SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report - December 30, 1998
(Date of earliest event reported)
Pre-Paid Legal Services, Inc.
(Exact name of registrant as specified in its charter)
(Commission File No. 1-9293)
Oklahoma 73-1016728
(State of Incorporation) (IRS Employer Identification No.)
321 East Main Street
Ada, Oklahoma 74821-0145
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (580) 436-1234
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On October 5, 1998, Pre-Paid Legal Services, Inc. ("Pre-Paid") entered
into a Stock Purchase Agreement (the "Agreement") with Pioneer Financial
Services ("Pioneer"), a wholly-owned subsidiary of Conseco, Inc., providing for
the purchase ("Stock Purchase") of all of the outstanding capital stock of
Universal Fidelity Life Insurance Company ("UFL"), a life and health insurance
company domiciled in the State of Oklahoma.
The Stock Purchase was consummated December 30, 1998. In accordance
with the Agreement and the purchase price calculation provisions contained
therein, Pre-Paid transferred $20.7 million in cash to Pioneer in exchange for
all of the outstanding capital stock of UFL, before consideration of a $12.5
million extraordinary dividend payable by UFL to Pre-Paid at Pre-Paid's
discretion, resulting in net consideration paid of $8.2 million. As a part of
the transaction Pioneer Life Insurance Company, a wholly-owned subsidiary of
Pioneer, entered into a 100% coinsurance agreement with UFL assuming all of the
assets and liabilities relating to UFL's Medicare supplement and health care
business written by UFL. UFL will retain its existing life insurance business
and will continue to provide claims processing for the coinsured Medicare
supplement and health care policies and receive full cost reimbursement for such
services pursuant to an Administrative Services Agreement entered into by UFL
and Pioneer or an affiliate of Pioneer. Statutory assets and liabilities
remaining in UFL after the purchase but before the dividend include $25.6
million in cash and investments, $800,000 relating to real estate, computer
systems and furniture and fixtures (occupied and utilized by UFL) and $2.2
million of receivables generated in the ordinary course of business, including a
receivable of $571,000 from Pioneer that was paid to UFL at closing. Statutory
liabilities of UFL remaining after the transaction include life insurance
reserves of $8.5 million and other ordinary course of business accrued
liabilities of $1.1 million.
The Stock Purchase consideration and related transactions were
determined by arm's-length negotiation between Pre-Paid and Pioneer. There was
no prior material relationship between Pioneer and its officers, directors and
shareholders and Pre-Paid or its officers, directors and affiliates. The UFL
capital stock was not publicly traded.
UFL is a Duncan, Oklahoma based life and health insurance company
formed in 1935 and engaged in the marketing of insurance products including
life, home health, long term care, nursing facilities and Medicare supplement
insurance policies.
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Financial statements of UFL are not required to be filed herewith
pursuant to Section 3-05(b) of Regulation S-X.
(b) Pro Forma Financial Information.
Pro forma financial information is not required to be presented herein
pursuant to Section 11-01 of Regulation S-X.
(c) Exhibits.
Exhibit
No. Description
2.1 Stock Purchase Agreement dated as of October 5, 1998,
between Pre-Paid and Pioneer.
2.2 Coinsurance Agreement dated as of December 30, 1998 between UFL
and Pioneer Life Insurance Company.
2.3 Administrative Services Agreement and Amendment No. 1 thereto
dated as of December 30, 1998 between UFL and Pioneer.
99.1 Press release dated October 6, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PRE-PAID LEGAL SERVICES, INC.
By: /s/ RANDY HARP
-------------------------------
Randy Harp, Chief Operating Officer
and Chief Financial Officer
Date: January 13, 1999
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
No.
2.1 Stock Purchase Agreement dated as of October 5, 1998, between
Pre-Paid and Pioneer.
2.2 Coinsurance Agreement dated as of December 30, 1998 between UFL and
Pioneer Life Insurance Company.
2.3 Administrative Services Agreement and Amendment No. 1 thereto dated
as of December 30, 1998 between UFL and Pioneer.
99.1 Press release dated October 6, 1998.
STOCK PURCHASE AGREEMENT
Between
PRE-PAID LEGAL SERVICES, INC.
And
PIONEER FINANCIAL SERVICES, INC.
Dated as of October 5, 1998
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into as of
October 5, 1998, by and between Pre-Paid Legal Services, Inc., an Oklahoma
corporation ("Buyer"), and Pioneer Financial Services, Inc., a Delaware
corporation ("Seller").
RECITALS
A. Seller has the beneficial interest in all of the outstanding
capital stock of Universal Fidelity Life Insurance Company, a
life and health insurance company domiciled in the State of
Oklahoma (the "Company"), which stock is held in escrow
pursuant to the terms of the Universal Fidelity Life Insurance
Company Escrow Agreement dated May 30, 1997 by and among
Conseco, Inc., an Indiana corporation, Rock Acquisition
Company, a Delaware corporation prior to its merger with and
into Seller, Seller, and Thomas J. Brophy, Michael A.
Cavataio, Mark S. Fischer, Philip J. Fiskow, Charles R.
Scheper, William B. Van Vleet and David I. Vickers, as the
Escrow Agents (the "Escrow Agreement").
B. Subject to the terms and conditions of this Agreement, Buyer
desires to purchase, and Seller desires to sell, all of the
outstanding stock of the Company.
STATEMENT OF AGREEMENT
Now, therefore, in consideration of the premises and the covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows.
ARTICLE ONE: PURCHASE AND SALE OF SHARES
SECTION 1.1: BASIC TRANSACTION.
On and subject to the terms and conditions of this Agreement, Buyer
agrees to purchase from Seller, and Seller agrees to sell to Buyer, all of the
outstanding shares (the "Shares") of the common stock, par value $1.00 per
share, of the Company (the "Common Stock") for the consideration specified in
Exhibit A attached hereto (the "Consideration").
SECTION 1.2: THE CLOSING.
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Buyer in Oklahoma, commencing at
10:00 a.m. local time on the third business day following the satisfaction or
waiver of all conditions to the obligations of the parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective parties will take at the Closing itself) or such other date as
Buyer and Seller may mutually determine (the "Closing Date"); provided, however,
that the Closing Date shall be no later than December 31, 1998 unless further
extended by the mutual written agreement of the parties.
SECTION 1.3: PAYMENT OF CONSIDERATION.
Buyer shall pay the Consideration to Seller at Closing, in cash by
electronic wire transfer, or, if acceptable to Seller, delivery of other
immediately available funds payable to Seller, to an account designated by
Seller in writing to Buyer.
ARTICLE TWO: REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller, its successors and assigns as
follows:
SECTION 2.1: ORGANIZATION OF BUYER.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of Oklahoma.
SECTION 2.2: AUTHORIZATION OF TRANSACTION.
(A) Buyer has full corporate power and authority to execute and deliver
this Agreement, and to perform its obligations hereunder. Assuming this
Agreement constitutes the valid and legally binding obligation of Seller, this
Agreement constitutes the valid and legally binding obligation of Buyer,
enforceable in accordance with their respective terms and conditions, except to
the extent that enforceability may be impacted by bankruptcy, insolvency,
moratorium or other laws affecting creditors' rights generally, or by other
equitable principles.
(B) Except for (i) the filing with and approval by the Oklahoma
Department of Insurance of Buyer's Form A Statement Regarding Acquisition of
Control of a Domestic Insurer and such filings relating to the Co-Insurance
Agreement (as defined in Section 6.8 below) and the Service Agreement (as
defined in Section 6.7 below) as may be required (collectively, the "ODI
Approval"); (ii) the approval of the extraordinary dividend referred to in
Section 7.1(F) and (iii) the filing of premerger notification and report forms
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), no prior notice to, filing with, authorization of, exemption by or
consent or approval of, any governmental authority is necessary for the
consummation by Buyer of the transactions contemplated by this Agreement.
SECTION 2.3: NONCONTRAVENTION.
Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (a) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court known to Buyer to which Buyer is subject; (b) violate any provision of
Buyer's charter or bylaws; or (c) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which Buyer is a party or by which it is bound or to which any of its assets
is subject (or result in the imposition of any mortgage, pledge, lien,
encumbrance, charge or other security interest upon any of its assets).
SECTION 2.4: BROKERS AND FINDERS.
Neither Buyer nor any of its officers, directors or employees has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder fees, and no broker or
finder has acted directly or indirectly for Buyer in connection with this
Agreement or the transactions contemplated hereby.
SECTION 2.5: LITIGATION.
There is no action, suit or proceeding pending against, or to the
Knowledge (as defined in Section 4.1 below) of Buyer threatened against or
affecting, Buyer or any Affiliate (as defined in Section 4.1 below) of Buyer or
any of its properties before any court or arbitrator or any governmental body,
agency or official which in any manner challenges or seeks to prevent, enjoin,
alter or materially delay any of the transactions contemplated hereby.
SECTION 2.6: INVESTMENT INTENT.
Buyer is not acquiring the Shares with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities
Act of 1933, as amended, and the rules and regulations thereunder (the
"Securities Act").
ARTICLE THREE: REPRESENTATIONS AND WARRANTIES OF SELLER
CONCERNING THE TRANSACTIONS AND THE SHARES
Seller represents and warrants to Buyer, its successors and assigns as
follows:
SECTION 3.1: ORGANIZATION OF SELLER.
Seller is a corporation duly organized, validly existing and in good
standing under the laws of Delaware.
SECTION 3.2: AUTHORIZATION OF TRANSACTION.
(A) Seller has full corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder, Pioneer Life
Insurance Company ("Pioneer Life") has full corporate power and authority to
execute and deliver the Co-Insurance Agreement and to perform its obligations
thereunder, and Seller has full corporate power and authority to execute and
deliver the Service Agreement and to perform its obligations thereunder.
Assuming this Agreement constitutes, and the Co-Insurance Agreement and the
Service Agreement when executed and delivered by the Company as provided herein
will constitute, the valid and legally binding obligations of Buyer or the
Company, as the case may be, this Agreement constitutes, and when executed and
delivered by Pioneer Life or Seller as provided herein the Co-Insurance
Agreement and the Service Agreement will constitute, the valid and legally
binding obligations of Seller or Pioneer Life, as the case may be, enforceable
in accordance with their respective terms and conditions, except to the extent
that enforceability may be impacted by bankruptcy, insolvency, moratorium or
other laws affecting creditors' rights generally, or by other equitable
principles.
(B) Neither Seller nor Pioneer Life is required to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the consummation by Seller or
Pioneer Life, as the case may be, of the transactions contemplated by this
Agreement except for the ODI Approval, the filing under the HSR Act and any
actions contemplated by Section 7.2(I) and such filings and approvals relating
to the Co-Insurance Agreement or the Service Agreement as may be required.
SECTION 3.3: NONCONTRAVENTION.
Neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (a) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court known to Seller to which Seller or Pioneer Life are subject; (b) violate
any provision of Seller's or Pioneer Life's charter or bylaws; or (c) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which Seller is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any mortgage, pledge, lien, encumbrance, charge or other security interest upon
any of its assets) which should adversely affect the performance by Seller of
its obligations, hereunder or thereunder.
SECTION 3.4: BROKERS AND DEALERS.
Neither Seller nor any of its officers, directors or employees, has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder fees, and no broker or
finder has acted directly or indirectly for Seller in connection with this
Agreement or the transactions contemplated hereby.
SECTION 3.5: TITLE TO AND POWER TO SELL THE SHARES.
Seller owns beneficially all issued and outstanding Shares, free and
clear of any adverse claims, liens, proxies, voting trusts, restrictions on
transfer or encumbrances with respect thereto, except for the Escrow Agreement.
