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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 (Date of earliest event reported) January 31, 1995
PIONEER FINANCIAL SERVICES, INC
(Exact name of registrant as specified in charter)
Delaware 1-10522 36-2479273
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1750 East Golf Road, Schaumburg, Illinois 60173
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 995-0400
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
On January 31, 1995, Manhattan National Life Insurance
Company ("Manhattan"), a wholly-owned subsidiary of the
Registrant, acquired all of the outstanding shares of the capital
stock of Connecticut National Life Insurance Company
("Connecticut") from GRENEL Financial Corporation ("GFC"). The
acquisition was made pursuant to a Stock Purchase Agreement,
dated November 21, 1994, among the Registrant, United Life
Holdings, Inc. ("United") and GFC (the "Stock Purchase
Agreement"). On December 1, 1994, United, a wholly owned
subsidiary of the Registrant, assigned all of its rights and
obligations under the Stock Purchase Agreement to Manhattan. The
aggregate purchase price (the "Purchase Price") for the
Connecticut stock, which was determined on the basis of arm's-
length negotiations, consisted of (i) cash in the amount of
$21,971,010, and (ii) a Promissory Note in the amount of
$1,660,436.
The Purchase Price shall be increased (or decreased) by the
amount, if any, by which Connecticut's statutory surplus (after
certain adjustments) as of December 31, 1994, exceeds (or is less
than) Connecticut's statutory surplus as of December 31, 1993.
The source of the cash paid at closing was (i) $15,000,000
obtained by the Registrant by borrowing pursuant to a Credit
Agreement (the "Credit Agreement") among the Registrant, American
National Bank and Trust Company of Chicago ("American National"),
as Agent, and American National, Firstar Bank Milwaukee, N.A. and
Bank One, Rockford, NA, as the Banks, and (ii) $6,971,010 from
the Registrant's and Manhattan's working capital.
Connecticut is in the business of marketing and selling life
insurance, annuities and other related products. The Registrant
intends to continue the business activities of Connecticut but
anticipates moving many of its administrative functions to the
Registrant's offices in Cincinnati, Ohio.
Prior to the acquisition there were no material
relationships between Connecticut and the Registrant or its
affiliates, directors or officers or any associate of any
director or officer of the Registrant.
The foregoing description of the Registrant's acquisition of
Connecticut is qualified in its entirety by reference to the
Stock Purchase Agreement which is filed as an Exhibit to this
Report.
Item 5. Other Events.
On February 1, 1995, the Registrant issued the following
press release:
"Pioneer Financial Services, Inc. (NYSE:PFS), a national
health and life insurer and marketer, announced it has finalized
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the purchase of Connecticut National Life Insurance Company from
GRENEL Financial Corporation, at a price of approximately $23.6
million. Connecticut National Life is licensed to sell life
insurance and annuities in 49 states, has assets of approximately
$307 million and 1994 annual premium revenue and investment
income of $50 million.
"`Part of our strategic plan for the next few years is to
significantly increase our life insurance operations,' said Peter
W. Nauert, chairman and chief executive officer of PFS. `With
this acquisition, the PFS life insurance group is in the top 25%
of life company operations in the U.S., based on assets. Our
life insurance group now has combined assets of over $700
million, annual collected premium revenue of approximately $100
million and life insurance in force of $15 billion. The
acquisition also increases the total assets of PFS to
approximately $1.4 billion.'
"PFS will consolidate life insurance operations between its
Cincinnati facility and the Connecticut facility.
"`Some underwriting and marketing functions are continuing
in Connecticut, while most administrative functions will be
combined with PFS' Manhattan National Life Insurance Company
operations in Cincinnati,' said Charles R. Scheper, senior
executive vice president of PFS and president of Manhattan
National Life. `When the consolidation is completed, we expect
to achieve a combined savings in administrative expenses of
approximately $5 million per year.'
"The product lines and distribution systems of Connecticut
National Life and Manhattan National are very similar.
"`The Connecticut National Life acquisition adds
approximately 10,000 brokers to the national distribution system
of our Life Insurance Division,' Nauert said. `We will be
blending the companies and distribution systems to emphasize the
strength of each company to make PFS' Life Division larger and
stronger.'
"PFS, through the operation of its subsidiaries, provides
marketing and insurance underwriting services throughout the
United States."
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
At the time of filing this Report, it is impracticable
to provide the required financial statements of the acquired
business described in Item 2, of this Report. The required
financial statements will be filed by the Registrant, under cover
of Form 8-K/A, as soon as practicable, but not later than
April 17, 1995.
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(b) Pro forma financial information.
At the time of filing this Report, it is impracticable
to provide the required pro forma financial statements. The
required pro forma financial statements will be filed by the
Registrant, under cover of Form 8-K/A, as soon as practicable,
but not later than April 17, 1995.
(c) Exhibits.
Exhibit No. Description of Document
(2)(a) Stock Purchase Agreement dated November
21, 1994 among the Registrant, United
Life Holdings, Inc. and GRENEL Financial
Corporation (together with a list
briefly identifying the contents of all
omitted exhibits, schedules and
appendices thereto). The Registrant
agrees to provide copies of such
exhibits, schedules and appendices to
the Commission upon request.
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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.
PIONEER FINANCIAL SERVICES, INC.
/s/Peter W. Nauert
Date: February 8, 1995 By:______________________________
Peter W. Nauert,
Chief Executive Officer and
Chairman of the Board
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INDEX TO EXHIBITS
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession
(a) Stock Purchase Agreement dated November 21, 1994 among
the Registrant, United Life Holdings, Inc. and GRENEL
Financial Corporation (together with a list briefly
identifying the contents of all omitted exhibits,
schedules and appendices thereto). The Registrant
agrees to provide copies of such exhibits, schedules
and appendices to the Commission upon request.
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Exhibit 2.(A)
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of the 21st day of
November, 1994 (the "Agreement"), is made between GRENEL
Financial Corporation ("GFC"), an Illinois corporation, and
United Life Holdings, Inc., a Nevada corporation and a wholly-
owned subsidiary of Pioneer Financial Services, Inc.
("Purchaser"), and for purposes of Section 3 only, Pioneer
Financial Services, Inc., a Delaware corporation ("Pioneer").
WHEREAS, the authorized capital stock of Connecticut
National Life Insurance Company, a Connecticut domestic insurance
company (the "Life Company"), consists solely of 67,500 shares of
preferred stock, $5.00 par value, and 300,000 shares of $8.40 par
value common stock (collectively, the "Capital Stock"), of which
only 300,000 shares of common stock are issued and outstanding
(the "Shares"); and
WHEREAS, all of the Shares are owned both of record and
beneficially solely by GFC; and
WHEREAS, Purchaser desires to acquire the Shares from GFC
and GFC desires to sell the Shares to the Purchaser; and
WHEREAS, all dollar amounts referred to herein or
contemplated hereby shall be deemed to refer to United States
Dollars; and
WHEREAS, each of GFC and Purchaser desires to make certain
representations, warranties, covenants and agreements in
connection with this Agreement and also to prescribe various
conditions to this Agreement.
NOW, THEREFORE, in consideration of the premises, the
representations, warranties, covenants and agreements herein
contained, and for other good and valuable consideration the
receipt of which is hereby acknowledged, GFC and Purchaser agree
as follows:
SECTION 1. SALE AND PURCHASE OF SHARES
1.1 PURCHASE PRICE. Subject to the terms and conditions
set forth in this Agreement, at the Closing (as hereinafter
defined) on the Closing Date (as hereinafter defined) GFC agrees
to sell, transfer and convey to Purchaser, and Purchaser agrees
to purchase from GFC, all of the Shares for a purchase price (the
"Purchase Price") of Twenty-five Million Dollars ($25,000,000),
which Purchase Price shall be subject to adjustment as set forth
in this Section 1.1 and in Section 5.15.
The parties agree that the Purchase Price shall be increased
(or reduced if a negative amount) by that amount (the
"Adjustment"), if any, by which the Life Company's statutory
surplus (including the "Asset Valuation Reserve"), as adjusted
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pursuant to the proviso of this sentence, as at the close of
business on December 31, 1994, exceeds the Life Company's
statutory surplus reflected in the Annual Convention Statement
(as hereinafter defined) as of December 31, 1993 (the "Subject
Statutory Surplus Amount"); provided, however, that the impact,
if any, on such statutory surplus of adjustments, if any,
resulting from transactions which are both (a) entered into by
the Life Company between January 1, 1994 and December 31, 1994,
and (b) described in Schedule 1.1(a) to the Disclosure Schedule
or entered into after the date of this Agreement and previously
approved (including the projected effect on surplus) by Purchaser
and GFC in writing, shall be excluded in computing the Subject
Statutory Surplus Amount, and, thus, in determining the amount of
the Adjustment.
1.2 CLOSING. Subject to the other provisions of this
Agreement, the sale and purchase of the Shares (the "Closing")
will take place at 10:00 a.m., Chicago time, on the later to
occur of (a) January 1, 1995 and (b) the fifth business day after
the date of satisfaction or waiver of the conditions set forth in
Section 6 hereof (the "Closing Date"), at the offices of
Purchaser, 1750 E. Golf Road, Suite 1000, Schaumburg, Illinois
60173, unless another time, date or place is agreed to in writing
by the parties hereto.
Subject to the other provisions of this Agreement, at the
Closing, Purchaser shall deliver to GFC, (a) by wire transfer in
immediately available funds to GFC's bank (designated by GFC to
Purchaser together with all necessary instructions for such
transfer at least three (3) business days before the Closing
Date), of Twenty-Three Million Dollars ($23,000,000) less (i) the
amount of the Escrow (as hereinafter defined), if any, (b) a
promissory note of Purchaser in the original principal amount of
Two Million Dollars ($2,000,000), payable in accordance with
Section 5.15 of this Agreement (the "Note"), and (c) all other
previously undelivered items that Purchaser is required to
deliver or cause to be delivered to GFC at or before the Closing
pursuant to the provisions of this Agreement; and GFC shall
deliver or cause to be delivered to the Purchaser (a) the Shares
accompanied by duly executed appropriate instruments of transfer,
and (b) all books and records of the Life Company, and of GFC and
of ELIC and Guardian (as hereinafter defined) which primarily
pertain to the business of the Life Company, other than the
corporate, financial and other records of GFC, ELIC or Guardian
which are not necessary for the future operation of the Life
Company (the "Books and Records"); (c) the Letter of Credit (the
"Letter of Credit") in the amount of One Million Dollars
($1,000,000) heretofore delivered by Purchaser to GFC to secure
its obligations hereunder to the extent stated therein (a
complete and correct copy of which is referred to in Item 1 of
and attached as Appendix I to the Disclosure Schedule which was
prepared by GFC for the Purchaser in connection with this
Agreement and the transactions contemplated hereby, which
Disclosure Schedule is incorporated herein by this reference and
is hereinafter referred to as the "Disclosure Schedule"), and (d)
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all other items that GFC is required to deliver or cause to be
delivered to the Purchaser at or prior to the Closing pursuant to
the provisions of this Agreement, in each case accompanied by
appropriate instruments of transfer.
