement, any Ancillary Agreement, the Buyer Disclosure Schedule or any other
certificate or document delivered by, or on behalf of, Buyer pursuant to this
Agreement or any Ancillary Agreement, other than those, if any, that have been
waived in writing by Seller, or (ii) any breach or violation of or failure to
fully perform any covenant, agreement, undertaking or obligation of Buyer set
forth in this Agreement or any Ancillary Agreement, other than those, if any,
that have been waived in writing by Seller.
For purposes of this Article IX and for purposes of determining whether
Seller is entitled to indemnification from Buyer pursuant to Section 9.3(a)(i)
hereof, any breach of or inaccuracy in any representation or warranty of Seller
shall be determined without regard to any materiality qualifications set forth
in such representation or warranty, and all references to the terms "material",
"materially", "materiality", "Material Adverse Effect" or any similar terms
shall be ignored for purposes of determining whether such representation or
warranty was true and correct when made.
(b) If the Closing occurs, Buyer shall have no Liability (for
indemnification or otherwise) with respect to any representation or warranty,
or covenant, agreement, undertaking or obligation to be performed and complied
with prior to the Closing Date, unless on or before the Closing Date Buyer is
given notice of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Seller.
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SECTION 9.4 Limitations on Amount - Seller.
(a) Seller shall not be liable for Damages arising in connection with its
indemnification obligations under Section 9.2(a) and (b) hereof until the
amount of such Damages exceeds $18,000,000 in the aggregate. If the aggregate
amount of such Damages exceeds $18,000,000, Seller shall be liable for the
amount of such Damages in excess of $18,000,000.
(b) Seller's maximum liability for Damages arising in conjunction with its
indemnification obligations under Section 9.2(a) and (b) hereof shall be an
amount equal to one half of the sum of (i) the Purchase Price and (ii) the
Special Dividend.
SECTION 9.5 Limitations on Amount - Buyer.
(a) Buyer shall not be liable for Damages arising in connection with its
indemnification obligations under Section 9.3 hereof until the amount of such
Damages exceeds $18,000,000 in the aggregate. If the aggregate amount of such
Damages exceeds $18,000,000 Buyer, shall be liable for the amount of such
Damages in excess of $18,000,000.
(b) Buyer's maximum liability for Damages arising in conjunction with its
indemnification obligations under Section 9.3 hereof shall be an amount equal
to one half of the sum of (i) the Purchase Price and (ii) the Special Dividend.
SECTION 9.6 Notice and Payment of Claims.
(a) Notice. The party entitled to indemnification pursuant to this Article
IX (the "Indemnitee") shall promptly notify the party liable for
indemnification pursuant to this Article IX (the "Indemnifying Party") and
shall provide to the Indemnifying Party as soon as practicable thereafter all
information and documentation necessary to support and verify any Damages that
the Indemnitee shall have determined to have given or may give rise to a claim
for indemnification hereunder and such other information and documentation as
may be reasonably requested by the Indemnifying Party, and the Indemnifying
Party shall be given access to all books and records in the possession or under
the control of the Indemnitee which the Indemnifying Party reasonably
determines to be related to such claim. Notwithstanding the foregoing, the
failure to so notify the Indemnifying Party shall not relieve the Indemnifying
Party of any Liability that it may have to any Indemnitee, except to the extent
that the Indemnifying Party demonstrates that it is prejudiced by the
Indemnitee's failure to give such notice.
(b) Payment. In the event an action for indemnification under this Article
IX shall have been finally determined, the amount of such final determination,
subject to the limitations of Sections 9.4 and 9.5, shall be paid to Seller or
Buyer, as the case may be, on
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demand in immediately available funds. An action, and the liability for and
amount of Damages therefor, shall be deemed to be "finally determined" for
purposes of this Article IX when the parties to such action have so determined
by mutual agreement or, if disputed, when a final non-appealable Order shall
have been entered.
(c) Interest. Any amounts not paid when due pursuant to this Article IX
shall bear interest from the date thereof until the date paid at a rate equal
to the prime rate of Wachovia Bank, N.A.
SECTION 9.7 Procedure for Indemnification - Third Party Claims.
(a) Upon receipt by an Indemnitee of notice of the commencement of any
Action by a third party (a "Third Party Claim") against it, such Indemnitee
shall, if a claim is to be made against an Indemnifying Party under this
Article IX, give notice to the Indemnifying Party of the commencement of such
Third Party Claim as soon as practicable, but in no event later than ten (10)
days after the Indemnitee shall have received notice of such Third Party Claim,
but the failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of any Liability that it may have to any Indemnitee, except
to the extent that the Indemnifying Party is prejudiced by the Indemnitee's
failure to give such notice.
(b) If a Third Party Claim is brought against an Indemnitee and it gives
proper notice to the Indemnifying Party of the commencement of such Third Party
Claim, the Indemnifying Party will be entitled to participate in such Third
Party Claim (unless the Indemnifying Party is also a party to such Third Party
Claim and the Indemnitee determines in good faith that joint representation
would be inappropriate) and, to the extent that the Indemnifying Party elects
to assume the defense of such Third Party Claim and appoint lead counsel
reasonably satisfactory to the Indemnitee and provides notice to the Indemnitee
of its election to assume the defense of such Third Party Claim, the
Indemnifying Party shall not, as long as it conducts such defense in a
reasonable manner, be liable to the Indemnitee under this Article IX for any
fees of other counsel or any other expenses with respect to the defense of such
Third Party Claim, in each case subsequently incurred by the Indemnitee in
connection with the defense of such Third Party Claim, other than reasonable
costs of investigation.
If the Indemnifying Party assumes the defense of a Third Party Claim, (i)
no compromise, discharge or settlement of, or admission of Liability in
connection with, such claims may be effected by the Indemnifying Party without
the Indemnitee's written consent (which consent shall not be unreasonably
withheld or delayed) unless (A) there is no finding or admission of any
violation of Law or any violation of the rights of any Person and no effect on
any other claims that may be made against the Indemnitee, and (B) the sole
relief provided is monetary damages that are paid in full by the Indemnifying
Party; (ii) the Indemnifying Party shall have no Liability with respect to any
compromise or settlement of
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such claims effected without its written consent (which consent shall not be
unreasonably withheld or delayed); and (iii) the Indemnitee shall cooperate in
all reasonable respects with the Indemnifying Party in connection with such
defense, and shall have the right to participate, at the Indemnitee's sole
expense, in such defense, with counsel selected by it. If proper notice is
given to an Indemnifying Party of the commencement of any Third Party Claim and
the Indemnifying Party does not give timely notice to the Indemnitee, but in no
event later than twenty (20) days after the Indemnitee's notice is given, of
its election to assume the defense of such Third Party Claim (or if the
Indemnitee is not entitled to assume such defense pursuant to the first
paragraph of this subsection (b)), the Indemnifying Party shall be bound by any
determination made in such Third Party Claim or any compromise or settlement
effected by the Indemnitee to which the Indemnifying Party has consented (which
consent shall not be unreasonably withheld or delayed), and the Indemnifying
Party shall be responsible for the reasonable fees and expenses of counsel
employed by the Indemnitee, which shall be promptly reimbursed for any such
fees and expenses, as and when incurred.
