SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Rule 14a-6(e)(2)
THE LIBERTY CORPORATION
---------------------------------------------------
(Name of Registrant as Specified in Its Charter)
---------------------------------------------------
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<PAGE>
[THE LIBERTY CORPORATION LOGO]
The Liberty Corporation
2000 Wade Hampton Boulevard
Greenville, South Carolina 29615
(864) 609-8256
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
THE LIBERTY CORPORATION TO BE HELD ON SEPTEMBER 29, 2000
To the Shareholders of The Liberty Corporation:
A special meeting of the shareholders of The Liberty Corporation will be
held at its headquarters building, 2000 Wade Hampton Boulevard, Greenville, SC
29615 at 11:00 A.M., local time, on September 29, 2000, for the following
purposes:
1. To consider and vote upon a proposal to approve and adopt the purchase
agreement dated as of June 19, 2000 between us and Royal Bank of Canada, and to
approve the sale of our insurance operations (which, as a matter of South
Carolina law, may constitute substantially all of our property) pursuant to
such agreement, as described in the attached proxy statement; and
2. To transact such other business as may properly come before the special
meeting or any adjournment or postponement.
Holders of record of our common stock and preferred stock at the close of
business on August 21, 2000 will be entitled to vote at the special meeting or
any adjournment or postponement. A list of shareholders entitled to vote will
be kept at our offices for inspection prior to the special meeting. This list
will also be available at the special meeting. Approval of the sale requires
the affirmative vote of the holders of 66 2/3% of our issued and outstanding
shares of capital stock, which includes approximately 19,700,000 shares of
common stock and approximately 180,000 shares of preferred stock. Each share
of capital stock is entitled to one vote on all matters to come before the
special meeting.
Shareholders who do not vote in favor of the sale may, under certain
circumstances and by following the procedures described under the South
Carolina Business Corporation Act ("SCBCA"), exercise dissenters' rights in
connection with their shares. A copy of Chapter 13 of the SCBCA is attached to
this notice.
Our Board of Directors has determined that the purchase agreement and the
sale referred to above are fair to and in the best interests of our
shareholders and recommends that shareholders vote for approval and adoption of
the purchase agreement and approval of the sale.
Your vote is important. Whether or not you plan to attend the special
meeting, please complete, sign and date the enclosed proxy card, and mail it
promptly using the enclosed envelope. Please do not send us your share
certificates. Your prompt attention will be greatly appreciated.
If you have any questions regarding the special meeting or the sale, you
may contact Georgeson Shareholder Communications Inc. by mail at 17 State
Street, 10th Floor, New York, NY 10004 or by telephone at (800) 223-2064. Banks
and brokers should call Georgeson collect at (212) 440-9800.
By Order of the Board of Directors,
/s/ Martha G. Williams
-----------------------------------
Martha G. Williams
General Counsel and Secretary
This proxy statement is dated August 22, 2000 and was first mailed to
shareholders on or about August 25, 2000.
<PAGE>
TABLE OF CONTENTS
SUMMARY TERM SHEET.............................................................1
The Parties to the Sale...................................................1
The Special Meeting.......................................................2
SUMMARY FINANCIAL DATA.........................................................6
QUESTIONS AND ANSWERS ABOUT THE SALE...........................................8
RISK FACTORS..................................................................10
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS....................13
THE PARTIES TO THE SALE.......................................................15
The Liberty Corporation..................................................15
Royal Bank of Canada.....................................................15
THE PROPOSED SALE.............................................................16
General..................................................................16
Background of the Sale...................................................16
Use of Proceeds..........................................................17
Reasons for the Sale; Recommendation of the Board of Directors...........17
Regulatory Approvals.....................................................18
Antitrust...........................................................19
Insurance...........................................................19
Canadian Approvals..................................................19
Voting Agreements........................................................19
Material Federal Income Tax Consequences.................................19
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS...................20
OPINION OF FINANCIAL ADVISOR..................................................24
Summary Multiples of Proposed Sale.......................................26
Comparison to Merger Market Transactions.................................26
Comparison of Selected U.S. Life Insurance Companies.....................27
THE PURCHASE AGREEMENT........................................................30
Purchase Price...........................................................30
The Closing..............................................................30
Ancillary Agreements.....................................................30
Representations and Warranties...........................................30
Covenants................................................................31
Taxes....................................................................32
Conditions to Completion of the Sale.....................................32
Termination..............................................................33
Consequences of Termination..............................................34
Indemnification..........................................................35
Noncompete...............................................................36
No Solicitation..........................................................36
Expenses and Transfer Taxes..............................................36
THE SPECIAL MEETING...........................................................37
Record Date; Voting at the Special Meeting...............................37
Quorum; Vote Required for Approval.......................................37
Voting and Revocation of Proxies.........................................37
Solicitation of Proxies..................................................38
Other Matters............................................................38
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................38
Security Ownership of Certain Beneficial Owners..........................38
Security Ownership of Management.........................................40
DISSENTERS' RIGHTS............................................................41
WHERE YOU CAN FIND MORE INFORMATION...........................................43
FUTURE SHAREHOLDER PROPOSALS..................................................44
i
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EXPERTS.......................................................................44
GENERAL INFORMATION...........................................................45
ANNEX A - Opinion of Goldman, Sachs & Co.
ANNEX B - Purchase Agreement dated as of June 19, 2000, between
The Liberty Corporation and Royal Bank of Canada
ANNEX C - Chapter 13 of the South Carolina Business Corporation Act
ii
<PAGE>
SUMMARY TERM SHEET
This summary term sheet highlights selected information contained in this
proxy statement and may not contain all of the information that is important to
you. To understand fully the details of the sale of our insurance operations to
Royal Bank of Canada, or RBC, fully, and for a more complete description of the
legal terms of the sale, you should read carefully this entire document and the
documents we have referred you to. See "Where You Can Find More Information."
The Parties to the Sale
The Liberty Corporation............ We are a holding company incorporated
2000 Wade Hampton Boulevard under the laws of the State of South
Greenville, South Carolina 29615 Carolina. We currently operate in the
(864) 609-8256 television currently operate in the
television broadcasting, life
insurance and life insurance policy
administration businesses through
wholly owned subsidiaries.
We conduct our broadcasting business
through our subsidiary, Cosmos
Broadcasting Corporation. Cosmos
currently owns and operates twelve
network-affiliated television
stations in the Southeast and
Midwest, eleven of which were ranked
No. 1 or No. 2 in their markets by
the May 2000 Nielsen ratings (from
sign-on to sign-off). The twelve
stations cover approximately 2.8% of
U.S. households. Seven of Cosmos'
stations are affiliated with NBC,
three with ABC, and two with CBS.
We offer our insurance products
through our insurance subsidiary,
Liberty Life Insurance Company.
Additionally, we are one of the
nation's largest life insurance
third-party administrators, providing
administrative services for
approximately 4.5 million policies
through our subsidiary, Liberty
Insurance Services Corporation.
If the sale is approved by our
shareholders and is consummated, we
will no longer be engaged in the
insurance business and will be
engaged principally in the
broadcasting business. You can find
more information about us in the
documents that are incorporated by
reference in this proxy statement.
See "Where you Can Find More
Information."
Royal Bank of Canada.............. RBC is a Canadian chartered bank whose
200 Bay Street shares are listed on the Toronto and
Toronto, Ontario, Canada New York Stock Exchanges. RBC ranks as
M5J 2J5 Canada's largest financial institution
(416) 974-5151 as measured by assets, revenues and
net income as of April 30, 2000, and
as the ninth largest bank in North
America as measured by assets as of
October 31, 1999. RBC also has one of
the leading insurance operations
among Canadian banks. RBC and its
subsidiaries engage principally in
personal and commercial banking,
insurance products, investment and
trust services, corporate and
investment banking and on-line
banking and transaction-based
services, including custody.
1
<PAGE>
The Special Meeting
Time and Place.................... The special meeting will take place at
our headquarters building, 2000 Wade
Hampton Boulevard, Greenville, SC
29615 on September 29, 2000 at 11:00
A.M., local time.
The Proposal...................... At the special meeting, our
shareholders will consider and vote
upon a proposal to approve and adopt
the purchase agreement dated as of
June 19, 2000 between us and RBC and
to approve the sale of our insurance
operations pursuant to the purchase
agreement. Under the terms of the
purchase agreement, RBC has agreed to
pay us $648,700,000, consisting of a
dividend to be paid to us by our
subsidiary, Liberty Life Insurance
Company, of up to $70,000,000 and the
balance in cash from RBC. See "The
Proposed Sale - General."
Voting and Revocation of Proxies.. All shareholders of record as of
August 21, 2000 are entitled to vote
at the special meeting. The approval
of the sale requires the affirmative
vote of the holders of 66 2/3 % of
our capital stock outstanding and
entitled to vote. See "The Special
Meeting - Record Date; Voting at the
Special Meeting" and "The Special
Meeting - Quorum; Vote Required For
Approval."
Any proxy given may be revoked by the
person giving it at any time before
it is voted. Proxies may be revoked
by submitting a new proxy on a later
date, notifying our Secretary in
writing or attending the special
meeting and voting in person. See
"The Special Meeting - Voting and
Revocation of Proxies."
See "Risk Factors" for a discussion
of some considerations you should
take into account before deciding how
to vote.
Recommendation of our Board of Our Board of Directors has determined
Directors.......................... that the sale is advisable and in the
best interests of our shareholders,
and has unanimously approved the
purchase agreement with RBC.
Accordingly, our Board of Directors
unanimously recommends that our
shareholders vote to approve the
purchase agreement and the sale. In
reaching its conclusions, our Board
of Directors considered the factors
described under "The Proposed Sale -
Reasons for Sale; Recommendation of
the Board of Directors."
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<PAGE>
Opinion of Financial Advisor............ In deciding to approve the sale, our
Board of Directors considered the
opinion of its financial advisor,
Goldman, Sachs & Co., as to the
fairness from a financial point of
view of the aggregate consideration
we will receive in the sale. See
"Opinion of Financial Advisor."
Voting Agreements....................... As an inducement to RBC entering into
the purchase agreement, certain of
our shareholders, holding in the
aggregate approximately 22.3% of our
outstanding capital stock, calculated
on a fully-diluted basis, have
entered into voting agreements with
RBC. Pursuant to the terms of each
voting agreement, each such
shareholder has agreed, among other
things, to vote certain of the shares
they beneficially own in favor of the
approval of the purchase agreement
and the sale. See "The Proposed Sale
- Voting Agreements."
Conditions to Completion of the Sale.... The purchase agreement contains
various conditions to closing,
including approval of our
shareholders, accuracy of
representations and warranties,
performance of obligations, receipt
of third party consents, absence of a
material adverse effect on the
companies to be sold and governmental
approvals. See "The Purchase
Agreement - Conditions to Completion
of the Sale."
Termination of the Purchase Agreement... The purchase agreement may be
terminated:
o if the parties mutually agree to
terminate it;
o by either party if the conditions
to closing are not fulfilled by
December 31, 2000 (subject to
extension in certain
circumstances);
o by the non-breaching party if any
provision of the purchase agreement
is breached and not waived or
cured;
o by either party if a law or a court
order permanently prohibits the
sale;
o by either party if approval of our
shareholders is not obtained;
o by RBC if our Board of Directors
fails to recommend, withdraws or
adversely modifies or qualifies
its recommendation to our
shareholders, or has not
reconfirmed its recommendation
upon RBC's request;
o by RBC if our Board of Directors
recommends another acquisition
proposal to our shareholders; or
o automatically if we enter into an
agreement with respect to another
acquisition proposal.
See "The Purchase Agreement -
Termination."
3
<PAGE>
Termination Fees and Expenses........... We have agreed to pay RBC certain
fees, which could be as much as
$20,000,000, if certain termination
events described under "The Purchase
Agreement - Consequences of
Termination" occur.
Indemnity............................... We have agreed to indemnify RBC and
other related persons, and RBC has
agreed to indemnify us, for any
damages incurred in connection with a
breach or inaccuracy of certain of
our or RBC's respective
representations, warranties or
agreements contained in the purchase
agreement and related agreements
until March 31, 2002.
Except in limited circumstances, we
will not indemnify RBC, and RBC will
not indemnify us, until the other
party has suffered losses in excess
of $18,000,000, at which time that
party will be entitled to
indemnification for the full amount
in excess of $18,000,000. The total
amounts recoverable by RBC or us
under this indemnity will not exceed,
in any event, $324,350,000.
We have also agreed to separately
indemnify RBC for a portion of
certain costs incurred relating to
the qualification or non-
qualification of certain of our
issued insurance policies under the
Internal Revenue Code. Our exposure
under this indemnity is limited to a
maximum of $2,500,000.
See "The Purchase Agreement--
Indemnification."
Regulatory Matters...................... The sale is subject to various
regulatory approvals, including
approval under federal antitrust law,
approvals under the insurance laws
and regulations of several
jurisdictions in the United States
and Bermuda and approvals under
applicable Canadian law. See "The
Proposed Sale - Regulatory
Approvals."
Dissenters' Rights...................... Shareholders who do not vote in favor
of the sale may, under certain
circumstances and by following the
procedures prescribed by South
Carolina law, exercise dissenters'
rights in connection with their
shares of capital stock. See
"Dissenters' Rights."
Civic Acquisition....................... We have entered into an agreement to
purchase Civic Communications, Inc.,
or Civic, for approximately $204
million. We expect that this
acquisition will be completed some
time in the fourth quarter of 2000.
Our obligation to acquire Civic is
not contingent upon the sale of our
insurance operations, and your
consent is not being solicited for
the acquisition of Civic.
Use of Proceeds......................... We will use the proceeds of the sale
to repay existing bank debt, pay
taxes and expenses related to the
sale and to fund our acquisition of
Civic. See "The Proposed Sale - Use
of Proceeds."
4
<PAGE>
Federal Income Tax Consequences......... Proceeds from the sale will not be
distributed to shareholders, and the
sale should not have any direct
federal income tax consequences to
you. However, the sale will
constitute a taxable sale of
subsidiary stock and assets and we
and our subsidiaries will recognize
taxable income with respect to the
sale. See "The Proposed Sale -
Material Federal Income Tax
Consequences."
5
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SUMMARY FINANCIAL DATA
Below is a summary of our unaudited pro forma combined condensed
financial information included elsewhere in this proxy statement. Please see
the section entitled "Unaudited Pro Forma Combined Condensed Financial
Statements."
The unaudited pro forma combined condensed balance sheet as of June 30,
2000, and the unaudited pro forma combined condensed statements of income for
the year ended December 31, 1999 and for the six months ended June 30, 2000,
give effect individually and in the aggregate to the proposed sale of Liberty's
insurance operations and to the acquisition of Civic. The unaudited pro forma
balance sheet as of June 30, 2000 presents our financial position assuming that
the transactions had occurred on that date. The unaudited pro forma income
statements have been prepared assuming the transactions occurred as of the
beginning of each period presented. In addition, the unaudited pro forma income
statements give effect to the acquisition of KCBD-TV, which occurred on
February 29, 2000, as if that acquisition had occurred at the beginning of each
period presented.
The unaudited pro forma combined financial statements are provided for
informational purposes only and are not necessarily indicative of our past or
future results of operations or financial position. Assumptions were used in
preparation of the unaudited pro forma combined condensed financial statements
and the pro forma results would differ had alternative assumptions been used.
Additionally, the unaudited pro forma combined condensed financial statements
have been prepared based on preliminary estimates of the taxable gain, and
taxes payable, from the proposed sale and preliminary estimates of the
allocation of the Civic purchase price to the assets acquired. The actual
results may change as additional facts become known.
Balance Sheet Data as of June 30, 2000 (in thousands)
<TABLE>
Pro Forma Pro Forma for
Pro Forma Adjustments for Proposed Sale
Adjustments for Pro Forma for Civic and Civic
Proposed Sale Proposed Sale Transaction Transaction
As Reported (unaudited) (unaudited) (unaudited) (unaudited)
----------- --------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Total assets $2,380,732 $(1,736,310) $ 644,422 $ 5,000 $ 649,422
Total liabilities 1,813,552 (1,747,427) 66,125 5,000 71,125
Total $ 567,180 $ 11,117 $ 578,297 -- 578,297
shareholders
equity
</TABLE>
Statement of Income Data for year ended December 31, 1999 (in thousands, except
per share amounts)
<TABLE>
Pro Forma Pro Forma for
Adjustments for Proposed Sale,
for KCBD-TV KCBD-TV
Pro Forma Acquisition and Acquisition
Adjustments for Pro Forma for for Civic and Civic
Proposed Sale Proposed Sale Transaction Transaction
As Reported (unaudited) (unaudited) (unaudited) (unaudited)
----------- --------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues $ 556,040 $ (359,448) $ 196,592 $ 42,982 $ 239,574
Net income $ 44,569 $ (11,989) $ 32,580 $ 4,705 $ 37,285
Earnings per
common share $ 2.29 $ 1.90
Diluted earnings $ 2.24 $ 1.87
per common share
</TABLE>
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<TABLE>
Statement of Income Data for six months ended June 30, 2000 (in thousands, except per share data)
Pro Forma Pro Forma for
Adjustments for Proposed Sale,
for KCBD-TV KCBD-TV
Pro Forma Acquisition and Acquisition
Adjustments for Pro Forma for for Civic and Civic
Proposed Sale Proposed Sale Transaction Transaction
As Reported (unaudited) (unaudited) (unaudited) (unaudited)
----------- --------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues $ 291,266 $ (184,748) $ 106,518 $ 18,893 $ 125,411
Net income $ 30,787 $ (13,868) $ 16,919 $ 2,018 $ 18,937
Earnings per
common share $ 1.58 $ 0.97
Diluted earnings $ 1.56 $ 0.96
per common share
</TABLE>
7
<PAGE>
QUESTIONS AND ANSWERS
ABOUT THE SALE
Q. When and where is the special meeting?
A. The special meeting will take place at our headquarters building, 2000
Wade Hampton Boulevard, Greenville, SC 29615 on September 29, 2000 at
11:00 A.M.
