<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: March 31, 1995 Commission File No. 1-9859
Pioneer Companies, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 06-1215192
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
165 Mason Street, Greenwich, CT 06830
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (203) 629-3088
GEV Corporation
(Former Name, Former Address and Former Fiscal Year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Number of Common Shares outstanding at May 8, 1995: 7,769,438 of Class A and
769,354 of Class B, both reflecting the one-for-four reverse stock split
effective April 27, 1995.
<PAGE>2
TABLE OF CONTENTS
Part I - Financial Information
Item 1 - Consolidated Financial Statements
* Consolidated Balance Sheets - March 31, 1995
(unaudited) and December 31, 1994
* Consolidated Statements of Operations (unaudited) -
Three Months Ended March 31, 1995 and 1994
* Consolidated Statements of Cash Flows (unaudited) -
Three Months Ended March 31, 1995 and 1994
* Notes to Consolidated Financial Statements
(unaudited)
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Part II - Other Information
Item 2 - Changes in Securities
Item 4 - Submission of Matters to a Vote of Shareholders
Item 6 - Exhibits and Reports on Form 8-K
Signature
<PAGE>3
PIONEER COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, December 31,
1995 1994
(unaudited)
----------- ------------
Assets
Current assets:
Cash and cash equivalents $ 458 $ 880
-------- --------
Total current assets 458 880
Property and equipment, net 20 32
Deferred tax asset - -
Deferred acquisition costs 600 -
-------- --------
Total assets $ 1,078 $ 912
======== ========
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable and accrued expenses $ 432 $ 150
Total current liabilities 432 150
Stockholders' equity:
Preferred stock: $.01 par value,
authorized 10,000,000 shares; none
issued
Common stock: $.01 par value,
Class A authorized 46,000,000 shares,
issued and outstanding 3,792,165 at
March 31, 1995 and 3,768,499 at
December 31, 1994. 38 38
Class B authorized 4,000,000 shares,
issued and outstanding 769,354,
convertible share-for-share into
Class A shares 8 8
Additional paid-in capital 1,905 1,869
Deficit (1,305) (1,153)
------- -------
646 762
Total liabilities and stockholders'
equity $ 1,078 $ 912
======= =======
See notes to consolidated financial statements.
<PAGE>4
PIONEER COMPANIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
------------------
1995 1994
---- ----
General and administrative expenses, net $ 152 $ 26
-------- --------
Net loss $ (152) $ (26)
======== ========
Loss per share: $ (.03) $ (.01)
======== ========
Average number of shares of
common stock outstanding 4,546 3,623
===== =====
See notes to consolidated financial statements.
<PAGE>5
PIONEER COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
------------------
1995 1994
---- ----
Cash flows from operating activities:
Net loss $ (152) $ (26)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1 1
Increase in operating assets and liabilities:
Accounts payable and accrued expenses 293 (70)
------ ------
Net cash provided by (used in) operating
activities 142 (95)
------ ------
Cash flows from investing activities:
Deferred acquisition costs (600) -
------ ------
Net cash used in investing activities (600) -
------ ------
Cash flows from financing activities:
Issuance of Class A Common Stock in
accordance with Directors Stock Plan 36 24
Proceeds from private placement of Class A Stock - 1,103
------- -------
Net cash provided by financing activities 36 1,127
------- -------
Increase (decrease) in cash and cash equivalents (422) 1,032
Cash and cash equivalents at beginning of period 880 104
------- -------
Cash and cash equivalents at end of period $ 458 $ 1,136
======= =======
See notes to consolidated financial statements.
<PAGE>6
PIONEER COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(In thousands, except share and per share data)
At the annual shareholders meeting held on March 31, 1995, the change of GEV
Corporation's name to Pioneer Companies, Inc. ("PCI") was approved subject to
consummation of the acquisition described below.
The accompanying unaudited consolidated financial statements at March 31, 1995
and for the three months then ended have been prepared on a going concern
basis and include accounts of PCI and its subsidiaries. The unaudited
financial statements include adjustments of a normal recurring nature which,
in the opinion of management, are necessary for a fair presentation of the
results of operations for the three months ended March 31, 1995 and 1994.
The accompanying unaudited financial statements should be read in conjunction
with the financial statements and notes thereto included in PCI's Annual
Report on Form 10-K for the year ended December 31, 1994.