SECTION 3.6: LITIGATION.
Except as set forth in Section 3.6 of the Disclosure Schedule, there is
no action, suit or proceeding pending against, or to the Knowledge of Seller
threatened against or affecting, Seller or any of its properties before any
court or arbitrator or any governmental body, agency or official which in any
manner challenges or seeks to prevent, enjoin, alter or materially delay any of
the transactions contemplated hereby.
ARTICLE FOUR: REPRESENTATIONS AND WARRANTIES OF SELLER
CONCERNING THE COMPANY
Seller represents and warrants to Buyer, its successors and assigns as
follows:
SECTION 4.1: CERTAIN DEFINITIONS.
As used herein, the following terms shall have the following meanings:
(1) An "Affiliate" of a person shall mean any corporation,
partnership, joint venture, limited liability company,
association or other entity which, directly or through one or
more intermediaries, controls, is controlled by or is under
common control with such person.
(2) "Knowledge" or "known" shall mean actual knowledge of the
officers of such entity.
SECTION 4.2: ORGANIZATION, QUALIFICATION AND CORPORATE POWER.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Oklahoma. The Company has the full
corporate power, right and authority to own its properties and assets and to
carry on its business as it is now being conducted. The Company is not required
to qualify to do business in any state or foreign jurisdiction where it is not
already so qualified except where the failure to so qualify would not have a
Material Adverse Effect. For the purposes of this Agreement "Material Adverse
Effect" shall mean a material adverse effect on the business, financial
condition or results of operations of the Company. The Company has all necessary
governmental authorizations to own or lease its properties and assets, to
underwrite insurance and to otherwise carry on its business as now being
conducted in each of the states listed on Section 4.2 of the disclosure schedule
delivered by Seller to Buyer on the date hereof (the "Disclosure Schedule"),
which is a complete list of all jurisdictions in which the Company conducts any
insurance business or in which the Company is licensed to conduct business. The
Company is in good standing with the applicable insurance regulatory authorities
in all of the jurisdictions listed on Section 4.2 of the Disclosure Schedule,
and has capital and surplus in such amounts as are required by the applicable
insurance laws of each such jurisdiction. Copies of each of the Company's
existing licenses issued by each such jurisdiction listed on Section 4.2 of the
Disclosure Schedule have been or will be provided to Buyer prior to the Closing
Date.
SECTION 4.3: SUBSIDIARIES.
The Company does not have any Subsidiaries. For the purposes of this
Agreement, a Subsidiary shall mean any corporation of which the Company directly
or indirectly owns more than 50 % of the capital stock or other equity interest
or has the power to vote or direct the voting of sufficient securities to elect
a majority of directors.
SECTION 4.4: CAPITALIZATION.
The authorized capital stock of the Company consists of 500,000 shares
of preferred stock, par value $1.00, of which no shares are outstanding and
2,000,000 shares of common stock, par value $1.00, of which 1,000 are issued and
outstanding and which constitute the Shares. All of the Shares have been duly
authorized, are validly issued, fully paid, and nonassessable. Except for this
Agreement, there are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Company to issue, sell, or
otherwise cause to become outstanding, any of its capital stock not presently
issued and outstanding. The Company has no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights. There are
no voting trusts, proxies, or other agreements or understandings other than the
Escrow Agreement with respect to the voting of the capital stock of the Company.
The Company has no liability to any former holder of any shares of capital stock
of the Company or to any other person or governmental authority relating to the
purchase, sale, redemption, retirement or cancellation thereof.
SECTION 4.5: NONCONTRAVENTION.
Neither the execution and the delivery of this Agreement, the
Co-Insurance Agreement or the Service Agreement, nor the consummation of the
transactions contemplated hereby or thereby, will (a) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court known to
the Company to which the Company is subject; (b) violate any provision of the
Company's charter or bylaws; or (c) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which the Company is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any mortgage, pledge, lien,
encumbrance, charge or other security interest upon any of its assets) which
would result in a Material Adverse Effect.
SECTION 4.6: BROKERS AND FINDERS.
Neither the Company, nor any of its officers, directors or employees,
has employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder fees, and no broker or
finder has acted directly or indirectly for the Company in connection with this
Agreement or the transactions contemplated hereby.
SECTION 4.7: FINANCIAL STATEMENTS.
The statutory financial statements (including the notes thereto) of the
Company as of and for the years ended December 31, 1995, December 31, 1996 and
December 31, 1997 (the "Annual Statements") and the statutory financial
statements including the notes thereto) of the Company for each of the fiscal
quarters ended March 31, 1998 and June 30, 1998 (the "Quarterly Statements") are
correct and complete, have been prepared in conformity with both statutory
accounting principles ("SAP") and any other accounting principles prescribed or
permitted by the Oklahoma Department of Insurance consistently applied, and
present fairly the admitted assets, liabilities and capital and surplus and
results of operations of the Company at the dates stated therein except as set
forth or disclosed in the notes, exhibits or schedules thereto, and except that
any unaudited statements are subject to year-end and audit adjustments and may
lack footnotes and other presentation items. Copies of the Annual Statements and
the Quarterly Statements have been previously provided to Buyer. The Annual
Financial Statements and the Quarterly Financial Statements are sometimes
referred to collectively herein as the "Company Financial Statements."
SECTION 4.8: TITLE TO PROPERTIES.
Except (1) as may be reflected in the Company Financial Statements, and
(2) for statutory mechanic's or materialmen's liens and liens for current taxes
not yet delinquent, the Company has good and marketable title to, or a valid
leasehold interest in, the properties and assets reflected in the June 30, 1998
Quarterly Statement or acquired after the date thereof (the "Assets"), free and
clear of any mortgage, pledge, lien, encumbrance, charge or other security
interest, except for properties and assets disposed of in the ordinary course of
business.
SECTION 4.9: REAL PROPERTY.
Except as set forth in Section 4.9 of the Disclosure Schedule, the
Company does not possess any beneficial or record interest in any real property,
or in any buildings, structures or appurtenances situated upon any real
property.
SECTION 4.10: CONTRACTS.
Section 4.10 of the Disclosure Schedule lists the following contracts
to which the Company is a party:
(A) Any agreement (or group of related agreements) for the
lease of personal property, by or to the Company, providing for lease
payments in excess of $25,000.00 per annum;
(B) Any agreement (or group of related agreements) (other than
insurance policies issued by the Company) for the purchase or sale of
raw materials, commodities, supplies, products, or other personal
property, or for the furnishing or receipt of services, the performance
of which will involve consideration in excess of $75,000.00;
(C) Any agreement concerning a partnership or joint venture;
(D) Any agreement (or group of related agreements) under which
the Company has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation,
in excess of $75,000.00 or under which it has imposed a mortgage,
pledge, lien, encumbrance, charge or other security interest on any of
its assets, tangible or intangible;
(E) Any agreement requiring the Company to refrain from
competition;
(F) Any agreement with Seller or its Affiliates;
(G) Any agreement under which the Company has advanced or
loaned any amount to any of its directors, officers, and employees
outside the ordinary course of business;
(H) Any agreement (other than agreements with Seller or its
Affiliates) under which the consequences of a default or termination
could reasonably be expected to have a Material Adverse Effect;
(I) Any agreement of employment which is not on an "at will"
basis;
(J) Any agreement with an employee which provides for
severance or termination benefits; and
(K) Any other agreement (or group of related agreements)
(other than insurance policies issued by the Company) the performance
of which involves consideration in excess of $75,000.00.
The Company is in compliance in all material respects with all
agreements referred to in Section 4.10 of the Disclosure Schedule except for
such defaults which could not reasonably be expected to have a Material Adverse
Effect.
SECTION 4.11: INSURANCE COVERAGES.
The Company is now covered and has been covered during the past five
(5) years by insurance in scope and amount customary and reasonable for the
business in which it has engaged during that period.
SECTION 4.12: TAX MATTERS.
Except as disclosed on Section 4.12 of the Disclosure Schedule:
(A) All material Tax Returns (as defined in Section 4.12 (H) below)
required to be filed by the Company and all Tax Returns of any consolidated,
combined or unitary group which includes the Company have been timely filed, and
the Taxes (as defined in Section 4.12 (G) below) shown thereon as due to be paid
or withheld have been paid or withheld. Complete and correct copies of all
federal income Tax Returns filed by the Company for the calendar years ending
December 31, 1996 and 1997 have been provided to Buyer.
(B) All Taxes of the Company required to be paid by the Company prior
to the Closing Date have been (or at or prior to the Closing Date shall be)
timely paid, and all Tax Returns relating to all such Taxes have been (or at or
prior to the Closing Date shall be) filed when and as required. All liability
for Taxes of the Company which relate to or arise with respect to any period
prior to the Closing Date, whether or not they have become payable, have been
(or at or prior to the Closing Date shall be) paid in full or adequately
reserved for in accordance with SAP on the Annual Statements and Quarterly
Statements through the dates thereof and thereafter on the books and records of
the Company, and to the extent liabilities for Taxes have been accrued but not
become payable, they are adequately reflected in accordance with SAP on the
Annual Statements and Quarterly Statements through the dates thereof and
thereafter on the books and records of the Company.
(C) There are no federal, state or local Tax liens upon any property or
assets of the Company.
(D) Neither the Company nor any member of any consolidated, combined or
unitary group which includes the Company, has any current or pending request for
any extension of time within which to file any Tax Returns.
(E) Neither the Company nor any consolidated, combined or unitary group
which includes the Company has any pending or proposed audit of any Tax Returns
with respect to which the Company has or would have any material liability. No
deficiency or adjustment for Taxes has been claimed, proposed or assessed by any
taxing authority against either the Company or any member of any consolidated,
combined or unitary group which includes the Company with respect to which the
Company would have any material liability, and there is no basis for any such
deficiency or claim known to any of Seller and the directors and officers (and
employees with responsibility for employment matters) of the Company for which
adequate reserves in accordance with SAP have not been established on the
Company Financial Statements through the date thereof and thereafter on the
books and records of the Company.
(F) The Company has not filed a consent under Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code"), concerning collapsible
corporations. The Company has not made any payments, is not obligated to make
any payments, and is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Code Section 280G. The Company has not been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii). The Company has
disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6662. The Company is not a party to any Tax allocation
or sharing agreement (not otherwise disclosed in Section 4.12 of the Disclosure
Schedule). The Company (a) has not been a member of an Affiliated Group (within
the meaning of Code Section 1504) filing a consolidated federal income Tax
Return (other than a group the common parent of which was the Company), or (b)
has no Liability for the Taxes of any person (other than any of the Company)
under Treasury Regulation Sec.1.1502-6(or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract, or otherwise (not
otherwise disclosed in Section 4.12 of the Disclosure Schedule).
(G) "Taxes" shall mean all taxes, charges, fees, levies or other
assessments of whatever kind or nature, including without limitation, all net
income, gross income, gross receipts, premium, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupancy or property taxes, custom duties, fees,
assessments or charges of any kind whatever (together with any interest,
penalty, or addition to tax).
(H) "Tax Returns" shall mean all returns, amended returns,
declarations, reports, estimates, information returns and statements required or
permitted to be filed under federal, state, local or foreign law relating to
Taxes by, or including, the Company.
SECTION 4.13: EMPLOYEES AND EMPLOYEE BENEFITS.
(A) The Company is not a party to or bound by any collective bargaining
agreement, nor, to the Knowledge of Seller and the Company has it experienced
any strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. To the Knowledge of Seller and the Company, the Company has
not committed any unfair labor practice. Neither Seller nor the Company has any
Knowledge of any organizational effort presently being made or threatened by or
on behalf of any labor union with respect to employees of the Company.