(c) The Indemnifying Party hereby consents to the non-exclusive
jurisdiction of any court in which a Third Party Claim is brought against the
Indemnitee for purposes of any claim that the Indemnitee may have under this
Agreement with respect to such Third Party Claim or the matters alleged
therein, and agrees that process may be served on the Indemnifying Party with
respect to such a claim anywhere in the world.
(d) Each party shall cooperate, and cause their respective Related Persons
to cooperate, in the defense or prosecution of any Third Party Claim and shall
furnish or cause to be furnished such records, information and testimony, and
attend such conferences, discovery proceedings, hearings, trials or appeals, as
may be reasonably requested in connection therewith.
SECTION 9.8 Tax Effect of Indemnification Payments. Seller and Purchaser
agree that any payment made under Article IX hereof will be treated by the
parties on their Tax returns as an adjustment to the Purchase Price.
SECTION 9.9 Remedies Exclusive. Absent a good faith claim of fraud or
wilful misconduct, the rights accorded to any Indemnitee under this Agreement
shall be the exclusive remedy available to such Indemnitee for any breach or
alleged breach of any representation, warranty, or covenant or any other claim
under or arising out of this Agreement or the transactions contemplated hereby.
Buyer acknowledges that absent fraud, misrepresentation, nondisclosure or any
breach of this Agreement, the indemnification rights provided under this
Article IX constitute Buyer's sole remedy with respect to any release of any
Hazardous Substance prior to Closing and Buyer waives any cause of action it
may have under CERCLA with respect to such release.
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ARTICLE X
MISCELLANEOUS
SECTION 10.1 Assignments; Successors; No Third Party Rights. Neither party
may assign any of its rights under this Agreement (including by merger or other
operation of law) without the prior written consent of the other parties hereto
(which may not be unreasonably withheld or delayed), and any purported
assignment without such consent shall be void, except that Seller hereby agrees
that Buyer may assign all and/or any of its rights under this Agreement or any
Section of this Agreement to one or more wholly owned Subsidiaries of Buyer but
any assignment will not relieve Buyer of its obligations under this Agreement.
In particular, one or more such Subsidiaries of Buyer may receive certain of
the Shares, the Transferred Property and/or the Seller Intellectual Property.
Upon Buyer's sale, disposition or other transfer, in whole or in part, of the
Business or assets or properties of any Company or any Company Subsidiary,
Seller hereby agrees that Buyer may assign, in whole or in part, any of Buyer's
indemnification rights related thereto set forth in Section 7.1, 7.11 or
Article IX hereof without the consent of Seller. Subject to the foregoing, this
Agreement and all of the provisions hereof shall apply to, be binding upon, and
inure to the benefit of the parties hereto and their successors and permitted
assigns and the parties indemnified pursuant to Article IX hereof. Nothing in
this Agreement, express or implied, is intended to confer upon any Person other
than the parties hereto any rights or remedies of any nature whatsoever under
or by reason of this Agreement or any provision of this Agreement, other than
any Person entitled to indemnity under Article IX hereof. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and permitted assigns.
SECTION 10.2 Entire Agreement. This Agreement, including the Disclosure
Schedule and Exhibits hereto, the Ancillary Agreements, the Confidentiality
Agreement, dated March 1, 2000, between Buyer and Seller (the "Confidentiality
Agreement"), and the other agreements and written understandings referred to
herein or otherwise entered into by the parties hereto on the date hereof,
constitute the entire agreement and understanding and supersede all other prior
covenants, agreements, undertakings, obligations, promises, arrangements,
communications, representations and warranties, whether oral or written, by any
party hereto or by any director, officer, employee, agent, Related Person or
Representative of any party hereto.
SECTION 10.3 Amendment or Modification. This Agreement may be amended or
modified only by written instrument signed by the parties hereto.
SECTION 10.4 Notices. All notices, requests, instructions, claims,
demands, consents and other communications required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly given on
the date delivered by hand or by courier service such as Federal Express, or by
other messenger (or, if delivery is
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refused, upon presentment) or upon electronic confirmation of a facsimile
transmission, or upon delivery by registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following addresses:
(a) If to Buyer:
Royal Bank of Canada
200 Bay Street
Royal Bank Plaza
Toronto, Ontario M5J 2J5
Facsimile: 416-974-0081
Attention: Peter W. Currie
Vice Chairman and Chief Financial Officer
and
RBC Insurance Holdings Inc.
55 City Centre Drive, Suite 1100
Mississauga, Ontario L5B 1M3
Facsimile: 905-949-8712
Attention: W. James Westlake
President and CEO
With a Copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Facsimile: (212) 558-3588
Attention: Donald J. Toumey, Esq.
(b) If to Seller:
The Liberty Corporation
2000 Wade Hampton Blvd.
Greenville, South Carolina 29615
Facsimile: 864-609-3176
Attention: Martha Williams, Esq.
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With a Copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Facsimile: (212) 450-4800
Attention: Dennis S. Hersch, Esq.
or to such other persons or addresses as the person to whom notice is given may
have previously furnished to the other in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 10.5 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF
THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 10.6 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
(a) THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK AND THE FEDERAL COURTS OF THE UNITED STATES
OF AMERICA LOCATED IN THE STATE OF NEW YORK SOLELY IN RESPECT OF THE
INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT AND OF THE
DOCUMENTS REFERRED TO IN THIS AGREEMENT, AND IN RESPECT OF THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY, AND HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS
A DEFENSE IN ANY ACTION FOR THE INTERPRETATION OR ENFORCEMENT HEREOF OR OF ANY
SUCH DOCUMENT, THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION MAY NOT BE
BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT THE VENUE THEREOF MAY NOT
BE APPROPRIATE OR THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE ENFORCED
IN OR BY SUCH COURTS, AND THE PARTIES HERETO IRREVOCABLY AGREE THAT ALL CLAIMS
WITH RESPECT TO SUCH ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED IN SUCH
A NEW YORK STATE OR FEDERAL COURT. THE PARTIES HEREBY CONSENT TO AND GRANT ANY
SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT
MATTER OF SUCH DISPUTE AND AGREE THAT MAILING OF
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PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE
MANNER PROVIDED IN SECTION 10.4 HEREOF OR IN SUCH OTHER MANNER AS MAY BE
PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY
DOCUMENT REFERRED TO IN THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
AND THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 10.6.
SECTION 10.7 Severability. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such provision or provisions shall be ineffective
only to the extent of such invalidity, illegality or unenforceability, without
invalidating the remainder of such provision or provisions or the remaining
provisions of this Agreement, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision or provisions had never been
contained herein, unless such a construction would be unreasonable.