All share and per share information has been retroactively restated to reflect
the one-for-four reverse stock split of PCI's Class A and Class B Common
Stock, effective April 27, 1995.
Subsequent Event - Pioneer Acquisition
On April 20, 1995, pursuant to a Stock Purchase Agreement, dated as of March
24, 1995 (the "Acquisition Agreement"), by and among PCI, Pioneer Americas
Acquisition Corp., a newly-formed wholly-owned subsidiary of PCI ("New
Pioneer"), and the holders of the outstanding common stock and other common
equity interests (the "Sellers") of Pioneer Americas, Inc. ("Pioneer"), New
Pioneer acquired all of such stock and interests (the "Acquisition") for a
purchase price equal to the sum of approximately (i) $102 million, paid in
cash, (ii) $10 million aggregate principal amount of subordinated promissory
notes of PCI (the "Seller Notes") and (iii) certain amounts payable after the
closing based upon earnings or proceeds attributable to certain of Pioneer's
direct and indirect real estate holdings which are not necessary for Pioneer's
business. In addition, as further consideration for the Acquisition, New
Pioneer paid approximately $45.5 million to retire all outstanding
indebtedness (net of available cash) of Pioneer and $5 million to redeem
Pioneer's outstanding preferred stock. Certain of the foregoing amounts are
subject to provision for post-closing adjustments under the terms of the
Acquisition Agreement.
In connection with the consummation of the Acquisition, (i) New Pioneer issued
and sold $135 million aggregate principal amount of 13 3/8% Senior Notes (the
"Initial Offering" or "Senior Notes"), (ii) PCI issued and sold the Seller
Notes in exchange for certain of the outstanding shares of Pioneer, which PCI
contributed to New Pioneer, (iii) PCI issued and sold to Interlaken Investment
Partners, L.P., a Delaware limited partnership (the "Interlaken Partnership"),
of which an entity controlled by William R. Berkley is the sole general
partner, 2,840,909 shares of Class A Common Stock of PCI for an aggregate
purchase price of $15 million (the "Interlaken Partnership Purchase"), the
proceeds of which were contributed to New Pioneer, (iv) PCI issued and sold to
certain employees and directors of Pioneer (collectively, the "Management
Investors"), 1,136,363 shares of Class A Common Stock of PCI for an aggregate
purchase price of $6 million (the "Management Purchase"), the proceeds of
which were contributed to New Pioneer, and (v) Pioneer and its subsidiaries
entered into a new bank revolving credit facility (the "Bank Credit
Facility"), providing for borrowings of up to $30 million. The net proceeds
of the Initial Offering, the Interlaken Partnership Purchase, the Management
Purchase and a borrowing under the Bank Credit Facility were used to pay the
cash portion of the purchase price of the Acquisition, to retire the
outstanding Pioneer indebtedness, to redeem Pioneer's outstanding preferred
stock and to pay certain transaction costs associated with the Acquisition.
<PAGE>7
New Pioneer has filed a Registration Statement with the Securities and
Exchange Commission pursuant to which it proposes to offer to exchange (the
"Exchange Offer") up to $135 million aggregate principal amount of 13 3/8%
First Mortgage Notes due 2005 (the "Exchange Notes") for up to $135 million
aggregate principal amount of its outstanding Senior Notes. If the
Registration Statement becomes effective and New Pioneer proceeds with the
Exchange Offer, the terms of the Exchange Notes and Senior Notes will be
substantially identical, except that the Exchange Notes will be freely
transferable subject to certain provisions and will be effectively secured by
first mortgage liens on certain Pioneer manufacturing facilities.
The Acquisition will be accounted for by the purchase method of accounting.
The approximately $113 million excess of the purchase price over the estimated
fair value of the net assets acquired will be amortized on a straight line
basis over periods of up to 25 years. The purchase price allocation is based
on preliminary estimates of the fair value of the net assets acquired and is
subject to adjustment as additional information becomes available. Deferred
acquisition costs include costs incurred in connection with the Acquisition.
The following unaudited pro forma summary of operations presents the
consolidated financial results of operations as if the Acquisition, the
Initial Offering, the Interlaken Partnership Purchase, the Management Purchase
and the borrowing under the Bank Credit Facility had occurred at the beginning
of the quarters presented and does not purport to be indicative of either
future results of operations or results that would have occurred had the
Acquisition actually been made as of such dates.