(B) Except as set forth on Section 4.13 of the Disclosure Schedule, the
Company does not maintain or contribute to any Employee Benefit Plan. The term
"Employee Benefit Plan" shall mean any (1) nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan (which
term has the meaning set forth in the Employee Retirement and Income Security
Act of 1974 ("ERISA") Section 3(2)); (2) qualified defined contribution
retirement plan or arrangement which is an Employee Pension Benefit Plan; (3)
qualified defined benefit retirement plan or arrangement which is an Employee
Pension Benefit Plan (including any Multiemployer Plan, which term has the
meaning set forth in ERISA Section 3(37); or (4) any Employee Welfare Benefit
Plan (which term has the meaning set forth in ERISA Section 3(1)) or material
fringe benefit plan or program. All such Employee Benefit Plans are being
operated in compliance in all material respects with ERISA.
SECTION 4.14: INSURANCE POLICIES: REINSURANCE.
(A) Section 4.14 (A) of the Disclosure Schedule contains a complete
list of all types of insurance policies issued by the Company. Prior to the
Closing Seller shall make available to Buyer complete and correct copies of all
forms of insurance policies currently being issued by the Company together with
all forms of endorsements thereto.
(B) Except as set forth on Section 4.14 (B) of the Disclosure Schedule
or in the Company Financial Statements, the Company is not a party to any
reinsurance agreements.
SECTION 4.15: LITIGATION. Except as set forth in Section 4.15 of the
Disclosure Schedule, the Company (a) is not a party to any claim, action, suit,
investigation or proceeding, pending or threatened, which if adversely
determined would reasonably be expected to have a Material Adverse Effect, (b)
is not subject to any order, judgment or decree issued by any court of competent
jurisdiction or other governmental authority, and (c) is not a party to any
claim, action, suit or investigation pending or, to the Knowledge of Seller or
the Company, threatened, for any bad faith or extra contractual claims, or
claims giving rise to punitive damages (in each case, excluding any and all
damages based on amounts recoverable under the terms of the applicable insurance
policy or policies) arising out of any action or inaction by the Company which
action by the Company was taken, or, in the case of any inaction by the Company,
was required to be taken, prior to the date hereof by the Company, with respect
to the denial of coverage under the Company's insurance policies, in each case,
as finally determined by a court of competent jurisdiction, and, to the
Knowledge of Seller and the Company, there does not exist any basis therefor,
which would reasonably be expected to result in a Material Adverse Effect.
Neither the Seller nor the directors and officers of the Company has any reason
to believe that any such action, suit, proceeding, hearing, or investigation may
be brought or threatened against the Company.
SECTION 4.16: REGULATORY AGREEMENTS. Except as set forth on Section
4.16 of the Disclosure Schedule, the Company is not a party to any supervisory
agreement, memorandum of understanding, consent order, cease and desist order,
or condition of any regulatory order or decree with or by the Oklahoma
Department of Insurance or any other regulatory authority that relates to the
conduct of the business of the Company.
SECTION 4.17: CONSENTS. Except as set forth on Section 4.17 of the
Disclosure Schedule, no consents or approvals of parties with whom Seller,
Seller's Affiliates or the Company has or has had contractual relationships are
or will be required to permit the consummation of the transactions contemplated
by this Agreement.
SECTION 4.18: ENVIRONMENTAL, HEALTH AND SAFETY LAWS.
(A) The Company (1) has complied in all material respects with all
Environmental, Health and Safety Laws (as defined in Section 4.18(C) below), and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been Filed or commenced against it alleging any failure to
comply with any such Environmental, Health or Safety Law; and (2) has obtained
and been in compliance in all material respects with the terms and conditions of
all permits, licenses, and other authorizations which are required under, and
have complied in all material respects with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health and Safety Laws.
(B) The Company has no liability (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and whether due or to become due), and the Company has not handled
or disposed of any substance, arranged for the disposal of any substance,
exposed any employee or other individual to any substance or condition, or owned
or operated any property or facility in any manner that could form the basis for
any valid present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against the Company giving rise to any such
liability, for damages to any site, location, or body of water (surface or
subsurface), for any illness of or personal injury to any employee or other
individual, or for any reason under any Environmental, Health and Safety Law.
(C) The term "Environmental, Health and Safety Laws" means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976, and the Occupational Safety
and Health Act of 1970, each as amended, together with all other laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
SECTION 4.19: LOSS RESERVES.
The reserves with respect to insurance as established or reflected in
the Company Financial Statements in the aggregate were determined in accordance
with SAP and the related life and health insurance annuity contracts and the
related reinsurance, coinsurance and other similar contracts of the Company, and
meet in all material respects the requirements of the insurance laws of each
applicable jurisdiction; provided, however, that no representation is made
pursuant to this Section 4.19 with respect to active life reserves.
SECTION 4.20: CERTAIN PAYMENTS.
All involuntary assessments relating to guaranty funds made against the
Company prior to the Closing have been paid or properly reserved on the books
and records of the Company.
SECTION 4.21: RATE AND FORM FILINGS.
The Company has timely made all required filings of rates and policy
forms as are required by applicable insurance regulatory authorities having
jurisdiction over its affairs and the conduct of the business of the Company has
been consistent with such filings in all material respects except in such
instances as would not reasonably be expected to have a Material Adverse Effect.
SECTION 4.22: UNDISCLOSED LIABILITIES.
The Company has no liability (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and whether due or to become due), and there is no basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against the Company giving rise to any such
liability, except for (a) liabilities set forth on the face of the June 30, 1998
Quarterly Statements (or in any notes, exhibits or schedules thereto), and (b)
liabilities which have arisen after June 30, 1998 in the ordinary course of
business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law, which would reasonably be expected to have a
Material Adverse Effect).
SECTION 4.23: BANK ACCOUNTS AND POWERS OF ATTORNEY.
Set forth in Section 4.23 of the Disclosure Schedule is an accurate and
complete list showing: (A) the name and address of each bank in which the
Company has an account or safe deposit box, the number of any such account or
any such box and the names of all persons authorized to draw thereon or to have
access thereto; and (B) the names of all persons, if any, holding powers of
attorney from the Company (other than customary powers of attorney granted to
governmental agencies) and a summary statement of the terms thereof.
SECTION 4.24: ABSENCE OF CERTAIN CHANGES.
Except as set forth on Section 4.24 of the Disclosure Schedule, during
the period from June 30, 1998 through the Closing, the Company has not:
(A) Experienced any change in its business, financial condition or
operations, financial or otherwise, which, in any case or in the aggregate,
would reasonably be expected to have a Material Adverse Effect, including but
not limited to, any material change in statutory surplus of the Company as a
result of any catastrophic event;
(B) Created or suffered to exist any lien, claim or encumbrance with
respect to any property, business or assets, tangible or intangible, other than
immaterial liens, claims or encumbrances created in the ordinary course of
business;
(C) Suffered any material damage, destruction or other casualty loss
(whether or not covered by insurance);
(D) Forgiven or canceled any material debts or claims, or waived any
material contractual or other rights;
(E) Written off as uncollectible any notes or other receivables, except
as write-offs in the ordinary course of business charged to applicable reserves,
none of which individually or in the aggregate would reasonably be expected to
have a Material Adverse Effect;
(F) Conducted its business except in the ordinary course of business;
(G) Made any change in the compensation or other direct or indirect
remuneration payable to any director, officer, or agent of the Company, or
become obligated or orally promised to change any such compensation, in each
case except as consistent with past practice or custom;
(H) Made or agreed to make any change in accounting practices;
(I) Amended its charter or bylaws;
(J) Declared, set aside, or paid any dividend or made any distribution
with respect to its capital stock;
(K) Redeemed, purchased or otherwise acquired any of its capital stock;
or
(L) Entered into any contract or commitment, or any preliminary letter
of intent, to do any of the things enumerated in this Section 4.24.
ARTICLE FIVE: PRE-CLOSING COVENANTS
SECTION 5.1: GENERAL.
Subject to the terms and conditions hereof, each of the parties agrees
to cooperate with the other and use all reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws, regulations and contractual
arrangements to consummate and make effective the transactions contemplated by
this Agreement. Seller shall promptly give to Buyer, and Buyer shall promptly
give to Seller, as the case may be, written notification of the existence or
occurrence of any condition of which such party may become aware which might
make any representation or warranty made by such party herein then untrue or
which might prevent the consummation of the transactions contemplated hereby. No
disclosure by any party pursuant to this Section 5.1, however, shall be deemed
to amend or supplement any schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
SECTION 5.2: REGULATORY APPROVALS.
Buyer, with the cooperation of Seller, shall prepare and shall file as
soon as practicable (a) a Form A Statement Regarding Acquisition of Control of a
Domestic Insurer with the Oklahoma Department of Insurance, and any other
documents which Buyer reasonably deems necessary or advisable in order to
expeditiously obtain the ODI Approval; and (b) such other forms, notices and
applications in such other applicable jurisdictions as may be required in order
to obtain any approvals necessary for the consummation of the transactions
contemplated hereby and the maintenance of the Company's insurance licenses in
effect on the date hereof after the Closing.
SECTION 5.3: OPERATION OF BUSINESS.
During the period between the execution and delivery of this Agreement
and the Closing, Seller shall not take any action which could cause the Company
to engage in any practice, take any action, or enter into any transaction
outside the ordinary course of business.
SECTION 5.4: ACCESS.
During the period between the execution and delivery of this Agreement
and the Closing, the Company shall permit representatives of Buyer to have
access, upon reasonable prior notice, during regular business hours, to all
premises, properties and personnel of, and all books, records (including Tax
records), contracts, and documents of or pertaining solely to, the Company.
ARTICLE SIX: ADDITIONAL AGREEMENTS
SECTION 6.1: COOPERATION.
In case at any time after the Closing any further action is necessary
or desirable to carry out the purposes of this Agreement, each of the parties
hereto will take such further action (including the execution and delivery of
such further instruments and documents) as the other party reasonably may
request, all at the sole cost and expense of the requesting party (unless the
requesting party is entitled to indemnification therefor under Article Nine
below). Buyer acknowledges and agrees that from and after the Closing, Seller
will be entitled to have reasonable access to, and Buyer and the Company shall
make available to Seller and its Affiliates, such Company personnel and such
Company documents, books, records (including Tax records), agreements, and
financial data as Seller or its Affiliates may reasonably request in order to
satisfy their respective obligations under this Agreement, the Co-Insurance
Agreement and the Service Agreement.
SECTION 6.2: LITIGATION SUPPORT.
In the event and for so long as Buyer, Seller or the Company actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (a) any
transaction contemplated under this Agreement, the Co-Insurance Agreement or the
Service Agreement, or (b) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction on or prior to the Closing Date involving the Company, each of
the parties hereto will cooperate with such other person and its counsel in the
contest or defense, make available its personnel, and provide such testimony and
access to its books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification therefor under Article Nine below).
SECTION 6.3: CONFIDENTIALITY.