SECTION 10.8 Waiver of Conditions.
(a) To the extent permitted by applicable Law: (i) no claim or right
arising out of this Agreement or the documents referred to in this Agreement
can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party;
(ii) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (iii) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the documents
referred to in this Agreement.
(b) The rights and remedies of the parties hereto are cumulative and not
alternative. Except where a specific period for action or inaction is provided
herein, neither the failure nor any delay on the part of any party in
exercising any right, power or privilege
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under this Agreement or the documents referred to in this Agreement shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any other or further exercise thereof
or the exercise of any other such right, power or privilege. The failure of a
party to exercise any right conferred herein within the time required shall
cause such right to terminate with respect to the transaction or circumstances
giving rise to such right, but not to any such right arising as a result of any
other transactions or circumstances.
SECTION 10.9 Actions of the Companies and the Company Subsidiaries.
Whenever this Agreement requires any Company or any Company Subsidiary to take
any action, such requirement shall be deemed to involve, with respect to
actions to be taken at or prior to the Closing, an undertaking on the part of
Seller to cause such Company or such Company Subsidiary to take such action.
SECTION 10.10 Descriptive Headings; Construction. The descriptive headings
herein are inserted for convenience of reference only and are not intended to
be part of, or to affect the meaning, construction or interpretation of, this
Agreement. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
SECTION 10.11 Counterparts. For the convenience of the parties hereto,
this Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such
counterparts shall together constitute the same agreement.
SECTION 10.12 Knowledge. When references are made in this Agreement of
information being "to the knowledge of the Seller"; "to the knowledge of Seller
and the Companies" or similar language, such knowledge shall refer to the
knowledge of the officers of Seller or of a Company set forth in Schedule
10.12. Such individuals shall be deemed to have "knowledge" of a particular
fact or other matter if: (a) such individual is actually aware of such fact or
other matter; or (b) a prudent individual would reasonably be expected to
discover or otherwise become aware of such fact or other matter; or (c) a
reasonably prudent individual would have conducted a reasonably comprehensive
investigation and as a result thereof would reasonably be expected to discover
or otherwise become aware of such fact or other matter in the course of
conducting such an investigation concerning the existence of such fact or other
matter.
SECTION 10.13 U.S. Dollars. All monetary references herein are in U.S.
dollars.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers duly authorized as of the date first written above.
THE LIBERTY CORPORATION
By: /s/ W. Hayne Hipp
-----------------------------------
Name: W. Hayne Hipp
Title: President and Chief
Executive Officer
ROYAL BANK OF CANADA
By: /s/ Peter W. Currie
-----------------------------------
Name: Peter W. Currie
Title: Vice Chairman and Chief
Financial Officer
By: /s/ W. James Westlake
-----------------------------------
Name: W. James Westlake
Title: Executive Vice President
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EXHIBIT A
INTELLECTUAL PROPERTY ASSIGNMENT
AND
ACKNOWLEDGMENT
THIS INTELLECTUAL PROPERTY ASSIGNMENT AND ACKNOWLEDGMENT (this
"Assignment") is made this ____ day of _________, 20__, by [SELLER], a _______
corporation, having its principal place of business at _______________________,
hereinafter referred to as "Seller", and [BUYER], a ________ corporation,
having its principal place of business at ______________________, hereinafter
referred to as "Buyer."
W I T N E S S E T H :
WHEREAS, Seller and Buyer have previously entered into a Purchase
Agreement (the "Purchase Agreement") dated as of June [ ], 2000 providing for
the purchase (the "Purchase") by Buyer of the stock of certain of the Seller's
subsidiaries as well as certain other assets of the Seller, including the
Trademarks (as hereinafter defined) and the Seller Intellectual Property (as
hereinafter defined);
WHEREAS, it is a condition to consummation of the Purchase, that Seller
and Buyer enter into this Assignment;
WHEREAS, Seller owns or has licenses to the trademarks and any
registrations and applications therefore as listed in Schedule A as well as
other intellectual property listed in Schedule A;
WHEREAS, to the extent related to the conduct of the Business, as defined
in the Purchase Agreement and as presently conducted, the trademarks and any
registrations and applications therefore as listed in Schedule A are
collectively referred to hereinafter as the "Trademarks" along with the other
intellectual property specified in Schedule A, collectively referred to as the
"Seller Intellectual Property";
WHEREAS, Buyer is desirous of acquiring Seller's entire right, title and
interest in and to the Seller Intellectual Property.
NOW, THEREFORE, in consideration of good and valuable consideration,
receipt and sufficiency of which is hereby acknowledged, and
<PAGE>
pursuant to the Purchase Agreement, Seller does hereby sell, assign, transfer,
set over and convey unto Buyer and its successors and assigns, as of the date
first above written, its entire right, title and interest in and to the Seller
Intellectual Property which includes the right to and full benefit of such
priorities as may now or hereafter be granted by local law, international
convention or treaty in and to the Seller Intellectual Property, together with
the good will of the Business symbolized by the Trademarks and all common law
rights associated with the Trademarks, any and all rights of enforcement with
respect to any Seller Intellectual Property, including all rights to sue or
recover for the past, present and future misappropriation, infringement or
other violation of the Seller Intellectual Property, and any and all choses in
action related thereto. All of the foregoing to be held and enjoyed by Buyer
for its own use and for the use of its successors, assigns or other legal
representatives, as fully and entirely as the same would have been held and
enjoyed by Seller if this transfer to Buyer had not been made.
Seller hereby requests and authorizes the Commissioner of Patents and
Trademarks of the United States of America and the Register of Copyrights of
the United States of America and any foreign register of any and all foreign
intellectual property rights transferred hereunder, whose collective duties
include issuing patents and copyrights, to issue any patent, or patent
resulting from pending applications or improvements, and to issue any
copyright, or copyright resulting from any application that is part of the
Seller Intellectual Property transferred hereunder, to Buyer, or its successors
and assigns, in accordance with the terms of this Assignment. Seller hereby
requests and authorizes any other official throughout the world whose duty it
is to register and record ownership of trademarks, patents and copyrights to
record Buyer, or its successors and assigns, as the assignee and owner of
right, title and interest assigned under this Assignment.
Seller shall provide to Buyer, its successors, assigns or legal
representatives, reasonable cooperation and assistance at Buyer's request and
expense (including the execution and delivery of any and all affidavits,
declarations, oaths, samples, exhibits, specimens, assignments, powers of
attorney or other documentation as may be reasonably required) in the
implementation or perfection of this Assignment.
This Assignment is an instrument of transfer contemplated by, and is
executed pursuant to, the Purchase Agreement and nothing contained herein shall
be deemed to modify any of the provisions of the Purchase Agreement or any
rights or obligations of the parties under the Purchase Agreement.