The parties acknowledge and agree that the existence or
amount of the Adjustment, if any, may not be determinable with
certainty before the time of Closing; and, accordingly, the
parties agree that Purchaser may, at the Closing, deliver to
Edwards & Angell, as escrow agent pursuant to an escrow agreement
to be entered into by GFC and the Purchaser (the "Escrow
Agreement"), a portion of the Purchase Price (the "Escrow") in
the amount equal to an estimate of the Adjustment, if any, based
on the most recently available statutory financial statements of
the Life Company and adjusted for known relevant transactions
subsequent to the date of such statutory financial statements.
GFC shall cause the Life Company to deliver a calculation of the
estimated Escrow amount to GFC and Purchaser not less than five
business days prior to the Closing Date. GFC and Purchaser will
discuss such estimate in good faith to determine the amount of
the Escrow; provided that if GFC and Purchaser cannot agree upon
the amount of the Escrow, the amount will be based on the most
recently available statutory financial statements of the Life
Company. Not later than 60 days after December 31, 1994,
Purchaser (or GFC if the Closing has not then occurred) will
cause to be delivered to Purchaser and GFC a balance sheet for
the Life Company as of December 31, 1994 (the "Closing Balance
Sheet"), audited and accompanied by the report of Deloitte &
Touche LLP. The Life Company shall bear the expense of such
audit. The Closing Balance Sheet shall be prepared in accordance
with the same statutory accounting principles used in the
preparation of the Annual Convention Statement. Each of GFC and
Purchaser and their auditors or advisors will be given full
access to the Life Company's books, records and Deloitte &
Touche's work papers relating to the Closing Balance Sheet. The
Closing Balance Sheet shall be final for purposes of determining
the Adjustment unless, within 30 days after delivery of the
Closing Balance Sheet (or after the Closing, if later), GFC or
Purchaser delivers a written notice (the "Dispute Notice") to the
other indicating disagreement with the Closing Balance Sheet and
describing in reasonable detail the items in dispute. After
delivery of a Dispute Notice, Purchaser and GFC shall promptly
negotiate in good faith with respect to the subject of the
Dispute Notice. If Purchaser and GFC are unable to resolve the
matters in dispute within 15 days of delivery of the Dispute
Notice, the items in dispute shall be submitted to Price
Waterhouse. In such event, GFC and Purchaser shall each be
responsible for one-half of the fees and expenses of Price
Waterhouse. Within five (5) business days following the final
determination of the amount of the Adjustment by the parties or
Price Waterhouse, as the case may be, the party determined to owe
such amount shall deliver such amount, together with interest
thereon from the Closing Date to the date of payment at the rate
of eight percent (8%) per annum, by electronic wire transfer in
immediately payable funds to the bank designated by the payee
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party (such amount will be delivered pursuant to the terms of the
Escrow Agreement and, to the extent the Escrow is insufficient,
the payor party shall deliver to the payee party the balance of
the amount payable). After such payment, the balance of the
Escrow, if any, shall be delivered to Purchaser.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF GFC
GFC represents and warrants to Purchaser as follows:
2.1 ORGANIZATION, STANDING AND POWER OF GFC AND THE LIFE
COMPANY. Each of GFC and the Life Company is a corporation duly
organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, has all
requisite corporate power and authority to own and operate its
business and to carry on its business as now being conducted.
The Life Company is duly licensed to conduct business as a life
and accident and health insurance company and is also authorized
to market annuities in the jurisdictions and to the extent set
forth in Item 2 of the Disclosure Schedule, and complete and
correct copies of the Life Company's certificates of authority
for each such jurisdiction have been provided to Purchaser. All
such licenses (including certificates of authority) are in full
force and effect and neither GFC nor any of its affiliates
(including without limitation the Life Company) has received any
notice of any event, inquiry, investigation or proceeding that
might materially adversely affect any of such licenses (including
certificates of authority).
Complete and correct copies of the Articles of Incorporation
and/or other charter documents and By-laws of the Life Company as
presently in effect, are attached as Appendix II to the
Disclosure Schedule and complete and correct copies of the
minutes (arranged in chronological order) reflecting all material
actions taken by the directors (or committees thereof) and
stockholders of the Life Company and any predecessor(s) to the
Life Company (from the dates of their original organization to
the date hereof), provided that with respect to actions of the
directors and stockholders of the Life Company prior to 1986, the
representation in this sentence is made solely to the knowledge
of GFC.
2.2 AUTHORITY. GFC has all requisite corporate power and
authority to enter into this Agreement and, subject to the
conditions contemplated by the third paragraph of this Section
2.2 and Section 4 of this Agreement, to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement by GFC and the consummation by GFC of the
transactions contemplated hereby have been duly authorized by all
necessary corporate and stockholder action on the part of GFC.
This Agreement has been duly executed and delivered by GFC
and constitutes a valid and binding obligation of GFC enforceable
against GFC in accordance with its terms except as enforcement
may be limited by bankruptcy, insolvency, or other similar laws
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affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court
before which any proceeding therefor may be brought. The
execution, delivery and performance of this Agreement by GFC do
not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not conflict with
or result in any violation of, or default (with or without notice
or lapse of time or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to
loss of a benefit under, any provision of the Articles of
Incorporation and/or other charter documents or By-laws of GFC or
the Articles of Incorporation and/or other charter documents or
By-laws of the Life Company or any contract, agreement, lien,
instrument, order, law, judgment, decree, ordinance, regulation,
or any other restriction of any kind to which the Life Company or
GFC or any of their property is subject or by which they are
bound except for such conflicts, violations and defaults as would
not have a material adverse effect upon the Life Company or the
ability of GFC to consummate the transactions contemplated by
this Agreement.
No consent, approval, order or authorization of, or
registration, declaration or filing with, any court,
administrative agency or commission, insurance regulatory
authority or other governmental authority or instrumentality,
domestic or foreign (a "Governmental Entity") is required by or
on behalf of GFC or the Life Company in connection with the
execution and delivery of this Agreement by GFC or the
consummation by GFC of the transactions contemplated hereby,
except (a) for insurance regulatory approvals required in
connection with the purchase of the Shares by Purchaser, (b) as
set forth in Item 4 of the Disclosure Schedule, and (c) if in the
opinion of counsel to GFC and the Life Company the same shall be
required, the timely filing of an acquisition notification report
by GFC and/or the Life Company under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR") and the expiration
or early termination of the waiting period prescribed under HSR.
2.3 CONVENTION STATEMENTS. The Annual Convention Statement
for the year ended December 31, 1993 (the "Annual Convention
Statement"), and the Convention Statements for the quarters ended
March 31, 1994, June 30, 1994, and September 30, 1994 (all such
statements being collectively referred to as the "Convention
Statements") as filed with the Connecticut insurance department
are attached as Appendix III to the Disclosure Schedule, and each
presents fairly the statutory financial condition of the Life
Company as at such date and the statutory results of operations
of the Life Company for the periods therein specified, and was
prepared in conformity with statutory accounting principles
prescribed or permitted by the applicable insurance regulatory
authority ("SAP"). The financial results as reflected in the
Annual Convention Statement have been audited by Deloitte &
Touche LLP as indicated by their report thereon which is also
attached as Appendix III to the Disclosure Schedule. The Life
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Company does not have any material liability not reflected in the
Convention Statements.
The Life Company provided to Tillinghast, Inc.
("Tillinghast") all information requested by Tillinghast for
purposes of preparing the Actuarial Appraisal of the Life Company
as of December 31, 1993 dated June 8, 1994 and such information
represented true and correct copies of or excerpts from the Life
Company's books and records. Except as set forth in Item 5 of
the Disclosure Schedule, since such dates, there has been no
material adverse change in the business, financial condition or
other circumstances of or involving the Life Company which would
make such provided information materially inaccurate. A copy of
such Actuarial Appraisal is referred to in Item 5 of the
Disclosure Schedule and a complete and correct copy of such
Actuarial Appraisal has been provided to Purchaser.
2.4 COMPLIANCE WITH APPLICABLE LAWS. Except to the extent
disclosed in Item 6 of the Disclosure Schedule, the business of
the Life Company is not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for
violations which would not have a material adverse effect on the
Life Company.
2.5 LITIGATION. Except to the extent disclosed in Item 7
of the Disclosure Schedule, there is no suit, action,
arbitration, mediation or proceeding of any nature, character or
description whatsoever (including without limitation any
investigation or market conduct or financial examination or
review) by any Governmental Entity or by any other person, firm
or entity pending, or to the knowledge of GFC or the Life
Company, threatened, against or affecting the Life Company,
except for insurance policy claims in the ordinary course of
business and except for any suit, action, arbitration, mediation
or proceeding which would not have a material adverse effect on
the Life Company, nor is there any judgment, decree, injunction,
rule or cease and desist or other order of any nature, character
or description whatsoever of any arbitrator, mediator or
Governmental Entity pending, threatened or outstanding against
the Life Company.
2.6 CAPITALIZATION. The authorized capital stock of the
Life Company consists solely of the Capital Stock of which only
the Shares are issued and outstanding. All of the Shares are
duly authorized, validly issued, fully paid and nonassessable and
were not issued in violation of any preemptive or other rights of
any person. The sole stockholders, both of record and
beneficially, of GFC are The Empire Life Insurance Company of
Kingston, Ontario a Canadian corporation ("ELIC") and Guardian
Assurance PLC, a company formed under the laws of the United
Kingdom and Wales ("Guardian"). The Life Company does not own,
and is not committed to acquire, any equity, debt or other
interest in any entity or joint venture, except for non-
controlling investments held in the Life Company's investment
portfolio.
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2.7 TITLE TO SHARES. GFC is the sole beneficial and record
owner of the Shares. None of the Shares is subject to any claim,
lien, pledge, charge, proxy, voting agreement, transfer
restriction, suit, judgment or any other encumbrance, pending
suit or, to the knowledge of GFC, threatened claim of any nature,
character or description whatsoever; and, upon the delivery of
the payment for the Shares at the Closing in the manner
contemplated by Section 1.2 of this Agreement, Purchaser will
acquire good and valid title thereto free and clear of any claim,
lien, pledge, charge, restriction, suit, judgement or any other
encumbrance, pending suit or, to the knowledge of GFC, threatened
claim of any nature, character or description whatsoever.