(A) Seller and Buyer shall, except as required by law or requested by
any regulatory authority, each treat and hold as such all of the Confidential
Information (as defined in 6.3(B) below), refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to the other or destroy, at the request and option of the other, all
tangible embodiments (and all copies) of the Confidential Information which are
in its possession or under its control. In the event that either party is
requested by any regulatory authority or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, such party shall notify the other promptly of the request or
requirement so that the other may seek an appropriate protective order. If, in
the absence of a protective order or the receipt of a waiver hereunder, either
party is, so requested or compelled to disclose any Confidential Information
such party shall use its best efforts to obtain, at the request of the other, an
order or other assurance that confidential treatment will be accorded to such
portion of the Confidential Information to be disclosed. The foregoing
provisions shall not apply to any Confidential Information which is generally
available to the public immediately prior to the time of disclosure, or which is
disclosed to a party by a person or entity not known by such party to be subject
to a confidentiality agreement relating to such Confidential Information. Each
party shall cause its directors, officers, employees and representatives to
comply with the provisions of this Section and shall be responsible for the
actions of such persons.
(B) As used in this Agreement, the term "Confidential Information"
shall mean information in whatever form, including without limitation
information which is written, electronically stored, orally transmitted, or
memorized, which is of commercial value to the recipient including any idea,
knowledge, know-how, process, system, formula, composition, method, technique,
research and development, drawing, design, specification, technology, software,
technical information, trade secret, trademark, copyrighted material, report,
record, documentation, data, agent, policyholder, customer or supplier lists,
pricing or cost information, tax or financial information, business or marketing
plan, proposal, strategy, or forecast and any information about the transactions
contemplated herein or the existence of a proposed transaction; provided, that
Confidential Information does not include information which is or becomes
generally known within Buyer's or the Company's industry through no act or
omission by Seller.
SECTION 6.5: TAX MATTERS.
The following Tax provisions shall apply after the Closing Date:
(A) The Company does not have any Tax sharing or Tax allocation
agreements or arrangements with Seller or its Affiliates. Seller, Buyer and the
Company shall cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the matters referred to in this section and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Seller and Buyer agree (i) to retain all books and
records with respect to Tax matters pertinent to the Company relating to any
taxable period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by Seller or Buyer, any
extensions thereof) of the respective Taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (ii) to
give the other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so requests,
Seller or Buyer, as the case may be, shall allow the other party to take
possession of such books and records.
(B) Seller and Buyer further agree, upon request, to use their best
efforts to obtain any certificate or other document from any governmental
authority or any other person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
(C) Seller and Buyer further agree, upon request, to provide the other
party with all information that either party may be required to report pursuant
to Section 6043 of the Code and all Regulations promulgated thereunder.
SECTION 6.6: TAX INDEMNIFICATION.
Notwithstanding anything to the contrary contained herein, in
calculating the amount of any claim for indemnification pursuant to this
Agreement, Buyer's Losses (as hereinafter defined) shall be reduced by any Tax
Benefit attributable to, realized (or to be realized) in connection with or
relating to such indemnifiable claim. The term "Tax Benefit" means the amount by
which any Taxes of Buyer or the Company or any affiliate thereof (the
"Benefitted Party") are or would be reduced by any loss, deduction, refund,
credit or other Tax benefit and includes, without limitation, an offsetting Tax
Benefit. The term "Offsetting Tax Benefit" means the amount of any Tax Benefit
realized or to be realized by the Benefitted Party in a subsequent taxable
period (including, without limitation, a taxable period ending after the Closing
Date) attributable to, realized (or to be realized) in connection with or
relating to an adjustment with respect to Taxes in a prior taxable period. For
purposes of the determination of the amount of any Tax Benefit which is not
currently realized, (i) the Benefitted Party shall be assumed to have sufficient
taxable income to use any Tax Benefit in the taxable period or periods in which
such Tax Benefit will first arise; (ii) the effective tax rate of 41% shall be
treated as applying to such Tax Benefit to be realized in such future taxable
period; (iii) the amount of Tax Benefits shall be discounted to the present
value of such Tax Benefits, determined using a discount rate equal to the
applicable federal rate under Section 1274 (d) of the Code for the period over
which such Tax Benefits are assumed to be realized under clause (i) above.
Interest will accrue on any Tax claims beginning the earlier of (i) the date of
such amount was received if owing to the other party, or (ii) 30 days after a
written claim has been made to the indemnifying party. Interest shall accrue at
the applicable rate charged by the Internal Revenue Service for overpayments.
SECTION 6.7: SERVICE AGREEMENT.
At or prior to the Closing Seller and the Company shall enter into an
administrative services agreement (the "Service Agreement") substantially in the
form of Schedule 6.7 attached hereto.
SECTION 6.8: CO-INSURANCE AGREEMENT.
At or prior to the Closing Pioneer Life and the Company shall enter
into a coinsurance agreement (the "Co-Insurance Agreement") substantially in the
form of Schedule 6.8 attached hereto.
ARTICLE SEVEN: CONDITIONS TO CLOSING
SECTION 7.1: CONDITIONS TO OBLIGATIONS OF BUYER.
The obligation of Buyer to consummate the transactions contemplated
hereunder is subject to satisfaction of each of the following conditions, unless
satisfaction is waived by Buyer in writing at or prior to the Closing:
(A) The representations and warranties of Seller set forth in Article
Three and Article Four above shall be true and correct in all material respects
at and as of the Closing Date as though made at and as of the Closing Date.
(B) Seller shall have performed and complied in all material respects
with all of its covenants hereunder which are to be performed by it at or prior
to the Closing.
(C) Seller shall have made all of the Closing deliveries required to be
made by it pursuant to Section 8.1 at or prior to the Closing.
(D) No action, suit, or proceeding shall be pending or known to be
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (1)
prevent the consummation of any of the transactions contemplated by this
Agreement, (2) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation, or (3) adversely affect the right of Buyer
to own the Shares and to control the Company (and no such injunction, judgment,
order, decree, ruling, or change shall be in effect).
(E) Seller shall have delivered to Buyer a certificate of its President
and Secretary to the effect that each of the conditions specified in Sections
7.1(A) and (B) above have been satisfied in all respects.
(F) The ODI Approval and all other requisite regulatory approvals shall
have been received as well as an approval from the Oklahoma Department of
Insurance of an extraordinary dividend by UFL in an amount reasonably acceptable
to Buyer.
(G) All applicable waiting periods (and any extensions thereof) under
the HSR Act shall have expired or otherwise been terminated.
(H) Seller shall have executed and delivered the Service Agreement, and
Pioneer Life shall have executed and delivered the Co-Insurance Agreement.
SECTION 7.2: CONDITIONS TO OBLIGATION OF SELLER.
The obligation of Seller to consummate the transactions contemplated
hereunder is subject to satisfaction of each the following conditions, unless
satisfaction is waived in writing by Seller at or prior to the Closing:
(A) The representations and warranties of Buyer set forth in Article
Two shall be true and correct in all material respects at and as of the Closing
Date as though made and as of the Closing Date.
(B) Buyer shall have performed and complied in all material respects
with all of its covenants hereunder which are to be performed by it at or prior
to the Closing.
(C) Buyer shall have made all of the Closing deliveries required to be
made by it pursuant to Section 8.2 at or prior to the Closing.
(D) No action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (1)
prevent consummation of any of the transactions contemplated by this Agreement,
or (2) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect).
(E) Buyer shall have delivered to Seller a certificate of its President
and Secretary to the effect that each of the conditions specified above in this
Section 7.2(A) and (B) has been satisfied in all respects.
(F) The ODI Approval and all other requisite regulatory approvals shall
have been received.
(G) All applicable waiting periods (and any extensions thereof) under
the HSR Act shall have expired or otherwise been terminated.
(H) Buyer shall have executed and delivered the Service Agreement and
the Co-Insurance Agreement.
(I) The order with respect to the Seller's Form A filing with the
Oklahoma Department of Insurance shall have been modified in a manner reasonably
acceptable to Seller.
ARTICLE EIGHT: CLOSING DELIVERIES
SECTION 8.1: DELIVERY OBLIGATIONS OF SELLER.
At the Closing, Seller shall have delivered, or cause to be delivered,
each of the following items to Buyer:
(A) Stock certificates representing all of the Shares, properly
endorsed in blank and accompanied by such stock powers and other instruments of
assignment as may reasonably be requested by Buyer, in form and substance
reasonably satisfactory to Buyer;
(B) The officers' certificate required by Section 7.1(E); and
(C) A duly executed original letter of resignation, effective as of the
Closing, of each of the directors of the Company.
SECTION 8.2: DELIVERY OBLIGATIONS OF BUYER.
At the Closing, Buyer shall have delivered, or cause to be delivered,
each of the following items to Seller:
(A) The Consideration; and
(B) The officers' certificate required by Section 7.2(E) (to be
delivered to Seller).
ARTICLE NINE: INDEMNIFICATION, ARBITRATION AND TERMINATION
SECTION 9.1: SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All of the representations and warranties of the parties contained in
this Agreement shall survive the Closing hereunder and shall expire 30 months
thereafter.
SECTION 9.2: SELLER'S INDEMNIFICATION OF BUYER.
Seller hereby indemnifies and agrees to defend and hold Buyer, the
Company and their respective successors and assigns harmless from and against
any and all claims, losses, damages, liabilities and legal or other expenses
(including, without limitation, reasonable attorneys' fees, witnesses' fees,
investigation fees, court reporters' fees and other out-of-pocket expenses)
incurred by or asserted against Buyer or the Company (less the amount of any tax
benefits received by Buyer, the Company or their respective successors and
assigns in connection therewith ("Buyer's Losses")), and directly or indirectly
resulting from, arising out of or relating to any misrepresentation or breach of
warranty or breach or nonperformance of any agreement, covenant or other
obligation of Seller (whether such misrepresentation, breach or nonperformance
is actual or alleged by a third party) contained in this Agreement, the
schedules hereto or any other instrument or document furnished or to be
furnished by Seller to Buyer in connection with the transactions contemplated by
this Agreement; provided, however, that notwithstanding the foregoing, there
shall be no liability for indemnification by Seller pursuant to this Article
Nine unless the aggregate amount of Buyer's Losses exceeds $100,000 after the
application of Section 6.6 hereof.
SECTION 9.3: BUYER'S INDEMNIFICATION OF SELLER.
Buyer hereby indemnifies and agrees to defend and hold Seller, its
successors and assigns harmless from and against any and all claims, losses,
damages, liabilities and legal or other expenses (including, without limitation,
reasonable attorneys' fees, witnesses' fees, investigation fees, court
reporters' fees and other out-of-pocket expenses) incurred by or asserted
against Seller, its successors and assigns, less any tax benefits received by
Seller, its successors and assigns in connection therewith, and directly or
indirectly resulting from or arising out of or relating to any misrepresentation
or breach of warranty or breach or nonperformance of any agreement, covenant or
other obligation of Buyer (whether such misrepresentation, breach or
nonperformance is actual or is alleged by a third party) contained in this
Agreement or any other instrument or document furnished or to be furnished by
Buyer to Seller in connection with the transactions contemplated by this
Agreement.
SECTION 9.4: ARBITRATION
(A) All claims, disputes and other matters in question between parties
arising out of or relating to the Agreement or the breach thereof, shall be
decided by arbitration with a panel of three arbitrators in accordance with the
Rules of the American Arbitration Association then obtaining, unless the parties
mutually agree otherwise. Each party to this Agreement shall select an
arbitrator, and the two arbitrators thus selected shall select a third
arbitrator. Such arbitrators must have expertise in the field of life and/or
health insurance. In the event that any party, or the two arbitrators, fail to
select an arbitrator, selection of that arbitrator shall be made by the American
Arbitration Association. The arbitrators shall reach their decision within 30
days following the close of the arbitration hearing.
(B) The foregoing agreement to arbitrate and any other agreement to
arbitrate with an additional person or persons duly consented to by the parties
to this Agreement shall be specifically enforceable under the prevailing
arbitration law. The award rendered by the arbitrators shall be final and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof.