(In thousands, except for per share data)
Three Months Ended
March 31,
------------------
1995 1994
---- ----
Revenues $47,842 $34,227
Depreciation and amortization 4,621 4,374
Interest expense, net 4,917 4,917
Earnings (loss) before extraordinary item and
income taxes 6,469 (5,787)
Earnings (loss) before extraordinary item 3,420 (5,787)
Extraordinary item, early extinguishment of debt,
(net of tax benefit of $2,183) 3,275 -
Net income (loss) $ 145 $(5,787)
Per Share Data
- - --------------
Average number of common shares outstanding 8,523 7,600
Earnings (loss) before extraordinary item $ 0.40 $ (0.76)
Extraordinary item 0.38 -
------- --------
Net income (loss) $ 0.02 $ (0.76)
======= ========
<PAGE>8
The following summary pro forma consolidated balance sheet as of March 31,
1995 has been prepared as if the Acquisition, the Initial Offering, the
Interlaken Partnership Purchase, the Management Purchase and the borrowing
under the Bank Credit Facility had occurred on that date.
Assets (In thousands)
- - ------
Current assets $ 47,932
Property, plant and equipment 83,506
Other assets 10,722
Excess of cost over fair market value of net assets acquired 112,663
---------
Total assets $ 254,823
=========
Liabilities and Stockholders' Equity
- - ------------------------------------
Current liabilities $ 35,375
Bank credit facility 9,000
Senior notes 135,000
Sellers' notes 10,000
Other long term liabilities 27,356
Stockholders' equity 38,092
---------
Total liabilities and stockholders' equity $ 254,823
=========
In connection with the Acquisition, PCI issued to the employees of PCI and its
subsidiaries options to acquire approximately 500,000 shares of PCI's Class A
Common Stock at an exercise price of $6.50 per share.
<PAGE>9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- - ------------------------------------------------------------------------------
The following discussion and analysis should be read in conjunction with the
financial statements and the notes thereto.
This item will discuss and analyze the financial condition and results of
operations of PCI for the three months ended March 31, 1995 and 1994.
Results of Operations
- - ---------------------
PCI reported a net loss of $152,000, or $.03 per share, in the first quarter
of 1995 as compared to a net loss of $26,000, or $.01 per share, in 1994.
General and administrative expenses were $126,000 higher in 1995 than in 1994
due primarily to the receipt of expense reimbursements from a previously
unconsolidated subsidiary in 1994 and higher transfer agent and legal fees in
1995.
Liquidity and Capital Resources
- - -------------------------------
PCI and its subsidiaries on a consolidated basis (the "Company") is highly
leveraged as a result of indebtedness incurred in connection with the
Acquisition. Concurrent with the Acquisition, the Bank Credit Facility became
available to the Company. The Bank Credit Facility provides the Company with
a $30 million revolving line of credit, subject to borrowing base limitations
that relate to the levels of accounts receivable and inventory. As of March
31, 1995, on a pro forma basis after giving effect to the Acquisition, New
Pioneer had outstanding Senior Indebtedness of approximately $144 million
(including the Senior Notes and $9.0 million of secured indebtedness under the
Bank Credit Facility). As of March 31, 1995, on a pro forma basis, Pioneer
had $2.6 million of letters of credit outstanding and would have had, subject
to certain restrictions (including borrowing base limitations), the ability to
draw up to $18.4 million of additional secured indebtedness under the Bank
Credit Facility through 1998. The Bank Credit Facility is secured by accounts
receivable and inventory, and upon issuance of the Exchange Notes will be
secured on a pari passu basis by liens on certain manufacturing facilities.
The Company believes that cash flow from current levels of operations and, to
a lesser extent, the availability under the Bank Credit Facility, will be
adequate to make the required payments on the indebtedness outstanding upon
consummation of the Acquisition, as well as to fund its foreseeable capital
expenditure and working capital requirements.
<PAGE>10
PART II - OTHER INFORMATION
Item 2. Changes in Securities
- - -----------------------------
On April 27, 1995, the Registrant filed in the Office of the Secretary of
State of the State of Delaware a Certificate of Amendment of the Third
Restated Certificate of Incorporation of the Registrant providing for a one-
for-four reverse split of the Registrant's Class A Common Stock, par value
$.01 per share, and Class B Common Stock, par value $.01 per share. The
reverse stock split was effective as of April 27, 1995. The Certificate of
Amendment provides that fractional interests are to be paid in cash.