2.8 OPTIONS, WARRANTS AND OTHER RIGHTS. There are no
outstanding options, warrants, calls, rights, commitments or
agreements of any nature, character or description whatsoever to
which GFC or any of its affiliates (including without limitation
the Life Company) is a party or by which any of them are bound
obligating or permitting any of them to issue, deliver or sell,
or cause to be issued, delivered or sold any shares of Capital
Stock (including without limitation the Shares) or any other
securities of any nature, character or description whatsoever
(including without limitation debt securities and securities
convertible into or exchangeable for any of the foregoing) of the
Life Company, or any obligation of GFC or any of such affiliates
(including without limitation the Life Company) to grant, extend
or enter into any such option, warrant, call, right, commitment
or other agreement.
2.9 EMPLOYEES AND EMPLOYMENT CONTRACTS. The Life Company
has no employees; and all services for the Life Company are
performed and all obligations of the Life Company for employment
compensation and benefits arise under written contracts with GFC,
complete and correct copies of which contracts (and any related
pension or other benefit plans) have been provided to Purchaser
and are referred to in Item 8 of the Disclosure Schedule. A
complete and correct list of the employees performing work for
the Life Company (all of which are employees of GFC) is referred
to in Item 8 of the Disclosure Schedule; and such list sets forth
in summary form information about each such employee, including
his/her name, titles, and approximate proportion of work time
expended in performing work for the Life Company. A correct and
complete description of compensation arrangements for such
employees has been heretofore provided to Purchaser by GFC. None
of the employees of GFC or the Life Company belongs to any labor
union or group and, to the knowledge of GFC and the Life Company,
there has never been any strike, work stoppage or labor
organizing effort involving GFC or the Life Company.
2.10 ERISA. Except to the extent disclosed, and described
in reasonable detail, in Item 9 of the Disclosure Schedule,
complete and correct copies of which have been provided to
Purchaser, the Life Company and GFC have no "employee benefit
plans" (as such term is defined in Section 3(3) of ERISA),
"welfare benefit funds" (as such term is defined in Section 419
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of the Internal Revenue Code of 1986, as amended (the "Code")),
deferred compensation, deferred benefit, incentive or bonus
plans, or trusts exempt from tax under Section 501(c)(9) or
Section 501 (c)(20) of the Code, or welfare benefit plans
maintained by the Life Company or GFC covering the employees,
directors, agents, brokers, representatives, or other personnel
of the Life Company or of GFC who provide services to the Life
Company (such plans, fund or trusts being referred to herein as
"Employee Benefit Plans"). Although certain Employee Benefit
Plans are maintained by GFC for the benefit of its employees who
perform services for the Life Company, the Life Company has not
adopted or maintained, nor is the Life Company a party to, such
Employee Benefit Plans. In addition, except as disclosed in Item
9 of the Disclosure Schedule, the Life Company is not the sponsor
of any Employee Benefit Plan and is not a party to any Employee
Benefit Plan or to a "multi-employer plan" as that term is
defined by Section 3(37) of ERISA. Except as disclosed in Item 9
of the Disclosure Schedule, and except to the extent otherwise
specifically contemplated by this Agreement, no contributions or
payments from the Life Company are or will be due any Employee
Benefit Plan or to GFC with respect to any Employee Benefit Plan
with respect to any period prior to the Closing.
No "reportable event", as such term is used in Section 4043
of ERISA, which may result in liability to the Life Company, has
occurred. No transaction with respect to an Employee Benefit
Plan which might subject the Life Company to the tax or penalty
on prohibited transactions imposed by Section 4975 of the Code or
to a civil penalty imposed by Section 502(i) of ERISA, or
liability under ERISA for breach of fiduciary duty, or give rise
to an obligation to indemnify any person for such tax or penalty
has occurred.
The Life Company has not engaged in any prohibited
transaction (as defined in Section 405 of ERISA or Section
4975(c) of the Code), self-dealing or similar activity with
respect to any Employee Benefit Plan, nor has it engaged in any
actions constituting a breach of fiduciary or any other duty
under ERISA that would result in liability to the Life Company.
2.11 NO MATERIAL ADVERSE CHANGE. Except as disclosed, and
described in reasonable detail, in Item 10 of the Disclosure
Schedule or in the Convention Statements, and except for changes
occurring in the ordinary course of business of the Life Company,
since December 31, 1993, there has been no material adverse
change (other than any changes that affect or may affect the life
insurance industry generally) in the business, financial
position, assets, liabilities, personnel or properties of the
Life Company; and, since that date, the Life Company has not,
other than in the ordinary course of business (and except such
thereof as have occurred after the date hereof with the written
consent of Purchaser or the Purchaser): (a) incurred any
material obligation or liability (fixed or contingent) or granted
any power of attorney; (b) discharged or satisfied any material
lien or encumbrance, or paid any material obligation or liability
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(fixed or contingent) other than current liabilities; (c)
mortgaged, pledged, subjected to lien or otherwise encumbered any
of its material assets, tangible or intangible; or (d) sold,
assigned, transferred or otherwise disposed of any of its
material tangible assets or cancelled any material debt or claim.
Except as disclosed, and described in reasonable detail, in
Item 10 of the Disclosure Schedule, since December 31, 1993, the
Life Company has not (except to the extent such have occurred
after the date hereof with the written consent of Purchaser):
(a) declared, made, paid, or set apart any sum for any dividend
or other distribution to its shareholders or purchased or
redeemed any shares of its capital stock or reclassified its
capital stock; (b) made any material change in the claims,
underwriting, actuarial, financial or accounting practices or
policies customarily followed by the Life Company or in any
assumption underlying any such practice or policy or in any
method of calculating any reserve; (c) suffered any material
damage, destruction or other casualty loss to its assets that is
not covered by casualty insurance sufficient to cover such
damage, destruction or loss; (d) extended any loan or advance
(other than to policyholders in the ordinary course of business)
or made any investment in any entity or person (other than in the
ordinary course of business); (e) made any write-offs or write-
downs of assets (other than in the ordinary course of business)
in an aggregate amount of more than $25,000; (f) made any
capital expenditures or commitments therefore in excess of
$25,000; (g) made or suffered any material decreases in the
amount of, or any material change in the nature of, the insurance
or annuities in force of the Life Company or any material change
in the amount or nature of the reserves or other similar amounts
of the Life Company with respect to insurance annuity contracts,
other than in the ordinary course of the Life Company's business;
(h) made or suffered any termination, amendment, or execution by
the Life Company of any reinsurance, coinsurance, or other
similar contract, as ceding or assuming insurer, other than in
the ordinary course of the Life Company's business or (i) any
increase in the aggregate compensation or benefits payable or to
become payable to employees of GFC which provide services to the
Life Company.
2.12 TAX RETURNS AND PAYMENTS. The Life Company has timely
filed all Tax Returns required to be filed prior to the Closing
Date and has timely filed all returns and reports with all
governmental units having jurisdiction with respect to Taxes
withheld by or imposed upon the Life Company, and all Taxes shown
on such returns or reports and all assessments received by Life
Company have been paid. The Life Company is not delinquent in
the payment of any assessed Taxes, nor has the Life Company
requested any extension of time within which to file any Tax
Return which return has not since been filed, nor has Life
Company waived any statute of limitations with respect to any
such Taxes, nor are there any tax liens upon any property or
assets of the Life Company. There are not outstanding
deficiencies for any Tax assessed against the Life Company and
<PAGE>
there are no proceedings or actions pending, concerning either
the tax liability of the Life Company or the collection or
assessment of Tax for any period for which Tax Returns have been
filed or were due and there is no pending audit of any of the Tax
Returns filed by the Life Company, and the Life Company has not
been notified in writing that any taxing authority proposes to
commence an audit.
For purposes of this Agreement,
"Taxes" means federal, state, county, local or foreign
income and other taxes or governmental charges,
including withholding taxes, transfer, recording and
other taxes or fees imposed with respect to the
transfer of the Shares, and those imposed with respect
to premiums, sales, services, payrolls, franchises and
real or personal property, additions to tax, penalties
or interest thereon, and information return or
reporting penalties, whether imposed on a separate or
consolidated basis; and
"Tax Returns" means all federal, state, county, local
and foreign tax returns, including those returns used
to report withholding, transfer, and recording taxes or
fees.
2.13 NO DEFAULTS. There is no in default under the terms
of any material contracts, agreements, or leases to which the
Life Company is a party or by which it is bound or by which it or
its properties, assets, or operations are bound or affected.
2.14 MATERIAL CONTRACTS. Except as disclosed, and
described in reasonable detail, in Item 11 of the Disclosure
Schedule, and complete and correct copies of which have been
provided to Purchaser, there are no contracts, agreements,
instruments, plans, leases or commitments (other than those
entered into after the date hereof with the written consent of
Purchaser) of the following nature to which (i) the Life Company
is a party or by which it is bound, or (ii) GFC or ELIC or
Guardian is a party or by which any of them is bound which is
primarily related to or used in or for the benefit of or in
connection with or otherwise affecting the Life Company or its
business, operations or the properties used therein other than
such as have not been material to the Life Company and are not
necessary for the future operation of the Life Company (the
"Material Contracts"): (a) any contract, agreement, instrument,
plan, lease or commitment of any character, nature or description
whatsoever which (i) was not entered into in the ordinary course
of the Life Company's business, or (ii) requires payment by the
Life Company in excess of $25,000 per year, or (iii) was
entered into with GFC or its affiliates (including without
limitation the Life Company), (b) any indebtedness, obligation
or liability for borrowed money, or liability for the deferred
purchase price of property in excess of $25,000, or any
instrument guaranteeing any indebtedness, obligation or
<PAGE>
liability, or any obligation to incur any indebtedness,
obligation or liability in excess of $25,000, (c) any contract or
agreement which provides for the lease of real property, or the
lease of personal property under which the remaining lease
payments exceed $25,000, (d) any employment, consulting or
similar contract or agreement, (e) any contract or agreement
providing for a joint venture, or (f) any contract or agreement
providing for reinsurance. All Material Contracts are in full
force and effect and are valid, binding and enforceable in
accordance with their terms in all material respects. There are
not material pending disputes under any Material Contract. To
the knowledge of GFC and the Life Company, no other party is in
breach of a Material Contract, except as described on Item 11 of
the Disclosure Schedule and the consummation of the transactions
contemplated by this Agreement will not result in a breach of any
Material Contract or give rise to any rights of termination or
penalty under any Material Contract.