(C) Notice of the demand for arbitration shall be filed in writing with
the other party to this Agreement and with the American Arbitration Association.
The demand for arbitration shall be made within a reasonable time after the
claim, dispute or other matter in question has arisen, and in no event shall it
be made after the date when institution of legal or equitable proceedings based
on such claim, dispute or other matter in question would be barred by the
applicable statute of limitation in the State of Oklahoma. All arbitration
proceedings shall be held in Oklahoma City, Oklahoma.
(D) Notwithstanding the foregoing, the parties agree that prior to the
Closing each party shall be entitled institute actions or proceedings in any
court of the United States or any state thereof to seek injunctive relief or
specific enforcement of the terms of this Agreement, it being understood that
after the closing the application for such relief shall be made through the
arbitration process.
SECTION 9.5: TERMINATION OF AGREEMENT.
(A) Buyer and Seller may terminate this Agreement by mutual written
consent at any time prior to the Closing.
(B) Buyer may terminate this Agreement by giving written notice to
Seller (1) at any time prior to the Closing in the event Seller has breached any
material representation, warranty, or covenant contained in this Agreement in
any material respect, Buyer has notified Seller of the breach, and the breach
has continued without cure for a period of 15 days after the notice of breach;
(2) at the Closing, by reason of the failure of any condition precedent under
Section 7.1 to be satisfied (unless the failure results primarily from Buyer
itself breaching any representation, warranty, or covenant contained in this
Agreement); or (3) if the Closing shall not have occurred on or before December
31, 1998 (unless extended as provided in Section 1.3 above), by reason of the
failure of any condition precedent under Section 7.1 to be satisfied (unless the
failure results primarily from Buyer itself breaching any representation,
warranty, or covenant contained in this Agreement); and
(C) Seller may terminate this Agreement by giving written notice to
Buyer (1) at any time prior to the Closing in the event Buyer has breached any
material representation, warranty, or covenant contained in this Agreement in
any material respect, Seller has notified Buyer of the breach, and the breach
has continued without cure for a period of 15 days after the notice of breach
(2) at the Closing, by reason of the failure of any condition precedent under
Section 7.2 to be satisfied (unless the failure results primarily from Seller
breaching any representation, warranty, or covenant contained in this
Agreement); or (3) if the Closing shall not have occurred on or before December
31, 1998 (unless extended as provided in Section 1.3 above), by reason of the
failure of any condition precedent under Section 7.2 to be satisfied (unless the
failure results primarily from Seller breaching any representation, warranty, or
covenant contained in this Agreement).
SECTION 9.6: EFFECT OF TERMINATION.
If this Agreement terminates pursuant to Section 9.5, all rights and
obligations of the parties hereunder shall terminate without any liability of
any party to any other party other than as expressly set forth herein (except
for any liability of a party then in breach and then only with respect to such
breach).
ARTICLE TEN: MISCELLANEOUS
SECTION 10.1: PRESS RELEASES AND PUBLIC ANNOUNCEMENTS.
No party shall issue any press release or make any public announcement
directly or indirectly relating to the subject matter of this Agreement prior to
the Closing without the prior written approval of both parties.
SECTION 10.2: NOTICES.
Any and all notices required to be given under this Agreement shall be
given by, and be deemed given (a) when delivered by personal delivery; (b) three
business days after deposited in U.S. first-class mail, postage prepaid; or (c)
when sent by facsimile with confirmation of receipt, addressed as follows:
If to Buyer: Pre-Paid Legal Services, Inc.
320 East Main
Ada, OK 74821
Attention: Harland C. Stonecipher,
Chairman of the Board
and Chief Executive Officer
Telephone: (580) 436-1234
Facsimile: (580) 436-7409
If to Seller: Pioneer Financial Services, Inc.
11825 N. Pennsylvania Street
Carmel, Indiana 46032
Attention: John J. Sabl, Executive Vice President,
General Counsel and Secretary
Telephone: (317) 817-6092
Facsimile: (317) 817-6327
or to such other address as the party may designate in writing to the other
party from time to time.
SECTION 10.3: GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of Oklahoma without giving effect to any choice
or conflict of law provision or rule (whether of the State of Oklahoma or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Oklahoma.
SECTION 10.4: AMENDMENT AND WAIVER.
This Agreement shall not be amended or modified, and none of the
provisions hereof shall be waived, except in a writing signed by both parties
hereto, or, in the case of a waiver, by the party making a waiver. In the event
that any obligation, agreement or covenant contained in this Agreement should be
breached by either party and thereafter waived by the other party, such waiver
shall be limited to the particular breach so waived and shall not be decreed to
waive any other breach hereunder.
SECTION 10.5: SECTION HEADINGS.
Section headings contained in this Agreement are for convenience only
and shall not be considered in construing any provision hereof.
SECTION 10.6: ASSIGNMENT.
This Agreement shall inure to the benefit of and be binding upon the
parties named herein and their respective successors and assigns. No party may
assign either this Agreement nor any of its rights, interest, or obligations
hereunder without the prior written approval of the other party.
SECTION 10.7: ENTIRE AGREEMENT.
This Agreement (including the documents referred to herein) constitutes
the entire agreement among the parties and supersedes any prior understandings,
agreements, or representations by or among the parties, written or oral, to the
extent they related in any way to the subject matter hereof.
SECTION 10.8: SEVERABILITY.
Any term or provision of this Agreement which is invalid or
unenforceable in any situation or in any jurisdiction shall, as to such
situation or jurisdiction, be ineffective only to the extent of such invalidity
or unenforceability without thereby rendering invalid or unenforceable the
remaining terms and provisions hereof or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any other
situation or in any other jurisdiction.
SECTION 10.9: EXPENSES.
Each party shall bear its own costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby; provided that Buyer and Seller shall share equally the
filing fee under the HSR Act. Seller agrees that the Company has not borne and
will not bear any of Seller's costs and expenses (including any legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby except those incurred in connection with the preparation of
the financial statements referred to herein.
SECTION 10.10: INCORPORATION OF EXHIBITS AND SCHEDULES.
The Exhibits and Schedules identified in this Agreement are
incorporated by reference and made a part hereof.
SECTION 10.11: SPECIFIC PERFORMANCE.
Each of the parties acknowledges and agrees that the other party would
be damaged irreparably in the event any of the provisions of this Agreement are
not performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the parties agrees that the other party shall be entitled
to injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the parties and the matter or through
the arbitration process as contemplated by Section 9.4, in addition to any other
remedy to which each may be entitled whether at law or in equity.
SECTION 10.12. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together will constitute one
and the same instrument.
SECTION 10.13: GENERAL RULES OF CONSTRUCTION.
The parties have participated jointly in the negotiation and drafting
of this Agreement. If a question concerning intent or interpretation arises, no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of authorship. Any reference to any federal, state, local or foreign
statute or law shall be deemed also to refer to all related rules and
regulations unless the context requires otherwise. Each representation, warranty
and covenant shall have independent significance, and if any party has breached
any of them in any way, the fact that there exists another representation,
warranty or covenant relating to the same subject matter which the party has not
breached shall not detract from or mitigate the fact that the party is in such
breach.
SECTION 10.14: THIRD PARTY BENEFICIARIES.
This Agreement shall not confer any rights or remedies on any person
other than the parties and their respective successors and permitted assigns.
In Witness Whereof, the parties have executed this Agreement as of the
date first set forth above.
PRE-PAID LEGAL SERVICES, INC.
By: /s/ HARLAND C. STONECIPHER
------------------------------
Harland C. Stonecipher
Chief Executive Officer
PIONEER FINANCIAL SERVICES, INC.
By: /s/ THOMAS J. KILIAN
-------------------------------
Thomas J. Kilian
President
Exhibit A
Calculation of Consideration
The valuation date for the Consideration (the "Valuation Date") shall
be the month end immediately preceding the Closing Date. Except as otherwise
indicated below, the Calculation shall be determined as of the Valuation Date
using valuations computed in accordance with SAP consistently with the
principles used in the Quarterly Statements. The Purchase Price shall be
calculated as follows (references to lines and pages refer to lines and pages
set forth in the Company's statutory financial statements):
Capital and Surplus (line 38, page 3), plus 17,343,874
Interest Maintenance Reserve (line 11.4, page 3), plus 6,366
Asset Valuation Reserve (line 24.1, page 3), plus 1,630,010
$1,000,000 1,000,000
----------
19,980,250
----------
plus or minus an adjustment as of the Closing Date for 65% of the
increase/decrease in the market value of bonds and stock as compared to
the statutory value of the bonds (line 1, page 2) and stock (lines 2.1
and 2.2, page 2) on the Valuation Date. This calculation will be made
after giving effect to the transfer of assets and liabilities pursuant
to the Co-Insurance Agreement.
The following is the market value calculation:
Preliminary purchase price $19,980,250
Market value adjustment 689,012
-----------
Purchase Price $20,669,262
===========
Book value Market value difference
---------- ------------ ----------
Bonds - total 11/30/98 portfolio $31,880,993
Common stocks - 11/30/98 portfolio 4,947,501
----------- ------------ ----------
$36,828,494 $37,888,512 $1,060,018
=========== ============
Taxes at 35% (371,006)
----------
Market value adjustment $ 689,012
==========
The undersigned hereby confirms that the terms of the Stock Purchase
Agreement dated as of October 5, 1998 between Pioneer Financial Services, Inc.
and Pre-Paid Legal Services, Inc. are acceptable to it.
Dated: October 5, 1998 CONSECO, INC.
By: /s/ THOMAS J. KILIAN
-----------------------------
Thomas J. Kilian
Executive Vice President
COINSURANCE AGREEMENT
This is a COINSURANCE AGREEMENT entered into on December 30, 1998, between
PIONEER LIFE INSURANCE COMPANY, a corporation organized under the laws of the
State of Illinois, (hereinafter referred to as the "Reinsurer"), and UNIVERSAL
FIDELITY LIFE INSURANCE COMPANY, a corporation organized under the laws of
Oklahoma (hereinafter referred to as the "Company").
W I T N E S S E T H:
ARTICLE I
It is hereby agreed that effective as of the close of business on the
month end immediately preceding the closing date under the Stock Purchase
Agreement between Pre-Paid Legal Services, Inc. and Pioneer Financial Services,
Inc. dated October 5, 1998 (the Closing Date), the Company does hereby cede, and
the Reinsurer does hereby assume by coinsurance, 100% of the Company's liability
for the insurance policies described in Exhibit A.
ARTICLE II
Accounting
The Reinsurer agrees to provide the Company with interim accounting
reports within 20 days after the end of each three month period or other
mutually agreed upon interval, but not less than quarterly, setting forth the
collected premium income, policy benefits, and expenses for agency compensation
paid, any statistical information pertaining to the policies which may be
necessary to fulfill statutory or regulatory requirements, and all other
necessary information on the business coinsured hereunder, to be determined in
accordance with the practices required to conform to the methods prescribed by
the National Association of Insurance Commissioners (NAIC) for the completion of
the Convention Form Annual and Quarterly Statement Blank; provided, that while
the Administrative Services Agreement dated as of December 30, 1998 between the
Company and Pioneer Financial Services, Inc. (the "Administrative Services
Agreement") shall be in effect, the Company shall provide all reports referred
to in this Article II to Reinsurer.
ARTICLE III
Reporting and Payment
to the Company
With respect to each reinsured policy, the Reinsurer shall collect all
premiums due under said policies and retain said premiums; provided, that while
the Administrative Services Agreement shall be in effect such premiums shall be
collected by the Company on behalf of Reinsurer and immediately remitted to
Reinsurer. These amounts shall be the full amount of the reinsurance premium due
to the Reinsurer hereunder with respect to such policies.