FURTHERMORE, Buyer acknowledges that neither this Assignment nor the
Purchase Agreement shall in any way limit the ability of Seller and its
2
<PAGE>
successors and assigns to use the words "Liberty" and "The Liberty Corporation"
and variants thereof as a (i) trade name, including in the operations of The
Liberty Corporation, and (ii) as a trademark or service mark in the provision
of goods and services in the broadcasting business.
IN WITNESS WHEREOF, each of Seller and Buyer has caused this Assignment to
be executed and its corporate seal to be hereunto affixed.
[SELLER]
By:
---------------------------------
Name:
Title:
[BUYER]
By:
---------------------------------
Name:
Title:
3
<PAGE>
STATE OF ___________________________)
) ss.:
COUNTY OF __________________________)
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared ______________, a [title] of
[SELLER], known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the act of such
Corporation, and that he executed the same for and as the act of such
Corporation for the purposes and consideration therein expressed and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ______ day of _________,
20__.
____________________________
Notary Public
4
<PAGE>
STATE OF ___________________________)
) ss.:
COUNTY OF __________________________)
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared ______________, a [title] of
[BUYER], known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of such
Corporation, and that he executed the same for and as the act of such
Corporation for the purposes and consideration therein expressed and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ______ day of _________,
20__.
____________________________
Notary Public
5
<PAGE>
EXHIBIT B
[Sub-Owned Real Property]
AFFIDAVIT OF TITLE
(this "Affidavit")
STATE OF ___________________________)
) ss.:
COUNTY OF __________________________)
The undersigned, _______________ a _______________ of [NAME OF PARENT], a
__________ corporation having an address at __________ (the "Corporation"),
being duly sworn deposes and says:
1. I am a _______________ of the Corporation, am familiar with the
business of the Corporation and its subsidiary __________, a __________
corporation (the "Subsidiary"), am a citizen of the United States and am at
least 18 years old. The execution and delivery of this Affidavit has been duly
authorized by the Corporation. The Subsidiary is duly formed and in good
standing under the laws of the State of __________. The statements in
paragraphs 2 through 5 below are true to the best of my knowledge, information
and belief.
2. The Subsidiary is the fee owner of the land known as __________ and
more particularly described in Exhibit A hereto (the "Property"). The
Subsidiary has owned the Property since __________; and, since that date, its
ownership has not been openly challenged. There is no outstanding contract or
option to purchase any part of the Property.
3. The Subsidiary and the Corporation are the only parties in possession
of the Property and there is no outstanding lease or option to lease any part
of the Property, except __________ [describe any that exist and any right of
the Parent to lease or use space under the Agreement].
4. There are no bankruptcy, reorganization or similar proceedings pending
against the Subsidiary.
5. Except for Permitted Exceptions (as such term is defined in the
Agreement) or as otherwise disclosed on the Subsidiary's Balance Sheet, as the
case may be, the Subsidiary (i) has not received any notice of any outstanding
mechanic's, materialman's or similar lien; (ii) within __________ [the
statutory period for filing a mechanic's, materialman's or similar lien in the
South Carolina], the Subsidiary has not contracted for any labor or materials
that might
<PAGE>
be or become the subject of a mechanic's, materialman's or similar lien upon
the Property; (iii) the Subsidiary has no knowledge of any easement or claim of
any easement on the Property; and (iv) the Subsidiary has no knowledge of any
taxes due or special assessments on the Property.
6. The Corporation makes this Affidavit in order to induce the Title
Company to issue its policy of title insurance to the Buyer and its lender, if
any, the Title Policy and is aware that the Title Company will rely on the
statements and agreements made in this Affidavit in issuing the Title Policy.
[NAME OF PARENT]
By:________________________________
Name:
Title:
Sworn to before me this
_____ day of __________.2000
_______________________________
Notary Public
2
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EXHIBIT C
[Parent - Sub Transferred Property]
AFFIDAVIT OF TITLE AND GAP INDEMNITY
(this "Affidavit")
STATE OF ___________________________)
) ss.:
COUNTY OF __________________________)
The undersigned, _______________ a _______________ of [NAME OF PARENT], a
__________ corporation having an address at __________ (the "Corporation"),
being duly sworn deposes and says:
1. I am a _______________ of the Corporation, am familiar with the
business of the Corporation, am a citizen of the United States and am at least
18 years old. The execution and delivery of this Affidavit has been duly
authorized by the Corporation. The Corporation is duly formed and in good
standing under the laws of the State of __________. The statements in
paragraphs 2 through 5 below are true to the best of my knowledge, information
and belief.
2. The Corporation is the fee owner of the land known as __________ and
more particularly described in Exhibit A hereto (the "Property"). The
Corporation has owned the Property since __________; and, since that date, its
ownership has not been openly challenged. There is no outstanding contract or
option to purchase any part of the Property, except __________ [describe the
Agreement].
3. The Corporation and its subsidiary, __________ (the "Subsidiary") are
the only parties in possession of the Property and there is no outstanding
lease or option to lease any part of the Property, except __________ [describe
any that exist and any right of the Parent to lease or use space under the
Agreement].
4. There are no bankruptcy, reorganization or similar proceedings pending
against the Corporation.
5. Except for Permitted Exceptions (as such term is defined in the
Agreement) or as otherwise disclosed on the Corporation's Balance Sheet, as the
case may be, the Corporation (i) has not received any notice of any
outstaneding mechanic's, materialman's or similar lien; (ii) within __________
[the statutory period for filing a mechanic's, materialman's or similar lien in
the South
<PAGE>
Carolina], has not contracted for any labor or materials that might be or
become the subject of a mechanic's, materialman's or similar lien upon the
Property; (iii) the Corporation has no knowledge of any easement or claim of
any easement on the Property; and (iv) the Corporation has no knowledge of any
taxes due or special assessments on the Property.
6. In order to induce __________ (the "Title Company") to issue its title
insurance policy (the "Title Policy") to __________ (the "Buyer") and its
lender, if any, without exception for encumbrances created by the Corporation
while it owned the Property and which first appear of record during the period
(the "Gap Period") commencing on __________1 and expiring on the earlier to
occur of (a) the date on which the deed from the Corporation to the Subsidiary
(the"Deed") is filed for record and (b) five days after to the date hereof
(such encumbrances being herein the "Gap Matters"), the Corporation hereby
agrees to indemnify the Title Company from all loss or damage which it may
suffer arising out of such Gap Matters, provided that the Title Company shall
promptly file the Deed for record. This indemnity shall cease, terminate and be
of no further force or effect upon the earlier of (i) the end of the Gap Period
if the Title Company has failed to file the Deed for record by that time, or
(ii) 30 days after the date hereof, except as to Gap Matters as to which notice
is given to the Corporation during such 30-day period, as to which Gap Matters
this indemnity shall continue until the same have been eliminated.
7. The Corporation makes this Affidavit in order to induce the Title
Company to issue its policy of title insurance to the Buyer and its lender, if
any, the Title Policy and is aware that the Title Company will rely on the
statements and agreements made in this Affidavit in issuing the Title Policy.