2.15 TITLE TO ASSETS. The Life Company has good and
marketable title to all of the assets reflected on the Annual
Convention Statement or acquired after December 31, 1993 and
included in the calculation of the Adjustment, other than any
assets that have been disposed of in the ordinary course of
business, free and clear of all liens, claims and encumbrances of
any character, nature or description whatsoever, except as
indicated on the Annual Convention Statement or as described in
Item 12 of the Disclosure Schedule. Except as described in Item
12 of the Disclosure Schedule, the assets owned or leased by the
Life Company as of the Closing Date (i) will be substantially all
of the assets currently used in the operation of the Life
Company's business, and (ii) will be in good operating condition
and repair (normal wear and tear excepted).
2.16 ENVIRONMENTAL PROTECTION. The Life Company has
obtained all material permits, licenses and other authorizations
which are required under any law, ordinance, regulation or order
of any Governmental Entity relating to public health and safety,
worker health and safety and pollution or protection of the
environment except where the failure to have such permit, license
or authorization would not have a material adverse effect on the
Life Company or its business, is in compliance with all terms and
conditions of such required permits, licenses and authorizations,
and is also in compliance with all other requirements contained
in any law, ordinance, regulation, or order of any Governmental
Entity relating to public health and safety, worker health and
safety and pollution or protection of the environment, except for
violations and failures to comply which would not have a material
adverse effect on the Company.
2.17 INSURANCE BUSINESS. All policies of insurance
(including annuities) issued by the Life Company in force on the
date hereof are, to the extent required by applicable law, on
forms which have been either approved by applicable insurance
regulatory authorities or filed with and not objected to by such
authorities within the period provided for such objection. Any
<PAGE>
premium rates or policy, administrative or other fees required to
be filed or approved by insurance regulatory authorities have
been so filed or approved and the premiums and fees charged
conform thereto. Since 1986, none of the insurance products
(including annuities) which have been marketed by the Life
Company (and/or the offer or sale thereof) were or are required
to be registered or qualified under the Securities Act of 1933,
as amended (the "Securities Act"), or any state securities laws.
True and complete copies of all forms of insurance which have
been marketed or sold by the Life Company at any time since 1986
have been provided to Purchaser.
2.18 THREAT OF CANCELLATION. Since December 31, 1993, no
policyholder or person writing, selling or producing insurance
business that individually or in the aggregate accounted for 5%
or more of the premium or annuity income of the Life Company for
the year ended December 31, 1993, has terminated or threatened to
terminate its relationship with the Life Company.
2.19 UNDERWRITING MANAGEMENT AND CLAIMS MANAGEMENT. The
underwriting standards utilized and ratings applied by or for the
benefit of the Life Company conform, in all material respects,
with the applicable laws and regulations and any relevant
requirements in applicable reinsurance, coinsurance or other
similar contracts and, except for reasonable or immaterial
exceptions, are based upon the provisions of the underwriting
manuals employed in the Life Company's business. The claims
paying practices employed in the Life Company's business conform,
in all material respects, with applicable laws and regulations
and the terms of the respective insurance products of the Life
Company to which they are applied, and any relevant terms of
applicable reinsurance, coinsurance or other similar contracts.
Complete and correct copies of the underwriting manuals employed
in the Life Company's business are referred to in Item 13 of the
Disclosure Schedule and have been provided to Purchaser.
2.20 AGENTS. Item 13a of the Disclosure Schedule sets
forth a complete list of contracts between the Life Company and
its agents or brokers authorizing such agents or brokers to
solicit insurance products on behalf of the Life Company.
Complete and correct copies of the forms of Life Company's agent
and brokers contracts currently in force have been made available
to Purchaser and except as set forth in Item 13a of the
Disclosure Schedule, none of Life Company's agent and brokers
contracts vary from such forms in any material respect.
2.21 INTANGIBLE PROPERTY AND COMPUTER SOFTWARE. Except to
the extent disclosed, and described in reasonable detail, in Item
14 of the Disclosure Schedule, the Life Company owns or has the
right to use under valid licenses which are described in Item 14
of the Disclosure Schedule (complete and correct copies of which
licenses have been provided to Purchaser), all trademarks,
service marks, trade names, business names, copyrights, formulas,
inventions, trade secrets, know-how and computer software,
including without limitation the software necessary to operate
<PAGE>
personal computer network systems, used in and material to the
conduct of its business (collectively, the "Intellectual
Property"). Except as described in Item 14 to the Disclosure
Schedule, (a) the Life Company is the owner or has the rights to
use the Intellectual Property in the conduct of its business, and
(b) to the knowledge of GFC, none of the Intellectual Property
infringes upon or otherwise violates the rights of others or is
being infringed upon by others, and none is subject to any order,
decree, judgment, license or other agreement, except for such
infringement which would not reasonably be expected to have a
materially adverse effect on the Life Company.
2.22 ACTUARIAL. The amounts carried in the Convention
Statements on account of the reserves identified in the
Convention Statement: (a) are based on actuarial assumptions
which are in accordance with those called for in policy
provisions; (b) conform with the requirements of the insurance
laws of Connecticut; and (c) except as set forth in Item 15 of
the Disclosure Schedule, are computed on the basis of assumptions
consistent with those used in computing the corresponding items
in the Convention Statement of the preceding year-end.
2.23 BROKERS/FINDERS. Neither GFC nor any of its
affiliates (including without limitation the Life Company) has
retained or will retain any broker or finder in connection with
this Agreement or the transactions contemplated hereby except
Northington Partners, Inc.; and GFC shall be solely responsible
for the payment of compensation to Northington Partners, Inc., or
to any other broker or finder claiming compensation through GFC
or its affiliates (including without limitation the Life Company)
on account of this Agreement and the transactions contemplated
hereby, whether such claim is asserted prior to or after the
Closing.
2.24 TRANSACTIONS WITH AFFILIATES. Except to the extent
disclosed in Item 16 of the Disclosure Schedule or in the
Convention Statements neither GFC nor any affiliate of GFC:
(a) owns, directly or indirectly, any interest or
investment in any entity which is a lessor, lessee,
customer or supplier of the Life Company, other than
under a lease, or customer or supplier arrangement
which is on an arm's-length, commercially reasonable
basis;
(b) has any cause of action or other claim
against or owes any amount to, or is owed any amount
by, the Life Company;
(c) has any interest in or owns any assets,
properties or rights used in the conduct of the Life
Company's business;
(d) is a party to any contract, lease, agreement,
or arrangement or other commitment to which Life
<PAGE>
Company is a party or which otherwise benefits the Life
Company's business, other than such arrangements which
are on an arm's-length, commercially reasonable basis; or
(e) received from or furnished to the Life
Company's business any goods or services since
December 31, 1993.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND
PIONEER.
Purchaser and Pioneer represent and warrant to GFC as
follows:
3.1 ORGANIZATION AND STANDING. Each of Purchaser and
Pioneer is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation. Purchaser has all requisite corporate power and
authority to own or lease its property and to carry on its
business as presently conducted.
3.2 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. The
execution, delivery and performance of, and compliance with this
Agreement by Purchaser and Pioneer and the consummation of the
transactions contemplated hereby by Purchaser will neither
violate, result in a breach of, nor constitute a default under
any material provision of any material charter, bylaw, statute,
contract, lien, instrument, order, judgment, decree, ordinance,
regulation, or any other material restriction of any kind to
which Purchaser, Pioneer or any of their property is subject or
bound, subject to the conditions contemplated by Sections 4 and
6.2(d) of this Agreement.
3.3 AUTHORITY. Each of Purchaser and Pioneer has all
requisite corporate power and authority to enter into this
Agreement and, subject to the conditions contemplated by the
third paragraph of this Section 3.3 and by Section 4 of this
Agreement, Purchaser has all requisite corporate power and
authority to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Purchaser and the
consummation by Purchaser of the transactions contemplated hereby
have been duly authorized by all necessary corporate and
stockholder action on the part of Purchaser.
This Agreement has been duly executed and delivered by
Purchaser and constitutes a valid and binding obligation of
Purchaser enforceable against Purchaser pursuant to its terms
except as enforcement may be limited by bankruptcy, insolvency,
or other similar laws affecting the enforcement of creditors'
rights generally and except that the availability of equitable
remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may
be brought. The execution, delivery and performance of this
Agreement by Purchaser and Pioneer do not, and the consummation
of the transactions contemplated hereby and compliance with the
<PAGE>
provisions hereof will not conflict with or result in any
violation of any provision of the Certificate of Incorporation or
By-laws of Purchaser or Pioneer.
No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity
is required by or on behalf of Purchaser in connection with the
execution and delivery of this Agreement by Purchaser or the
consummation by Purchaser of the transactions contemplated
hereby, except (a) as contemplated by Sections 4 and 6.2(d) of
this Agreement, and (b) for any required filing of an acquisition
notification report by Purchaser under the HSR and the expiration
or early termination of the waiting period prescribed in HSR.
3.4 ACQUISITION OF LIFE COMPANY SHARES FOR OWN ACCOUNT AND
NO DISPOSITION IN VIOLATION OF SECURITIES LAW. Purchaser
acknowledges that the Life Company Shares are not registered
under the Securities Act. Purchaser will be acquiring the Life
Company Shares for its own account, for investment and with no
present intention of making a distribution thereof in violation
of the Securities Act, and will not dispose of all or any part of
the Life Company Shares except in compliance with the
registration requirements of the Securities Act or an applicable
exemption from such registration provisions.
3.5 BROKERS/FINDERS. Neither Purchaser nor Pioneer has
retained nor will they retain any broker or finder in connection
with this Agreement or the transactions contemplated hereby
except DeHayes Consulting; and Purchaser shall be solely
responsible for the payment of compensation to DeHayes
Consulting, or to any other broker or finder claiming
compensation through Purchaser or its respective affiliates
(excluding the Life Company after the Closing, for which GFC
shall have sole responsibility) on account of this Agreement and
the transactions contemplated hereby, whether such claim is
asserted prior to or after the Closing.
3.6 FINANCING. Pioneer has available to it and is willing
to make available to Purchaser, sufficient financing to
consummate the transactions contemplated by this Agreement.
SECTION 4. THE PARTIES' AGREEMENT TO OBTAIN REQUIRED
GOVERNMENTAL AUTHORIZATIONS. Each of the parties agrees that it
shall use reasonable efforts promptly to obtain all
authorizations, approvals, consents or licenses of insurance
departments and of any other Governmental Entity and to make all
filings (including with limitation HSR filings) required of it
(and, in the cases of GFC, required of the Life Company) in
connection with the transactions contemplated by this Agreement
(it being the understanding of the parties that they will
cooperate fully with one another in connection therewith). Each
of the parties shall permit the other to review, prior to filing,
all forms and documents to be filed with any Government Entity
and shall use reasonable efforts to afford the other party with
<PAGE>
the opportunity to participate to any appropriate extent in
discussions with such Governmental Entities.