As a result of the ceding and acceptance of reinsurance, the Reinsurer
also assumes and agrees to reimburse the Company for all of the following with
respect to the reinsured policies:
(a) Any guaranty fund assessments attributable to premiums written
on the reinsured policies except where such is eligible as a
credit against premium or state income taxes or is attributed
to being licensed to conduct business in a state (class A);
and
(b) Premium taxes relating to premiums written by the Company
under the reinsured policies.
At the end of each calendar quarter, the Reinsurer will determine the
cumulative gain or loss on the business reinsured for the period commencing on
the Closing Date of this Agreement and ending on the last day of such calendar
quarter in accordance with Exhibit C. Within 30 days following the end of each
calendar quarter, the Reinsurer shall pay to the Company an amount equal to 10%
of any cumulative gain, minus all amounts previously paid to the Company
pursuant to this paragraph.
ARTICLE IV
Transfer of Assets
and
Any Remittances Due Hereunder
The Company will transfer assets on the Closing Date (which must be
marketable securities or cash equivalents) to the Reinsurer having a fair market
value on the Closing Date equal to 100% of the reserves and other policy
liabilities as of the Closing Date on the business coinsured hereunder. It is
understood that these assets are transferred to the Reinsurer for the purpose of
funding and maintaining the reserves and other policy liabilities on the
coinsurance hereunder. These assets shall include the applicable deferred and
uncollected net premiums and securities for the remainder of the assets required
to fund the reserves and other policy liabilities.
Prior to the date of such transfers, the Company will hold sufficient
funds for the benefit of the Reinsurer to cover the amount to be transferred.
Reserves and other Policy liabilities and assets to be transferred are
shown in Exhibit B.
ARTICLE V
Assignment
The Company hereby assigns to the Reinsurer its rights, title and
interest in the following:
(a) Gross premiums, premium adjustments and any other
consideration due or to become due to the Company from
insureds and reinsurers on reinsured policies.
(b) Reinsurance recoverables relating to or arising under any
certificate, agreement or treaty of reinsurance and ceding
commissions or other consideration due or to become due to the
Company under reinsured policies.
ARTICLE VI
Premium Rates;
Cooperation
The Reinsurer shall determine the premium rates for the policies
reinsured hereunder and the Company authorizes the Reinsurer to seek approval
from the applicable Insurance Departments or other regulatory body as required
by law of any rate changes the Reinsurer feels are necessary to maintain the
rates at an adequate level.
The Company shall cooperate, as reasonably necessary, in assisting the
Reinsurer in obtaining any regulatory approvals, acquiescences or consents
required to properly administer the business or establish appropriate and
adequate rates. Such cooperation shall include, but not be limited to, review of
and comment upon proposed rate filings, attendance at meetings with regulators
and testimony at insurance department hearings which involve issues related to
the business reinsured.
ARTICLE VII
Insolvency
In the event of insolvency of the Company, the reinsurance shall be
payable directly to the liquidator, receiver or statutory successor of the
Company, on the basis of claims allowed against the insolvent Company by any
court of competent jurisdiction or by any conservator, liquidator, or statutory
successor of the Company having authority to allow such claims, without
diminution because of the insolvency of the Company or because the conservator,
liquidator or statutory successor has failed to pay all of a portion of any
claims.
It is further agreed that the liquidator, or receiver, or statutory
successor of the Company shall give written notice to the Reinsurer of the
pendency of any claim against the Company on the policies reinsured within a
reasonable time after such claim is filed in the insolvency proceeding, and that
during the pendency of such claim the Reinsurer may investigate such claim and
interpose, at its expense, in the proceeding in which such claim is to be
adjudicated, any defense or defenses which it may deem available to the Company
or to its liquidator, or receiver, or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to court approval,
against the Company as part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to the Company solely as a
result of the defense undertaken by the Reinsurer.
ARTICLE VIII
Parties to the Agreement
This is a Coinsurance Agreement for indemnity coinsurance solely
between the Company and the Reinsurer, their successors or assigns. Subject to
the provisions of ARTICLE VII above, the coinsurance hereunder shall not create
any right or relationship between the Reinsurer and any person or entity,
including but not limited to the insured, owner, or beneficiary of any policy of
the Company which may be coinsured hereunder.
ARTICLE IX
Errors and Omissions
It is expressly understood and agreed that if failure to comply with
any condition of this Coinsurance Agreement is shown to be unintentional and as
a result of a misunderstanding, oversight, or clerical error on the part of
either the Company or the Reinsurer, both the Company and the Reinsurer shall be
restored to the position they would have occupied had no such error or oversight
occurred.
ARTICLE X
Other Reinsurance
The Company agrees it will not sell, reinsure or otherwise attempt to
dispose of the business coinsured under this Coinsurance Agreement without the
express written consent of the Reinsurer.
ARTICLE XI
Liability for Claims and Policy Benefits
The Reinsurer shall be liable to the Company for the benefits coinsured
hereunder to the same extent as the Company is liable to the insured for such
benefits, and all coinsurance shall be subject to the terms and conditions of
the policy under which the Company shall be liable.
The Reinsurer shall be liable for any punitive damages or any other
extra-contractual amounts on coinsurance hereunder which are incurred by the
Company unless said damages or extra-contractual amounts are a consequence of
the Company's action following the Closing Date of this Agreement.
ARTICLE XII
Commencement of Liability
Except as provided in Article XI, the liability of the Reinsurer shall
follow the Company in every case and shall be subject in all respects to all the
general and specific stipulations, clauses, waivers, extensions, modifications,
and endorsements of the Company's policies subject to all other terms and
conditions of this Agreement.
ARTICLE XIII
Termination of this Agreement
This Agreement shall remain in effect for as long as any policies
reinsured hereunder shall remain outstanding and in effect. However, either
party may terminate this Agreement as to new business at any time upon 90 days
advance, written notice.
ARTICLE XIV
Security
As long as this Agreement is in effect, the Reinsurer shall provide the
Company with security (by trust account, letter of credit or other) sufficient
to allow the Company to claim reinsurance credits equal to the total reserves
and claim liabilities ceded under this Agreement. Such security, if necessary,
must be satisfactory to the Company and acceptable to the state of domicile of
the Company.
ARTICLE XV
Entire Agreement
This Agreement represents the entire Agreement between the Company and
the Reinsurer and supersedes any prior oral or written agreements between the
parties regarding its subject matter.
No modification of this Agreement shall be effective unless set forth
in a written amendment executed by both parties.
ARTICLE XVI
Offset
Any debts or credits, matured or unmatured, liquidated or unliquidated,
regardless of when they arose or were incurred, in favor of or against either
the Company or the Reinsurer with respect to this Agreement or any other
reinsurance agreement between the parties, shall be offset and only the balance
allowed or paid. If either party is then under formal insolvency proceedings,
this right of offset shall be subject to the laws of the state exercising
primary jurisdiction over such proceedings.
ARTICLE XVII
Deferred Cost Tax Election
The Reinsurer and the Company each acknowledges that it is subject to
taxation under Subchapter "L" of the Internal Revenue Code of 1986 (the "Code").
With respect to this Agreement, the Reinsurer and the Company agree to
the following pursuant to Section 1.848-2(g)(8) of the Income Tax Regulations
issued in December of 1992, whereby:
(1) Each party agrees to attach a schedule to its federal income
tax return which identifies this Agreement for which the joint
election under the regulation has been made;
(2) The party with net positive consideration, as defined in the
regulation promulgated under Code Section 848, for this
Agreement for each taxable year, agrees to capitalize specific
policy acquisition expenses with respect to this Agreement
without regard to the general deductions limitation of Section
848(c)(1);
(3) Each party agrees to exchange information pertaining to the
amount of net consideration under this Agreement each year to
ensure consistency; and
(4) This election shall be effective for the year that this
Agreement was entered into and for all subsequent years that
this Agreement remains in effect.
ARTICLE XVIII
Complaints, Litigation and Official Notices
(a) Both parties shall promptly notify the other of any complaint
from any insurance department of which it becomes aware in
connection with any transaction under this Agreement.
(b) Both parties shall promptly notify the other of any litigation
of which it becomes aware in connection with any transaction
covered by this Agreement.
(c) Each party shall cooperate fully and assist the other in the
defense of any lawsuit or administrative action brought
against it by any third party in connection with any
transaction subject to this Agreement.
(d) Each party shall promptly notify the other of and immediately
refer any and all official notices dealing with such matters
as bankruptcies and levies along with any pertinent
information providing such matters arise from or relate to
transactions under this Agreement.
(e) Each party shall promptly notify the other of any subpoena or
subpoena duces tecum directed to it in connection with any
transaction covered by this Agreement.
(f) Unless expressly authorized in this Agreement, or otherwise
specifically authorized in writing, neither party shall have
authority to bind the other by any statement, promise or
representation.
(g) The parties shall have no authority to admit liability on the
part of the other in any matter arising out of or subject to
the terms of this Agreement, unless specifically authorized in
writing.
(h) Neither party shall have authority to institute any action or
legal proceeding on behalf of the other party, unless
authorized in writing by the other.
(i) Reinsurer shall have the sole responsibility for management of
litigation resulting from this Agreement and shall retain
counsel, reasonably acceptable to Company. However, Company
may, at its own expense, retain its own counsel in the defense
of any litigation.
ARTICLE XIX
Assurances
The Company and the Reinsurer agree to refrain, and to cause their
employees, agents and affiliates (as identified in the organizational charts of
the annual statements of the Company and Reinsurer as filed in their respective
states of domicile) and their affiliates' employees and agents to refrain from
utilizing information regarding the business reinsured hereunder for the
purposes of causing or attempting to cause any contract holder to replace any
contract reinsured hereunder with any contract or policy of insurance of the
Company or any affiliate of the Company, the Reinsurer or any affiliate of the
Reinsurer or any other company, other than in the ordinary course of business
and consistent with the past practices of the Company or Reinsurer. The Company
and Reinsurer agree to use all reasonable efforts to conserve, maintain and
assure the persistency of the business reinsured and agree to refrain from
taking any action which might tend to have a materially adverse effect on the
persistency of the business reinsured hereunder, other than the ordinary course
of business consistent with past practice, without the prior written consent of
the other party. The Company agrees not to engage in any internal replacement
program targeted towards the contracts reinsured hereunder. The Company agrees
not to solicit, and not to facilitate the solicitation of, any contractholder of
any contract reinsured hereunder for the sale of additional insurance.
ARTICLE XX
Notices
All notices which are required to be in writing shall be deemed to have
been given at the time mailed in the general or branch United States Post Office
enclosed in a certified prepaid envelope addressed to the respective parties at
the address indicated below or at such other addresses as may be required in
writing by any party as to its own address:
If to Reinsurer: Pioneer Life Insurance Company
11815 N. Pennsylvania Street
Carmel, IN 46032
If to Company: Universal Fidelity Life Insurance Company
11815 N. Pennsylvania Street
Carmel, IN 46032
Provided, however, that any notice of change of address will be
effective only upon receipt.
ARTICLE XXI
Arbitration
(a) All claims, disputes and other matters in question between
Company and Reinsurer arising out of or relating to the
Agreement or the breach thereof, whether arising before or
after the termination of this Agreement, shall be decided by
arbitration with a panel of three (3) arbitrators in
accordance with the Rules of the American Arbitration
Association then obtaining, unless the parties mutually agree
otherwise. Each party to this Agreement shall select an
arbitrator, and the two arbitrators thus selected shall select
a third arbitrator. Such arbitrators must have expertise in
the field of life and/or health insurance. In the event that
any party, or the two arbitrators, fail to select an
arbitrator, selection of that arbitrator shall be made by the
American Arbitration Association. The arbitrators shall reach
their decision within forty five (45) days following the close
of the arbitration hearing.