Q. What is being sold?
A. Under the purchase agreement dated as of June 19, 2000 between us and
Royal Bank of Canada, or RBC, we have agreed to sell to RBC for a total
purchase price of approximately $650 million all of the capital stock of
Liberty Life Insurance Company, Liberty Insurance Services Corporation,
The Liberty Marketing Corporation, Liberty Capital Advisors, Inc. and LC
Insurance Ltd., which together constitute all of our insurance operations.
Following the sale, we will no longer be involved in the insurance
business.
Q. What will Liberty's business be after the sale?
A. As previously announced, we intend to focus on expanding our broadcasting
business and new media/digital opportunities associated with broadcasting.
In this regard, Cosmos Broadcasting Corporation, or Cosmos, our wholly
owned media subsidiary, has signed an agreement dated as of July 27, 2000
to acquire Civic Communications, Inc., an operator of three
network-affiliated television stations, for $204 million in cash.
Q. Will you pay any dividends after the sale of the insurance operations is
completed?
A. While we will not pay any special dividends to shareholders as a result of
the sale, we expect to continue our policy of paying regular cash
dividends. Please note, however, that there are no assurances that we will
pay dividends in the future, as our ability to pay them will depend upon
factors which are not now known, such as future earnings, capital
requirements and our overall financial condition.
Q. Will I continue to be able to sell my shares?
A. The sale of our insurance operations will not affect your right to sell or
otherwise transfer your shares of our capital stock.
Q. Will I have dissenters' rights?
A. If you follow the procedures established by South Carolina Law, you will
be entitled to exercise dissenters' rights. These procedures are described
in the section entitled "Dissenters' Rights" in this proxy statement.
Q. When do you expect the sale to be completed?
A. We are working towards completing the sale as quickly as possible. We hope
to complete the sale in the early part of the fourth quarter of 2000.
Q. What do I need to do now?
A. Just mail your signed proxy card in the enclosed return envelope, as soon
as possible, so that your shares may be represented at the special
meeting. In order to assure that your vote is obtained, please give your
proxy as instructed on your proxy card even if you currently plan to
attend the special meeting in person. Our Board of Directors recommends
that you vote in favor of the sale.
8
<PAGE>
Q. What do I do if I want to change my vote?
A. Just send in a later-dated, signed proxy card to our Secretary, Martha G.
Williams, The Liberty Corporation, 2000 Wade Hampton Boulevard,
Greenville, SC 29615, before the special meeting. Or, you can attend the
special meeting in person and vote. You may also revoke your proxy by
sending a notice of revocation to our Secretary, as noted above.
Q. If my shares are held in "street name" by my broker, will my broker vote
my shares for me?
A. If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker will not be permitted to vote them on
the sale. You should, therefore, be sure to provide your broker with
instructions on how to vote your shares.
Q. Who do I call if I have questions about the special meeting or the sale?
A. You may direct your inquiries to our solicitation agent, Georgeson
Shareholder Communications Inc., at 17 State Street, 10th Floor, New York,
NY 10004. Georgeson may also be reached by telephone at (800) 223-2064.
Banks and brokers should call Georgeson collect at (212) 440-9800.
9
<PAGE>
RISK FACTORS
Risks Relating to the Sale of Our Insurance Operations
Our insurance operations accounted for approximately 68% of our revenues,
63% of our net income and 86% of our total assets for the year ended December
31, 1999.
For the year ended December 31, 1999, our insurance operations accounted
for approximately 68% of our revenues, 63% of our net income and 86% of our
total assets. Upon consummation of the sale of our insurance operations,
substantially all of our revenues will be generated by our broadcasting
business. If we are not successful in operating and growing our broadcasting
business, our business, results of operations and financial condition will be
adversely affected.
In the past we may have been less vulnerable to risks associated with our
broadcasting business because only a portion of our revenues, assets and income
related to our broadcasting business. Upon consummation of the sale of our
insurance operations, substantially all of our revenues and income will be
derived from our broadcasting operations, and substantially all of our assets
will relate to broadcasting. As a result, risks associated with our
broadcasting business may become more significant to us.
Risks Relating to Our Business After the Sale
We will depend in large part on the success of our network affiliations.
Changes in our business relationship with, and the general success of, our
network affiliations could materially adversely affect our operating results
and the price of our stock. All of our television stations are affiliated with
national networks. Seven of our owned and operated stations are affiliated with
NBC, three with ABC and two with CBS. Upon consummation of the Civic
transaction, eight stations will be affiliated with NBC, five with ABC and two
with CBS. Each of the networks with which we are affiliated generally provides
our stations with up to twenty- two hours of prime time programming per week.
In return, the stations broadcast network-inserted commercials during
prime-time programming and receive cash compensation. Although network
affiliates generally have achieved higher ratings than unaffiliated independent
stations in the same market, we cannot assure you of the future success of each
network's programming or the continuation of such programming. Particularly,
our concentration of NBC affiliates makes us sensitive to adverse changes in
our business relationship with, and the general success of, NBC.
Our affiliation agreements with the networks may not be renewed or may be
terminated.
The non-renewal or termination of a network affiliation agreement could
have a material adverse effect on our operations and our stock price. Our
network affiliation agreements are subject to termination and non-renewal or
renewal on less favorable terms by the relevant network under certain
circumstances. We believe that we enjoy a good relationship with each of NBC,
ABC and CBS. However, we cannot assure you that our affiliation agreements will
remain in place or that each network will continue to provide programming or
compensation to affiliates on the same basis as it currently provides
programming or compensation.
Networks recently have been seeking arrangements from their broadcast
affiliates to share the network's programming costs and to change the structure
of network compensation to the broadcast affiliates. We cannot predict the
nature or scope of any such potential compensation arrangements or the effect,
if any, on our operations. Eleven of our twelve stations have long-term
affiliation agreements, the earliest of which is not due to expire until
January 1, 2002.
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<PAGE>
We may be unable to compete favorably in our highly competitive local
markets within the broadcasting industry.
The television broadcasting industry is a highly competitive business and
is undergoing a period of consolidation and significant change. We may not be
able to maintain or increase our current audience ratings or advertising
revenues and our results of operations and stock price may be materially and
adversely affected. Many of our current and potential competitors have greater
financial, marketing, programming and broadcasting resources than us.
Technological innovation and the resulting proliferation of programming
alternatives, such as cable television, wireless cable, satellite-to-home
distribution services, pay-per-view and home video and entertainment systems,
have fractionalized television viewing audiences and have subjected free
over-the-air television broadcast stations to new types of competition. Also,
as a result of the Telecommunications Act of 1996, the legislative ban on
telephone cable ownership has been repealed and telephone companies are now
permitted to seek approval of the Federal Communications Commission, or the
FCC, to provide video services to homes under specified circumstances.
We may be adversely affected by broadcasting regulation on license renewals,
duopoly ownership rules and the broadcasting industry generally.
The broadcasting industry is subject to regulation by various governmental
agencies. Under the Communications Act of 1934, the FCC licenses television
stations and extensively regulates their ownership and operation. Our wholly
owned media subsidiary, Cosmos Broadcasting Corporation, depends on its ability
to hold television broadcast licenses from the FCC, which are ordinarily issued
for maximum terms of eight years and are renewable. Although it is rare for the
FCC to deny a license renewal application, we cannot assure you that our
television broadcasting licenses will be renewed or that if renewed, the
renewals will not include restrictive conditions or qualifications. In
addition, the lifting of limitations on the ownership of television stations
within the same market, the so-called "duopoly" rules, will result in
competition to consolidate within the industry and may adversely affect our
ability to successfully bid for certain acquisitions.
The U.S. Congress and the FCC currently have under consideration, and may
in the future adopt, new laws, regulations and policies regarding a wide
variety of matters that could, directly or indirectly, materially adversely
affect the operation and ownership of Cosmos. We are unable to predict the
outcome of future federal legislation or the impact of any such laws or
regulations on our operations.
Our net revenues may fluctuate depending on advertising cyclicality and
volatility.
Our operating results will be primarily dependent on advertising revenues
which, in turn, depend on national and local economic conditions, coverage of
political events and high profile sporting events (e.g., the Olympics, Super
Bowl and NCAA Men's Basketball Tournament), the relative popularity of station
programming, the demographic characteristics of our viewing audience and other
factors beyond our control. We have experienced cyclicality in our advertising
revenues, with the second and fourth quarters of each year being traditionally
our strongest quarters, and the first and third quarters being our weakest.
In addition, our advertising revenues fluctuate with the promotional
efforts and marketing campaigns of our advertisers. We cannot predict or
control their future spending or demand for television advertising. We cannot
assure you that we can maintain our levels of advertising revenue or that we
will be able to increase our advertising revenues in the future.
We may be unable to effectively integrate newly acquired television
broadcasting stations.
As part of our business strategy, we will continue to evaluate
opportunities to acquire television broadcasting stations in small to
medium-sized local markets. We intend to pursue selective acquisitions of
television broadcasting stations with the goal of improving their operating
performance by applying our management's business strategy. We cannot assure
you that we will find attractive acquisition candidates or effectively manage
the integration of acquired stations into our existing business. Combining
company cultures and facilities could have a
11
<PAGE>
material adverse effect on our operating results, particularly during the
period immediately following such acquisitions. If we do not experience
operating efficiencies from acquisitions, if we fail to integrate effectively
new stations or recently acquired stations into our existing business, or if
the costs of such integration exceed our expectations, our operating results,
financial condition and the price of our stock could be adversely affected.
We may be adversely affected by implementing digital television service.
The FCC has adopted rules and regulations which require television
stations to implement digital television service (including high definition) in
the United States. Conversion to digital television service may reduce our
television stations' geographic reach or result in a corresponding loss of
population coverage. In addition, we will incur significant costs implementing
our digital television service, primarily due to the capital costs associated
with the construction of digital television facilities and increased operating
costs both during and after the transition to digital television service. Our
television stations are required to begin broadcasting on their digital
channels, in addition to their analog channels, in 2002.
Our business strategy to "grow around the edges" may divert resources from
our core business.
We cannot assure you that our business strategy to invest in other
businesses, including cable advertising, electronic media, electronic commerce,
direct mail coupons and periodicals, will not have an adverse effect on our
core television broadcasting business. Our formation of, or participation in,
new, related businesses may compete, from time to time, for the attention of
our management team and may require capital expenditures that we would
otherwise reinvest in our television stations. Further, if the new businesses
do not prove to be successful, the strength of our stations' brand names may
suffer as a result.
Our stock may fluctuate significantly after the sale, and you could lose all
or part of your investment as a result.
We do not know how our common stock will trade in the future. The market
price of our common stock may fluctuate significantly due to a number of
factors, some of which may be beyond our control, including:
o actual or anticipated fluctuations in our operating results;
o changes in earnings estimated by securities analysts or our ability to
meet those estimates;
o the operating and stock price performance of other comparable
companies;
o overall stock market fluctuations;
o the broadcasting environment, including industry down cycles; and
o economic conditions.
We may be unable to sustain a growth rate sufficient to implement our
business strategy.
Our broadcasting business has grown rapidly over the past few years. We
may not be able to continue to grow at rates consistent with our recent past or
profitably. Our future prospects are dependent upon a number of factors,
including:
o the popularity of the programming our stations broadcast and our
ability to continue to attract new advertisers and maintain our
relationships with current advertisers;
o our ability to effectively compete in the local markets where our
stations currently operate;
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o our ability to maintain or enhance our relationships with the networks
with respect to our affiliation agreements;
o our ability to fulfill our plans to convert to digital television
technology;
o our ability to identify, develop, and take advantage of synergistic
opportunities;
o our ability to fulfill our plans to become a diverse communications
company through selective acquisitions in attractive local markets;
o our ability to attract and retain talented creative and managerial
personnel and to expand our infrastructure to accommodate our growth;
o our ability to maintain or enhance our bargaining position with
agencies representing national advertisers; and
o our ability to predict and to keep up with constantly shifting
audience viewership trends and maintain or increase our audience
household reach.
We may be unable to generate sufficient cash flow or obtain sufficient
financing to implement our business strategy.
We will require substantial capital expenditures to implement our business
strategy. If we do not generate sufficient cash flow from operations or if we
are unable to obtain sufficient financing or on acceptable terms, we may be
required to reduce our planned capital expenditures, which could have a
material adverse effect on our growth prospects and the market price of our
common stock. We estimate:
o our acquisition of new stations will require capital expenditures of
approximately $264 million in fiscal 2000;
o our formation of, or participation in, new, related businesses are
expected to require capital expenditures of $4 million in fiscal
2000; and
o the conversion to digital televison technology by May 2002 will
require capital expenditures of approximately $25 to $35 million over
the next two years.
The realization of any of the risks described in these "Risk Factors"
could have a significant and adverse impact on the market price of our common
stock. Also, the stock market in general has experienced volatility that has
often been unrelated or disproportionate to the operating performance of
particular companies. These broad market fluctuations may adversely affect the
trading price of our common stock, regardless of our actual operating
performance. Additionally, if our quarterly results of operations fluctuate
significantly, including as a result of the advertising cyclicality of the
broadcasting industry, the timing and costs of new station acquisitions, the
performance of existing stations, the timing and costs of increased capital
spending on the conversion to digital television, or the investment in new
communications businesses or media, the market price of our common stock may be
affected.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information contained in this
proxy statement, or incorporated by reference into this proxy statement, is or
may be viewed as forward-looking. The words "expect," "believe," "anticipate"
or similar expressions identify forward-looking statements. Although we have
used appropriate care in developing any such forward-looking information,
forward-looking information involves risks and uncertainties that could
significantly impact actual results. These risks and uncertainties include, but
are not limited to, the following: changes in national and local
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markets for television advertising; changes in general economic conditions,
including the performance of financial markets and interest rates; competitive,
regulatory, or tax changes that affect the cost of or demand for our products;
and adverse litigation results. We undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future developments, or otherwise.
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<PAGE>
THE PARTIES TO THE SALE
The Liberty Corporation
We are a holding company incorporated under the laws of the State of South
Carolina which currently operates in the television broadcasting, life
insurance and life insurance policy administration businesses through our
wholly owned subsidiaries. We market our insurance products through our
insurance subsidiary, Liberty Life Insurance Company. Additionally, we are one
of the nation's largest life insurance third-party administrators, providing
administrative services for approximately 4.5 million policies through our
subsidiary, Liberty Insurance Services Corporation. If the sale is approved by
our shareholders and is consummated, we will no longer be engaged in the
insurance business. At that time, we will be engaged principally in the
broadcasting business through our subsidiary Cosmos.
Cosmos currently owns and operates twelve network-affiliated television
stations in the Southeast and Midwest, eleven of which were ranked No. 1 or No.
2 in their markets by the May 2000 Nielsen ratings (from sign-on to sign- off).
The twelve stations cover approximately 2.8% of U.S. households. Seven of
Cosmos' stations are affiliated with NBC, three with ABC, and two with CBS.
Through its wholly-owned cable advertising company, CableVantage Inc.,
Cosmos represents seven independent cable operators that reach, in combination,
over 400,000 subscribers. In addition, Cosmos operates a direct-mail coupon
company, SuperCoups USA. Through SuperCoups USA, Cosmos has acquired the
direct-mail franchise rights to a number of southeastern cities. Cosmos also
owns 100% of Broadcasting Merchandising Corporation, a broadcast equipment and
technology distributor.
In addition, Cosmos has entered into an agreement dated as of July 27,
2000 to acquire all of the outstanding shares of capital stock of Civic
Communications, Inc., or Civic, for approximately $204 million. We expect that
this acquisition will be completed some time in the fourth quarter of 2000. Our
obligation to acquire Civic is not contingent upon the sale of our insurance
operations, and your approval is not being solicited for the acquisition of
Civic.
Civic owns and operates three television stations in Mississippi and
Texas. All three stations were rated No. 1 in local news in their respective
markets by the May, 2000 Nielsen ratings. The Cosmos and Civic stations
together will cover approximately 3.56% of U.S. households and will broadcast
to local viewers in more than 3.5 million households.
Royal Bank of Canada
RBC is a Canadian chartered bank, with its principal executive office
located at 200 Bay Street, Toronto, Ontario, Canada M5J 2J5. Shares of RBC are
listed on the Toronto Stock Exchange and on the New York Stock Exchange. RBC
ranks as Canada's largest financial institution as measured by assets, revenues
and net income as of April 30, 2000. As of October 31, 1999, its most recent
fiscal year end, RBC was the ninth largest bank in North America and among the
sixty largest banks in the world, as measured by assets. RBC also has one of
the leading insurance operations among Canadian banks. RBC and its subsidiaries
engage principally in personal and commercial banking, insurance products,
investment and trust services, corporate and investment banking and on- line
banking and transaction-based services, including custody.
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<PAGE>
THE PROPOSED SALE
General
The purchase agreement, which was executed by us and RBC on June 19, 2000,
provides for the sale to RBC of all of the outstanding capital stock of Liberty
Life Insurance Company, Liberty Insurance Services Corporation, The Liberty
Marketing Corporation, Liberty Capital Advisors, Inc. and LC Insurance Ltd.,
which together constitute all of our insurance operations. Subject to certain
indemnification obligations that will survive the consummation of the sale, we
expect to receive $648,700,000, consisting of a dividend to be paid to us by
our subsidiary Liberty Life Insurance Company of up to $70,000,000 and the
balance in cash from RBC.
Background of the Sale
On February 2, 1999, our Board of Directors received a report from
management indicating that management believed it would be appropriate to
consider a variety of restructuring alternatives in order to create a company
that would be able to more actively support the business objectives of our
operating subsidiaries and thereby enhance value for our shareholders.