[NAME OF PARENT]
By:________________________________
Name:
Title:
Sworn to before me this
_____ day of __________.2000
_____________________________
Notary Public
--------
1 Insert effective date of the Title Company's title commitment as
continued to the most recent date to which the real estate records are
available for search. If there is no gap between such date and the Closing
under the Agreement and the Deed is placed with the Title Company to be
recorded on that date, then delete the Gap Indemnity (delete this paragraph 6).
2
<PAGE>
EXHIBIT D
LEASE
THIS LEASE (this "Lease"), made and executed, as of this ____ day of
_______, 2000, by and between LIBERTY LIFE INSURANCE COMPANY, a __________
corporation, herein called "Lessor" and THE LIBERTY CORPORATION, a ___________
corporation, herein called "Lessee".
WITNESSETH
Lessor hereby leases to Lessee and Lessee hereby leases from Lessor a
portion of the building (the "Building") designated as _________ situate on
real property commonly known and designated as 2000 Wade Hampton Blvd.,
Greenville County, South Carolina, and as more particularly described on
Exhibit A attached hereto and made a part hereof (the "Real Property") , which
portion of the Building is as further shown in Exhibit B attached hereto and
made a part hereof, (the "Premises"). For purposes of this Lease, the Premises
shall be deemed to contain____ square feet. Lessee shall accept delivery of the
Premises in "as is" condition as of the Commencement Date (as hereinafter
defined).
1. TERM
The term of this Lease, (the "Term"), shall commence on the date hereof
(the "Commencement Date"), and shall continue through 11:59 p.m. on December
31, 2001 (the "Expiration Date"), unless terminated sooner as set forth herein.
2. BASE RENT
(a) Lessee shall pay to Lessor rent, (the "Rent"), for the Premises in the
amount equal to Lessee's Pro Rata Share (as hereinafter defined) of all costs
and expenses, (including without limitation all real estate taxes and
assessments, insurance, water and sewer rents) paid or incurred by or on behalf
of Landlord with respect to the operation, cleaning, repair, safety,
management, administration, security and maintenance of the Real Property
<PAGE>
(the "Operating Expenses"). Landlord shall furnish to Lessee a statement
setting forth in reasonable detail Landlord's good faith estimate of the
Operating Expenses for the Term and the method of calculation of the Operating
Expenses. Lessee shall pay to Landlord, on the first day of each month during
the Term, an amount equal to one-twelfth (1/12th) of Landlord's estimate of the
Lessee's Pro Rata Share of Operating Expenses for the Term. Lessee's obligation
to pay the estimated Rent payment shall accrue as of the Commencement Date. In
estimating Operating Expenses hereunder, Landlord shall act in a commercially
reasonable manner. Within one hundred twenty (120) days after the end of the
Term, Landlord shall furnish to Lessee a statement accompanied by a reasonably
detailed computation of Operating Expenses from which Landlord shall compute
the Rent. If such statement shall show that the sums paid by Lessee under this
Section 2 exceeded Lessee's Pro Rata Share of Operating Expenses actually
incurred by Landlord during the Term, Landlord shall refund to Lessee, within
thirty (30) days, the amount of such excess, and if such statement shall show
that the sums so paid by Lessee were less than Lessee's Pro Rata Share of
Operating Expenses actually incurred by Landlord during the Term, Lessee shall
pay the amount of such deficiency within thirty (30) days thereafter. Lessee
shall have the right to object to any matter set forth in such statement within
sixty (60) days after Landlord delivers such statement to Lessee.
3. [Intentionally omitted].
4. PUBLIC UTILITIES
Lessor shall pay all charges for utilities used in the Premises.
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<PAGE>
5. USE
Lessee may use the Premises for general office purposes (and for any other
purposes for which the Premises have been generally used during the two (2)
years immediately preceding the Commencement Date) during the Term hereof, and
for no other purpose.
6. REPAIRS AND MAINTENANCE
(a) Should it become necessary during the Term hereof to repair the
structure of the Building, including but not limited to the roof, exterior
walls, floor slab, windows, and exterior doors or any portion of the Building
systems, the Lessor shall make such repairs at its sole cost and expense,
within a reasonable time after notice to do so by Lessee, unless such repairs
are required as the result of the gross negligence or willful misconduct of
Lessee, and in this event, such necessary repairs shall be made by Lessee at
its expense.
(b) Lessee shall keep the Premises, including all equipment, in good
condition and repair and in a good, clean and safe condition at all times
during the Term of this Lease and return the same to the Lessor at any
termination hereof in as good condition and state of repair as the same are in
as of the commencement of the Term hereof, except for loss or damage occasioned
by reasonable wear and tear or excepted perils as hereinafter defined.
(c) In the event that during the Term hereof any alteration, addition, or
other change to the Premises, or any portion thereof, is required to be made by
the enactment, amendment or repeal of any statute, ordinance, rule or
regulation, or by the rendering of any judicial or administrative decision,
then and in that event:
(i) if such alteration, addition or change is required solely by reason
of the manner or mode or character of Lessee's use of the Premises,
Lessee shall have the right to terminate this Lease by giving notice
to Lessor, in which case this Lease shall terminate as of the date
that is
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<PAGE>
sixty (60) days after the date of such notice is given; if Lessee
shall not elect to terminate this Lease, Lessee shall make such
alteration, addition or change at Lessee's expense and in compliance
with the terms of this Lease;
(ii) if said alteration, addition or change is required for any reason,
including, but not limited to, a structural defect in or other
condition relating to the Premises which was in existence as of the
date hereof, then said alteration, addition or change shall be made
and paid for by Lessor.
(d) Lessor, its agents and representatives, may enter upon the Premises at
any reasonable time and without unreasonably interfering with Lessee's
business, after 24 hour advance notice to Lessee, emergencies excepted, for the
purpose of inspecting the same.
(e) Notwithstanding the foregoing provisions, if Lessee has actual
knowledge of any condition reasonably requiring any repair to the Premises or
requiring the performance of any other act, and a delay in the performance
thereof may result in material loss or damage to the Premises, Lessee shall
have the right, at its option, to make such repairs or perform such act
promptly without obtaining Lessor's prior approval if otherwise required
hereunder. Lessee shall as soon as practicable thereafter notify Lessor of the
facts and shall be entitled to be reimbursed promptly for all its reasonable
costs incurred in connection therewith, provided it is not Lessee's
responsibility under this Lease to make said corrections.
7. ALTERATIONS AND IMPROVEMENTS
Lessee shall not make any alterations or improvements to the Premises
without first obtaining Lessor's written approval. Any alterations and
improvements shall become the property of Lessor, subject to Lessee's right to
use same during the Term hereof.
-4-
<PAGE>
8. SIGNS
Lessee may, with the prior written consent of Lessor, erect, place or
maintain such sign or signs on the Premises as are usual to the type of
operation conducted by Lessee or required by applicable law or regulation.