Item 4. Submission of Matters to a Vote of Shareholders
- - --------------------------------------------------------
The annual shareholders meeting was held on March 31, 1995. There were
3,869,101 total eligible votes. The shareholders voted for two Directors:
Donald J. Donahue and Jack H. Nusbaum. Each such Director was reelected to
serve until 1998 or until a successor is selected.
The following table sets forth information with respect to the votes for each
such Director:
Votes Votes
For Withheld
---------- ----------
Donald J. Donahue 3,480,737 7,168
Jack H. Nusbaum 3,480,112 7,168
<PAGE>11
The following table sets forth information with respect to the votes for the
other proposals presented at the annual shareholders meeting:
<TABLE>
<CAPTION>
Votes Votes Broker
Proposals Presented For Against Abstain Non-Votes
- - ------------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
(1) To approve an amendment to the
Registrant's Third Restated
Certificate of Incorporation (the
"Certificate of Incorporation")
to effect a one-for-four reverse
split of the Registrant's Class
A Common Stock and Class B Common
Stock. 3,361,229 105,107 1,488 20,081
(2) To approve an amendment to the
Certificate of Incorporation to
change the Registrant's name
from "GEV Corporation" to "Pioneer
Companies, Inc.," subject to the
consummation of the acquisition
described in the Proxy Statement. 3,331,565 4,563 3,495 148,282
(3) To approve the 1995 Stock
Incentive Plan. 2,641,586 24,569 6,789 814,961
(4) To ratify the appointment of
Deloitte & Touche LLP as
independent certified public
accountants for the Registrant
for the fiscal year ending
December 31, 1995. 3,438,200 49,192 513
</TABLE>
All share information set forth in this Item 4 has been retroactively restated
to reflect the one-for-four reverse stock split of the Registrant's Class A
and Class B Common Stock, effective April 27, 1995.
<PAGE>12
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits:
2 Stock Purchase Agreement, dated as of March 24, 1995, by and among
the Registrant, New Pioneer and the Sellers.*
10 Subscription Agreement, dated as of March 24, 1995, by and among the
Registrant and the Interlaken Partnership.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
During the quarter ended March 31, 1995, the Registrant filed a Report on
Form 8-K, dated January 24, 1995, relating to the press release for the
proposed acquisition of Pioneer Americas, Inc.
- - --------------------------------
* Incorporated herein by reference to Exhibit 2 of the Form 8-K Current
Report of the Registrant filed on May 5, 1995.
______________________________________________________________________________
Omitted from this Part II are items which are inapplicable or to which the
answer is negative for the period presented.
<PAGE>13
SIGNATURE
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 thereunto duly authorized.
PIONEER COMPANIES, INC.
Date: May 9, 1995 By: /s/ George T. Henning, Jr.
Name: George T. Henning, Jr.
Title: Chief Financial Officer and
Treasurer
<PAGE>
EXHIBIT INDEX
Exhibit
-------
2 Stock Purchase Agreement, dated as of March 24, 1995, by and among
the Registrant, New Pioneer and the Sellers.*
10 Subscription Agreement, dated as of March 24, 1995, by and among the
Registrant and the Interlaken Partnership.
27 Financial Data Schedule.
- - --------------------------------
* Incorporated herein by reference to Exhibit 2 of the Form 8-K Current
Report of the Registrant filed on May 5, 1995.
<PAGE>1
SUBSCRIPTION AGREEMENT
This SUBSCRIPTION AGREEMENT, dated as of March 24, 1995 (the
"Agreement"), by and among GEV Corporation, a Delaware corporation (the
"Company"), and Interlaken Investment Partners, L.P., a Delaware limited
partnership (the "Interlaken Partnership"),
W I T N E S S E T H:
WHEREAS, the Company and Pioneer Americas Acquisition Corp., a
Delaware corporation and wholly owned subsidiary of the Company (the "Buyer"),
have agreed to acquire all of the issued and outstanding capital stock of
Pioneer Americas, Inc., a Delaware corporation ("Pioneer"), upon the terms and
subject to the conditions set forth in that certain Stock Purchase Agreement,
dated as of March 24, 1995, by and among the Company, the Buyer and the
stockholders of Pioneer and certain other persons named therein (the "Purchase
Agreement"); and
WHEREAS, pursuant to Section 6.10 of the Purchase Agreement, the
Company has agreed to issue to the Interlaken Partnership, upon the terms and
subject to the conditions set forth herein, an aggregate of 11,363,636 shares
(the "Shares") of the Company's Class A common stock, par value $.01 per share
(the "Class A Common Stock");
WHEREAS, the Interlaken Partnership desires to purchase the Shares
from the Company, and the Company desires to issue and sell the Shares to the
Interlaken Partnership, in each case upon the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, the obligations of the Company to consummate the
transactions contemplated by the Purchase Agreement are subject to the
condition that the transactions contemplated by this Agreement be consummated
in full prior to consummation of the transactions contemplated by the Purchase
Agreement;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
SECTION 1. Definitions. Capitalized terms used but not defined
herein shall have the respective meanings ascribed thereto in the Purchase
Agreement. Whenever used in this Agreement, any noun or pronoun shall be
deemed to include both the singular and plural and to cover all genders.