For the remainder of 1999, Goldman, Sachs & Co. assisted us with an
investigation of possible options, including the distribution of Cosmos shares
to our shareholders, as a result of which the insurance and broadcasting
businesses would be separated. In the late part of 1999, we determined that it
was not feasible at the time to effect the separation of these businesses
through a distribution of Cosmos shares to our shareholders on a tax-efficient
basis.
On November 2, 1999, our Board of Directors met and received a report
outlining regulatory changes in the financial services and broadcasting
industries. The report indicated that portions of the 1933 Glass-Steagall Act
had been repealed and that previously prohibited combinations of banks and
insurance companies were now permitted. In addition, more flexible FCC multiple
ownership rules were scheduled to take effect in mid-November, 1999, which
would allow a broadcaster to own, under certain circumstances, more than one
television station in the same market and which would eliminate the prohibition
against owning stations in adjacent markets with overlapping signals.
On January 27, 2000, a third party proposed to introduce us to RBC in
order to facilitate a discussion between us and RBC with respect to RBC's
interest in expanding its insurance business into the U.S. market.
On February 1, 2000, our Board of Directors met and discussed the
possibility of a sale of our insurance business. Our Board of Directors
concluded that a combination of our insurance operations with a bank might be
desirable at the appropriate price. Our Board of Directors further concluded
that if a sale of the insurance operations materialized, we would be able to
focus on aggressively expanding our core broadcasting business and the new
media/digital opportunities associated with television broadcasting.
On February 18, 2000, management and RBC representatives spoke by phone
and began to exchange certain written information. RBC expressed an interest in
acquiring our insurance subsidiaries. On February 22, 2000, representatives of
RBC visited with management at our offices in Greenville, South Carolina.
On March 1, 2000, management visited with representatives of RBC in the
Mississauga, Ontario offices of RBC, and the parties executed a confidentiality
agreement. Management and representatives of RBC spoke by phone numerous times
over the next two weeks and discussed certain of the principal terms of the
transaction. The Executive Committee of the Board of Directors met on March 5,
2000 to receive a report on the status of the negotiations.
On March 29, 2000, representatives of RBC began a ten-day preliminary due
diligence review of our books and records at an off-site location in
Greenville. Due diligence continued until June 19, 2000. During the due
diligence
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process, various members of management made presentations and were available
for interviews regarding our insurance businesses.
On April 21, 2000, RBC forwarded to us the first draft of a purchase
agreement. Around this time, we engaged Goldman, Sachs & Co. to assist us in
the possible sale of our insurance business. We had utilized the services of
Goldman Sachs in financing and acquisition matters for a number of years. We
also felt that Goldman Sachs' familiarity with us would prove helpful in
evaluating the fairness of the transaction from a financial point of view.
Discussions between our representatives and representatives of RBC continued.
On May 2, 2000 our Board of Directors met and discussed the progress of the
negotiations.
Our representatives and representatives of RBC met in Greenville on May
12, 2000 to outline the framework for future negotiations. Over the next
several weeks the purchase agreement was revised to reflect the negotiated
terms.
On May 24, 2000 the parties again met in Greenville to negotiate certain
of the major remaining contractual and business issues. The Executive Committee
of our Board of Directors received a report on this meeting on May 25, 2000.
On June 8, 2000 the parties met in New York City. During and following
this meeting, final negotiations resulted in the definitive purchase agreement
that was approved by our Board of Directors on June 18, 2000 and was signed by
the parties on June 19, 2000.
Use of Proceeds
The gross proceeds from the sale to RBC are expected to be $648,700,000,
which will be comprised of a dividend of up to $70,000,000 to be paid to us by
Liberty Life Insurance Company (of which approximately $16,793,000 will be a
non-cash distribution) and the balance in cash. See "The Purchase Agreement -
Purchase Price." After income taxes and transaction expenses, which are
estimated to total approximately $154,400,000, the net cash proceeds from the
sale will be approximately $477,507,000.
We do not intend to distribute any of the net proceeds of the sale to our
shareholders. We will use the proceeds to repay all of our existing bank debt
and to further our business plan. In particular, we intend to use a portion of
the proceeds to fund our acquisition of Civic. Upon completion of the sale of
our insurance operations and our acquisition of Civic, we do not expect to have
any significant amount of debt.
Reasons for the Sale; Recommendation of the Board of Directors
At a meeting of our Board of Directors held on June 18, 2000, after due
consideration, the Board of Directors determined that the sale is fair to, and
in the best interests of, our shareholders and unanimously approved the
purchase agreement with RBC and the sale. Our Board of Directors unanimously
recommends that shareholders vote to approve the purchase agreement and the
sale.
As described above under "Background of the Sale," the decision of our
Board of Directors to approve the sale and to recommend that our shareholders
approve the transaction followed a negotiation process which included the
substantial involvement of our legal and financial advisors. Among the factors
that the Board of Directors considered in this decision were:
o Our Board of Directors believes that the combination of an insurance
business and a broadcasting business in the same corporate group was
not optimal from a shareholder's perspective. This belief is based
upon the difference between the two businesses, including factors
such as:
- the insurance industry and broadcasting industry bear no
particular relationship to each other and very few synergies are
obtained by owning businesses in both industries;
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- insurance is generally a slow-growing, conservative business and
broadcasting is generally a faster- growing, more dynamic
business;
- the combination of insurance and broadcasting businesses produces
tension with respect to Liberty's future direction; and
- the optimal capital structures of insurance companies, on the
one hand, and broadcasting companies, on the other hand, are
fundamentally incompatible.
o Several recent regulatory changes (including the 1995 elimination of
the "fin-syn" rules which previously prohibited networks from
acquiring a financial interest in programming aired on the networks,
the passage of the Telecommunications Act of 1966 and the 1999
relaxation of the rules which previously prohibited ownership of two
television stations with overlapping broadcasting signals) have
prompted consolidation within the television broadcasting industry.
o Management believes that Cosmos needs to use its borrowing capacity
in order to fund its growth plan. However, we are currently
constrained from maximizing Cosmos' borrowing capacity because our
low leverage ratio is a significant factor in determining how
insurance rating agencies view our financial strength and assess our
overall credit rating. The ability of an insurance company to sell
its products is directly affected by its credit rating. Our Board of
Directors believes that we will be able to have much higher leverage
ratios if we are no longer engaged in the insurance business.
o We may wish to use our stock as consideration in connection with
future acquisitions of television stations, and our Board of
Directors believes that our stock may be more attractive to potential
sellers if we are no longer engaged in the insurance business.
o Our stock is generally valued by investors and industry analysts on
the basis of earnings per share, or EPS, whereas the stock of
companies engaging only in television broadcasting is generally
valued on a cash flow basis. Since valuations of television broadcast
companies made on a cash flow basis are generally well in excess of
tangible book value, acquisitions of such companies generally result
in the creation of large amounts of goodwill and the write-up of
tangible assets, both of which must be amortized following an
acquisition. This amortization has a depressing effect on EPS. As a
result, our Board of Directors believes that if we were to continue
to own an insurance subsidiary further acquisitions of television
stations could have a more severe dampening effect on our stock price
than if we were focused on television broadcasting and were valued on
a cash flow basis.
Our Board of Directors also considered the factors described in the
section entitled "Risk Factors" in this proxy statement in deciding to approve
the sale and to recommend that shareholders approve the transaction.
In view of the wide variety of factors considered in connection with its
evaluation of the sale and the complexity of these matters, our Board of
Directors did not find it useful to, and did not attempt to, quantify, rank or
otherwise assign relative weights to these factors. Our Board of Directors
relied on the experience and expertise of Goldman Sachs, our financial advisor,
and took into account Goldman Sachs' opinion as to the fairness of the
aggregate consideration from a financial point of view. See "Opinion of
Financial Advisor." In addition, our Board of Directors did not undertake to
make any specific determination as to whether any particular factor, or any
aspect of any particular factor, was favorable or unfavorable to its ultimate
determination, but rather conducted an overall analysis of the factors
described above. In considering the factors described above, individual members
of our Board of Directors may have given different weight to different factors.
Regulatory Approvals
The sale of our insurance operations is subject to a number of regulatory
approvals that are described below. While we believe that we and RBC will be
able to obtain these regulatory approvals, we cannot be certain whether
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such approvals will be obtained within the period of time contemplated by the
purchase agreement or on conditions that would not be detrimental to the sale.
Antitrust. Transactions such as the sale of our insurance operations are
reviewed by the United States Department of Justice and the United States
Federal Trade Commission to determine whether they comply with applicable
antitrust laws. Under the provisions of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder, the sale may not be completed until applicable waiting-period
requirements have been satisfied. We and RBC each filed our respective
notification reports with the Department of Justice and Federal Trade
Commission under the Hart-Scott-Rodino Act on July 14, 2000, and our requests
for early termination of the review period were granted on July 28, 2000.
Insurance. The insurance laws and regulations of all U.S. jurisdictions
and Bermuda generally require that, prior to the acquisition of control of a
domestic insurer, the acquiror obtain the prior approval of such jurisdictions.
In addition, certain states require notification of the acquisition of control
of an insurer licensed in this state and expiry of applicable waiting periods.
The completion of the sale is subject to certain approvals of the
Insurance Director of South Carolina, the Insurance Commissioner of Louisiana
and the Insurance Minister of Bermuda. RBC has filed applications for approvals
of the sale with those respective insurance regulators of South Carolina and
Louisiana, and it has filed a notice to the insurance regulator of Bermuda.
Public hearings on RBC's applications for approval of the sale will be held in
South Carolina and Louisiana.
The dividend from Liberty Life Insurance Company of up to $70,000,000 as
part of the sale constitutes an extraordinary dividend for which approval of
the Insurance Director of South Carolina is mandatory. We intend to file an
application for approval of the dividend prior to the closing of the sale.
Canadian Approvals. Because under applicable Canadian law the transaction
constitutes a substantial investment by RBC in a financial institution, prior
written approval of the Canadian Minister of Finance on the recommendation of
the Canadian Superintendent of Financial Institutions is required in connection
with the consummation of the transaction.
Voting Agreements
As an inducement to RBC entering into the purchase agreement, certain of
our shareholders holding in the aggregate approximately 22.3% of our
outstanding capital stock, calculated on a fully-diluted basis, have entered
into voting agreements with RBC. Pursuant to the terms of each voting
agreement, each such shareholder has agreed, among other things, to vote
certain of the shares they beneficially own in favor of the approval and
adoption of the purchase agreement and the sale. The terms of each voting
agreement are identical, with the exception of the voting agreement between W.
Hayne Hipp and RBC, which, in addition to requirements that are identical to
those in the other voting agreements, requires that Mr. Hipp, subject to his
fiduciary duties as a member of our Board of Directors, not take any action
that would adversely affect the consummation of the transactions contemplated
by the purchase agreement. Each voting agreement will terminate on the earlier
to occur of (i) the first anniversary of its execution and (ii) the termination
of the purchase agreement in accordance with its terms.
In addition, under the terms of the voting agreements, the shareholders
have agreed, subject to certain exceptions, not to transfer any shares unless
the transferee has executed an irrevocable proxy in favor of RBC in form and
substance substantially similar to such provision of the voting agreement as
governs the voting of the shares and an agreement identical in all material
respects to the voting agreement.
Material Federal Income Tax Consequences
Proceeds from the sale will not be distributed to shareholders, and the
sale should not have any direct federal income tax consequences to you.
However, the sale will constitute a taxable sale of subsidiary stock and
assets, and we and our subsidiaries will recognize taxable income with respect
to the sale.
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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed balance sheet as of
June 30, 2000, and the unaudited pro forma combined condensed statements of
income for the year ended December 31, 1999 and for the six months ended June
30, 2000 give effect individually and in the aggregate to the proposed sale of
our insurance operations and to the acquisition of Civic. The unaudited pro
forma balance sheet as of June 30, 2000 presents our financial position
assuming that the transactions had occurred on that date. The unaudited pro
forma income statements have been prepared assuming the transactions occurred
as of the beginning of each period presented. In addition, the unaudited pro
forma income statements give effect to the acquisition of KCBD-TV, which
occurred on February 29, 2000, as if that acquisition had occurred at the
beginning of each period presented.
The unaudited pro forma combined condensed financial statements, which
have been prepared in accordance with the rules prescribed by Article 11 of
Regulation S-X, are provided for informational purposes only and are not
necessarily indicative of our past or future results of operations or financial
position. Assumptions were used in the preparation of the unaudited pro forma
combined condensed financial statements and the pro forma results would differ
had alternative assumptions been used. Additionally, the unaudited pro forma
combined condensed financial statements have been prepared based on preliminary
estimates of the taxable gain, and taxes payable, from the proposed sale and
preliminary estimates of the allocation of the Civic purchase price to the
assets acquired. The actual results may change as additional facts become
known.
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The Liberty Corporation
Unaudited Pro Forma Combined Condensed Balance Sheet
As of June 30, 2000
(in thousands)
<TABLE>
Pro Forma Pro Forma for
Pro Forma Pro Forma for Adjustments Proposed Sale
Adjustments for Pro Forma for for Civic and Civic
Proposed Sale Proposed Sale Transaction Transaction
As Reported (unaudited) (unaudited) (unaudited) (unaudited)
----------- ------------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Bonds................................$ 874,080 $ (874,080)1(a) -- --
Mortgage loans....................... 235,319 (233,412)1(a) $ 1,907 $ 1,907
All other investments................ 194,637 (143,556)1(a) 51,081 51,081
---------- ----------- --------- ---------- ---------
Total investments.................... 1,304,036 (1,251,048) 52,988 52,988
Cash................................. 2,035 (1,441)1(a)
477,507 1(b)
(273,000)1(c) 205,101 $ (204,000)2(a) 1,101
Receivables from reinsurers.......... (258,213) (258,213)1(a) -- --
Deferred acquisition costs........... 304,501 (304,501)1(a) -- --
Property, plant and equipment........ 98,102 (26,603)1(a) 71,499 21,000 2(b) 92,499
Intangibles related to TV operations. 264,317 264,317 178,000 2(b) 442,317
All other assets..................... 149,528 (99,011)1(a) 50,517 10,000 2(b) 60,517
---------- ----------- --------- ---------- ---------
Total assets.........................$2,380,732 $(1,736,310) $ 644,422 $ 5,000 $ 649,422
========== =========== ========= ========== =========
Policy liabilities...................$1,333,298 $(1,333,298)1(a) -- --
Notes mortgages and other debt....... 274,300 (273,000)1(c) $ 1,300 1,300
All other liabilities................ 205,954 (141,129)1(a) 64,825 5,000 2(b) 69,825
---------- ----------- --------- ---------- ---------
Total liabilities.................... 1,813,552 (1,747,427) 66,125 5,000 71,125
Total shareholders equity............ 567,180 11,117 1(d) 578,297 578,297
---------- ----------- --------- ---------- ---------
Total liabilities and
shareholders equity..............$2,380,732 $(1,736,310) $ 644,422 $ 5,000 $ 649,422
========== =========== ========= ========== =========
</TABLE>
---------
1(a) Elimination of assets and liabilities related to the companies to be
sold.
1(b) Represents the net cash proceeds from the proposed sale to RBC.
1(c) Pursuant to the terms of our revolving credit facility related to the
sale of a significant subsidiary, we are required to repay the balance
outstanding under such facility upon the consummation of the proposed
sale.
1(d) Reflects the estimated after-tax gain from the proposed sale.
2(a) Funding of the Civic purchase using proceeds from the sale to RBC.
2(b) Allocation of the purchase price for the Civic stations based on
estimates of $21 million to buildings, equipment and towers, $6.0
million to accounts receivable, $4.0 million to program contract
rights, $178 million to intangibles and $5.0 million to program
liabilities.
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The Liberty Corporation
Unaudited Pro Forma Combined Condensed Statement of Income
For the Year ended December 31, 1999
(in thousands except per share amounts)
<TABLE>
Pro Forma Pro Forma for
Adjustments Proposed Sale,
Pro Forma for KCBD-TV KCBD-TV
Adjustments for Pro Forma for for Civic and Civic
Proposed Sale Proposed Sale Acquisition Acquisition
As Reported (unaudited) (unaudited) (unaudited) (unaudited)
----------- ------------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Insurance premiums...................$ 252,401 $ (252,401) 1(a) -- --
Broadcasting revenue................. 178,144 $ 178,144 $ 42,982 2(a) $ 221,126
Net investment income................ 98,444 (96,686) 1(a) 1,758 1,758
Service contract revenue............. 22,905 (22,905) 1(a) -- --
Other income......................... 18,052 (512) 1(a) 17,540 17,540
Realized investment gains (losses)... (13,906) 13,056 1(a) (850) (850)
---------- ----------- --------- --------- ---------
Total revenue........................ 556,040 (359,448) 196,592 42,982 239,574
Policyholder benefits................ 131,741 (131,741) 1(a) -- --
Commissions.......................... 74,693 (74,693) 1(a) -- --
General insurance expenses........... 70,264 (70,264) 1(a) -- --
Amortization of deferred acquisition
costs............................. 43,108 (43,108) 1(a) -- --
Broadcasting operating expenses...... 114,619 2,000 1(b) 116,619 25,288 2(a) 141,907
Broadcasting depreciation and
amortization...................... 16,680 16,680 9,777 2(a) 26,457
Interest expense..................... 15,085 (15,085) 1(c) -- 75 2(b) 75
Other expenses....................... 23,027 (14,034) 1(a) 8,993 8,993
---------- ----------- --------- --------- ---------
Total expenses....................... 489,217 (346,925) 142,292 35,140 177,432
Income before income taxes........... 66,823 (12,523) 54,300 7,842 62,142
Income tax provision................. 22,254 (534) 1(a) 21,720 3,137 2(c) 24,857
---------- ----------- --------- --------- ---------
Net income...........................$ 44,569 $ (11,989) $ 32,580 $ 4,705 $ 37,285
========== =========== ========= ========= =========
Earnings per common share............$ 2.29 $ 1.90
Diluted earnings per common share....$ 2.24 $ 1.87
</TABLE>
---------
1(a) Elimination of revenues and expenses related to the companies to be
sold.