9. MECHANIC'S LIENS
(a) If a "mechanic's lien" or other statutory lien is filed against the
Premises arising from any work, labor or material furnished to Lessee in
connection with any alterations or improvements made by Lessee upon the
Premises, Lessee shall, subject to the following, promptly pay and discharge
the same.
(b) If Lessee fails to pay and discharge the same for a period of thirty
(30) days after such lien shall have been filed against the Premises, Lessor
may, at its option, pay all or any portion of the amount of said lien, and pay
any sum necessary to prevent a judgment or execution, or sale or forfeiture of
the Premises, or redeem the same from any sale or forfeiture made on account
thereof. The amounts so paid, including all expenses and reasonable attorney's
fees, shall be repaid by Lessee to Lessor within 10 business days after demand,
together with interest thereon at the rate of ten percent (10%) per annum from
the date of payment by Lessor until repaid as aforesaid.
(c) A copy of any notice, writ, process or demand served upon either
Lessor, or Lessee with respect to said "mechanic's lien", or other statutory
lien, shall promptly be forwarded to the other party.
10. PUBLIC LIABILITY INSURANCE AND INDEMNIFICATION
(a) Except to the extent of Lessor's gross negligence or willful
misconduct, Lessee agrees to indemnify, defend and hold Lessor harmless from
any and all liability and expense arising from the use or occupation of the
Premises by Lessee or anyone therein with Lessee's permission, or from any
breach of this Lease.
-5-
<PAGE>
(b) During the Term, Lessee shall secure and maintain, at its expense,
primary and non-contributory insurance as follows:
(i) Commercial General Liability Insurance covering the Premises on
an occurrence basis against all claims for personal injury, bodily injury,
death and property damage, including contractual liability covering the
indemnification provisions of this Lease. Such insurance shall be for such
limits that are reasonably required by Lessor from time to time but not
less than a combined single limit of Five Million Dollars ($5,000,000).
Such policy shall name Lessor as additional insured and shall provide (x)
that the same may not be canceled or terminated without at least thirty
(30) days written notice to Lessor by the company issuing the policy and
(y) that no act or omission to act of Lessee shall invalidate such
insurance as to Lessor;
(ii) Workers' Compensation and Employers' Liability Insurance for an
amount not less than One Million Dollars ($1,000,000), both in accordance
with the laws of South Carolina;
(iii) "All Risk" Insurance in an amount adequate to cover the full
replacement cost of all equipment, installations, fixtures and contents of
the Premises in the event of loss
A copy of each insurance policy or certificate thereof shall be, issued by
an insurer reasonably satisfactory to Lessor and authorized to issue such
policy or policies shall name Lessor and mortgagee of Lessor as additional
insured and shall otherwise be reasonably satisfactory to Lessor, shall be
delivered to the Lessor within ten (10) days following commencement of the
term. Such insurance, by its terms or by endorsement, shall waive any right of
subrogation of the insurer against Lessor, its agents and employees.
11. FIRE AND EXTENDED COVERAGE INSURANCE
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<PAGE>
(a) The Lessor shall, at its expense, secure and maintain fire and
extended coverage insurance upon the Building. Such insurance shall be in an
amount at least equal to the value of the Building, shall be written by an
insurance company or association authorized to issue such policies under the
laws of the State of South Carolina. A copy of each insurance policy or
certificate thereof shall be delivered to the Lessee within thirty (30) days
following commencement of the term, and shall not be subject to cancellation
upon less than thirty (30) days written notice to Lessee. Such insurance, by
its terms or by endorsement, shall waive any right of subrogation of the
insurer against Lessee, its agents and employees, for any loss or damage
resulting from fire or extended coverage perils. Lessee shall not take any
action which could cause an increase in Lessor's insurance premiums.
12. GOVERNMENTAL REGULATIONS
(a) Lessee shall, at its expense, comply with all applicable laws,
ordinances and regulations and insurance requirements in its use of the
Premises, subject to the provisions of the article hereof entitled "Repairs and
Maintenance".
(b) Lessee shall, however, have the right to contest or review by legal
proceedings or in any such other manner as Lessee deems suitable, any such
laws, ordinances and regulations. Such proceedings may be commenced in the name
of the Lessor, Lessee, or both. Lessor shall cooperate with Lessee, execute
such documents and perform such acts as may be reasonably required to
effectively prosecute such contest or review, all at Lessee's sole expense.
13. RIGHT TO ASSIGN
(a) Lessee shall not assign the Premises, or any part thereof, or
transfer, assign, hypothecate or encumber this Lease, or any part hereof, or
any right or interest herein except to an entity that controls, is controlled
by or is under common control with Lessee. For purposes hereof, assignment
shall be deemed to include any change of control of Lessee,
-7-
<PAGE>
provided, however, that such an assignment shall not be deemed a default under
this Lease provided Lessee vacates the Premises no later than ninety (90) days
after such assignment becomes effective.
14. DESTRUCTION OF THE PREMISES
Should the Premises be destroyed or damaged in whole or in part at any
time during the Term by fire, earthquake, act of God, or acts of the public
enemy, or by any other casualty, the rights and duties of the parties with
respect to reconstruction, rebuilding or repair thereof, and with respect to
the continuance or termination of this Lease, shall be as follows:
(a) If the cost of reconstructing, rebuilding or repairing is less than
fifty percent (50%) of the total value of all improvements, excluding personal
property and improvements made by Lessee, Lessor shall reconstruct, rebuild or
repair the Premises with no unreasonable delay, at Lessor's sole cost and
expense. During the period of such reconstruction, rebuilding or repairing, the
Base Rent herein provided to be paid by Lessee shall be reduced on a pro rata
basis in the same proportion that the area of the Premises not able to be
occupied by Lessee during such period bears to the area of Premises prior to
such casualty.
(b) If the cost of reconstructing, rebuilding or repairing is fifty
percent (50%) or more of the total value of all improvements, excluding
personal property and improvements made by Lessee, either Lessee or Lessor may
terminate this Lease at any time within thirty (30) days from the date of such
casualty upon notice to the other. In the event this Lease is not so
terminated, Lessor shall reconstruct, rebuild or repair said Premises,
exclusive of improvements made by Lessee, without unreasonable delay, at
Lessor's sole cost and expense. In this event, the Base Rent shall be prorated
during the period of such reconstruction, rebuilding or repairing in the manner
provided in subparagraph (a) above.
(c) Notwithstanding the foregoing provisions if, in Lessee's reasonable
opinion, the damage caused by any such casualty cannot be repaired within
ninety (90) days after the date
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of such casualty and in addition, such damage makes the use of said Premises by
Lessee impracticable, Lessee shall have the right at its option, to cancel this
Lease upon notice to Lessor within twenty (20) days from and after the date of
such casualty.
(d) Any such termination shall be deemed effective as of the date of the
casualty and each of the parties hereto shall be relieved of all further
obligations hereunder not accrued before said date, except such obligations as,
by their terms, must be performed or completed after such termination.