<PAGE>2
SECTION 2. Sale and Purchase of Securities. (a) Subject to the
terms and conditions set forth herein, on the Closing Date (as defined
herein), the Company shall sell to the Interlaken Partnership and the
Interlaken Partnership shall purchase from the Company the Shares for an
aggregate purchase price of $15,000,000 in cash (the "Purchase Price").
(b) The sale, issuance and purchase of Shares shall be effected by
the Company executing and delivering to the Interlaken Partnership a duly
executed stock certificate evidencing the Shares to be purchased by the
Interlaken Partnership, duly registered against payment by the Interlaken
Partnership to the Company of the Purchase Price. The Interlaken Partnership
shall effect payment of the Purchase Price by wire transfer in immediately
available funds to an account at a bank in the United States of America
designated by the Company.
(c) The closing of the transactions hereunder (the "Closing") shall
take place prior to the closing of the transactions contemplated by the
Purchase Agreement, at such time and date as the parties hereto shall agree in
writing, at the offices of Willkie Farr & Gallagher, One Citicorp Center, 153
East 53rd Street, New York, New York 10022-4669, or at such other place as the
parties hereto shall agree in writing.
SECTION 3. Representations and Warranties of the Company. The
Company hereby makes to the Interlaken Partnership the representations,
warranties and covenants set forth in Sections 3.1 through 3.14 and 3.16 of
the Purchase Agreement, subject to such exceptions and qualifications as may
be noted therein, to the same extent as if such representations, warranties
and covenants were set forth herein in their entirety.
SECTION 4. Representations and Warranties of the Interlaken
Partnership. The Interlaken Partnership hereby represents, warrants and
agrees with the Company, as follows:
(a) Validity of Agreement. This Agreement has been duly executed
by the Interlaken Partnership and, assuming due authorization, execution and
delivery by the Company, constitutes the valid and binding obligation of the
Interlaken Partnership enforceable against the Interlaken Partnership in
accordance with its terms, except that such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and to
general equitable principals.
(b) No Conflict or Violation. To the extent applicable, the
execution, delivery and performance by the
<PAGE>3
Interlaken Partnership of this Agreement does not and will not violate any
provision of law typically applicable to the transactions contemplated herein,
or any order, judgment or decree of any court or other governmental or
regulatory authority to which the Interlaken Partnership is subject.
(c) Consents and Approvals. Schedule 4(c) hereto sets forth a true
and complete list of each consent, waiver, authorization or approval of any
governmental or regulatory authority, domestic or foreign, or of any other
Person, and each declaration to or filing or registration with any such
governmental or regulatory authority, that is required of the Interlaken
Partnership in connection with the execution and delivery of this Agreement by
the Interlaken Partnership or the performance by the Interlaken Partnership of
its obligations hereunder.
(d) Review of Certificate of Incorporation. The Interlaken
Partnership has been provided for review a copy of the Company's Third
Restated Certificate of Incorporation (the "Certificate of Incorporation") and
its Bylaws, in the forms attached hereto as Exhibit A. The Interlaken
Partnership acknowledges and accepts that certain provisions of the
Certificate of Incorporation restrict the Interlaken Partnership's ability to
Transfer (as defined in the Certificate of Incorporation) the Shares and any
shares of the Company's capital stock subsequently acquired by the Interlaken
Partnership. In particular, in order to protect certain tax attributes of the
Company, the Interlaken Partnership acknowledges, and agrees to adhere to, the
provisions of Article THIRTEENTH of the Certificate of Incorporation, which,
among other things, restricts every holder of the Company's capital stock from
making certain Transfers of such capital stock.