1(b) Estimated additional corporate expenses for cost of functions
(including treasury, finance, tax, legal and administrative) previously
shared with the companies to be sold.
1(c) Elimination of interest expense, as we are required to use a portion of
the net proceeds from the sale to repay our revolving credit facility
in full.
2(a) Revenues and expenses of Civic's and KCBD-TV's operations for the period
from January 1, 1999 until December 31, 1999.
2(b) Estimated interest expense on the debt-financed portion of the Civic
purchase price.
2(c) Income taxes provision calculated at an effective tax rate of 40%.
22
<PAGE>
The Liberty Corporation
Unaudited Pro Forma Combined Condensed Statement of Income
For the six months ended June 30, 2000
(in thousands except per share amounts)
(unaudited)
<TABLE>
Pro Forma Pro Forma for
Adjustments Proposed Sale,
Pro Forma for KCBD-TV KCBD-TV
Adjustments for Pro Forma for for Civic and Civic
Proposed Sale Proposed Sale Acquisition Acquisition
As Reported (unaudited) (unaudited) (unaudited) (unaudited)
----------- ------------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Insurance premiums............... $ 127,361 $ (127,361) 1(a) -- --
Broadcasting revenue............. 93,889 $ 93,889 $ 18,893 2(a) $ 112,782
Net investment income............ 49,535 (48,458) 1(a) 1,077 1,077
Service contract revenue......... 10,927 (10,927) 1(a) -- --
Other income..................... 3,214 (777) 1(a) 2,437 2,437
Realized investment gains........ 6,340 2,775 1(a) 9,115 9,115
------------ ----------- --------- --------- ---------
Total revenue.................... 291,266 (184,748) 106,518 18,893 125,411
Policyholder benefits............ 65,684 (65,684) 1(a) -- --
Commissions...................... 37,760 (37,760) 1(a) -- --
General insurance expenses....... 32,984 (32,984) 1(a) -- --
Amortization of deferred
acquisitioncosts............... 18,408 (18,408) 1(a) -- --
Broadcasting operating expenses.. 63,852 1,000 1(b) 64,852 11,374 2(a) 76,226
Broadcasting depreciation and
amortization..................... 9,035 9,035 4,156 2(a) 13,191
Interest expense................. 8,390 (8,390) 1(c) -- -- 2(a) --
Other expenses................... 7,846 (3,413) 1(a) 4,433 4,433
------------ ----------- --------- --------- ---------
Total expenses................... 243,959 (165,639) 78,320 15,530 93,850
Income before income taxes....... 47,307 (19,109) 28,198 3,363 31,561
Income tax provision............. 16,520 (5,241) 1(a) 11,279 1,345 2(b) 12,624
------------ ----------- --------- --------- ---------
Net income....................... $ 30,787 $ (13,868) $ 16,919 $ 2,018 $ 18,937
============ =========== ========= ========= =========
Earnings per common share........ $ 1.58 $ 0.97
Diluted earnings per common share $ 1.56 $ 0.96
</TABLE>
---------
1(a) Elimination of revenues and expenses related to the companies to be sold.
1(b) Estimated additional corporate expenses for cost of functions
(including treasury, finance, tax, legal and administrative) previously
shared with the companies to be sold.
1(c) Elimination of interest expense, as we are required to use a portion of
the net proceeds of the sale to repay the revolving credit facility in
full.
2(a) Revenues and expenses of Civic's operations for the entire period and
estimated revenues and expenses of KCBD-TV's operations for the period
from January 1, 2000 until February 29, 2000.
2(b) Income taxes provision calculated at an effective tax rate of 40%.
23
<PAGE>
OPINION OF FINANCIAL ADVISOR
On June 18, 2000, Goldman, Sachs & Co. rendered its oral opinion to our
Board of Directors, which was confirmed by the written opinion of Goldman
Sachs, dated June 19, 2000, that, as of that date, and based upon and subject
to the various qualifications and assumptions described in its opinion, the
aggregate consideration to be received by us in connection with the sale of our
life insurance business pursuant to the purchase agreement was fair from a
financial point of view. For purposes of its opinion, Goldman Sachs defined the
consideration to be received by us as $648.7 million, inclusive of a special
dividend of up to $70 million to be paid to us by Liberty Life Insurance
Company, part of which was to consist of Liberty Life Insurance Company's
interest in certain non-cash assets.
The full text of the fairness opinion of Goldman Sachs, dated June 19,
2000, which sets forth the assumptions made, procedures followed, matters
considered, and limitations on the review undertaken in connection with the
opinion, is attached to this proxy statement as Annex A and is incorporated
herein by reference. You should read the opinion in its entirety.
In connection with its opinion, Goldman Sachs reviewed, among other
things:
o the purchase agreement;
o our annual reports to shareholders and annual reports on Form 10-K for
the five years ended December 31, 1999;
o certain of our interim reports to shareholders and quarterly reports on
Form 10-Q;
o the annual financial statements of Liberty Life Insurance Company and
Liberty Insurance Services Corporation for each of the three years
ended December 31, 1999;
o the annual statutory statements of Liberty Life Insurance Company for
each of the five years ended December 31, 1999;
o the quarterly statutory statements of Liberty Life Insurance Company
for each of the three month periods ended March 31, June 30 and
September 30 during each of the three years ended December 31, 1999;
o certain other communications from us to our shareholders;
o certain other information related to the life insurance business; and
o certain internal financial analyses and forecasts for the life
insurance business prepared by our management and the management of the
life insurance business.
In addition, Goldman Sachs:
o held discussions with members of our senior management regarding their
assessment of the strategic rationale for, and the potential benefits
of, the transaction contemplated by the purchase agreement and our past
and current business operations, financial condition and future
prospects and the past and current business operations, financial
condition and future prospects of the life insurance business;
o reviewed the reported price and trading activity for our common stock;
o compared certain financial and stock market information for us and
certain financial information for the life insurance business with
similar information for certain other companies the securities of which
are publicly traded and reviewed the financial terms of certain recent
business combinations in the life insurance industry and financial
outsourcing industry specifically and in other industries generally;
and
24
<PAGE>
o performed such other studies and analyses as Goldman Sachs considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information discussed with or reviewed by it and assumed
such accuracy and completeness for purposes of rendering its opinion. In
rendering its opinion, Goldman Sachs took into account, with our consent,
management's assessment of the risks and uncertainties associated with the life
insurance business achieving management's projections in the amounts and at the
times indicated therein. Goldman Sachs did not make actuarial determinations or
evaluations and did not evaluate actuarial assumptions. Goldman Sachs relied on
our actuaries with respect to reserve adequacy. In addition, Goldman Sachs did
not make an independent evaluation or appraisal of our assets and liabilities
(including the policy reserves) or the assets and liabilities (including the
policy reserves) of any of our subsidiaries or businesses, and Goldman Sachs
was not furnished with any such evaluation or appraisal. Goldman Sachs made no
analyses, and expressed no opinion as to the adequacy, of the policy reserves
of the life insurance business. With our consent, Goldman Sachs relied upon the
advice we received from our legal counsel and tax advisors as to all legal and
tax matters in connection with the proposed transaction. Goldman Sachs, with
our consent, did not take into account any potential payment we may be required
to make pursuant to our indemnification obligations under the purchase
agreement. Pursuant to our instructions, Goldman Sachs assumed that the value
of the non-cash assets included in the dividend to be paid to us was equal to
their March 31, 2000 carrying value of $16,793,522, and Goldman Sachs did not
make an independent assessment of the value of those assets. With our consent,
Goldman Sachs did not opine on the fairness of the allocation of the
consideration for tax or other purposes, nor did Goldman Sachs take into
account our obligations with respect to those allocations or our obligations
under the ancillary agreements referred to as exhibits to the purchase
agreement.
Goldman Sachs understood that we were considering using certain of the
proceeds from the sale of the life insurance business in connection with one or
more transactions, including the potential acquisition of certain broadcast
assets. With our consent, Goldman Sachs did not opine on the fairness of the
consideration to be paid in, or any other aspect of, those transactions.
Goldman Sachs was not requested to solicit, and did not solicit, interest from
other parties with respect to an acquisition of or other business combination
with the life insurance business. Goldman Sachs did not opine on the
transaction contemplated by the purchase agreement relative to other potential
transactions that we might otherwise have pursued. Goldman Sachs' advisory
services and its opinion were provided for the information and assistance of
our Board of Directors in connection with its consideration of the transaction
contemplated by the purchase agreement and such opinion does not constitute a
recommendation as to how any holder of our common stock should vote with
respect to such transaction.
The following is a summary of the material financial analyses presented to
our Board of Directors by Goldman Sachs on June 18, 2000 in connection with its
opinion. It does not purport to be a complete description of the analyses
performed by Goldman Sachs. The order of analyses described, and the results of
those analyses, do not represent the relative importance or weight given to
those analyses by Goldman Sachs. Except as otherwise noted, the following
quantitative information, to the extent that it is based on market data, is
based on market data as it existed on or before June 16, 2000, and is not
necessarily indicative of current market conditions.
The summary includes information presented in tabular format. These tables
should be read together with the text of each summary.
25
<PAGE>
Summary Multiples of Proposed Sale
For purposes of comparison to merger market transactions in the U.S. life
insurance industry and to publicly traded U.S. life insurance companies as
described below, Goldman Sachs examined various multiples for the proposed
sale. Goldman Sachs calculated the purchase price for the proposed sale as a
multiple of the life insurance business' (1) last twelve months, or LTM,
operating earnings as of March 31, 2000, (2) actual operating earnings for
1999, (3) estimated operating earnings for 2000 and (4) estimated operating
earnings for 2001. Goldman Sachs also calculated the purchase price for the
proposed sale as a multiple of the life insurance business' (1) GAAP book value
at December 31, 1999, excluding accumulated other comprehensive income, or
AOCI, (2) GAAP tangible book value at December 31, 1999, excluding AOCI and (3)
statutory surplus, adjusted for the asset valuation reserve, at December 31,
1999. In conducting its analysis, Goldman Sachs used a transaction value of
$648.7 million. Goldman Sachs obtained the data relating to the life insurance
business' operating earnings and book value from us. The results of this
analysis follow below:
Proposed Sale
-------------
Earnings:
LTM (3/31/00)........................... 19.7x
1999 (actual)........................... 21.2x
2000 (estimated)........................ 18.9x
2001 (estimated)........................ 15.0x
Purchase Price as a Multiple of Book Value:
12/31/99 GAAP.......................... 1.4x
12/31/99 Tangible GAAP................. 1.4x
12/31/99 Statutory Surplus............. 3.8x
Comparison to Merger Market Transactions
Goldman Sachs evaluated selected merger transactions in the life
insurance and home service insurance industries and calculated the transaction
values, or purchase prices, as a multiple of the target company's (1) LTM
earnings, (2) GAAP tangible book value, excluding AOCI and (3) statutory
surplus. Goldman Sachs reviewed over 30 transactions in the life insurance
industry since 1996 and 13 transactions in the home service insurance industry
since 1986. In calculating these multiples, Goldman Sachs used the target
company's (1) LTM earnings as of the date of the announcement of the
transaction, (2) tangible GAAP book value as of the end of the most recently
available period preceding the announcement of the transaction and (3)
statutory surplus book value as of the end of the year preceding the
announcement of the transaction. In calculating similar multiples for the life
insurance business, Goldman Sachs used LTM operating earnings as of March 31,
2000 and the applicable book values (tangible GAAP and statutory surplus) as of
December 31, 1999. The results of these analyses follow below:
<TABLE>
Merger Transactions
----------------------------------------------
Life Insurance Home Service
Companies Insurance Companies
-------------------- ---------------------
Proposed
Sale Median Low-High Median Low-High
--------- ------ ---------- ------- -----------
<S> <C> <C> <C> <C> <C>
Purchase Price as a Multiple of LTM Earnings..... 19.7x 17.5x 7.6x-37.4x 15.6x 10.0x-25.9x
Purchase Price as a Multiple of Book Value:
Tangible GAAP............................ 1.4x 1.5x 0.5x-5.2x 1.4x 1.1x-2.9x
Statutory Surplus........................ 3.8x 3.6x 0.9x-13.2x 2.9x 1.8x-4.7x
</TABLE>
In addition, Goldman Sachs compared historical trading prices for certain
public U.S. asset accumulation and large cap life insurance companies as a
multiple of their LTM earnings to the LTM earnings multiples calculated for the
life insurance merger market transactions described above in order to compare
merger market valuations to public market
26
<PAGE>
valuations over time. Goldman Sachs calculated the trading prices for each of
the companies examined on the last trading day of each month for the period
January 1, 1996 through May 31, 2000 as a multiple of LTM earnings. The mean
trading price to LTM earnings multiple for the asset accumulation and large cap
life insurance companies examined during this period was 15.5x, and the mean
trading price to LTM earnings multiple for these companies as of May 31, 2000
was 13.8x.
The public market multiples over time were compared to the life insurance
merger market transaction multiples which were grouped by the years in which
the transactions were announced. Those multiples are illustrated below:
Purchase Price/LTM Earnings Multiple
------------------------------------
Year Low Median High
---- ----- ------ -----
1996....................... 8.4x 17.5x 37.4x
1997....................... 13.1x 15.6x 23.2x
1998....................... 7.6x 16.7x 35.8x
1999....................... 22.3x 23.1x 29.1x
Additionally, in May 2000, one merger transaction had a purchase price to
LTM earnings multiple of 18.1x. In comparison to these multiples, the proposed
sale has a purchase price to LTM operating earnings multiple of 19.7x as of
March 31, 2000.
Comparison of Selected U.S. Life Insurance Companies
Goldman Sachs calculated the trading prices as of June 16, 2000 of 12
publicly traded U.S. life insurance companies, including us, as a multiple of
each of their respective (1) estimated earnings for 2000 and 2001 and (2) GAAP
book value at March 31, 2000, excluding AOCI in order to compare these
multiples to comparable multiples for the proposed sale. The 11 publicly traded
companies, in addition to us, were comprised of two groups, selected large cap
life insurance companies and selected medium to small cap life insurance
companies. The group of selected large cap life insurance companies consisted
of AXA Financial, Inc., American General Corporation, Metlife, Inc., John
Hancock Financial Services, Inc., Lincoln National Corporation, Jefferson -
Pilot Corporation and Torchmark Corporation, and the group of selected medium
to small cap life insurance companies consisted of Protective Life Corporation,
MONY Group Inc., AmerUs Life Holdings, Inc. and Kansas City Life Insurance
Company. In calculating these multiples, Goldman Sachs obtained the estimated
earnings for 2000 and 2001 from I/B/E/S International Inc., or IBES, a data
service which monitors and publishes a compilation of earnings estimates
produced by selected research analysts on publicly traded companies. In
calculating similar multiples for the life insurance business, Goldman Sachs
used the purchase price of $648.7 million for the proposed sale and obtained
estimated operating earnings for the life insurance business from us. The
results of these analyses follow below:
<TABLE>
Publicly Traded Life Insurance
Companies
----------------------------------
Proposed The Liberty
Sale Corporation Median Low-High(a)
-------- ----------- ------ -----------
<S> <C> <C> <C> <C>
Price as a Multiple of Earnings:
2000 (estimated).................. 18.9x 13.9x 10.6x 7.8x
2001 (estimated).................. 15.0x 12.9x 9.5x 7.2x
Price as a Multiple of GAAP Book 1.4x 1.4x 1.4x 0.6x
Value.............................
</TABLE>
---------
(a) Includes The Liberty Corporation.
27
<PAGE>
Goldman Sachs also calculated a number of other financial ratios and
multiples for The Liberty Corporation and the same group of selected large cap
life insurance companies and selected medium to small cap life insurance
companies. Using the applicable trading prices as of June 16, 2000 for each of
these companies, Goldman Sachs calculated (1) the trading price as a percentage
of each company's 52-week high trading price, (2) the ratio of the price to
2001 estimated earnings as a multiple of IBES 5-year growth estimates, (3) the
LTM return on average common equity, or ROACE, (4) the 2000 estimated ROACE,
(5) the debt to total book capital ratio and (6) the current annualized
dividend yield rate. The results of these analyses follow below:
<TABLE>
Percentage of 2001 P/E Ratio
52-Week High to IBES 5-Year Debt/Total Dividend
Company Trading Price Growth Rate LTM ROACE 2000 ROACE Book Cappital Yield
------------------------- ------------- -------------- --------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
The Liberty
Corporation............... 70% 2.6x 11.1% 9.5% 36% 2.3%
Median of Large Cap
Life Insurance
Companies................. 77% 0.8x 14.9% 16.0% 32% 1.4%
Median of Medium
and Small Cap Life
Insurance Companies....... 71% 0.9x 8.4% 8.8% 21% 1.9%
Median - All.............. 73% 0.8x 10.8% 14.7% 27% 1.9%
</TABLE>
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying the opinion of Goldman Sachs. In arriving at its opinion, Goldman
Sachs considered the results of all such analyses and did not attribute any
particular weight to any factor or analysis considered by it, nor did it derive
any value from, or draw any conclusion with respect to fairness based on, any
particular analysis. Rather, Goldman Sachs made its determination as to
fairness on the basis of its experience and professional judgment after
considering the results of all such analyses. No company used in the above
analyses as a comparison is directly comparable to the life insurance business
or us.