SECTION 5. CERTAIN COVENANTS. During the period from the
date of this Agreement and continuing until the Closing (or for
such other period as is provided for herein, including without
limitation periods after the Closing to the extent specified),
GFC agrees (except as otherwise specifically provided in or
contemplated by this Agreement or to the extent that Purchaser
shall otherwise consent in writing) and Purchaser agrees (to the
extent specifically provided below) that:
5.1 ORDINARY COURSE. The Life Company will be operated
prudently and in the ordinary course of business and shall not
enter into any material transactions or activities, without the
consent of Purchaser, which consent will not be unreasonably
withheld. For purposes of this Section 5.1, "material
transaction or activities" shall include without limitation (a)
capital expenditures in excess of Twenty-Five Thousand Dollars
($25,000); (b) agreements, commitments or arrangements requiring
annual payments in excess of Twenty-Five Thousand Dollars
($25,000) or which extend for a term of one or more years (in
each case excluding insurance products sold in the ordinary
course of business); (c) issuance of or incurring debt for
borrowed money; (d) material changes in agents or brokers
agreements, commitments or arrangements; (e) terminating,
entering into or modifying reinsurance agreements, commitments or
arrangements; (f) investment transactions involving in excess of
Five Hundred Thousand Dollars ($500,000) (in each case excluding
investments in commercial paper or investments with a maturity of
less than one year); (g) amendment of existing or introduction of
new insurance products; (h) making dividends, distributions or
other payments of any nature, character or description whatsoever
with respect to securities of any nature, character or
description whatsoever of the Life Company; (i) issuance of any
security of any type, nature or description whatsoever of the
Life Company or any right of any nature, character or description
whatsoever to acquire such a security; (j) amending or restating
its Articles of Incorporation or other charter documents or By-
laws; (k) disposing of or acquiring any assets other than in the
ordinary course of business; (l) entering into or amending or
modifying any employment agreements, commitments or arrangements
of any nature, character or description whatsoever except for
increases in compensation for the services of non-executive
employees in the ordinary course of business in accordance with
the past customary practices; (m) making any loan or advance to
or investment in, any entity or person, except in the ordinary
course of business consistent with past practices; (n)
mortgaging, pledging or encumbering any assets; (0) maintaining
all insurance covering the Life Company or any of its assets,
operations or employees; (p) purchasing or entering into or
amending leases for real estate; and (q) agreeing to do any
action described in (a) through (p) above.
<PAGE>
5.2 ACCESS TO INFORMATION. From and after the execution of
this Agreement, GFC will, and will cause the Life Company to give
to Purchaser and its business, legal, actuarial, accounting and
other representatives, upon reasonable advance notice, full and
complete access to the corporate, business, financial, and other
records relating to the Life Company, including the assets,
liabilities, officers and employees of, or used in the business
of the Life Company, and will, upon Purchaser's request, request
similar access from the Life Company's brokers, agents and legal,
accounting, actuarial and other representatives and will make
available all such information and personnel as may reasonably be
requested in connection therewith. If the transactions
contemplated herein are not consummated, it is understood and
agreed that none of the parties hereto will disclose, nor will
they permit any of their affiliates or their respective
employees, agents or representatives to disclose to any third
party (except to the extent publicly available or obtainable from
independent sources or required by law) any confidential
information obtained from any other party.
5.3 REINSURANCE.
(A) EMPIRE REINSURANCE AGREEMENT. GFC hereby represents to
Purchaser that the Life Company and ELIC have heretofore entered
into that certain Automatic Reinsurance Agreement, the current
version of which is dated June 16, 1993 (the "Empire Reinsurance
Agreement"). A complete and correct copy of the Empire
Reinsurance Agreement is attached as Appendix IV to the
Disclosure Schedule. GFC shall cause the Life Company and ELIC
to continue the Empire Reinsurance Agreement as it is presently
constituted in full force until Closing. However, prior to the
Closing, GFC shall also cause the Life Company and ELIC to enter
into a "Modification of Agreement" in the form attached as
Appendix V to the Disclosure Schedule.
5.4 GUARANTEES. GFC shall cause each of ELIC and Guardian
to execute and deliver to Purchaser at the Closing, a Guarantee
(collectively the "Guarantees") of the obligations of GFC under
this Agreement, which Guarantee shall be in the form of Exhibit A
hereto.
5.5 MERGER ELECTIONS. If requested of GFC by Purchaser
prior to the Closing, the purchase of the Shares by the Purchaser
may be effected via a "reverse triangular merger" (in which the
Life Company is the surviving entity) in lieu of through a
purchase of the Shares as presently contemplated by this
Agreement; provided that, for federal income tax purposes, such
merger will be treated as a purchase of the Shares. In such
event, this Agreement shall automatically be deemed to be
reformed and restated to the full extent necessary to reflect the
new form of such transaction; and GFC shall and shall cause ELIC,
Guardian and the Life Company to take all such corporate and
stockholder actions and execute all such further documentation as
may be reasonably requested by Purchaser as necessary or
desirable to more fully effectuate the purposes of the foregoing.
<PAGE>
Purchaser also agrees that, in such event, it will take all such
corporate actions and execute all such further documentation as
may be reasonably requested by GFC as necessary or desirable to
more fully effectuate the purposes of the foregoing.
5.6 OTHER ACTIONS.
(a) GFC hereby represents to Purchaser that, except as
disclosed in Item 17 of the Disclosure Schedule, the Life Company
owns no real property; the office space allocated to the Life
Company to conduct its business at 86 Hopmeadow Street, Simsbury,
Connecticut 06089 (the "Business Location") is under written
lease to GFC, a copy of which lease is referred to in Item 18 of
the Disclosure Schedule and a complete and correct copy of which
has been provided to Purchaser (the "Business Location Lease").
GFC will allow the Life Company to continue to occupy the
Business Location on a cost pass through basis to the Life
Company, with no profit to GFC or its affiliates (provided,
however, that such occupancy shall not continue beyond October
31, 1995, the currently scheduled termination date of the
Business Location Lease). Such occupancy shall be effected
through either a sublease or an administrative services
agreement, as selected by GFC (the "Business Location
Agreement"); and, prior to the Closing, GFC shall use its
reasonable best efforts to obtain, in form and substance
reasonably satisfactory to Purchaser all necessary landlord and
other approvals and consents (the "Business Location Approvals")
required under the term of the Business Location Lease to permit
such continued occupancy under the Business Location Agreement.
If, at the request of the Life Company, the Business Location
Lease is terminated prior to October 31, 1995, Purchaser agrees,
after the Closing, to cause the Life Company or Purchaser to bear
the cost of such early termination.
(b) For a period of up to six (6) months following the
Closing, GFC will allow the Life Company and/or the Purchaser to
elect to lease, license or otherwise utilize GFC's and its
affiliates' employees, facilities, equipment, systems, licenses
and other assets (to the extent theretofore used in the Life
Company's business) upon such terms and conditions as the parties
may, acting reasonably and in good faith, agree; provided,
however, that such terms and conditions shall reflect a cost
pass-through basis to the Life Company or Purchaser (with no
profit to GFC or any of its affiliates). Purchaser agrees, after
the Closing, to cause the Life Company or the Purchaser to be
solely responsible for all costs, if any, associated with
terminating leases, equipment, software, and premises used in
business of the Life Company to the extent (but only to such
extent, it being understood and agreed that GFC shall be solely
responsible for all other such costs, if any) they are consistent
with the obligations hereby represented by GFC to Purchaser and
described in reasonable detail in Item 19 of the Disclosure
Schedule.) GFC also agrees, at the Closing and without further
consideration, to transfer or cause to be transferred to the Life
Company or Purchaser (as hereinafter designated by Purchaser
<PAGE>
prior to the Closing), by instruments of transfer reasonably
satisfactory to Purchaser (the "Assignments"), good, valid and
marketable title to all furniture and equipment identified, and
described in reasonable detail, in Item 20 of the Disclosure
Schedule used in the ordinary course of the business of the Life
Company (or in the case of leased furniture or equipment, valid
lessee's interests therein), free and clear of any claim, lien,
pledge, charge, restriction, suit, judgement or any other
encumbrance, pending suit or threatened claim of any nature,
character or description whatsoever, other than valid leases with
respect to such items currently leased.
(c) After the Closing, GFC shall afford Purchaser the right
to offer employment to all such employees who or which have been
involved in the Life Company's business, as Purchaser may elect.
After the Closing, Purchaser agrees to cause the Life Company to
be solely responsible for all severance payments to all employees
of GFC or the Life Company who are not employed by the Life
Company or Purchaser or their respective affiliates after the
Closing to the extent (but only to such extent, it being
understood and agreed that GFC shall be solely responsible for
all other such payments) that they are consistent with the
information hereby represented by GFC to Purchaser on such costs
which is hereby represented by GFC to Purchaser and is set forth
in reasonable detail in Item 21 of and Appendix V to the
Disclosure Schedule. Purchaser shall cause the Life Company to
assume the obligations of GFC under and to ensure that the Life
Company is the recognized sponsor of the pension obligations
related to employees of GFC and the Life Company who work in the
business of the Life Company, under the Connecticut National Life
Insurance Company Employees Pension Plan, set forth in reasonable
detail in Item 21 of and attached as Appendix VI to the
Disclosure Schedule and to indemnify and hold harmless GFC for
all of said obligations. During the period from the execution of
this Agreement until the Closing Date, Purchaser shall, with
GFC's full cooperation and assistance, endeavor to identify
persons employed by GFC performing work for the Life Company
which Purchaser intends to employ following the Closing Date.
5.7 NO SOLICITATION OF OFFERS, ETC. GFC shall not and
shall cause its affiliates (including without limitation the Life
Company) not to and shall and shall cause such affiliates to
instruct its and their respective officers, representatives,
agents and advisors not to solicit, encourage or negotiate any
proposal from or with, or supply information to persons other
than Purchaser and its affiliates and representatives with
respect to, or in connection with any merger or consolidation
involving the Life Company, or the acquisition of any equity
interest or any material assets of the Life Company. In
furtherance of, and not by way of limitation of the foregoing,
GFC will not take or permit any of its affiliates (including
without limitation the Life Company) to take or permit (or permit
any other person acting for or on behalf of any of the foregoing)
to take, directly or indirectly, any action: (a) to seek or
solicit any offer or proposal from any person to acquire any
<PAGE>
shares of capital stock or any other securities of the Life
Company or any other interest therein; (b) to seek or solicit a
merger, consolidation , or combination with the Life Company; (c)
to seek or solicit a liquidation, dissolution, or reorganization
of the Life Company in any manner; (d) to seek or solicit any
acquisition of any assets or properties of the Life Company that
are individually or in the aggregate material to the business or
financial condition of the Life Company, or (e) to furnish or
cause to be furnished any non-public information with respect to
the Life Company to any person (other than Purchaser and its
affiliates and representatives) that GFC or any of its
affiliates, including without limitation the Life Company (or any
person acting for or on behalf any of the foregoing), knows or
has reason to believe is in the process of attempting or
considering any acquisition, merger, consolidation, combination,
liquidation, dissolution, or reorganization involving the Life
Company.