(b) No arbitration shall include by consolidation, joinder or in
any other manner, parties other than Company and Reinsurer,
and any other persons substantially involved in a common
question of fact or law, whose presence is required if
complete relief is to be accorded in the arbitration. No
person other than Company or Reinsurer shall be included as an
original third party or additional third party to an
arbitration whose interest or responsibility is insubstantial.
In no event shall any insured who claims benefits be subject
to such arbitration unless he/she consents in writing.
(c) The foregoing agreement to arbitrate and any other agreement
to arbitrate with an additional person or persons duly
consented to by the parties to this Agreement shall be
specifically enforceable under the prevailing arbitration law.
The award rendered by the arbitrators shall be final and
judgment may be entered upon it in accordance with applicable
law in any court having jurisdiction thereof.
(d) Notice of the demand for arbitration shall be filed in writing
with the other party to this Agreement and with the American
Arbitration Association. The demand for arbitration shall be
made within a reasonable time after the claim, dispute or
other matter in question has arisen, and in no event shall it
be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in
question would be barred by the applicable statute of
limitation in the State of Oklahoma. All arbitration
proceedings shall be held in Oklahoma City, Oklahoma.
(e) In addition, the obligations of the parties undertaken
pursuant to Article XVIII Complaints, Litigation and Official
Notices shall be performed by the parties during the pendency
of any arbitration proceeding under this Paragraph.
IN WITNESS WHEREOF, the parties hereto have caused this Coinsurance
Agreement to be executed and signed by their respective duly authorized officers
to become effective as provided in this Coinsurance Agreement.
PIONEER LIFE INSURANCE COMPANY
By: /s/ THOMAS J. KILIAN
-----------------------------
Thomas J. Kilian, President
Name Title
Date: December 30, 1998
Attest
/s/ JOHN J. SABL
- ------------------------------
John J. Sabl, Secretary
Name Title
UNIVERSAL FIDELITY LIFE INSURANCE COMPANY
By: /s/ RANDY HARP
-----------------------------
Randy Harp, CFO & COO
Name Title
Date: December 30, 1998
Attest
/s/ KATHLEEN S. PINSON
- ----------------------------------
Kathleen S. Pinson, VP/Controller
Name Title
<PAGE>
EXHIBIT A
All health business including Medicare supplement, long term and home
health care business.
<PAGE>
EXHIBIT B
STATUTORY ITEMS TO BE TRANSFERRED
AS OF December 30, 1998.
Asset Items:
1. Deferred and Uncollected New Premiums: $ 271,161
2. Remaining assets to be Transferred
Securities having a market value at
December 28, 1998 12,610,703
3. Cash 78,550
------------
$ 12,960,414
------------
Liability and Surplus Items:
1. Aggregate Reserves for accident and health: $ 7,735,414
2. Policy and contract claims: accident & health 5,225,000
3. Premiums received in advance: 0
4. Liability for premium and other deposit funds: 0
5. Policy and contract liabilities not included
elsewhere: 0
------------
$ 12,960,414
------------
<PAGE>
EXHIBIT C
Gain/Loss Formula
The formula for determining the cumulative gains/losses for any period
during the term of the Agreement is as follows:
(1) Net Gross Earned Premiums; plus
(2) Investment income; minus
(3) Incurred Claims; minus
(4) Commissions Incurred; minus
(5) Assumed Expense Allowance; minus
(6) Reinsurer's Income Tax Allowance
The above items shall be determined in each case for such period by
Reinsurer in accordance with the definitions below and items (1) through (4)
shall be determined in manner consistent with Reinsurer's statutory financial
reporting for the business reinsured.
Definitions
"Net Gross Earned Premiums" shall mean an amount equal to the unearned
gross premium reserve and advance premiums as of the beginning of the quarterly
computational period, plus collected premiums, less any refunded premiums, less
the unearned gross premium reserve and advance premiums as of the end of the
quarterly computational period on business reinsured.
"Investment Income" shall mean an amount calculated on a per quarterly
computational period basis and shall equal the interest rate multiplied by the
sum of the average claim and active life reserves on business reinsured for the
quarterly computation period. The interest rate shall equal the average of the
one-year Treasury constant maturities rate as of the last day of each month in
the quarterly computation period as published in the Federal Reserve Statistical
Releases. The average claim reserve on business reinsured for the quarterly
computational period shall equal the average of the claim reserve on business
reinsured at the beginning of the computational period and the claim reserve at
the end of the computational period. The average active life reserve on business
reinsured for the quarterly computational period shall equal the average of the
active life reserve at the beginning of the computational period and the active
life reserve at the end of the computational period.
"Incurred Claims" shall mean the amount equal to claims paid during the
quarterly computational period, plus the claim reserve at the end of the
computational period, plus the active life reserve at the end of the
computational period, minus the claim reserve at the beginning of the
computational period, minus the active live reserve at the beginning of the
computational period on business reinsured.
"Commissions Incurred" shall be the amount of commissions, first year
and renewal, incurred on the business reinsured by Reinsurer during the
quarterly computational period. Commissions Incurred shall include all
commissions earned by agents which are used to repay any debit balance and
commissions paid directly to agents.
"Assumed Expense Allowance" shall mean an amount equal to 10% of Net
Gross Earned Premiums and is the amount allotted to Reinsurer to administer the
reinsured policies and pay any premium taxes, assessments, fines, penalties and
examination and regulatory fees related to such reinsured policies.
"Reinsurer's Income Tax Allowance" shall mean an amount equal to 35% of
profits before income taxes on business reinsured. Profits before income taxes
shall equal Net Gross Earned Premiums, plus Investment Income, minus Incurred
Claims, minus Commissions Incurred, minus Assumed Expense Allowance.
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement ("Agreement") is made effective
as of the 30th day of December, 1998, by and between UNIVERSAL FIDELITY LIFE
INSURANCE COMPANY, an Oklahoma insurer ("UFL"), and PIONEER FINANCIAL SERVICES,
INC., a Delaware corporation ("PFS").
WHEREAS, PFS owns a number of insurance subsidiaries directly and
indirectly (collectively, the "PFS Companies"); and
WHEREAS, PFS desires to appoint and retain UFL to perform certain
claims administrative services required to support the Medicare Supplement
insurance policies issued by PFS Companies, identified in Exhibit A of this
Agreement (the "PFS Policies") and policies reinsured under the Coinsurance
Agreement between UFL and Pioneer Life Insurance Company dated December 30, 1998
(the "UFL Policies", the PFS Policies and the UFL Policies being collectively
referred to as the "Policies"), and UFL desires to accept such appointment on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises set forth herein, and for other good and valuable consideration, and
intending to be legally bound hereby, the parties agree as follows:
1. CLAIMS ADMINISTRATION SERVICES
1.1. Services. UFL shall perform the following services ("Services") in
connection with the administration of claims under the Policies timely and
accurately in all material respects:
1.1.1. UFL agrees to process the PFS Company Part A and Part B Medicare
supplement insurance claims that are not automatically adjudicated.
1.1.2. UFL shall bill PFS by the 20th day of each month for claims
processed in the preceding month.
1.1.3. UFL shall perform all administration of policies reinsured under
the Coinsurance Agreement except for rights reserved to Reinsurer as provided in
the Coinsurance Agreement.
2. COMPENSATION
PFS shall pay or cause its subsidiaries to pay UFL its reasonable
expenses attributable to or incurred for the benefit of PFS and its subsidiaries
within twenty (20) days following receipt of UFL's bill for Services. This
expense shall be all direct and directly allocable expenses, including overhead,
exclusive of any costs associated with the executive management of UFL,
reasonably and equitably determined by UFL to be attributable to or incurred for
the benefit of administering the claims submitted under the Policies.
3. PERSONNEL, FACILITIES, AND COSTS
3.1. Personnel. UFL shall furnish all personnel necessary to provide
the Services. Such personnel shall at all times remain employees of UFL subject
solely to its direction and control. UFL shall alone retain full liability to
such employees for their welfare, salaries, fringe benefits, legally required
employer contributions and tax obligations.
3.2. Facilities. The Services will be performed by UFL using furniture,
fixtures and equipment (including computer hardware) owned or leased by UFL
(collectively, the "Facilities"). All Facilities owned by UFL shall remain the
property of UFL and PFS acknowledges and agrees that it shall not have any
right, title or interest in or to the Facilities.
3.3. Costs. UFL shall pay all personnel and other costs and expenses to
provide the Services.
4. COMPLIANCE WITH APPLICABLE LAWS
Each of the parties hereto agrees to comply with all applicable
statutes, ordinances, rules, and regulations of any and all federal, state, and
municipal authorities (collectively, "Laws") as they apply to the performance of
such party's obligations under this Agreement, including but not limited to
state laws/regulations governing the timely processing and payment of claims.
5. LICENSING
At all times during the term of this Agreement, UFL shall maintain in
full force and effect all licenses, qualifications and other authorizations
necessary under applicable Laws to provide the Services. UFL agrees to provide
PFS with copies of any such documents upon request.
6. SUPERVISION BY BOARD OF DIRECTORS
UFL acknowledges that the Boards of Directors of the PFS Companies are
vested with the power, authority and responsibility for managing the business
and affairs of the PFS Companies, including with respect to claims
administrative services. UFL acknowledges that any and all actions or services,
whether supervisory or administerial, taken or provided pursuant to this
Agreement by UFL shall be subject to the continuous supervision of the Boards of
Directors of the PFS Companies and, to the extent designated by such Boards of
Directors, the appropriate designated officers of the PFS Companies.
7. MAINTENANCE OF RECORDS
UFL shall maintain during the term of this Agreement and for the
required period to satisfy record retention requirements, complete and accurate,
in all material respects, books and records of all transactions between PFS and
its subsidiaries, and claimants including, without limitation all claims
submitted by individuals under the Policies. UFL shall maintain computerized
records of all claims administered under this Agreement and shall supply the PFS
Companies with summary tabulations of pertinent statistical data upon request.
All records shall be maintained in accordance with prudent standards of
insurance record keeping and in accordance with any and all Laws.
8. AUDIT
PFS shall have the right, after providing reasonable notice to UFL, to
audit the records and procedures of UFL pertaining to the Services performed by
UFL under this Agreement.
9. ERRORS AND OMISSIONS
Inadvertent delays, errors or omissions that occur or are made in
connection with the transactions contemplated by this Agreement shall be
rectified by the party making such error or omission as soon as possible after
discovery thereof.
10. TERMINATION
This Agreement shall remain in effect as long as any of the Policies
remain in force. However, either party may terminate the Agreement with respect
to the PFS Policies or the UFL Policies or both, without cause, upon ninety (90)
days written notice; provided that such termination does not occur prior to
December 31, 2003.
11. INDEMNIFICATION
11.1 Indemnification of UFL by PFS. PFS shall indemnify and hold UFL
harmless from any expenses, losses, claims, damages, liabilities and reasonable
attorneys' fees to which UFL becomes subject (except insofar as such arise from
the failure of UFL to perform any act required under this Agreement) which
results from a breach by PFS of any covenant contained in this Agreement.