Goldman Sachs prepared these analyses solely for purposes of providing an
opinion to our Board of Directors as to the fairness from a financial point of
view of the aggregate consideration to be received by us for the life insurance
business, and they do not purport to be appraisals, nor do they necessarily
reflect the prices at which businesses or securities actually may be sold.
Analyses based upon forecasts of future results are not necessarily indicative
of actual future results, which may be significantly more or less favorable
than suggested by these analyses. Because these analyses are inherently subject
to uncertainty and are based upon numerous factors or events beyond the control
of the parties or their respective advisors, neither we nor Goldman Sachs
assumes responsibility if future results are materially different from those
forecasted. As described above, the opinion of Goldman Sachs to our Board of
Directors was one of many factors taken into consideration by our Board of
Directors in making its determination to approve the purchase agreement.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with us, having acted as our financial advisor in connection with the
purchase agreement. Goldman Sachs has also provided investment banking services
to us for several years, including having acted as a dealer-manager for a Dutch
auction self-tender for 2.4 million shares of our common stock in 1998 and as a
financial advisor in connection with the sale of Pierce National Life Insurance
Company in 1998. Goldman Sachs may provide investment banking services to us in
the future. In addition, Goldman Sachs is a full service
28
<PAGE>
securities firm and in the ordinary course of its trading activities it may
from time to time effect transactions, for its own account or the account of
customers, and hold positions in securities, including derivative securities,
of us and RBC.
Pursuant to a letter agreement dated March 1, 2000 between us and Goldman
Sachs, we engaged Goldman Sachs to act as our exclusive financial advisor in
connection with the possible sale of our life insurance business. Pursuant to
the terms of this letter, if the sale is consummated, we will pay Goldman Sachs
a transaction fee of $2.5 million.
In addition, we have agreed to reimburse Goldman Sachs periodically, upon
request, and upon consummation of the sale of the life insurance business or
upon termination of its services pursuant to the letter agreement, for its
reasonable out-of-pocket expenses, including the fees and disbursements of
Goldman Sachs' attorneys, plus any sales, use or similar taxes (including
additions to such taxes, if any) arising in connection with any matter referred
to in the letter. We have also agreed to indemnify Goldman Sachs and certain
related persons against certain liabilities in connection with its engagement,
including liabilities under the federal securities laws.
29
<PAGE>
THE PURCHASE AGREEMENT
The following is a brief summary of certain provisions of the purchase
agreement. The description is qualified in its entirety by reference to the
complete text of the purchase agreement, which is incorporated by reference and
attached to this proxy statement as Annex B. The terms not otherwise defined in
this summary or elsewhere in this proxy statement have the meanings set forth
in the purchase agreement. All shareholders are urged to carefully read the
purchase agreement in its entirety.
Purchase Price
Pursuant to the terms of the purchase agreement, in consideration of the
transfer to RBC of all of the issued and outstanding capital stock of the
companies to be sold, RBC has agreed to pay $648,700,000 to us, consisting of a
dividend of up to $70,000,000 to be paid to us from Liberty Life Insurance
Company and the balance in cash from RBC.
The Closing
The sale is expected to be consummated in the early part of the fourth
quarter of 2000, subject to the approval of the sale by our shareholders at the
special meeting and the satisfaction or waiver, to the extent legally
permissible, of all other conditions to closing of the sale by such time. In no
event will the closing take place after December 31, 2000 without the consent
of each of us and RBC, unless the closing has not occurred by December 31, 2000
because necessary governmental consents and approvals have not been obtained
and such consents and approvals are being diligently pursued.
Ancillary Agreements
In addition to the purchase agreement, we and RBC have agreed to execute
and deliver prior to the closing certain ancillary agreements, including:
o a lease pursuant to which certain real property will be leased from
Liberty Life Insurance Company to us for a period of one year after
the closing; and
o an intellectual property assignment agreement contemplating the
assignment to RBC of all of our right, interest and title in licenses
to certain trademarks, any registrations and applications therefor
and certain other intellectual property items.
We and RBC have also agreed to work together to agree upon the terms and
conditions of a transitional services agreement pursuant to which RBC will
cause the companies being sold to provide to us, and we will provide to such
companies, certain transitional services from the closing of the sale until
December 31, 2001.
Representations and Warranties
We have given various representations and warranties in the purchase
agreement relating to the companies to be sold including, among others,
representations and warranties relating to:
o corporate organization and similar corporate matters o capital
structure and ownership of the capital stock of the companies to be sold o
authorization and enforceability o necessary governmental and contractual
consents and approvals o non-contravention of our organizational documents
or the organizational documents of our subsidiaries by the transactions
contemplated by the purchase agreement and the ancillary agreements o
non-contravention of laws, licenses, permits and binding agreements
applicable to the companies to be sold o the accuracy of certain financial
and statutory statements provided to RBC o absence of certain changes or
events since December 31, 1999 o absence of legal proceedings o taxes and
tax returns and compliance with certain provisions of state and federal
tax law o employee benefit plans and matters o labor matters o valid title
to real property o absence of default under contracts o compliance with
environmental laws and other
30
<PAGE>
environmental matters o insurance coverage o absence of brokers' fees or
finders' fees to be paid in connection with the sale of the companies to
be sold o absence of certain undisclosed liabilities o intellectual
property matters o insurance issued by the companies to be sold o validity
of reinsurance and coinsurance contracts o validity of third party
administrator contracts o threats of cancellation by policyholders o
accuracy of actuarial reports o financial strength and claim-paying
ability of Liberty Life Insurance Company o sufficiency of reserves o
reports as to risk-based capital o strength of investment assets o
insurance pooling and fronting arrangements o loan documentation o
employees of Liberty and o accuracy of information delivered to RBC.
The purchase agreement contains representations and warranties of RBC
including, among others representations and warranties relating to:
corporate organization and similar corporate matters o authorization and
enforceability of the purchase agreement and related transactions o
necessary governmental and contractual consents and approvals o compliance
with the Securities Act of 1933, as amended o absence of brokers' fees or
finders' fees o availability of financing and o absence of litigation.
Covenants
Pursuant to the purchase agreement, we have agreed to conduct the business
of the companies to be sold in the ordinary course, consistent with past
practice.
In addition, we have agreed:
o to certain limitations with respect to alternative transactions
involving the disposition of the companies to be sold o to provide RBC and
its representatives access to personnel, premises, properties and certain
information with respect to the companies to be sold o to cause Liberty
Life Insurance Company to dividend to us certain assets prior to the
closing o to take certain actions with respect to advisory client consents
o to notify RBC of certain matters o to certain obligations with respect
to the termination of intercompany agreements prior to the closing o to
provide to RBC certain additional financial statements o to certain
limitations with respect to some of our intellectual property o to permit
RBC to conduct certain environmental surveys of some of our real property
to be transferred to the companies to be sold o to certain commitments
with respect to obtaining shareholder approval o to prepare this proxy
statement o to maintain insurance and o to transfer certain property to
the companies to be sold.
RBC has agreed:
o to certain commitments with respect to current and former employees of
the companies to be sold; and
o to permit us to retain certain corporate records.
We and RBC have agreed:
o to use all reasonable efforts to, among other things, take, or cause
to be taken, all actions necessary in order to consummate and make
effective the sale;
o 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 promptly all necessary consents of all third
parties and governmental entities;
o to limitations on the ability of each of us to issue public releases
or announcements concerning the sale;
o that, subject to certain exceptions, each of us will be responsible
for our own costs and expenses in connection with the sale;
31
<PAGE>
o that each of us will execute and deliver the ancillary agreements and
perform our obligations thereunder;
o to negotiate in good faith the terms of certain transitional services
arrangements; and
o to certain limitations on the ability of each of us to trigger certain
anti-takeover laws.
Taxes
In addition to the other provisions of the purchase agreement governing
taxes, we and RBC have further agreed:
o that we shall file by the closing for taxable periods ending on or
before the closing all tax returns required to be filed on or before
the closing on behalf of the companies to be sold and all income tax
returns required to be filed after the closing which are on a
combined or consolidated basis with us;
o that RBC shall file all tax returns required to be filed on behalf of
the companies to be sold, other than those required to be filed by us
pursuant to the purchase agreement, and provide us with copies of tax
returns that cover a taxable year or period beginning before and
ending after the closing prior to the due date;
o that RBC will promptly notify us of any threatened audits or
assessments for which we may be obligated to indemnify them;
o that we and RBC shall each assist the other party in the preparation
of any documents and for any proceeding related to the taxes of the
companies to be sold;
o that, at the request of RBC, both we and RBC shall make a joint
election with respect to Section 338(h)(10) of the Internal Revenue
Code and shall allocate the purchase price for such purposes in
accordance with terms mutually agreed upon by us and RBC; and
o that any tax sharing agreements in effect between us and the
companies to be sold prior to the closing shall be terminated as of
the closing.
Conditions to Completion of the Sale
Our obligations to effect the sale are subject to the satisfaction or, to
the extent legally permissible, waiver of the following conditions:
o the representations and warranties of RBC contained in the purchase
agreement must be true and correct as of the date of the agreement
and on and as of the closing, except where such failures to be
correct would not be expected to have a material adverse effect on
the companies to be sold or would not materially threaten or delay
the consummation of the sale;
o RBC must have performed in all material respects all agreements and
covenants to be performed by RBC prior to the closing;
o RBC must have executed each of the ancillary agreements; and
o no suit, action or other proceeding by any governmental authority may
have been instituted which imposes damages on us or any of the
companies to be sold in connection with the closing.
The obligations of RBC to effect the sale are subject to the satisfaction
or, to the extent legally permissible, waiver of the following conditions:
32
<PAGE>
o our representations and warranties contained in the purchase
agreement must be true and correct as of the date of the agreement
and on and as of the closing, except where such failures to be
correct would not be expected to have a material adverse effect on
the companies to be sold or would not materially threaten or delay
the consummation of the sale;
o we must have performed in all material respects all agreements and
ovenants to be performed by the closing;
o no claim shall have been made asserting beneficial ownership of
shares of capital stock of the companies to be sold;
o all consents of third parties to the sale must have been obtained,
except for those the absence of which would not be expected to have a
material adverse effect on the companies to be sold;
o RBC must have received a legal opinion from our counsel concerning
such legal matters as are usually addressed in similar transactions
and as RBC may reasonably request;
o since December 31, 1999, there must have been no material adverse
effect on the business, condition (financial or otherwise), assets,
liabilities, operations or financial performance of the companies to
be sold;
o the financial strength or claims-paying ability of Liberty Life
Insurance Company shall be rated at least "A" by A.M. Best, unless
failure to meet this condition is a result of the declaration or
payment of the proposed dividend;
o we must have executed each of the ancillary agreements;
o RBC must have received resignations from all of the directors and
officers of the companies to be sold and the subsidiaries of the
companies to be sold as requested by RBC and effective as of the
closing; and
o no suit, action or other proceeding by any governmental authority may
have been instituted which imposes damages on RBC or any of the
companies to be sold in connection with the closing or which imposes
conditions on RBC that would materially and adversely affect the
companies to be sold, materially impair the ability of RBC to
consummate the transactions, or materially and adversely affect the
economic benefits to RBC of the transaction.
The obligations of each of us and RBC to effect the sale are subject to
the satisfaction or, to the extent legally permissible, waiver of the following
conditions:
o no suit, action or other proceeding by any government authority may
have been instituted which, among other things, questions the
validity or legality of the sale or prohibits, restrains, delays or
makes the closing illegal;
o all required authorizations, approvals or consents of any governmental
entity must have been obtained; and
o our shareholders must have approved the purchase agreement and the
transactions contemplated thereby at the special meeting.
Termination
The purchase agreement may be terminated and the sale abandoned at any
time prior to the closing:
o by mutual written consent;
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o by RBC or us if the conditions to closing are not fulfilled by
December 31, 2000, but subject to extension as described under "The
Purchase Agreement -- The Closing;"
o by RBC or us if there has been a material breach of any provision of
the purchase agreement by the other and the breach has not been
waived and has not been cured;
o by RBC or us if any governmental entity shall have issued an order,
decree or ruling or taken any other action restraining, enjoining, or
otherwise prohibiting the consummation of the sale and such order,
decree, ruling or other action has become final or non-appealable;
o by RBC or us if the purchase agreement and the transactions
contemplated thereby are not approved by our shareholders;
o by RBC if our Board of Directors has failed to recommend or has
withdrawn, adversely modified or qualified its recommendation to our
shareholders of the purchase agreement, or has not reconfirmed its
recommendation to our shareholders upon the request of RBC;
o by RBC if our Board of Directors recommends to our shareholders
another acquisition proposal; or
o automatically if we are not otherwise in breach of certain provisions
of the purchase agreement but have entered into a legally binding
agreement to consummate an acquisition proposal which our Board of
Directors determines in good faith is more favorable and provides
greater value to our shareholders and which is reasonably likely to
be consummated.
Consequences of Termination
We will pay to RBC a fee of $20,000,000 in the event the purchase
agreement is terminated because:
o our Board of Directors has failed to recommend or has withdrawn or
adversely qualified its recommendation to our shareholders of the
purchase agreement, has not reconfirmed its recommendation to our
shareholders upon the request of RBC or has recommended to our
shareholders another acquisition proposal and RBC terminates the
purchase agreement; or
o we are not otherwise in breach of the purchase agreement but enter
into a legally binding agreement to consummate an acquisition
proposal which our Board of Directors determines in good faith is
more favorable and provides greater value to our shareholders and
which is reasonably likely to be consummated.
We will pay to RBC a fee of $20,000,000 in the event:
o that, after another acquisition proposal has been made or after we
have entered into an agreement with a third party to consummate
another acquisition proposal or recommended that our shareholders
approve, accept or tender their shares in response to another
acquisition proposal with any person other than RBC, or any person
other than RBC acquires beneficial ownership or the right to acquire
beneficial ownership of twenty percent of our outstanding common
stock, or any group, other than a group of which RBC is a member, is
formed which beneficially owns ten percent or more of our outstanding
common stock, each such event referred to in this summary as an
Acquisition Event;
o the purchase agreement is terminated, other than a termination by us
either as a result of a material breach by RBC of any provision of
the purchase agreement or in the event a governmental entity has
issued an order, decree or ruling or taken any other action
restraining, enjoining, or otherwise prohibiting the consummation of
the sale and such order, decree, ruling or other action has become
final or non-appealable; and
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o within one year of termination of the purchase agreement, a
transaction contemplated by another acquisition proposal occurs that
has the effect of transferring a material portion of the business of
the companies to be sold, the aggregate assets of the companies to be
sold and their subsidiaries, or the capital stock of the companies to
be sold.
We will pay to RBC a fee of $5,000,000 in the event:
o the purchase agreement is terminated, other than a termination by us
either as a result of a material breach by RBC of any provision of
the purchase agreement or in the event a governmental entity has
issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the consummation of
the sale and such order, decree, ruling or other action has become
final or non-appealable;
o no other acquisition proposal has been made and no Acquisition Event
has occurred before the purchase agreement is terminated; and
o within one year after such termination, we have entered into an
agreement with respect to another acquisition proposal that would, if
consummated, have the effect of transferring a material portion of
the business of the companies to be sold, the aggregate assets of the
companies to be sold and their subsidiaries, or the capital stock of
the companies to be sold.
If the purchase agreement is terminated by either us or RBC as a result of
its failure to be approved by our shareholders, we will reimburse RBC for its
reasonable and substantiated out-of-pocket expenses, up to a maximum of
$3,000,000. The amount of this payment will be credited against any of the
payments described above.
Indemnification
We have agreed to indemnify and hold harmless RBC and certain other
related persons from and against any and all damages incurred or caused by,
directly or indirectly, relating to, resulting from, arising out of or in
connection with, any breach or inaccuracy of any of our representations or
warranties, covenants, agreements, undertakings or obligations contained in the
purchase agreement, any ancillary agreement or the schedules attached thereto
until March 31, 2002, except with respect to the indemnity to be provided by us
to RBC for representations and warranties pertaining to capitalization and
ownership of the capital stock of the companies to be sold, which shall survive
indefinitely, and those pertaining to taxes, which shall survive until the
expiration of all relevant statutes of limitations.
RBC has agreed to indemnify us and hold us harmless from and against any
and all damages incurred by RBC, directly or indirectly, based on, arising out
of, relating to, resulting from or in connection with, any breach or
inaccuracy, other than those that have been waived by us, of its
representations or warranties, covenants, agreements, undertakings or
obligations contained in the purchase agreement, any ancillary agreements or
the schedules attached to them until March 31, 2002, except with respect to any
representation or warranty, covenant, agreement, undertaking or obligation to
be performed and complied with before the closing (unless we give RBC notice of
the problem on or before the closing).
The parties have agreed that we shall not indemnify RBC, and RBC will not
indemnify us, for any damages incurred (other than damages occurring as a
result of (i) a breach of representation or warranty relating to taxes or (ii)
failures of life insurance or annuity contracts issued by Liberty Life
Insurance Company, LC Insurance Ltd. or any subsidiary of the companies to be
sold engaging in the sale of insurance products to qualify under the Internal
Revenue Code as a life insurance or annuity contract, or the qualification of
any life insurance contract issued by such entities prior to closing as a
modified endowment contract, such failures referred to in this summary as
Contract Failures), unless and until the other party has suffered losses in
excess of $18,000,000, whereupon that party shall be entitled to
indemnification for the full amount of such losses in excess of $18,000,000;
provided, however, that no party shall be entitled to recover from the other
more than $324,350,000 less half of any damages paid for any breach of a
representation or warranty relating to taxes, except in the case of fraud or
intentional
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<PAGE>
misconduct. RBC shall not be entitled to bring an indemnity claim for damages
to the extent a reserve for such damages has been established in our March 31,
2000 quarterly financial statements. We have also agreed to separately
indemnify RBC for any damages incurred in connection with Contract Failures but
only to the extent such damages exceed $3,700,000. RBC's sole remedy against us
for damages in connection with Contract Failures shall be pursuant to this
indemnity and shall be limited to an aggregate amount of $2,500,000.