5.8 INVESTMENTS. GFC shall cause the Life Company to
invest its future cash flow, any cash from matured and maturing
investments, any cash proceeds form the sale of any assets of the
Life Company, and any cash funds held by the Life Company from
the date hereof through the Closing, in securities with:
(1) maturities of two (2) years or less,
(2) a credit rating of not less than an
equivalent of A by Standard & Poor's or a commercial
paper credit rating of not less than an equivalent of
A-1 by Standard & Poor's, and
(3) any other security approved by Purchaser.
5.9 Intentionally deleted.
5.10 FILING OF TAX RETURNS AND PAYMENT OF TAXES.
(a) GFC shall indemnify and hold Purchaser and the
Life Company harmless, on an after tax basis, for all Taxes
arising in connection with the conduct, prior to or on December
31, 1994, of the business of the Life Company (regardless of when
imposed), in all cases to the extent such Taxes have not already
been paid or otherwise reserved for on the Closing Balance Sheet.
(b) GFC shall be required to file and shall have the
sole right to control the preparation and filing of all Tax
Returns reflecting the operations of the Life Company for all
periods ending on or before December 31, 1994; provided, however,
that GFC shall provide Purchaser with a substantially final draft
of each Tax Return at least fifteen business days prior to the
due date for filing such Tax Return, and Purchaser shall have the
right to review such Tax Return prior to the filing of such Tax
Return. Purchaser shall notify GFC of any reasonable objections
Purchaser may have to any items set forth in such draft Tax
Return, and Purchaser and GFC agree to consult in good faith any
<PAGE>
such objection. Such Tax Returns shall be prepared or completed
in a manner consistent with the prior practice of the Life
Company (including elections and accounting methods and
conventions), except as otherwise agreed to by Purchaser prior to
the filing thereof.
(c) Except as otherwise provided in subparagraph (d),
Purchaser will pay or cause to be paid all Taxes attributable to
the operations of the Life Company after December 31, 1994. To
the extent Purchaser does not pay, or cause to be paid, or is
held pursuant to administrative action or judicial determination
to have not paid, such Taxes, Purchaser will indemnify and hold
GFC harmless therefrom on an after-tax basis, together with any
fees and expenses related thereto.
(d) In any case where applicable laws, rules,
regulations or orders do not permit or require a short period tax
return, then, for purposes of this Agreement, Taxes attributable
to the taxable period of the Life Company that includes December
31, 1994 shall be allocated to GFC for the period up to and
including December 31, 1994 and to Purchaser for the period
subsequent to December 31, 1994. For purposes of the preceding
sentence, Taxes for the period up to and including December 31,
1994 shall be (i) in the case of a Tax that is not based on gross
receipts or income, the total of such Tax for the period in
question multiplied by a fraction, the numerator of which is the
total number of days in the period up to and including December
31, 1994, and the denominator of which is the total number of
days in such period, and (ii) in the case of a Tax that is based
on gross receipts or income, the tax that would be due determined
on the basis of an interim closing of the books as of December
31, 1994. GFC shall pay any such allocated Taxes within thirty
days after demand therefor from Purchaser or Pioneer.
5.11 POST-CLOSING ACCESS AND COOPERATION.
Purchaser will afford promptly to GFC and its
representatives and agents reasonable access during normal
business hours (on terms not disruptive to the business,
operations or employees of Purchaser) to the Life Company's books
and records pertaining to periods prior to the Closing Date for
the purpose of obtaining information relating to periods ending
on or prior to the Closing Date, to the extent such access is
necessary: (a) to complete any Tax Returns required to be filed
by GFC after the Closing Date; or (b) to comply with requests
made of GFC by any tax or other regulatory authority conducting
an audit, investigation or inquiry relating to the Life Company's
activities during periods prior to the Closing Date. GFC will
hold all information provided to it pursuant to this Section 5.11
(and any information derived therefrom) in confidence (except to
the extent it otherwise becomes public other than through actions
of GFC) and will not disclose any such information other than to
directors, officers, employees, and agents of GFC who need to
know such information for the purposes for which it was obtained,
<PAGE>
as required by applicable law or regulation, or for the purposes
set forth in this Section 5.11 and 5.10 above.
5.12 ACTIONS WITH RESPECT TO TAXES.
GFC at its own expense and with its own counsel shall have
the right to control the prosecution, defense or settlement in
whole or in party of any examination, audit or other
administrative or legal proceeding relating to the liability of
the Life Company for Taxes for taxable periods ending on or prior
to December 31, 1994 and Purchaser or Pioneer shall have the
right to participate therein at its expense but shall not have
the right to control any decisions required to be made during any
such proceeding. In the case of any examination, audit or other
administrative or legal proceeding relating to the liability of
the Life Company for a taxable period which includes December 31,
1994, control of such proceeding shall be determined based on
which party, GFC or Purchaser, is responsible under this
Agreement for the payment of taxes for the largest percentage of
time in such taxable period. The party not in control of such
proceeding shall have the right to participate therein at its
expense. If either Purchaser or the Life Company receives notice
of the commencement by the IRS or any other taxing authority or
any examination, audit or other proceedings, or of any claim or
demand for Taxes which might result in GFC being required to
indemnify or make any other payment to the Purchaser under this
Agreement, Purchaser shall, or shall cause the Life Company to,
notify GFC promptly in writing of such tax audit or tax claim, as
the case may be. GFC may, upon notice to Purchaser, assume and
control the defense of any such tax audit or tax claim
proceeding. Purchaser shall cooperate, and shall cause the Life
Company to cooperate, with GFC in connection with any such tax
audit or tax claim proceeding and, at GFC's request, shall cause
the Life Company to execute and deliver waivers of any tax
statute of limitations for any period affected by such tax audit
or tax claim proceeding. Purchaser shall, and shall cause the
Life Company to, at GFC's expense, execute and deliver to GFC or
its designees all instruments (including, without limitation,
powers of attorney) reasonably requested by GFC in order to
effectuate the provisions of this Section. If as a result of
such tax claim or tax audit proceedings, additional Taxes
described in this Section 5.12 become payable by the Life
Company, GFC shall, to the extent not previously paid by GFC or
the Life Company to the relevant taxing authority, reimburse,
indemnify and hold the Life Company harmless therefrom on an
after-tax basis, within ten (10) days after the deficiency in
additional Taxes becomes final. If the Life Company receives a
credit or refund, the Purchaser shall pay to the GFC, within ten
(10) days from receipt by the Life Company of the refund or
notice of the credit, the amount of such refund or credit
(including any interest received) (net of any Taxes payable by
the Life Company with respect thereto). The Purchaser shall
cause the Life Company to cooperate in the preparation, filing
and prosecution of any such claim for refund or credit of Taxes
of the Life Company.
<PAGE>
Notwithstanding the foregoing, GFC shall not settle any
claim for Taxes without the prior written consent of Purchaser
(which consent shall not be unreasonably withheld); provided,
however, that in the event such consent is not given by Purchaser
within ten (10) business days after receipt of notice that GFC
intends to settle any such Tax claim, (i) GFC's liability for
such Taxes shall be limited to the amount, if any, for which it
would have been liable pursuant to the settlement proposed by GFC
and (ii) Purchaser shall assume the defense of such tax claim
proceeding, and shall be responsible for all Taxes in excess of
the amount GFC would have been liable for pursuant to the
settlement proposed by GFC and all costs and expenses thereafter
incurred in the prosecution or defense of such tax claim
proceeding.
5.13 CONSOLIDATION. GFC represents and warrants to
Purchaser that the Life Company has never been included in a
consolidated Tax Return nor been required to be so included.
5.14 STATUTE OF LIMITATIONS. All representations,
warranties, covenants and agreements made with respect to Taxes
shall survive the Closing for a period ending upon the expiration
of the applicable statute of limitations. No claim for
indemnification under this Agreement may be made in respect of
any Tax that is asserted by any taxing authority after the
applicable statute of limitations period with respect to such Tax
has expired; provided, however, that this limitation shall not
apply to any expenses or costs (including reasonable attorneys'
fees) incurred in defending against such action.
5.15 MORTGAGE/OWNED REAL ESTATE ARRANGEMENTS.
GFC represents and warrants to Purchaser that the Life
Company has no investment in any real property or real property
mortgage other than those described in Item 22 of the Disclosure
Schedule (the "Real Estate Portfolio"). With respect to the Real
Estate Portfolio, GFC and Purchaser agree as follows:
(a) ELIC shall manage the Real Estate Portfolio,
in accordance with the direction of and in the best
interests of the Life Company and be compensated for
such services through an annual management fee equal to
3/8% of the net book value of the Real Estate Portfolio
(as reflected on the financial records of the Life
Company) payable each quarter with respect to the book
value during the quarter (pro rated for changes during
the quarter).
(b) The Medical Office Towers property located in
Salt Lake City (the "SLC Property") included in the
Real Estate Portfolio will be listed for sale and ELIC
will use reasonable efforts to sell such property
within two years after the Closing.
<PAGE>
(c) Mortgages included in the Real Estate
Portfolio will be renewable only if (i) at the time of
renewal, no amount payable to the Life Company there
under is past due, (ii) the renewal is for a period of
not more than six months, and (iii) there has been no
more than one prior renewal of such mortgage after the
date of this Agreement.
(d) Any foreclosure, termination, cancellation or
sale of any property or mortgage in the Real Estate
Portfolio (a "Realization Transaction") will require
the prior written approval of Purchaser, which approval
will not be unreasonably withheld.
(e) An amount equal to the product of (i) the net
aggregate rent and interest payments actually received
by the Life Company with respect to the Real Estate
Portfolio in any calendar quarter while there is a
principal amount outstanding under the Note, multiplied
by (ii) a fraction, the numerator of which is the then
outstanding principal amount of the Note and the
denominator of which is the then net book value of the
Real Estate Portfolio, will be paid to GFC as interest
on the Note, within thirty days after the end of such
quarter.