15. DEFAULT
All the provisions of this Lease are conditions precedent to be faithfully
and fully performed and observed by Lessee to entitle Lessee to continue its
possession of the Premises, and:
(i) if Lessee shall fail to pay rent, or make any payment due or owing
by Lessee to Lessor under this Lease, and if such default is not
rectified within ten (10) days after written notice thereof is given
Lessee by Lessor or if Lessee shall fail to keep in effect any
insurance required pursuant to the terms of this Lease; or
(ii) if Lessee fails to perform any other condition, covenant or
provision in this Lease (except the payment of rent) and fails to
rectify said default within thirty (30) days after notice thereof is
given to Lessee by Lessor, provided, however if such default cannot
with reasonable diligence be rectified within said thirty (30) day
period then it shall be deemed rectified if Lessee shall have
commenced to rectify such default within said thirty (30) day period
and shall diligently continue its efforts until such default is fully
rectified; or
(iii) if Lessee shall file a voluntary petition in bankruptcy or
insolvency, or shall be adjudicated a bankrupt or insolvent, or shall
file any petition or answer seeking any
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reorganization, readjustment, liquidation, dissolution or similar
relief under the present or any future federal bankruptcy act or any
other present or future applicable federal, state or other statute or
law (foreign or domestic), or shall make a general assignment for the
benefit of creditors or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver or liquidator of Lessee or of all
or any substantial part of Lessee's property; or
(iv) If, within ninety (90) days after the commencement of any filing
by a third party against Lessee of any proceeding of the nature
referred to in subsection (iii) above, whether by the filing of a
petition or otherwise, such proceeding shall not have been dismissed,
or if, within ninety (90) days after the appointment of any trustee,
receiver or liquidator of Lessee or of all or any substantial part of
Lessee's property, without the consent of Lessee, such appointment
shall not have been vacated or otherwise discharged, or if any
execution or attachment shall be issued against Lessee or any of
Lessee's property pursuant to which the Premises shall be taken or
occupied or attempted to be taken or occupied;
Lessor can avail itself of all rights and remedies available to it, including,
without limitation, Lessor's right to evict Lessee and to collect all rent for
the remainder of the term of this Lease.
In the event Lessor commences any summary proceeding or action for
non-payment of rent, Lessee covenants and agrees not to interpose, by
consolidation of actions or otherwise, any counterclaim in any such proceeding,
it being agreed that nothing contained herein shall be deemed to prevent Lessee
from interposing a counterclaim if failure to do so would constitute a waiver
of the counterclaim or from bringing a separate proceeding with respect to such
counterclaim to be deemed a waiver thereof. To the extent permitted by law,
Lessor and Lessee hereby waive trial by jury in any matter arising out of or in
any way connected with this Lease. The provisions of this paragraph shall
survive the termination of this Lease.
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16. QUIET ENJOYMENT
(a) If, and so long as, Lessee pays all rent due hereunder and performs
Lessee's other obligations hereunder, Lessee shall peaceably and quietly hold
and use the Premises during the Term hereof without any disturbance by Lessor
or others claiming through or under Lessor.
17. NOTICES
Any notice required or permitted hereunder shall be given in writing and
delivered: a) by fax transmission confirmed by the recipient; or b) by
certified mail, return receipt requested, postage prepaid, addressed as set
forth below; or c) by a reputable international overnight courier service; or
d) by personal service made on the individual named below for the purposes of
service, with a receipt obtained from such person. Notice shall be directed as
follows:
If to Lessor:
With a copy to:
If to Lessee:
With a copy to:
A notice given by mail will be deemed given at the close of business on the
fifth (5th) business day next subsequent to the date of mailing indicated on
the official U.S. Postal Service receipt, or upon actual receipt or upon
refusal of delivery, whichever shall first occur. Notice given by fax or by
personal service shall be deemed given upon receipt. Notice given
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by courier shall be deemed given on the next business day. A party may change
its address for notices by giving notice to the other party of the change in
the manner aforesaid.
18. SUCCESSORS AND ASSIGNS
(a) All of the provisions of this Lease shall also extend to, bind and
inure to the benefit of, as the case may require, each and every heir,
administrator, successor and assign of the respective parties hereto. Any
reference in this Lease to either party shall be deemed to include the heirs
administrators, successors and assigns of each of the parties hereto. All of
the covenants and conditions of this Lease shall be construed as covenants
running with the land. Lessor shall give written notice to Lessee of any
assignment, sale, or transfer of the Premises.
(b) Nothing contained in this paragraph, however, shall constitute nor be
construed as a waiver of the necessity of obtaining in each instance the
approval of Lessor wherever required hereunder.
19. ASSISTANCE AND COSTS IN LAWSUITS
Should suit be instituted for collection of any Base Rent or other payment
of which is provided for herein, recovery of possession of the Premises or
enforcement by either party hereto of any of the terms, conditions or covenants
herein contained, or right hereunder, the prevailing party therein shall
recover from the other in addition to any other judgment or recovery through
said suit, such costs and reasonable attorney's fees as it may have incurred in
connection therewith.
20. CONDEMNATION
If a material area of the improvements occupied by Lessee hereunder shall
be taken or condemned by any competent authority for any public or quasi-public
use or purpose such that Lessee, in its reasonable discretion, shall determine
that it is unable to carry on its
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activities at the Premises, Lessee shall have the right to terminate this Lease
on the date when said area is so taken. If less than a material area of the
Premises is taken or condemned, Lessor and Lessee shall cooperate to
reconfigure the remaining portion of the Premises for Lessee's use. Except as
provided below, all condemnation awards shall belong to Lessor, but Lessor
shall reimburse Lessee for any prepaid Base Rent on a daily pro rata basis.
Notwithstanding the foregoing, Lessor shall have the right to assert a
claim against the condemning body or authorities for any damage to the Building
resulting from any such condemnation proceedings, except that Lessee shall have
the right to assert a claim against the condemning body or authorities for any
damage resulting from any such condemnation proceedings to improvements made by
it in the Premises, and for business interruption and relocation costs, and
Lessor shall not share in the proceeds of such claim.
21. HOLDING OVER
In the event Lessee shall hold over possession of the Premises upon the
expiration of the Term herein set forth, with the consent, express or implied,
of the Lessor, such holding shall be construed to be a use and occupancy from
month to month upon the same terms, covenants and conditions as set forth
above, except that the Base Rent shall increase by fifty percent (50%) from the
rate in effect immediately prior to such occupancy and the occupancy may be
terminated at any time with thirty (30) days notice from Lessor.
22. TERMINATION OPTION
Provided that Lessee is not then in default under this Lease, Lessee shall
have the option, without payment of any cancellation premium or penalty, of
terminating this Lease by giving Lessor not less than 90 days prior written
notice specifying that Lessee is exercising its option to terminate this Lease.
23. REMEDIES
The remedies provided the parties herein shall be cumulative and in
addition to any other remedies provided by law or equity.