Noncompete
Pursuant to the purchase agreement, we have agreed, for five years
following the closing, not to directly or indirectly, without the prior written
consent of RBC,
o cause or encourage any officer, director, employee, consultant,
agent, broker or similar associate of any of the companies to be sold
to terminate his or her employment or other relationship with such
company for the purpose of competing with any of the companies to be
sold;
o cause or encourage any customer of Liberty Insurance Services
Corporation to terminate, modify or fail to renew any contract or
other relationship with Liberty Insurance Services Corporation;
o act together with any person for the purpose of competing, directly
or indirectly, with the business being sold or damaging the companies
to be sold; or
o except in certain circumstances, engage in or have a greater than
five percent equity interest in any company which competes with the
business being sold.
No Solicitation
Pursuant to the purchase agreement, we have agreed not to, without the
prior written consent of RBC, (i) solicit for employment any current employee,
consultant, agent, broker or similar associate of any of the companies to be
sold or (ii) hire any current employee, consultant, agent, broker or similar
associate of any of the companies to be sold within one year of the date of
such individual's termination.
Expenses and Transfer Taxes
Other than transfer taxes which are to be borne by us and subject to
certain exceptions, including those described under "The Purchase Agreement --
Consequences of Termination," each party has agreed to bear its own fees and
expenses in respect of the sale.
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THE SPECIAL MEETING
We are furnishing this proxy statement to holders of our common stock and
preferred stock in connection with the solicitation of proxies by our Board of
Directors for use at the special meeting to be held on September 29, 2000 at
the time and place specified in the accompanying Notice of Special Meeting of
Shareholders, and at any adjournment or postponement. The purpose of the
special meeting is to consider and vote upon a proposal to approve and adopt
the purchase agreement and the sale of our insurance operations and to transact
such other business as may properly come before the special meeting.
Record Date; Voting at the Special Meeting
The Board of Directors has fixed the close of business on August 21, 2000
as the record date for determination of the shareholders entitled to notice of
and to vote at the special meeting and any postponement or adjournment. On the
record date, there were outstanding approximately 19,700,000 shares of common
stock and 180,000 shares of preferred stock. Each holder of record of common
stock and preferred stock on the record date is entitled to cast one vote per
share. A shareholder may vote in person or by a properly executed proxy on each
proposal put forth at the special meeting.
Quorum; Vote Required for Approval
The presence in person or by properly executed proxy of a majority of our
capital stock outstanding and entitled to vote at the special meeting is
necessary to constitute a quorum. If a quorum is not present, the special
meeting may be adjourned from time to time until a quorum is obtained. The
approval of the sale requires the affirmative vote of the holders of 66 2/3% of
our capital stock outstanding and entitled to vote.
Certain of our officers and directors will be present at the special
meeting and available to respond to questions.
Under applicable rules, brokers that hold shares in street name for
customers are precluded from exercising their voting discretion on those
shares. Signed proxies held by brokers without instructions are referred to as
"broker non-votes." While broker non-votes will be counted for purposes of
determining whether there is a quorum at the stockholders' meeting, absent
specific instructions from the beneficial owner of the shares, brokers are not
empowered to vote these shares. Since the affirmative vote of a 66 2/3% of the
capital stock outstanding and entitled to vote is required to approve the sale,
a broker non-vote or the failure to vote in person or by proxy will have the
effect of a vote against the sale.
Voting and Revocation of Proxies
All shareholders should complete, sign and return the enclosed form of
proxy. All shares of capital stock represented at the special meeting by
properly executed proxies received before or at the special meeting, unless
those proxies have been revoked, will be voted at the special meeting,
including any postponement or adjournment. If no instructions are indicated on
a properly executed proxy, the proxies will be deemed to be FOR approval of the
proposals.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by either:
o submitting a new proxy with a later date;
o notifying our Secretary in writing before the special meeting that you
have revoked your proxy; or
o attending the special meeting and voting in person.
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Solicitation of Proxies
Proxies are being solicited by and on behalf of the Board of Directors. We
have retained Georgeson Shareholder Communications Inc. to aid in the
solicitation of proxies and to verify records related to the solicitations. We
will pay Georgeson approximately $10,000 plus expense reimbursement for its
services. We may request by facsimile, mail, or other means of communication
the return of the proxy cards.
Other Matters
As of the date of this proxy statement, our Board of Directors knows of no
matters that will be presented for consideration at the special meeting, other
than as described in this proxy statement. If any other matters shall properly
come before the special meeting or any adjournments or postponements of the
special meeting and shall be voted on, the enclosed proxies will be deemed to
confer discretionary authority on the individuals named as proxies therein to
vote the shares represented by such proxies as to any of those matters. The
persons named as proxies intend to vote or not vote in accordance with the
recommendation of our Board of Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table shows as of June 30, 2000, the shares of our common
stock and preferred stock beneficially owned (as that term is defined by Rule
13d-3 issued by the SEC under the Securities Exchange Act of 1934) by all
persons who beneficially own more than 5% of the shares of each such class of
our capital stock. The table does not reflect the beneficial ownership interest
of RBC in us resulting solely from the voting agreements RBC entered into with
certain of our shareholders in connection with the purchase agreement. See "The
Proposed Sale - Voting Agreements." Mary Jane Brock, Hayne Hipp and John B.
Hipp are brothers and sister; Anna Kate Hipp is Hayne Hipp's wife; Dorothy G.
Leland, William F. Hipp and the individuals previously named are cousins; Gail
H. Cooke is the daughter of Frances M. McCreery and the aunt of those
previously named. Jo Love Little, James S. Love, III and Mary E. McMillan are
brother and sisters.
<TABLE>
Nature and Amount of Beneficial
Ownership
----------------------------------------
Shared Voting Total Shares
Sole Voting and/or and/or Investment Beneficially Percentage Percentage
Name and Address(1) Investment Power(2) Power(3) Owned of Common of Common
---------------------- ------------------- ----------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Mary Jane Hipp Brock 225,805 640,700 866,505 4.44% -0-
New York, NY
Gail Hipp Cooke 471,277 -0- 471,277 2.42% -0-
New York, NY
Gabelli Funds, Inc.
One Corporate Center
Rye, NY 10580-1434 3,819,948 (4) -0- 3,819,948 19.58% -0-
Mason A. Goldsmith -0- 868,369 868,369 4.45% -0-
410 E. Washington Street
Greenville, SC 29601
Anna Kate Hipp 12,045 526,991 539,036 2.76% -0-
Greenville, SC
Hayne Hipp
Greenville, SC 359,527 (5) 1,969,815 2,329,342 11.94% -0-
</TABLE>
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<TABLE>
Nature and Amount of Beneficial
Ownership
----------------------------------------
Shared Voting Total Shares
Sole Voting and/or and/or Investment Beneficially Percentage Percentage
Name and Address(1) Investment Power(2) Power(3) Owned of Common of Common
---------------------- ------------------- ----------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
John Boyd Hipp 90,553 646,844 737,397 3.78% -0-
Atlanta, GA
William F. Hipp 56,220 556,910 613,130 3.14% -0-
Atlanta, GA
Dorothy Gunter Leland 9,536 52,532 62,068 0.32% -0-
Sullivans Island, SC
Frances M. McCreery 949,156 -0- 949,156 4.86% -0-
Chagrin Falls, OH
William R. Patterson
999 Peachtree Street, NE
Atlanta, GA 30309-3996 -0- 1,913,804 (6) 1,913,804 9.81% -0-
Jo Love Little
#2 Birch Cove
Gulfport, MS 39503 63,740 (7) -0- 63,740 -0- 15.87%
James S. Love, III
12137 Hickman Road
Biloxi, MS 39532 176,045 (7) -0- 176,045 -0- 43.82%
Mary E. McMillan
1200 Meadowbrook, #34
Jackson, MS 39206 136,724 (7) -0- 136,724 -0- 34.03%
Notes:
1. The mailing address for the individuals listed above, with the exception of Gabelli Funds, Inc.,
Mr. Goldsmith, Mr. Patterson, Ms. Little, Mr. Love and Ms. McMillan is P.O. Box 789, Greenville,
SC 29602.
2. Except as otherwise indicated in these notes, each person has sole voting
and investment power with respect to the designated shares.
3. Shares shown in this column are included in the totals for more than one person as follows: Mary Jane Brock
shares voting and investment power with John B. Hipp with respect to 345,700 shares; Hayne Hipp shares
voting and investment power with Mary Jane Brock with respect to 295,000 shares; Hayne Hipp shares voting
and investment power with John B. Hipp with respect to 301,144 shares; Hayne Hipp shares voting and
investment power with Anna Kate Hipp with respect to 297,302 shares; Hayne Hipp shares voting and
investment power with Anna Kate Hipp and W. R. Patterson with respect to 208,000 shares; Hayne Hipp
shares voting and investment power with M. A. Goldsmith and another individual with respect to 815,837
shares; Hayne Hipp shares voting and investment power with M. A. Goldsmith and Dorothy G. Leland with
respect to 52,532 shares; and W. F. Hipp shares voting and investment power with W. R. Patterson and another
individual with respect to 276,380 shares. Except as otherwise indicated in these notes, both voting and
investment power are shared with respect to the shares designated in this column.
4. Amendment No. 27 to Schedule 13D filed with the SEC on November 9, 1999, reflects that Gabelli Funds, Inc.
is the ultimate parent of a variety of companies engaged in the securities business and is the beneficial owner of
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the above shares, including 3,786,648 shares for which sole voting power is held and 3,819,948 shares for which
sole investment power is held.
5. Includes 55,600 restricted shares as to which he has sole voting power but no investment power and 21,591 shares
held in trust for the benefit of charity and/or family and non-family members of which Hayne Hipp serves as sole trustee.
6. Includes 1,913,804 shares for which shared voting power is held and 1,581,392 shares for which shared investment
power is held.
7. The shares shown as being owned by Jo Love Little, James S. Love, III and Mary E. McMillan are shares of our
Series 1995-A Preferred Stock, which entitles these holders to receive an equal number of shares of common
stock upon conversion of the shares of preferred stock.
</TABLE>
Security Ownership of Management
The following table shows the shares of our common stock owned
beneficially (as that term is defined by Rule 13d-3 issued by the SEC under the
Securities Exchange Act of 1934), unless otherwise indicated, by each director
and by all executive officers and directors of Liberty as a group on June 30,
2000.
Percentage of
Number of Shares Outstanding Shares
Shareholder(1) of Common Stock of Common Stock
------------------------------------ ---------------- -------------------
Edward E. Crutchfield 5,030 (2) 0.03%
Robert E. Evans 74,320 (3) 0.38%
John R. Farmer 8,030 (2) 0.04%
Hayne Hipp 2,329,342 (4) 11.94%
Jennie M. Johnson 135,764 (5) 0.70%
W. W. Johnson 3,830 (2) 0.02%
James M. Keelor 91,926 (6) 0.47%
William O. McCoy 5,430 (2) 0.03%
John H. Mullin, III 5,030 (2) 0.03%
Benjamin F. Payton 3,230 (2) 0.02%
J. Thurston Roach 5,030 (2) 0.03%
Eugene E. Stone, IV 6,530 (7) 0.03%
William B. Timmerman 3,030 (2) 0.02%
Martha G. Williams 153,421 (8) 0.79%
All Directors and Executive Officers
as a Group (15 persons) 2,860,571 (9) 14.66%
Notes:
1. None of the directors and executive officers is the beneficial owner of
any preferred stock or of any equity securities of any of our
subsidiaries. Except as otherwise indicated in these notes, each of the
individuals named above has sole voting and investment power with respect
to the shares listed for such person.
2. Includes 2,280 restricted shares as to which he has sole voting power but
no investment power.
3. Includes options to purchase 4,000 shares currently exercisable under our
Performance Incentive Compensation Program and 18,997 restricted shares
as to which he has sole voting power but no investment power.
4. See the table in "Security Ownership of Certain Beneficial Owners" and
Notes 3, 4 and 6 thereto for a more complete description of the nature
and amount of beneficial ownership by Hayne Hipp.
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5. Includes options to purchase 24,000 shares currently exercisable under
our Performance Incentive Compensation Program and 25,464 restricted
shares as to which she has sole voting power but no investment power.
6. Includes options to purchase 14,000 shares currently exercisable under
our Performance Incentive Compensation Program and 21,683 restricted
shares as to which he has sole voting power but no investment power.
7. Includes 2,280 restricted shares as to which he has sole voting power but
no investment power and 2,500 shares held by a limited partnership as to
which he has shared voting and investment power. Mr. Stone disclaims
beneficial ownership of the 2,500 shares held by the limited partnership.
8. Includes options to purchase 23,500 shares currently exercisable under
our Performance Incentive Compensation Program and 24,005 restricted
shares as to which she has sole voting power but no investment power.
9. Includes options to purchase 74,548 shares currently exercisable under
our Performance Incentive Compensation Program and 175,593 restricted
shares as to which they have sole voting power but no investment power.
DISSENTERS' RIGHTS
Shareholders of our capital stock are entitled to dissenters' appraisal
rights under Chapter 13 of the South Carolina Business Corporation Act of 1996,
as amended (the "SCBCA"), if the sale of our insurance operations is
consummated. To effectively assert dissenters' rights, a shareholder must
follow the procedures outlined in Chapter 13 of the SCBCA.
The following discussion is not a complete statement of the law pertaining
to dissenters' rights under South Carolina law and is qualified in its entirety
by the full text of Chapter 13 of the SCBCA, which is reprinted in its entirety
as Annex C to this proxy statement and incorporated herein by reference. Annex
C should be reviewed carefully by any shareholder who wishes to exercise
dissenters' rights or who wishes to preserve the right to do so, since failure
to comply with the procedures of the statute will result in termination or
waiver of dissenters' rights under Chapter 13.
Any holder of our capital stock wishing to exercise dissenters' rights is
urged to consult legal counsel before attempting to exercise such rights.
Under Chapter 13, if the sale is consummated, each shareholder has the
right:
o to dissent from the sale; and
o to receive payment of the "fair value" of the shares held by the
shareholder.
Under Chapter 13, a shareholder electing to exercise dissenters' rights
must:
o deliver to us, before the vote is taken, a written notice of the
shareholder's intent to demand payment of his or her shares if the
sale is consummated; and
o not vote in favor of or consent in writing to the sale. A vote in
favor of the sale by a proxy holder solicited by us shall not,
however, disqualify a shareholder from demanding payment for his or
her shares.
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A vote by proxy or in person against the sale does not in and of itself
constitute a demand for appraisal under South Carolina law.
Within 10 days following the consummation of the sale, we are required to
send to each dissenting shareholder a notice setting forth the following:
o where the payment demand must be sent;
o where certificates for shares must be deposited;
o the extent to which transfer of the uncertificated shares is to be
restricted after the payment demand is
received;
o the date by which we must receive the payment demand, which may not
be fewer than thirty nor more than sixty days after the date that the
notice is delivered; and
o the date by which certificates for certificated shares must be
deposited, which may not be earlier than twenty days after the demand
date.
In addition, we will supply:
o a copy of Chapter 13 of the SCBCA; and
o a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the
sale and requires that the person asserting dissenters' rights
certify whether or not he or she, or, if he or she is a nominee
asserting dissenters' rights on behalf of a beneficial shareholder,
the beneficial shareholder, acquired beneficial ownership of the
shares before that date.
In order to continue to pursue dissenters' rights, a shareholder who
receives such notice must:
o demand payment within the time prescribed in the notice;
o certify whether he or she (or the beneficial owner on whose behalf he
or she is asserting dissenters' rights) acquired beneficial ownership
of the shares before the date of the first announcement of the terms
of the sale; and
o deposit his or her certificates representing shares of capital stock
in accordance with the terms of the notice.
A shareholder who does not substantially comply with the first and third
requirements will not be entitled to payment for his or her shares under
Chapter 13 of the SCBCA.
Except as hereinafter described, upon our receipt of a payment demand, we
shall pay each dissenter who has substantially complied with the foregoing
requirements the amount which we estimate is the fair value of the dissenters'
shares, plus accrued interest. Payment for the shares must be accompanied by
certain financial statements from us and our consolidated subsidiaries
including:
o a balance sheet as of the end of a fiscal year ending not more than
sixteen months before the date of payment;
o an income statement for that year;
o a statement of changes in shareholders' equity for that year; and
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o the latest available interim financial statements, if any.
The payment must also be accompanied by:
o a statement of our estimate of the fair value of the shares and an
explanation of how the fair value was calculated;
o an explanation of how the interest was calculated;
o a statement of the dissenter's right to demand additional payment
under Chapter 13; and
o a copy of Chapter 13 of the SCBCA.
Within 30 days after we have made or offered payment for the dissenters'
shares, the dissenter may:
o notify us in writing of the dissenter's estimate of the fair value
and amount of interest due for the shares and demand in writing
payment of his or her estimate (less any payment previously made by
us); or
o reject our offer and demand payment of the fair value of his or her
shares and interest due.
The dissenter may make such notification or rejection under any of the
following circumstances:
o the dissenter believes that the amount paid or offered to be paid is
less than the fair value of his or her shares or that the interest
due is calculated incorrectly;
o we fail to make or offer to make the payment in Chapter 13 within
sixty days after the date set for demanding payment; or
o we fail to complete the sale and do not return the deposited
certificates or release the transfer restrictions imposed on
uncertificated shares within sixty days after the date set for
demanding payment in our notice.
Within 60 days after receiving the demand for additional payment, if the
demand remains unsettled, we may file a petition in the South Carolina Court of
Common Pleas in Greenville County, South Carolina, requesting the court to
determine the fair value of shares and accrued interest. If we do not commence
the proceeding within such 60 day period, we must pay each dissenter whose
demand remains unsettled the amount demanded.