11.2 Indemnification of PFS by UFL. UFL shall indemnify and hold PFS
harmless against any expenses, losses, claims, damages, liabilities and
reasonable attorneys' fees to which PFS becomes subject (except insofar as such
arise from (i) the specific instructions and direction of PFS to UFL or (ii) the
failure of PFS to perform any act required under this Agreement) which results
from a breach of any covenant of this Agreement by UFL; provided, however, UFL's
liability under this paragraph shall be limited to the aggregate administrative
fees paid to it by the PFS Companies under this Agreement.
11.3 Procedures for Receiving Indemnification. After receipt by either
UFL or PFS of any written notice of the commencement of any action against it in
respect to which indemnification or reimbursement may be sought against the
other party, the party seeking indemnification or reimbursement shall notify the
indemnifying party in writing within thirty (30) days after its receipt of
notification of the commencement of action; provided, however, that the
obligation of the indemnifying party shall not be reduced on account of the
failure or delay of the indemnified party to give such notice except to the
extent that the indemnifying party is damaged by such failure or delay. In case
any such action is brought against a party seeking indemnity or reimbursement,
and said party notifies the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent that
it may wish, assume the defense thereof with counsel satisfactory to the party
seeking indemnity or reimbursement. In the event that the indemnifying party
recommends a monetary settlement which is acceptable as full settlement by the
claimant bringing the action and such settlement is refused by the party seeking
indemnification, the indemnification hereunder shall be limited to the amount of
such recommended settlement. If a reasonable settlement is agreed to by both the
party seeking indemnification and the indemnifying party, the indemnifying party
shall pay all expenses, losses, claims, damages, liabilities and reasonable
attorneys' fees incurred in the settlement of such action.
12. CONFIDENTIALITY
All claims, records and other material pertaining to this Agreement are
not meant for public dissemination and shall be held by UFL in strict
confidence, except as explicitly provided under any Policy or as required by the
Laws.
13. RELATIONSHIP OF THE PARTIES
13.1 Contractual Relationship. The only relationship between UFL and
PFS is a contractual relationship established by this Agreement. Nothing
contained in this Agreement shall be construed to create the relationship of
employer and employee or constitute a partnership or joint venture arrangement
between the parties. UFL's authority shall be limited to that which is expressly
stated in this Agreement. PFS shall exercise no control over the hours, office
location, rentals or employees of UFL.
13.2 Assignment. This Agreement shall be binding upon UFL and PFS and
their respective successors and assigns. This Agreement may not be assigned in
whole or in part by UFL or PFS without the prior written consent of the other
party.
13.3 Sub-Contracting by UFL. UFL may not, without PFS's prior written
consent, which consent shall not be unreasonably withheld, sub-contract with
others for the performance of any services which UFL is to provide under this
Agreement. In the event that PFS consents to sub-contracting, UFL shall remain
responsible for the proper performance of such services.
14. AMENDMENTS
This Agreement shall not be modified or amended except in writing
signed by an authorized officer of UFL and by an authorized officer of PFS.
15. CONTROLLING LAW.
This Agreement shall be subject to and construed under the laws of the
state of Oklahoma.
16. REFERENCES AND SECTION HEADINGS
Any reference to the singular shall include reference to the plural and
vice versa. Section headings are intended for purposes of description only and
shall not be used for purposes of interpretation of this Agreement.
17. ARBITRATION
In the event any dispute arises between the parties with reference to
any aspect of this Agreement, such dispute shall be submitted for resolution by
arbitration upon the written request of either party to the other party. Within
thirty (30) days after receipt of such written request, each party shall select
one arbitrator (for a total of two), and such selected arbitrators shall select
a third arbitrator within sixty (60) days after receipt of such written request
for arbitration. If either party fails to select an arbitrator within such
period, the arbitrator that was timely selected by the other party shall serve
as the sole arbitrator. All arbitrators shall have had experience serving as an
arbitrator for claims administrative disputes or shall have served as an officer
of a life, accident or health insurance company. No arbitrators shall be or have
been affiliated with or employed by any party hereto or their respective
affiliates. The arbitration shall occur in a mutually acceptable location and be
governed pursuant to the rules of commercial arbitration of the American
Arbitration Association and the laws of the state of Oklahoma. The arbitrators
shall make their determination within thirty (30) days after the appointment of
the last arbitrator. Judgement may be entered upon the final decision of the
arbitrators in any court having jurisdiction, and notwithstanding any provision
in this Agreement to the contrary, such arbitration determination shall be final
and conclusive for all legal purposes and may not be appealed to any court or
other forum. Each party shall pay the expenses incurred by it and by the one
arbitrator selected by it. Each party shall pay one half of the fees and out of
pocket expenses of the American Arbitration Association (if any) and the third
arbitrator.
18. SEVERABILITY
If any part, term or provision shall be held void, illegal or
unenforceable, the validity of the remaining portions or provisions shall not be
effected thereby.
19. ENTIRE AGREEMENT
This Agreement contains the entire Agreement and understanding between
the parties with respect to the transactions contemplated thereby, and
supersedes all prior Agreements and understandings, written or oral, with
respect thereto.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized officers as of the date first set forth above.
UNIVERSAL FIDELITY LIFE INSURANCE COMPANY
BY: /s/ RANDY HARP
---------------------------------------
NAME: Randy Harp
TITLE: CFO & COO
PIONEER FINANCIAL SERVICES, INC.
BY: /s/ THOMAS J. KILIAN
---------------------------------------
NAME: Thomas J. Kilian
TITLE: President
Exhibit A
to Administrative Services Agreement
Pre-standardized and standardized Medicare Supplement policies issued by
Health and Life Insurance Company of America, National Group Life Insurance
Company and Pioneer Life Insurance Company
AMENDMENT NO. 1 TO
ADMINISTRATIVE SERVICES AGREEMENT
This Amendment No. 1 to Administrative Services Agreement ("Amendment")
is made and entered into this 30th day of December, 1998 by and between
UNIVERSAL FIDELITY LIFE INSURANCE COMPANY, an Oklahoma insurer ("UFL"), and
PIONEER FINANCIAL SERVICES, INC., a Delaware corporation ("PFS").
WHEREAS, UFL and PFS are parties to that certain Administrative
Services Agreement dated December 30, 1998 (the "Agreement"); and
WHEREAS, UFL and PFS desire to amend the Agreement to reflect certain
changes to the Agreement and to provide for data processing services for certain
life insurance business issued by UFL and business reinsured under the
Coinsurance Agreement between UFL and Pioneer Life Insurance Company dated
December 30, 1998 ("UFL Policies").
NOW, THEREFORE, in consideration of the premises and of the mutual
promises set forth herein, and for other good and valuable consideration, and
intending to be legally bound hereby, the parties agree as follows:
1. DATA PROCESSING SERVICES.
1.1. Services. PFS or its affiliates shall perform the following
services ("Services") in connection with the administration of claims under the
Agreement:
1.1.1. PFS or its affiliates shall provide all telecommunications
services and electronic data processing services, including software programming
and documentation, hardware utilization and software licensing that are
necessary for UFL to perform the Services described in the Agreement.
1.1.2. PFS or its affiliates shall provide all telecommunications
services and electronic data processing services, including software programming
and documentation, hardware utilization and software licensing that are
necessary for UFL to administer the UFL Policies and life business comparable to
those currently provided to UFL.
1.1.3. PFS shall cause its affiliates to bill UFL by the 20th day of
each month for the Services listed in this Amendment.
1.1.4 The parties recognize that some software conversions or
modifications are necessary for the Services to be provided in a manner that is
year 2000 compliant. It shall be the responsibility of PFS or its affiliates to
make such conversions and modifications, so that the Services may be provided by
PFS or its affiliates in a year 2000 compliant fashion.
2. COMPENSATION
PFS shall be entitled to the reasonable expenses of its affiliates
attributable to or incurred for the benefit of UFL. This expense shall be for
all direct and directly allocable expenses, including overhead, exclusive of any
costs associated with the executive management of PFS and its affiliates,
reasonably and equitably determined by PFS or its affiliates to be attributable
to or incurred for the benefit of providing the Services rendered under this
Amendment.
PFS shall be entitled to offset the amount that its affiliates are due
for Services rendered under this Amendment against the compensation payable for
Services rendered by UFL under the Agreement. If compensation due PFS under this
Amendment exceeds that due UFL under the Agreement, UFL shall pay the excess to
PFS or its affiliates within twenty (20) days of the receipt of the PFS bill.
3. NO MODIFICATION
Except as set for herein, no other provision of the Agreement is
amended hereby.
4. CONTROLLING LAW
This Amendment shall be subject to and construed under the laws of the
State of Oklahoma.
IN WITNESS WHEREOF, this Amendment has been duly executed and delivered
as of the date first above written.
UNIVERSAL FIDELITY LIFE INSURANCE COMPANY
BY: /s/ RANDY HARP
---------------------------------------
NAME: Randy Harp
TITLE: CFO & COO
PIONEER FINANCIAL SERVICES, INC.
BY: /s/ THOMAS J. KILIAN
---------------------------------------
NAME: Thomas J. Kilian
TITLE: President
For Immediate Release
Tuesday, October 6, 1998
Company Melanie Lawson
Contact: (580) 436-7462
CONSECO TO OFFER LEGAL PLANS THROUGH
PRE-PAID LEGAL SERVICES, INC.
ADA, OK, October 6, 1998 - Pre-Paid Legal Services, Inc. (ASE:PPD)
("Pre-Paid"), and Conseco announced a marketing alliance designed to allow the
160,000 agents who represent Conseco's insurance companies to offer Pre-Paid's
legal plans to their customers. It is expected that Conseco will focus primarily
on their existing group accounts.
Separately, Pre-Paid Legal Services agreed to acquire Universal
Fidelity Life Insurance Company from Conseco. This transaction is subject to
certain conditions, including insurance department approval.
Harland C. Stonecipher, Pre-Paid Chairman and Chief Executive Officer,
commented: "We believe that the marketing alliance with Conseco will create an
even greater awareness of the need for legal service memberships and will
further enhance our opportunities for growth. The acquisition of Universal
Fidelity will give us the opportunity to manufacture specialty insurance
products for the benefit of our marketing associates which number in the tens of
thousands and is growing daily. This will also assure that Universal Fidelity
remains a strong and vibrant Oklahoma company."
Thomas J. Kilian, executive vice president and chief operations officer
of Conseco and president of Conseco Marketing, LLC, said, "Our partnership with
Pre-Paid Legal Services, Inc. will allow our agents to expand the products and
services they offer to the 9 million middle-American customers served by the
Conseco insurance companies."
Universal Fidelity, based in Duncan, Oklahoma, was a subsidiary of
Pioneer Financial Services, Inc., when Pioneer was acquired by Conseco in 1997.
The terms of the acquisition transaction contemplate that Universal Fidelity's
health insurance policies will be reinsured by a subsidiary of Conseco.
Universal will retain the existing life business with 1997 annual premium of
approximately $1 million. Pre-Paid's purchase price is expected to be
approximately $7 million in cash, which is approximately 1.2 times the estimated
capital and surplus of Universal after a planned extraordinary dividend. The
transaction is not expected to have a material effect on Pre-Paid's operating
results in the near term.
Pre-Paid Legal Services develops, underwrites and markets legal service
plans nationally. The plans provide for or reimburse legal service benefits,
including unlimited attorney consultation, will preparation, traffic violation
defense, automobile-related criminal charges, letter writing, document
preparation and review and a general trial defense benefit.
Headquartered in Carmel, Indiana, Conseco is a financial services
organization dedicated to providing its customers with solutions for both wealth
protection and wealth creation. Through its subsidiaries, Conseco is one of the
nation's leading providers of supplemental health insurance, retirement
annuities, universal life insurance and consumer and commercial finance products
and services.
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