(f) Promptly following any Realization
Transaction which results in the aggregate Book Value
(as hereinafter defined) of the Real Estate Portfolio
being less than the then outstanding principal amount
of the Note, Purchaser will make a payment of principal
under the Note sufficient to reduce the outstanding
principal amount of the Note to an amount not in excess
of the aggregate Book Value of the Real Estate
Portfolio and promptly following the Realization
Transaction which results in the Real Estate Portfolio
no longer including any investment of the Life Company,
the aggregate net proceeds of all Realization
Transactions will be delivered to GFC in payment of the
principal amount of the Note (but only to the extent of
the then unpaid principal amount of the Note);
provided, however, that the principal amount of the
Note will be adjusted as follows: (i) if the net
proceeds from a Realization Transaction are less than
the value of the relevant investment on the financial
records of the Life Company as of the Closing Date
(adjusted only to reflect principal payments received
after the Closing Date with respect to mortgages (the
"Book Value")), then the principal amount of the Note
will be immediately reduced by the amount of such
deficiency, and (ii) if the net proceeds from a
Realization Transaction exceed the Book Value of the
relevant investment, then the principal amount of the
Note will be immediately increased by the amount of
such excess; however, in no event may the principal
<PAGE>
amount of the Note ever exceed $2,000,000. In
addition, if at any time the principal amount of the
Note exceeds the then net book value of the Real Estate
Portfolio, then Purchaser will promptly make a payment
of the principal amount of the Note sufficient to
reduce such principal amount to an amount not in excess
of such net book value.
(g) In the event of a default in the performance
of obligations to the Life Company under any of the
mortgages, which default continues for at least twelve
months, the Life Company shall have the option to sell
such mortgage to GFC for a purchase price equal to the
Book Value thereof. In the event that the SLC Property
is not sold within two years after the Closing Date,
the Life Company shall have the option to sell the SLC
Property to GFC for a purchase price equal to the Book
Value thereof. In the event that GFC, in its sole
discretion, does not purchase such investment and pay
such purchase price within sixty days after demand
therefor by the Life Company, the principal amount of
the Note shall immediately and irrevocably be reduced
by an amount equal to the Book Value of such mortgage
or property.
(h) The Note will be secured by a collateral
assignment of mortgages in the Real Estate Portfolio
with an aggregate Book Value equal to the outstanding
principal amount of the Note from time to time.
(i) The Life Company and ELIC shall enter into an
investment management agreement which will reflect the
provisions of this Section 5.15.
SECTION 6. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The
respective obligations of each of the parties to consummate the
transactions contemplated hereby is subject to the satisfaction
of (or waiver by) the affected party in the manner contemplated
by Section 9.2 hereof at or prior to the Closing of the following
conditions:
6.1 CONDITIONS AFFECTING GFC'S PERFORMANCE.
(a) The representations and warranties of Purchaser
contained in this Agreement shall be in all material respects
true and accurate as of the date when made and, except for
changes expressly contemplated by this Agreement, at and as of
the Closing as if made again on and as of the Closing.
(b) Purchaser shall have performed and complied in all
material respects with each and every covenant, agreement and
condition required by this Agreement to be performed or complied
with by it prior to or on the Closing.
<PAGE>
(c) No order of any Governmental Entity shall be in effect
which restrains or prohibits any transaction contemplated hereby;
no suit, action, investigation, inquiry or proceeding by any
Governmental Entity or other person or entity shall be pending or
threatened against Purchaser, GFC or the Life Company, or any of
their respective affiliates which challenges the validity or
legality, or seeks to restrain the consummation, of any
transaction contemplated hereby; and no written advice shall have
been received by Purchaser, GFC or the Life Company, or their
respective counsel, from any Governmental Entity, and remain in
effect, stating that an action or proceeding will, if the
transactions contemplated hereby are consummated or sought to be
consummated, be filed seeking to invalidate or restrain the same.
(d) All material approvals and authorizations of all
Governmental Entities shall have been obtained and all required
waiting periods required by law or any Governmental Entity
(whether under HSR or otherwise) shall have expired.
(e) Purchaser shall have furnished GFC with a certificate,
dated as of the Closing Date, of Purchaser signed by one of its
senior officers and attested by its Secretary or an Assistant
Secretary to the effect that Purchaser's representations and
warranties contained in this Agreement are true and accurate in
all material respects at and as of the Closing as though such
representations and warranties were made again on and as of the
Closing and that Purchaser has performed or complied in all
material respects with all terms, covenants and provisions of
this Agreement required to be performed or complied with by it
prior to or at Closing.
(f) GFC shall have received the Purchase Price less any
Escrow as contemplated in Section 1.2 above.
(g) Purchaser shall have delivered or caused to be
delivered to GFC all other items Purchaser was required to
deliver or cause to be delivered to GFC at or prior to the
Closing.
(h) Purchaser shall have delivered to GFC an opinion of
McDermott, Will & Emery, dated as of the Closing Date, addressed
to GFC and in form and substance reasonably satisfactory to GFC,
to the effect set forth in Exhibit B hereto.
(i) Purchaser shall have delivered to GFC a guarantee of
Pioneer in the form of Exhibit C hereto.
6.2 CONDITIONS AFFECTING PURCHASER'S PERFORMANCE.
(a) The representations and warranties of GFC contained in
this Agreement shall be in all material respects true and
accurate as of the date when made and, except for changes
expressly contemplated by this Agreement, at and as of the
Closing as if made again on and as of the Closing.
<PAGE>
(b) GFC shall have performed and complied in all material
respects with each and every covenant, agreement and condition
required by this Agreement to be performed or complied with by it
prior to or on the Closing.
(c) No order of any Governmental Entity shall be in effect
which restrains or prohibits any transaction contemplated hereby;
no suit, action, investigation, inquiry or proceeding by any
Governmental Entity or other person or entity shall be pending or
threatened against Purchaser, GFC or the Life Company, or any of
their respective affiliates, which challenges the validity or
legality, or seeks to restrain the consummation, of any
transaction contemplated hereby; and no written advice shall have
been received by Purchaser, GFC or the Life Company, or their
respective counsel, from any Governmental Entity and remain in
effect, stating that an action or proceeding will, if the
transactions contemplated hereby are consummated or sought to be
consummated, be filed seeking to invalidate or restrain the same.
(d) All material approvals and authorizations of all
Governmental Entities shall have been obtained and all waiting
periods required by law or any Governmental Entity (whether under
HSR or otherwise) shall have expired.
(e) GFC shall have delivered to Purchaser an opinion of
LeBoeuf, Lamb, Greene & MacRae, regular outside counsel and
regulatory counsel to GFC and the Life Company, each dated as of
the Closing Date, addressed to Purchaser and in form and
substance reasonably satisfactory to Purchaser to the effect set
forth in Exhibit D hereto.
(f) GFC shall have furnished to Purchaser with a
certificate, dated as of the Closing Date, of GFC signed by its
Chairman of the Board or President, and attested by its Secretary
or an Assistant Secretary, to the effect that GFC's
representations and warranties contained in this Agreement are
true and accurate in all material respects at and as of the
Closing as though such representations and warranties were made
again on and as of the Closing and that GFC has performed or
complied in all material respects with all terms, covenants and
provisions of this Agreement required to be performed or complied
with by it prior to or at the Closing.
(g) Purchaser shall have received the Shares, the Letter of
Credit and the Books and Records, together with accompanying
instruments of transfer reasonably satisfactory to Purchaser, all
as contemplated by Section 1.2 hereof.
(h) GFC shall have delivered to Purchaser a fully executed
original copy of the Modification of Agreement, all as more fully
contemplated by Section 5.3 hereof, and both of such agreements
shall be in full force and effect.
(i) GFC shall have delivered to Purchaser a fully executed
copy of the Guarantees, dated as of the Closing Date,
<PAGE>
contemplated by Section 5.4 hereof and such Guarantees shall be
in full force and effect.
(j) GFC shall have delivered to Purchaser a fully executed
copy of the executed Business Location Agreement, together with
fully executed copies of the Business Location Approvals, in form
and substance reasonably satisfactory to Purchaser, all as more
fully contemplated by Section 5.6(a) hereof.
(k) GFC shall have delivered to the Purchaser and/or the
Life Company (as designated for such purpose by Purchaser prior
to the Closing) the Assignments, in form and substance reasonably
satisfactory to Purchaser, as more fully contemplated by Section
5.6(b) hereof.
(l) As of the Closing, the Life Company shall have no
receivable from or payable to GFC or any affiliates of GFC,
except such thereof as may have arisen under the terms of the
Empire Reinsurance Agreement or the Investment Management
Agreement or the Marketing and Management Agreement between Life
Company and GFC dated January 1, 1987, as amended.
(m) The business and the assets of the Life Company shall
not have been affected in any significant way by any act of God,
fire, flood, war, labor disturbance, legislation (proposed or
enacted) or other event or occurrence, whether or not covered by
insurance, and there shall have been no change which would have a
material adverse effect upon the Company, its business, financial
condition or prospects.
(n) GFC shall have executed a stockholder's release
substantially in the form attached hereto as Exhibit E hereto.
(o) Purchaser shall have received written resignations from
each of the officers and directors of the Life Company.
(p) GFC shall have delivered to Purchaser all other items
GFC was required to deliver or cause to be delivered to Purchaser
at or prior to the Closing.
SECTION 7. TERMINATION AND ABANDONMENT AND LIABILITY.
7.1 TERMINATION AND ABANDONMENT. This Agreement may be
terminated and the transactions contemplated hereby may be
abandoned prior to the Closing: (a) by the mutual consent of the
Boards of Directors of Purchaser and GFC; or (b) by Purchaser or
by GFC at any time after March 31, 1995 (or such later date as
shall have been agreed to in writing by them) if the conditions
precedent to such party's obligations to consummate the
transactions contemplated hereby have not, by such date, been
satisfied; or (c) by Purchaser (i) if there has been a material
misrepresentation or material breach on the part of GFC in the
representations, warranties, covenants or agreements of GFC set
forth herein, or (ii) if there has been any material failure on
the part of GFC to comply with its obligations hereunder; or (d)
<PAGE>
by GFC (i) if there has been a material misrepresentation or
material breach on the part of Purchaser in the representations,
warranties, covenants or agreements of Purchaser set forth
herein, or (ii) if there has been any material failure on the
part of Purchaser to comply with its obligations hereunder. If
this Agreement is terminated in accordance with this Section 7.1,
the transactions contemplated hereby shall be abandoned without
further action by Purchaser or GFC.
7.2 LIABILITY UPON TERMINATION. In the event of
termination or abandonment of the transactions contemplated
hereby pursuant to Section 7.1 hereof, neither Purchaser nor GFC
shall have any liability or further obligation under this
Agreement to the other; provided however, that if such
termination or abandonment is effected by GFC pursuant to Section
7.1 (d) of this Agreement, then GFC shall be entitled to receive
from Purchaser its damages. In the event that the Agreement is
terminated by Purchaser pursuant to Section 7.1 (c) (i) or
Section 7.1(c)(ii), then Purchaser shall be entitled to receive
from GFC its damages. In the case of any termination pursuant to
Section 7.1 other than a termination by GFC pursuant to Section
7.1 (d), GFC shall immediately return the Letter of Credit to
Purchaser.