WHERE YOU CAN FIND MORE INFORMATION
We file periodic reports, proxy statements, and other information with the
SEC. These filings are available to the public over the Internet at the SEC's
web site (www.sec.gov). You may also read and copy any document that we file
with the SEC at the SEC's public reference facilities at 450 Fifth Street,
N.W., Washington, D.C. 20549; 7 World Trade Center, Suite 1300, New York, New
York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You may obtain copies of the documents at prescribed rates by
writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of its public reference facilities.
We "incorporate by reference" into this proxy statement the information in
certain documents we file with the SEC, which means that we can disclose
important information to you by referring you to those documents. We
incorporate by reference into this proxy statement the following documents we
have previously filed with the SEC:
o Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2000;
o Current Report on Form 8K filed June 30, 2000;
43
<PAGE>
o Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2000;
o Proxy Statement for our annual meeting of shareholders held on
May 2, 2000; and
o Annual Report on Form 10-K for the fiscal year ended
December 31, 1999.
We also incorporate by reference into this proxy statement additional
documents that we file with the SEC under Sections 13(a), 13(c), 14, or 15(d)
of the Securities Exchange Act of 1934 between the date of this proxy statement
and the date of the special meeting.
You may request a copy of these filings at no cost by contacting us at the
following address:
The Liberty Corporation
Martha G. Williams
General Counsel and Secretary
2000 Wade Hampton Boulevard
Greenville, South Carolina 29615
(864) 609-8256
In order to obtain timely delivery, you must request copies of our SEC filings
no later than September 20, 2000.
You should rely only on the information delivered with, or stated or
incorporated by reference in, this proxy statement. We have not authorized
anyone else to provide you with different information. You should not assume
that the information in this proxy statement is accurate as of any date other
than the date on the front of this document.
FUTURE SHAREHOLDER PROPOSALS
Any shareholder proposal for our annual meeting in 2001 must be sent to
Martha G. Williams, our Secretary, at 2000 Wade Hampton Boulevard, Greenville,
SC 29615. The deadline for receipt of a proposal to be considered for inclusion
in our proxy statement is November 29, 2000. Any such proposal must comply with
Rule 14a-8 of Regulation 14A of the SEC's Proxy Rules and must contain certain
information specified by our Bylaws. A proposal for which a shareholder will
conduct his or her own solicitation must be received by our Secretary at the
address indicated above between October 30, 2000 and November 29, 2000. On
request, the Secretary will provide a copy of our Bylaws containing procedural
requirements for submitting proposals.
EXPERTS
The consolidated financial statements of The Liberty Corporation appearing
in The Liberty Corporation's Annual Report (Form 10-K) for the year ended
December 31, 1999, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
44
<PAGE>
GENERAL INFORMATION
The above Notice of Special Meeting of Shareholders and Proxy Statement
are sent by order of our Board of Directors.
/s/ Martha G. Williams
---------------------------------
Martha G. Williams
General Counsel and Secretary
45
<PAGE>
THE LIBERTY CORPORATION
This Proxy is solicited on behalf of the Board of Directors of the Corporation.
The undersigned hereby appoints Sophia G. Vergas and Mark D. Wesson,
or either of them, as proxies, with full power of substitution, to represent
the undersigned at the Special Meeting of Shareholders of The Liberty
Corporation ("Liberty") to be held at 11:00 a.m. on September 29, 2000, at The
Liberty Corporation Headquarters Building, 2000 Wade Hampton Boulevard,
Greenville, South Carolina, and at any adjournment thereof, and to vote all the
shares of Liberty stock which the undersigned would be entitled to vote if
personally present.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting and Proxy Statement, each dated August 22, 2000, expressly revokes any
and all proxies heretofore given or executed by any undersigned with respect to
the shares of stock represented by this Proxy and hereby gives notice of such
revocation by filing this Proxy with Liberty's Secretary.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCE
WITH INSTRUCTIONS CONTAINED HEREIN. IN THE ABSENCE OF SUCH INSTRUCTIONS, THIS
PROXY WILL BE VOTED IN FAVOR OF ALL THE PROPOSALS.
--------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE: Please sign exactly as name(s) appear(s) hereon. When signing as
attorney, executor, administrator, trustee, guardian or officer of a
corporation, please give full title as such.
--------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
____________________________________ _______________________________________
____________________________________ _______________________________________
____________________________________ _______________________________________
(Continued and to be signed on reverse side.)
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
FOR AGAINST ABSTAIN
1. Proposal to approve and adopt the
Purchase Agreement dated as of June [ ] [ ] [ ]
19, 2000 between The Liberty
Corporation and Royal Bank of Canada
and to approve the sale of Liberty's
insurance operations pursuant to such
Agreement.
2. In their discretion, the Proxies
are authorized to vote upon such other
business as may properly come before
said meeting or any adjournment
thereof.
--------------------------------------------- ------------------------------------------ Date:________________
SHAREHOLDER(S) SIGN HERE CO-OWNER SIGN HERE
NOTE: Please be sure to sign and date this Proxy.
</TABLE>
<PAGE>
ANNEX A
PERSONAL AND CONFIDENTIAL
June 19, 2000
Board of Directors
The Liberty Corporation
2000 Wade Hampton Boulevard
Greenville, South Carolina 29615
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to The Liberty Corporation (the "Company") of the aggregate consideration
(the "Consideration") to be received by the Company in connection with the
Company's sale of all of the outstanding shares of capital stock (the "Shares,"
as such term is defined in the Agreement referred to below) of each of Liberty
Life Insurance Company ("Liberty Life"), Liberty Insurance Services
Corporation, The Liberty Marketing Services Corporation, Liberty Capital
Advisors Inc., and LC Insurance Limited (collectively, the "Life Insurance
Business") and certain intellectual property (collectively, with the Shares,
the "Assets") pursuant to the Purchase Agreement, dated as of June 19, 2000, by
and between Royal Bank of Canada (the "Buyer") and the Company (the
"Agreement").
The Consideration consists of $648,700,000 in cash, inclusive of a special
dividend of up to $70,000,000 from Liberty Life to the Company immediately
prior to the transaction closing (it being understood that such special
dividend, if any, shall consist of Liberty Life's interest in certain non-cash
assets (the "Excluded Assets"), with the balance of the special dividend to be
distributed to the Company in cash).
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company, having acted as its financial advisor in connection
with the Agreement. In addition, we have performed investment banking services
for the Company for several years, including having acted as a dealer-manager
for a Dutch-auction self-tender for 2.4 million shares of the common stock of
the Company in 1998 and as a financial advisor in connection with the sale of
Pierce National Life Insurance Company in 1998. We may provide investment
banking services to Buyer in the future. Goldman, Sachs & Co. provides a full
range of financial advisory and securities services and, in the course of its
normal trading activities, may from time to time effect transactions and hold
positions in securities, including derivative securities, of the Company or
Buyer for its own account and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company for the five years ended December 31, 1999; certain interim reports
to stockholders and Quarterly Reports on Form 10-Q of the Company; the annual
financial statements of Liberty Life Insurance Company and Liberty Insurance
Services Corporation for each of the three years ended December 31, 1999; the
annual statutory statements of Liberty Life Insurance Company for each of the
five years ended December 31, 1999; the quarterly statutory statements for
Liberty Life Insurance
A-1
<PAGE>
Company for each of the three month periods ended March 31, June 30 and
September 30 during each of the three years ended December 31, 1999; certain
other communications from the Company to its stockholders; certain other
information related to the Life Insurance Business; and certain internal
financial analyses and forecasts for the Life Insurance Business prepared by
management of the Company and the Life Insurance Business. We also have held
discussions with members of the senior management of the Company regarding
their assessment of the strategic rationale for, and the potential benefits of,
the transaction contemplated by the Agreement and the past and current business
operations, financial condition and future prospects of the Company and the
Life Insurance Business. In addition, we have reviewed the reported price and
trading activity for the Company's common stock, compared certain financial and
stock market information for the Company and certain financial information for
the Life Insurance Business with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the life insurance industry
and the financial outsourcing industry specifically and in other industries
generally, and performed such other studies and analyses as we considered
appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. In rendering
our opinion, we took into account, with your consent, management's assessment
of the risks and uncertainties associated with the Life Insurance Business
achieving management's projections in the amounts and at the times indicated
therein. We are not actuaries and our services did not include actuarial
determinations or evaluations by us or an attempt to evaluate actuarial
assumptions and we have relied upon your actuaries with respect to reserve
adequacy. In addition, we have not made an independent evaluation or appraisal
of the assets and liabilities (including the policy reserves) of the Company or
any of its subsidiaries or businesses and we have not been furnished with any
such evaluation or appraisal. In that regard, we have made no analyses, and
express no opinion as to the adequacy, of the policy reserves of the Life
Insurance Business. With your consent, we have relied upon the advice the
Company has received from its legal counsel and tax advisors as to all legal
and tax matters in connection with the proposed transaction. We understand
that, pursuant to the terms of the Agreement, the Company has agreed to certain
indemnification obligations. In rendering this opinion, we have, with your
consent, not taken into account any potential payment the Company may be
required to make pursuant to these obligations. Pursuant to your instructions,
we have assumed for purposes of this opinion that the value of the Excluded
Assets is equal to their March 31, 2000 carrying value of $16,793,522 and we
have not made an independent assessment of the value of those assets. With your
consent, we are not opining on the fairness of the allocation of the
Consideration for tax or other purposes, as contemplated by the Agreement, nor
have we taken into account the Company's obligations with respect to those
allocations or its obligations under the ancillary agreements referred to as
exhibits to the Agreement.
We understand that the Company is considering using certain of the proceeds
from the sale of the Assets in connection with one or more transactions,
including the potential acquisition of certain broadcast assets pursuant to an
agreement that may be executed shortly after the execution of the Agreement.
With your consent, we are not opining on the fairness of the consideration to
be paid in, or any other aspect of, those transactions. In addition, we were
not requested to solicit, and did not solicit, interest from other parties with
respect to an acquisition of, or other business combination with, the Life
Insurance Business. Finally, we are not opining on this transaction relative to
other potential transactions that the Company might otherwise have pursued. Our
advisory services and the opinion expressed herein are provided for the
information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the
Agreement and such opinion does not constitute a recommendation as to how any
holder of the voting shares of the Company should vote with respect to such
transaction.
A-2
<PAGE>
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof, the
Consideration to be received by the Company for the Assets pursuant to the
Agreement is fair from a financial point of view to the Company.
Very truly yours,
/s/ Goldman, Sachs & Co.
A-3
<PAGE>
ANNEX B
PURCHASE AGREEMENT
by and between
THE LIBERTY CORPORATION
and
ROYAL BANK OF CANADA
dated as of
June 19, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
THE ACQUISITION
SECTION 1.1 The Acquisition..............................................B-2
SECTION 1.2 Purchase Price...............................................B-2
SECTION 1.3 Payment of Purchase Price....................................B-2
SECTION 1.4 Intellectual Property Assignment.............................B-2
ARTICLE II
THE CLOSING
SECTION 2.1 Closing......................................................B-2
SECTION 2.2 Deliveries by Seller to Buyer................................B-3
SECTION 2.3 Deliveries by Buyer to Seller................................B-4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER
SECTION 3.1 Organization and Good Standing; Company Subsidiaries.........B-5
SECTION 3.2 Capitalization...............................................B-5
SECTION 3.3 Corporate Authority; Board Approval..........................B-6
SECTION 3.4 Governmental Filings and Consents............................B-7
SECTION 3.5 No Violations................................................B-8
SECTION 3.6 Financial and Statutory Statements...........................B-8
SECTION 3.7 Absence of Certain Changes and Events.......................B-10
SECTION 3.8 Actions; Orders.............................................B-13
SECTION 3.9 Taxes.......................................................B-13
SECTION 3.10 Employee Benefits; ERISA....................................B-15
SECTION 3.11 Labor Matters...............................................B-17
SECTION 3.12 Compliance with Laws; Governmental Authorizations; etc......B-17
SECTION 3.13 Real Property...............................................B-20
SECTION 3.14 Contracts; No Default.......................................B-20
SECTION 3.15 Environmental Matters.......................................B-22
SECTION 3.16 Insurance...................................................B-33
SECTION 3.17 Brokers and Finders.........................................B-24
SECTION 3.18 No Undisclosed Liabilities..................................B-24
SECTION 3.19 Intellectual Property.......................................B-24
SECTION 3.20 Insurance Issued by the Companies...........................B-25
SECTION 3.21 Reinsurance and Coinsurance.................................B-26
SECTION 3.22 Service Contracts...........................................B-26
SECTION 3.23 Threats of Cancellation.....................................B-26
SECTION 3.24 Actuarial Reports...........................................B-27
SECTION 3.25 Ratings.....................................................B-27
SECTION 3.26 Reserves....................................................B-27
SECTION 3.27 Risk-Based Capital; IRIS Ratios.............................B-27
<PAGE>
SECTION 3.28 Company Investment Assets...................................B-27
SECTION 3.29 Pools and Fronting Arrangements; Service Agreements.........B-28
SECTION 3.30 Intercompany Accounts.......................................B-28
SECTION 3.31 Assets Sufficient...........................................B-28
SECTION 3.32 Loans.......................................................B-28
SECTION 3.33 Employees...................................................B-29
SECTION 3.34 Disclosure..................................................B-29
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 4.1 Organization and Good Standing..............................B-29
SECTION 4.2 Corporate Authority.........................................B-29
SECTION 4.3 Governmental Filings and Consents; No Violations............B-29
SECTION 4.4 Securities Act..............................................B-30
SECTION 4.5 Brokers and Finders.........................................B-30
SECTION 4.6 Financing...................................................B-30
SECTION 4.7 Litigation..................................................B-30
ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business.........................................B-31
SECTION 5.2 Acquisition Proposals.......................................B-31
SECTION 5.3 Access......................................................B-33
SECTION 5.4 Required Approvals..........................................B-33
SECTION 5.5 Reasonable Best Efforts.....................................B-34
SECTION 5.6 HSR Act.....................................................B-34
SECTION 5.7 Publicity...................................................B-34
SECTION 5.8 Expenses....................................................B-35
SECTION 5.9 Dividend of Shares of Subsidiaries of the Company...........B-35
SECTION 5.10 Advisory Contract Consents..................................B-35
SECTION 5.11 Further Assurances..........................................B-35
SECTION 5.12 Notifications...............................................B-35
SECTION 5.13 Non-Competition; Non-Solicitation...........................B-36
SECTION 5.14 Employee and Employee Benefit Matters.......................B-37
SECTION 5.15 Intercompany Agreements and Accounts........................B-38
SECTION 5.16 Additional Financial Statements.............................B-38
SECTION 5.17 Ancillary Agreements........................................B-38
SECTION 5.18 Retention of Records........................................B-39
SECTION 5.19 Liberty Mark................................................B-39
SECTION 5.20 Forbearances of Seller and Buyer............................B-39
SECTION 5.21 Environmental Testing.......................................B-39
SECTION 5.22 Shareholder Approval........................................B-40
SECTION 5.23 Proxy Statement.............................................B-40
SECTION 5.24 Maintenance of Insurance....................................B-41
SECTION 5.25 Transferred Property........................................B-41
SECTION 5.26 Takeover Laws...............................................B-41
ii
<PAGE>
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.1 Conditions to Obligations of Buyer..........................B-42
SECTION 6.2 Conditions to Obligations of Seller.........................B-44
ARTICLE VII
TAX MATTERS
SECTION 7.1 Liability for Taxes and Related Matters.....................B-45
SECTION 7.2 Tax Returns and Reports.....................................B-46
SECTION 7.3 Contest Provisions..........................................B-47
SECTION 7.4 Cooperation; Records........................................B-47
SECTION 7.5 Disputes....................................................B-48
SECTION 7.6 Section 338(h)(10) Election.................................B-48
SECTION 7.7 Allocation..................................................B-48
SECTION 7.8 Termination of Tax Allocation Agreements....................B-48
SECTION 7.9 Section 1445................................................B-49
SECTION 7.10 Survival of Obligations.....................................B-49
SECTION 7.11 Indemnification for Sections 7702, 7702A, 72, 101(f)
and 817(h) Liability........................................B-49
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination.................................................B-50
SECTION 8.2 Effect of Termination.......................................B-51
SECTION 8.3 Termination Fee.............................................B-51
ARTICLE IX
INDEMNIFICATION; REMEDIES
SECTION 9.1 Survival....................................................B-53
SECTION 9.2 Indemnification and Reimbursement by Seller.................B-53
SECTION 9.3 Indemnification and Reimbursement by Buyer..................B-54
SECTION 9.4 Limitations on Amount - Seller..............................B-54
SECTION 9.5 Limitations on Amount - Buyer...............................B-55
SECTION 9.6 Notice and Payment of Claims................................B-55
SECTION 9.7 Procedure for Indemnification - Third Party Claims..........B-55
SECTION 9.8 Tax Effect of Indemnification Payments......................B-56
SECTION 9.9 Remedies Exclusive..........................................B-56
iii
<PAGE>
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Assignments; Successors; No Third Party Rights..............B-57
SECTION 10.2 Entire Agreement............................................B-57
SECTION 10.3 Amendment or Modification...................................B-57
SECTION 10.4 Notices.....................................................B-57
SECTION 10.5 Governing Law...............................................B-58
SECTION 10.6 Consent to Jurisdiction; Waiver of Jury Trial...............B-58
SECTION 10.7 Severability................................................B-59
SECTION 10.8 Waiver of Conditions........................................B-59
SECTION 10.9 Actions of the Companies and the Company Subsidiaries.......B-60
SECTION 10.10 Descriptive Headings; Construction..........................B-60
SECTION 10.11 Counterparts................................................B-60
SECTION 10.12 Knowledge...................................................B-60
SECTION 10.13 U.S. Dollars................................................B-60
Exhibit A Form of Intellectual Property Assignment
Exhibit B Form Title Affidavit
Exhibit C Form Title Affidavit
Exhibit D Form of Lease
iv
<PAGE>
INDEX OF DEFINED TERMS
Page
401(K) Plan................................................................B-38
A.M. Best .................................................................B-27
Acquisition ................................................................B-2
Acquisition Event .........................................................B-52
Acquisition Proposal.......................................................B-31
Acquisition Transaction....................................................B-52
Actions ...................................................................B-13
Agreement ..................................................................B-1
Ancillary Agreement.........................................................B-4
Annual Statements ..........................................................B-9
Antitrust Division..........................................................B-7
Applicable Contract.........................................................B-8
Asset Sale ................................................................B-11
Assets .....................................................................B-2
Benefit Plans .............................................................B-15
Business ...................................................................B-1
Business Day ...............................................................B-2
Buyer ......................................................................B-1
Buyer Disclosure Schedule..................................................B-29
Buyer Indemnified Persons..................................................B-53
CERCLA ....................................................................B-23
Closing ....................................................................B-2
Closing Date ...............................................................B-3
Code ......................................................................B-14
Common Stock .............................................................. B-1
Companies ..................................................................B-1
Company ....................................................................B-1
Company Actuarial Analyses.................................................B-27
Company Investment Assets..................................................B-28
Company Subsidiaries........................................................B-5
Company Subsidiary..........................................................B-5
Company Welfare Plans......................................................B-37
Confidentiality Agreement..................................................B-57
Consents ...................................................................B-7
Contract ...................................................................B-8
Contract Failure ..........................................................B-50
Covered Transactions........................................................B-7
Damages ...................................................................B-53
Deed ......................................................................B-41
Disclosure Schedule.........................................................B-5
Employee Transfer .........................................................B-37
Environmental Law .........................................................B-23
ERISA .....................................................................B-16
Exchange Act ..............................................................B-19
Excluded Assets ...........................................................B-11
Excluded Subsidiaries......................................................B-35
Excluded Subsidiary........................................................B-35
Filings ....................................................................B-7
Final Quarterly Statements.................................................B-10
Final Year End Statements..................................................B-10
v
<PAGE>
Finally determined..........................................................B-55
Financial Statements........................................................B-8
Fortis Agreement ..........................................................B-32
Fronting arrangement.......................................................B-28
FTC ........................................................................B-7
GAAP .......................................................................B-9
Governmental Authorization..................................................B-8
Governmental Entity.........................................................B-7
Hardware ..................................................................B-28
Hazardous Substance........................................................B-23
HSR Act ....................................................................B-7
HSR Filing .................................................................B-7
Indemnifying Party.........................................................B-55
Indemnitee ................................................................B-55
Insurance Subsidiaries......................................................B-5
Insurance Subsidiary........................................................B-5
Intellectual Property......................................................B-24
Intellectual Property Assignment............................................B-1
Intercompany Agreement.....................................................B-22
Investment Adviser Subsidiary..............................................B-19
Investment Advisers Act....................................................B-19
Investment Company Act.....................................................B-19
IRIS ......................................................................B-27
Law ........................................................................B-8
Lease ......................................................................B-2
Leased Real Property.......................................................B-20
Liability .................................................................B-24
Liberty Bermuda ............................................................B-1
Liberty Bermuda Common Stock................................................B-1
Liberty Capital ............................................................B-1
Liberty Capital Common Stock................................................B-1
Liberty Life ...............................................................B-1
Liberty Life Common Stock...................................................B-1
Liberty Life Dividends.....................................................B-10
Liberty Life Preferred Stock................................................B-1
Liberty Marketing ..........................................................B-1
Liberty Marketing Common Stock..............................................B-1
Liberty Marketing Preferred Stock...........................................B-1
Liberty Services ..........................................................B-1
Liberty Services Common Stock...............................................B-1
Liens ......................................................................B-6
Material ...................................................................B-4
Material Adverse Effect.....................................................B-4
Material Interest .........................................................B-37
NYSE .......................................................................B-7
Order ......................................................................B-8
Ordinary Course of Business................................................B-10
Organizational Documents....................................................B-5
Owned Real Property........................................................B-20
Pension Plan ..............................................................B-16
Permitted Exceptions.......................................................B-20
Person .....................................................................B-5
Plan Transfer .............................................................B-38
vi
<PAGE>
Post-Closing Tax Period....................................................B-14
Pre-Closing Tax Period.....................................................B-15
Preferred Stock ............................................................B-1
Producers .................................................................B-12
Properties ................................................................B-22
Property Transfer ..........................................................B-1
Proxy Statement ...........................................................B-40
Purchase Price .............................................................B-2
Quarterly Statements........................................................B-9
RBC .......................................................................B-27