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24. ENTIRETY
This Lease contains the entire agreement of the parties hereto and no
representations, inducements, promises, or agreements between parties not
embodied herein shall be of any force or effect. The instrument may not be
changed orally. Any amendments, modification, additions, or alterations of this
instrument shall be in writing signed by both Lessor and Lessee.
25. CONSTRUCTION OF LEASE
The terms "Lessor" and "Lessee" when used herein shall be taken to include
the singular and the plural and masculine, feminine, or neuter gender as may
fit the case and shall include heirs and administrators.
26. BROKERS OR FINDERS
Lessor and Lessee each represent it has not used the services of a real
estate broker for this transaction and shall indemnify and hold each other
harmless from any such claims for a commission by a broker or finder.
27. LESSOR SERVICES
(a) During the term of this Lease, Lessor shall furnish and distribute to
the Premises heating, ventilating and air conditioning ("HVAC") as are provided
to other portions of the Building and the other Buildings on the Real Property.
(b) During the term of this Lease, Lessor shall cause the Premises to be
cleaned substantially in accordance with the cleaning specifications from time
to time established by Lessor for the Building. Lessor and its cleaning
contractor, if any, and their employees shall have access to the Premises, and
the use of Lessee's light, power and water without charge therefor, at all
times. If Lessee shall have a separate area for the storage, preparation,
service
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or consumption of food or beverages in the Premises, Lessee shall. at its
expense, cause such portions of the Premises to be cleaned daily in a manner
reasonably satisfactory to Lessor.
(c) During the term of this Lease, Lessor shall supply an adequate amount
of tepid and cold water to the building standard lavatories, wash rooms and
wash closets for normal office use.
(d) Lessor reserves the right to stop, interrupt or reduce service of the
HVAC systems, elevators, electrical or plumbing or any other service or systems
because of events beyond the reasonable control of Lessor or for repairs or
improvements which, in the reasonable judgment of Lessor, are deemed necessary
or desirable. Lessor shall have no liability to Lessee for failure to supply
any such service or system during such period.
28. MISCELLANEOUS
(a) This lease shall be governed by, and construed in all respects in
accordance with, the laws of the State of South Carolina.
(b) Lessor and Lessee agree that in all disputes arising out of this
Lease, Lessor and Lessee shall be governed by the terms of that certain
Purchase Agreement, dated as of ________, 2000, to which each of Lessor and
Lessee is a party.
(c) The failure of either party at any time to insist upon the strict
performance of any obligation of this Lease, or to exercise any right herein
contained, shall not be construed as a waiver or relinquishment of the
performance of such obligation or of the right to exercise any such right in
the future.
(d) Lessee and Lessee's invitees shall faithfully observe and comply with,
and shall not permit a violation of, any rules and regulations Lessor shall
reasonably adopt with respect to the Building.
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(e) The term "Lessor" shall mean only the owner at the time in question of
the present lessor's interest in the Premises and, in the event of a sale or
transfer of the Building (by operation of law or otherwise) the grantor or
transferor shall be and hereby is (to the extent of the interest or portion of
the Premises sold or transferred) automatically and entirely released and
discharged, from and after the date of such sale or transfer, of all liability
in respect of the performance of any of the terms of this Lease on the part of
Lessor thereafter to be performed from and after such date of transfer;
provided that the purchaser or transferee shall be deemed to have assumed and
agreed to perform all of the terms of this Lease on the part of Lessor to be
performed during such period of ownership.
(f) No recourse shall be had on any of Lessor's obligations hereunder or
for any claim based thereon or otherwise in respect thereof against any
incorporator, subscriber to the capital stock, shareholder, officer, director,
past, present or future, of any corporation or any partner of any partnership
or joint venturer of a joint venture or member of a limited liability company
that shall be Lessor hereunder or included in the term "Lessor" or any
successor of any such corporation, or against any principal, disclosed or
undisclosed, or any affiliate of any party that shall be Lessor or included in
the term "Lessor", whether directly or through Lessor or through any receiver,
assignee, trustee in bankruptcy or through any other person, whether by virtue
of any constitution, statute or rule of law or by enforcement of any assessment
or penalty or otherwise, except to the extent of the interest of any of the
foregoing in the Building, all such liability, except as aforesaid, being
expressly waived and released by Lessee.
(g) Lessee shall look solely to Lessor's estate and interest in the
Building and the rents, issues and profits thereof, and any insurance and
condemnation awards or payments, for the satisfaction of any right of Lessee
for the collection of a judgment or other judicial process or arbitration award
requiring the payment of money by Lessor and no other property or assets of
Lessor, Lessor's agents, incorporators, shareholders, officers, directors,
partners, principals (disclosed or undisclosed) or affiliates shall be subject
to levy, lien, execution,
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attachment or other enforcement procedure for the satisfaction of Lessee's
rights and remedies under of with respect to this Lease, the relationship of
Lessor and Lessee hereunder or under law, or Lessee's use and occupancy of the
Premises or any other liability of Lessor to Lessee. The terms and provisions
of this paragraph are solely for the benefit of Lessor and the other parties
referred to hereinabove and shall not apply to or be for the benefit of any
insurance company providing any form of insurance to Lessor.
(h) This Lease and Lessee's rights hereunder are subject and subordinate
to (a) all present and future ground leases, and similar leases (collectively,
the "Superior Lease"), (b) all present and future mortgages and building loan
agreements, which may now or hereafter affect all or any portion of the Land,
the Building or the Superior Lease and each advance made under the Superior
Mortgage, and (c) all renewals, modifications, spreaders, consolidations,
replacements, substitutions and extensions of the Superior Lease and the
Superior Mortgage; provided Lessee's use, possession and enjoyment of the
Premises shall not be disturbed and this Lease shall continue in full force and
effect as long as Lessee is not in default under the terms hereof. The
provisions of this Section shall be self-operative and no further instrument of
subordination shall be required. Lessee shall promptly execute and deliver, at
its expense, any instrument, in recordable form if requested, that Lessor may
reasonably request to evidence and confirm such subordination.
(i) This Lease contains the entire agreement between the parties. No
modification or amendment of this Lease shall be effective unless in writing
signed by the parties. This Lease shall be governed by, and construed in
accordance with the laws of the State of South Carolina.
(j) LESSEE AND LESSOR EXPRESSLY AGREE THAT THERE ARE AND SHALL
BE NO IMPLIED WARRANTIES OF MERCHANTABILITY, HABITABILITY, FITNESS
FOR A PARTICULAR PURPOSE OR ANY OTHER KIND ARISING OUT OF THIS
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LEASE, AND THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE EXPRESSLY SET
FORTH IN THIS LEASE.
(k) Every agreement contained in this Lease is, and shall be construed as,
a separate and independent agreement. If any term of this Lease or the
application thereof to any person or circumstances shall be invalid and
unenforceable, the remaining provisions of the Lease, the application of such
term to persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of the
day and year first hereinabove written.
Lessee:
By:________________________________________
Name:
Title:
Lessor:
By:________________________________________
Name:
Title:
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