SECTION 8. SURVIVAL AND INDEMNIFICATION.
8.1 SURVIVAL. Except as otherwise provided in Section
5.14, all representations, warranties, covenants and agreements
contained in this Agreement or in any document delivered pursuant
hereto shall be deemed to be material and to have been relied
upon by the parties hereto, and shall survive the Closing until
May 1, 1996. The representations and warranties contained in
this Agreement shall not be affected by any investigation,
verification or examination by any party hereto or by anyone on
behalf of any such party.
8.2 INDEMNIFICATION. Purchaser on the one hand, and GFC on
the other, shall defend, indemnify and hold harmless the other
(or, in the case of GFC's defense, indemnification and hold
harmless obligations, the Purchaser and also, after the Closing,
the Life Company) on a current basis, on demand, from and against
any and all loss, damage, expense (including court costs, amounts
paid in settlement, judgments, reasonable attorneys' fees or
other expenses for investigating and defending), suit, action,
claim, liability or obligation related to, caused by or arising
from any misrepresentation, breach of warranty or failure to
fulfill any covenant or agreement contained in this Agreement; or
in any other agreement, instrument or other document delivered
pursuant hereto provided, however, that notwithstanding anything
to the contrary contained herein, GFC's liability hereunder shall
be limited to an aggregate maximum amount of $12,500,000, and GFC
shall be liable under this Section 8.2 only if the aggregate
damages exceed $200,000. The right of each indemnified party
under this Section 8.2 shall be the exclusive remedy of the
indemnified party with respect to claims resulting from or
<PAGE>
relating to any breach of any representation, warranty, covenant
or agreement contained in this Agreement.
8.3 DEFENSE AGAINST ASSERTED CLAIMS. Any party seeking
indemnification (the "Indemnified Party") shall give written
notice to the indemnifying party (the "Indemnifying Party") of
the facts and the circumstances giving rise to any claim for
indemnification pursuant to Section 8.2 (the "Notice"). The
Indemnified Party shall not settle or compromise any claim by a
third party for which the Indemnified Party is entitled to
indemnification hereunder without the prior written consent of
the Indemnifying Party (which shall not be unreasonably
withheld), unless legal action shall have instituted against the
Indemnified Party and the Indemnifying Party shall not have taken
control of such suit within 30 days after notification thereof as
provided herein. In connection with any claim giving rise to
indemnification hereunder resulting from or rising out of any
claim or legal proceeding by a person other than the Indemnified
Party, the Indemnifying Party shall, upon written notice to the
Indemnified Party, assume the defense of any such claim or legal
proceeding without prejudice to the right of the Indemnifying
Party to contest its obligation to indemnify the Indemnified
Party in respect to the claims asserted therein. If the
Indemnifying Party assumes the defense of any such claim or legal
proceeding, the Indemnifying Party shall select counsel, the
selection of which counsel shall be subject to the approval of
the Indemnified Party (which shall not be unreasonably withheld),
to conduct the defense in such claims and legal proceedings and
at its sole cost and expense shall take all steps necessary in
the defense or settlement thereof. The Indemnifying Party shall
not consent to the settlement of, or the entry of any judgment
arising from, any claim or legal proceeding, without the prior
written consent of the Indemnified Party (which will not
unreasonably be withheld), unless the Indemnifying Party admits
in writing its liability to hold the Indemnified Party harmless
from and against any losses, damages, expenses and liabilities
arising out of such settlement. The Indemnified Party shall be
entitled to participate in the defense of any such action with
its own counsel and at its own expense (unless the Indemnifying
Party reasonably and in good faith believes that there may be a
conflict of interest with the Indemnifying Party, in which event
such shall be at the Indemnifying Party's expense, and, in such
event, the Indemnified Party shall be entitled to participate
equally with the Indemnifying Party in the control of the
proceeding). If the Indemnifying Party does not assume the
defense of any such claim or litigation resulting therefrom in
accordance with the conditions hereof, the Indemnified Party may
defend such claim or litigation in such manner as it may deem
appropriate, including settling such claim or litigation after
giving notice of the same to the Indemnifying Party on such terms
as the Indemnified Party deems appropriate, and in any action by
the Indemnified Party seeking indemnification from the
Indemnifying Party in accordance with the provisions of this
Section, the Indemnifying Party shall not be entitled to question
the manner in which the Indemnified Party defended such claim or
<PAGE>
litigation or the amount or nature of any such settlement. In
the event of a claim by a third party, the Indemnified Party
shall cooperate with the Indemnifying Party in the defense of
such action (including making a personal contact with the third
party if deemed beneficial) by the Indemnifying Party and the
relevant records of each party shall be made available on a
timely basis.
SECTION 9 MISCELLANEOUS PROVISIONS.
9.1 AMENDMENT AND MODIFICATION. This Agreement may be
amended, modified or supplemented with respect to any of the
terms contained herein only by the mutual written consent of
Pioneer, Purchaser and GFC.
9.2 WAIVER OF COMPLIANCE. Either of the parties may, by an
instrument in writing, extend the time for or waive performance
of any of the obligations of the other, or waive any of the
conditions to its obligations, contained herein. No such
extension of time or waiver shall operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
9.3 NOTICES. All notices and other communications required
or permitted hereunder shall be in writing and delivered by hand
or overnight courier, mailed by registered or certified mail,
postage prepaid, or sent by telex or facsimile transmission
(promptly confirmed in writing), addressed as follows:
If to Purchaser:
c/o Pioneer Financial Services, Inc.
1750 East Golf Road
Schaumburg, Illinois 60173
Attention: Peter W. Nauert, Chairman
Telephone Number: (708) 995-0400
FAX Number: (708) 995-0447
with copies to:
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606
Attention: Helen R. Friedli, P.C.
Telephone Number: (312) 372-2000
FAX Number: (312) 984-3669
or to such other person as Purchaser shall designate in writing,
such writing to be delivered to GFC in the manner provided in
this Section 9.3;
If to GFC:
GRENEL Financial Corporation
c/o The Empire Life Insurance Company
<PAGE>
259 King Street East
Kingston, Ontario K7L 3A8
Attention: Christopher H. McElvaine
Telephone Number: (613) 548-1881
FAX Number: (613) 548-4584
with copies to:
Guardian Royal Exchange Assurance plc
68 King William Street
London, England
EC4N7BU
Attention: Mr. Clayton, Secretary
Telephone Number: 011-44-71-2837101
FAX Number: 011-44-71-621-2598
and
LeBoeuf, Lamb, Greene & MacRae
225 Asylum Street
Hartford, Connecticut 06103
Attention: Thomas L. Fairfield
Telephone Number: (203) 293-3500
FAX Number: (203) 293-3555
or to such other person as GFC shall designate in writing, such
writing to be delivered to Purchaser in the manner provided in
this Section 9.3. Delivery shall not be deemed to have occurred
until receipt at the location to which it is sent.
9.4 ASSIGNMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Except as set
forth herein, neither party shall assign, delegate or otherwise
transfer their rights and obligations hereunder without the prior
written consent of the other parties, whether by operation of law
or otherwise. Notwithstanding the previous sentence, Purchaser
may assign or delegate any of its rights or obligations under
this Agreement to any of its affiliates without the consent of
GFC.
9.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois,
without giving effect to the choice of law principles thereof.
The parties agree that any disputes involving this Agreement
shall be resolved by binding arbitration, which arbitration shall
be conducted in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, as then in effect. The
arbitration proceedings will take place in Chicago, Illinois.
9.6 NO THIRD PARTY BENEFICIARY. Nothing expressed or
implied in this Agreement is intended or shall be construed to
confer upon or give to any person, firm or entity other than the
parties hereto any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby, except as
<PAGE>
otherwise specifically provided in or contemplated by this
Agreement.
9.7 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
9.8 HEADINGS. The headings of sections of this Agreement
are inserted for convenience of reference only and shall not
constitute a part hereof.
9.9 ENTIRE AGREEMENT. This Agreement (including the
Disclosure Schedule) and all annexes and exhibits hereto,
contains the entire understanding of the parties hereto in
respect of the subject matter hereof and supersedes all prior
agreements and understandings between the parties with respect to
such subject matter.
9.10 COSTS. Each party to this Agreement will bear its own
costs with respect to the transactions contemplated hereby
whether or not the transaction contemplated by the Closing is
consummated.
9.11 PARTIAL VALIDITY. If any portion of this Agreement is
held to be invalid by a court of competent jurisdiction, the
remainder of this Agreement will remain in force as though the
portion so invalidated had never been part hereof.
9.12 FURTHER ASSURANCES. Subject to the other provisions
of this Agreement, each of the parties hereto agrees to take or
cause to be taken all such actions, including without limitation
the execution and delivery of documents, as may reasonably be
requested by the other as necessary or desirable to more fully
effectuate the purposes of this Agreement. The parties shall at
all times cooperate with and act in good faith with one another
with respect to this Agreement and the subject matter of this
Agreement.
9.13 PUBLICITY. So long as this Agreement is in effect,
GFC and Purchaser shall not, and shall not permit any of their
respective affiliates (including without limitation the Life
Company) to disclose or issue or cause the publication of any
press release or other public announcement with respect to the
transactions contemplated by this Agreement without the consent
of the other party, which consent shall be provided promptly and
will not be unreasonably withheld, unless such disclosure or
publication or announcement is required by or deemed advisable
under applicable law.
9.14 TERMINATION. Termination of this Agreement pursuant
to Section 7 shall terminate all obligations of the parties
hereunder, except for the obligations provided therein and in
Section 9.10; provided, however, that each party shall remain
<PAGE>
responsible for any breach of this Agreement by such party,
except as otherwise provided herein.
9.15 EXHIBITS. The Exhibits referenced in this Agreement
have not been finally negotiated as of the date of this
Agreement; however, the parties will use their best efforts to
finalize such Exhibits within five business days after the date
of this Agreement. The final Exhibits will then be added to this
Agreement by way of amendment.
IN WITNESS WHEREOF, the parties have entered into this
Agreement as of the date first above written.
UNITED LIFE HOLDINGS, INC.
/s/ Charles R. Scheper
By:___________________________________
GRENEL Financial Corporation
/s/ Chris McElvaine /s/ Ian Glew
By:___________________________________
PIONEER FINANCIAL SERVICES, INC.
/s/ Charles R. Scheper
By:___________________________________