Real Property .............................................................B-20
Real Property Leases.......................................................B-20
Regular Dividends .........................................................B-10
Related Person ............................................................B-36
Reports ....................................................................B-7
Representatives ...........................................................B-31
Reserve Standards .........................................................B-27
Reserves ..................................................................B-27
Restricted Area ...........................................................B-36
Restructuring Transactions..................................................B-1
SAP ........................................................................B-9
SEC .......................................................................B-19
Securities Act ............................................................B-30
Sell-Side Termination......................................................B-52
Seller .................................................................... B-1
Seller Intellectual Property...............................................B-25
Seller Party ..............................................................B-12
Seller's Group ............................................................B-15
Service Contracts .........................................................B-26
Services Agreement.........................................................B-38
Shareholder Approval........................................................B-6
Shareholders Meeting.......................................................B-40
Shares .....................................................................B-1
Software ..................................................................B-24
South Carolina Law..........................................................B-6
Special Dividend ..........................................................B-10
Stated Termination Date....................................................B-50
Statutory Statements........................................................B-9
Subsidiary .................................................................B-5
Subsidiary Dividend........................................................B-35
Superior Proposal .........................................................B-32
Takeover Laws ..............................................................B-7
Tax .......................................................................B-15
Tax Liability Allocation Agreement.........................................B-15
Tax Package ...............................................................B-46
Tax Return ................................................................B-15
Tax Sharing Amount........................................................B-15
Termination Fee ...........................................................B-51
Third Party Claim .........................................................B-55
Total Adjusted Capital.....................................................B-11
Transferred Employee.......................................................B-37
Transferred Property.......................................................B-41
UFL .......................................................................B-32
vii
<PAGE>
Voting Agreements .........................................................B-41
viii
<PAGE>
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)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
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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 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
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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:
(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;
(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.
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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.
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.
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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 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 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
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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 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
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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.
(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 forth in
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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.
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
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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 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
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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", 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, 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
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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;
(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
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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 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);
(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
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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 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
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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 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.
"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.
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"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 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
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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 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 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
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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;
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
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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 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
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Subsidiary which are required to be filed with or approved by any Governmental
Entity have been so filed or approved and the 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.
(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
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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 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
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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 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
(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:
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(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 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.
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(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 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).
(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
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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.
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.
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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 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 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
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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 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
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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.
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
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payment of principal or interest or dividends or have been, or, to Seller's or
any Company's knowledge, 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").
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.
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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 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
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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, 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:
(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
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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,
(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,
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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 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 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.
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(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, 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.
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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.
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 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,
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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 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
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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 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 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.
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(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.
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.
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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):
(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
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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.
(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.
(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.
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(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 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.
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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):
(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 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
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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.
(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.
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(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 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 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
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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 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)
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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.
(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.
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(d) Nothing in this Section 7.2 shall reduce Seller's obligations under
Section 7.1(a) hereof.
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;
(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;
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(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.
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.
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(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 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.
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
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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.
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
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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;
(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
Subsidiaries, or the Shares, which fee shall be payable immediately upon
such occurrence.
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(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 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.
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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.
(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
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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;
(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.
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.
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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 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
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<PAGE>
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 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.
B-56
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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 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
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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.
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
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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 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 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.
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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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<PAGE>
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
B-61
<PAGE>
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 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.
B-62
<PAGE>
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
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:
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<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
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<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
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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 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.
B-66
<PAGE>
[NAME OF PARENT]
By:________________________________
Name:
Title:
Sworn to before me this
_____ day of __________.2000
_______________________________
Notary Public
B-67
<PAGE>
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
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
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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).
B-69
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<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 (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,
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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.
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
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terminate this Lease by giving notice to Lessor, in which case this
Lease shall terminate as of the date that is 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.
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.
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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.
(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;
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(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
(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
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change of control of Lessee, 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 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.
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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 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.
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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.
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 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.
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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 itsactivities 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
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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.
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
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Lessee's light, power and water without charge therefor, at all times. If
Lessee shall have a separate area for the storage, preparation, service 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.
(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.
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(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, 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.
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(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 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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ANNEX C
DISSENTERS' RIGHTS
Title 33, Chapter 13 of the Code of Laws of South Carolina 1976,
Dissenters' Rights, provides as follows:
ARTICLE 1
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
SS.33-13-101 DEFINITIONS.
In this chapter:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation
by merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 33-13-102 and who exercises that right
when and in the manner required by Sections 33-13-200 through
33-13-280.
(3) "Fair value", with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the
corporate action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate action
to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion
would be inequitable. The value of the shares is to be determined by
techniques that are accepted generally in the financial community.
(4) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate
currently paid by the corporation on its principal bank loans or, if
none, at a rate that is fair and equitable under all the
circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on
file with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial
owner of shares held by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
SS.33-13-102 RIGHT TO DISSENT.
(A) A shareholder is entitled to dissent from, and obtain payment of
the fair value of, his shares in the event of any of the following corporate
actions:
(1) consummation of a plan of merger to which the corporation is a
party (i) if shareholder approval is required for the merger by
Section 33-11-103 or the articles of incorporation and the shareholder
is entitled to vote on the merger or (ii) if the
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corporation is a subsidiary that is merged with its parent under
Section 33-11-104 or 33- 11-108 or if the corporation is a parent that
is merged with its subsidiary under Section 33-11-108;
(2) consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares are to be acquired, if the
shareholder is entitled to vote on the plan;
(3) consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale
or exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale must be
distributed to the shareholders within one year after the date of
sale;
(4) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because
it:
(i) alters or abolishes a preferential right of the shares;
(ii) creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;
(iii) alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(iv) excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights; or
(v) reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under Section 33-6-104; or
(5) in the case of corporations which are not public corporations,
the approval of a control share acquisition under Article 1 of Chapter
2 of Title 35;
(6) any corporate action to the extent the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting
or nonvoting shareholders are entitled to dissent and obtain payment
for their shares.
(B) Notwithstanding subsection (A), no dissenters' rights under this
section are available for shares of any class or series of shares which, at the
record date fixed to determine shareholders entitled to receive notice of a
vote at the meeting of shareholders to act upon the agreement of merger or
exchange, were either listed on a national securities exchange or designated as
a national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc.
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SS.33-13-103 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer
than all the shares registered in his name only if he dissents with respect to
all shares beneficially owned by any one person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection are
determined as if the shares to which he dissents and his other shares were
registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to
shares held on his behalf only if he dissents with respect to all shares of
which he is the beneficial shareholder or over which he has power to direct the
vote. A beneficial shareholder asserting dissenters' rights to shares held on
his behalf shall notify the corporation in writing of the name and address of
the record shareholder of the shares, if known to him.
ARTICLE 2
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
SS.33-13-200 NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under
Section 33-13-102 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to assert
dissenters' rights under this chapter and be accompanied by a copy of this
chapter.
(b) If corporate action creating dissenters' rights under Section
33-13-102 is taken without a vote of shareholders, the corporation shall notify
in writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in Section
33-13-220.
SS.33-13-210 NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under
Section 33-13-102 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights (1) must give to the
corporation before the vote is taken written notice of his intent to demand
payment for his shares if the proposed action is effectuated and (2) must not
vote his shares in favor of the proposed action. A vote in favor of the
proposed action cast by the holder of a proxy solicited by the corporation
shall not disqualify a shareholder from demanding payment for his shares under
this chapter.
(b) A shareholder who does not satisfy the requirements of subsection
(a) is not entitled to payment for his shares under this chapter.
SS.33-13-220 DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under
Section 33-13-102 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied
the requirements of Section 33-13-210(a).
(b) The dissenters' notice must be delivered no later than ten days
after the corporate action was taken and must:
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(1) state where the payment demand must be sent and where certificates
for certificated shares must be deposited;
(2) inform holders of uncertificated shares to what extent transfer
of the shares is to be restricted after the payment demand is
received;
(3) supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of
the proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he or, if he is a nominee
asserting dissenters' rights on behalf of a beneficial shareholder,
the beneficial shareholder acquired beneficial ownership of the shares
before that date;
(4) set a date by which the corporation must receive the payment
demand, which may not be fewer than thirty nor more than sixty days
after the date the subsection (a) notice is delivered and set a date
by which certificates for certificated shares must be deposited, which
may not be earlier than twenty days after the demand date; and
(5) be accompanied by a copy of this chapter.
SS.33-13-230 SHAREHOLDERS' PAYMENT DEMAND.
(a) A shareholder sent a dissenters' notice described in Section
33-13-220 must demand payment, certify whether he (or the beneficial
shareholder on whose behalf he is asserting dissenters' rights) acquired
beneficial ownership of the shares before the date set forth in the dissenters'
notice pursuant to Section 33-13-220(b)(3), and deposit his certificates in
accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A shareholder who does not comply substantially with the
requirements that he demand payment and deposit his share certificates where
required, each by the date set in the dissenters' notice, is not entitled to
payment for his shares under this chapter.
SS.33-13-240 SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated
shares from the date the demand for payment for them is received until the
proposed corporate action is taken or the restrictions are released under
Section 33-13-260.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
SS.33-13-250 PAYMENT.
(a) Except as provided in Section 33-13-270, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the corporation
shall pay each dissenter who substantially complied with Section 33-13-230 the
amount the corporation estimates to be the fair value of his shares, plus
accrued interest.
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(b) The payment must be accompanied by:
(1) the corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the date of payment, an
income statement for that year, a statement of changes in
shareholders' equity for that year, and the latest available interim
financial statements, if any;
(2) a statement of the corporation's estimate of the fair value of the
shares and an explanation of how the fair value was calculated;
(3) an explanation of how the interest was calculated;
(4) a statement of the dissenters' right to demand additional payment
under Section 13-33-280; and
(5) a copy of this chapter.
SS.33-13-260 FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within sixty
days after the date set for demanding payment and depositing share
certificates, the corporation, within the same sixty-day period, shall return
the deposited certificates and release the transfer restrictions imposed on
uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Section 33-13- 220 and repeat the payment demand
procedure.
SS.33-13-270 AFTER-ACQUIRED SHARES.
(a) A corporation may elect to withhold payment required by Section
33-13-250 from a dissenter as to any shares of which he (or the beneficial
owner on whose behalf he is asserting dissenters' rights) was not the
beneficial owner on the date set forth in the dissenters' notice as the date of
the first announcement to news media or to shareholders of the terms of the
proposed corporate action, unless the beneficial ownership of the shares
devolved upon him by operation of law from a person who was the beneficial
owner on the date of the first announcement.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the fair value and interest
were calculated, and a statement of the dissenter's right to demand additional
payment under Section 33-13-280.
SS.33-13-280 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER.
(a) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due and demand
payment of his estimate (less any payment under Section 33-13-250) or reject
the corporation's offer under Section 33-13-270 and demand payment of the fair
value of his shares and interest due, if the:
(1) dissenter believes that the amount paid under Section 33-13-250 or
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offered under Section 33-13-270 is less than the fair value of his
shares or that the interest due is calculated incorrectly;
(2) corporation fails to make payment under Section 33-13-250 or to
offer payment under Section 33-13-270 within sixty days after the date
set for demanding payment; or
(3) corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set
for demanding payment.
(b) A dissenter waives his right to demand additional payment under
this section unless he notifies the corporation of his demand in writing under
subsection (a) within thirty days after the corporation made or offered payment
for his shares.
ARTICLE 3
JUDICIAL APPRAISAL OF SHARES
SS.33-13-300 COURT ACTION.
(a) If a demand for additional payment under Section 33-13-280
remains unsettled, the corporation shall commence a proceeding within sixty
days after receiving the demand for additional payment and petition the court
to determine the fair value of the shares and accrued interest. If the
corporation does not commence the proceeding within the sixty-day period, it
shall pay each dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit
court of the county where the corporation's principal office (or, if none in
this State, its registered office) is located. If the corporation is a foreign
corporation without a registered office in this State, it shall commence the
proceeding in the county in this State where the principal office (or, if none
in this State, the registered office) of the domestic corporation merged with
or whose shares were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters (whether or not
residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication, as provided by law.
(d) The jurisdiction of the court in which the proceeding is
commenced under subsection (b) is plenary and exclusive. The court may appoint
persons as appraisers to receive evidence and recommend decisions on the
question of fair value. The appraisers have the powers described in the order
appointing them or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to
judgment for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation.
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SS.33-13-310 COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Section
33-13-300 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess
costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Section 33-13-280.
(b) The court also may assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(1) against the corporation and in favor of any or all dissenters if
the court finds the corporation did not comply substantially with the
requirements of Sections 33- 13-200 through 33-13-280; or
(2) against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in
good faith with respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that
the fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefitted.
(d) In a proceeding commenced by dissenters to enforce the liability
under Section 33- 13-300(a) of a corporation that has failed to commence an
appraisal proceeding within the sixty- day period, the court shall assess the
costs of the proceeding and the fees and expenses of dissenters' counsel
against the corporation and in favor of the dissenters.
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