(e) Investment Representations.
(i) The Interlaken Partnership is acquiring the Shares solely
for its own account as principal, for investment purposes only, and not
with a view to, or for, subdivision, resale, distribution or
fractionalization thereof, in whole or in part, or for the account, in
whole or in part, of others, and no other Person has a direct or indirect
beneficial interest in the Shares; further, the Interlaken Partnership
intends to hold the Shares as an investment and does not presently
anticipate any change in circumstances or other particular occasion or
event that would cause it to attempt to sell any of the Shares.
<PAGE>4
(ii) The Interlaken Partnership understands that no federal or
state agency has passed upon the accuracy or adequacy of the Information
Statement, dated March 17, 1995, delivered to the Interlaken Partnership
by the Company in connection with its purchase of Shares (with the
documents referred to therein as constituting a part thereof, the
"Memorandum") or made any finding or determination as to the fairness of
this investment and that the offering and sale of the Shares is intended
to be exempt from registration both under the Securities Act, by virtue
of Section 4(2) of the Securities Act and the provisions of Rule 506 of
Regulation D promulgated thereunder, and the securities laws of most
states, and, in furtherance thereof, the Interlaken Partnership
represents and warrants to, and agrees with, the Company as follows:
(A) The Interlaken Partnership has the financial ability
to bear the economic risk of its investment, and has adequate means
for providing for its current needs and contingencies and has no
need for liquidity with respect to its investment in the Shares;
(B) The Interlaken Partnership has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of the prospective investment; and
(C) The Interlaken Partnership has reviewed the merits of
an investment in the Shares with tax and legal counsel and with an
investment advisor to the extent deemed advisable by the Interlaken
Partnership.
(iii) The Interlaken Partnership:
(A) has been furnished with a copy of the Memorandum and
any documents which may have been made available upon its request
and it has carefully read the Memorandum and understands and has
evaluated the risks of a purchase of Shares, including the risks set
forth under "RISK FACTORS" in the offering memorandum included as
part of the Memorandum; is aware that there are substantial risks of
loss incident to an investment in the Shares; and has relied solely
(except as indicated in subparagraph (B) below) on the information
contained in the Memorandum;
(B) (x) has been given the opportunity to ask questions
of, and receive answers from, the Company concerning the terms and
conditions of the offering and
<PAGE>5
other matters pertaining to this investment, and all such questions
have been answered to the satisfaction of the Interlaken
Partnership; (y) has been given the opportunity to obtain such
additional information necessary to verify the accuracy of the
information contained in the Memorandum and information that has
been otherwise provided in order for it to evaluate the merits and
risks of investment in the Shares; and (z) has been given the
opportunity to obtain additional information from the Company,
except to the extent the Company has informed the Interlaken
Partnership that it does not possess such information and cannot
acquire it without unreasonable effort or expense, or that the
requested information is proprietary and confidential, and the
Interlaken Partnership has not been furnished with any other
offering literature or prospectus except as referred to herein or
in the Memorandum;
(C) has not been furnished with any oral representation
or warranty in connection with the offering of the Shares by the
Company, or its officers, employees, agents, affiliates or
subsidiaries; and
(D) has determined that the Shares are a suitable
investment for it and that at this time it could bear the complete
loss of its investment.
(iv) The Interlaken Partnership is not relying on the Company
in regard to the tax and other personal financial considerations related
to this investment, and the Interlaken Partnership has, to the extent it
deems it necessary, relied on the advice of, or has consulted with, only
its own advisors.
(v) The Interlaken Partnership will not sell or otherwise
transfer the Shares without registration under the Securities Act, and
applicable state securities laws unless the Company has received an
appropriate opinion of counsel reasonably acceptable to the Company that
registration thereunder is not required, and fully understands and agrees
that the Interlaken Partnership must bear the economic risk of its
purchase for an indefinite period of time because, among other reasons,
the Shares have not been registered under the Securities Act or under the
securities laws of most states and, therefore, cannot be resold, pledged,
assigned or otherwise disposed of unless they are subsequently registered
under the Securities Act and under the applicable securities laws of such
states or an exemption from such registration is available. The
<PAGE>6
Interlaken Partnership understands that the Company is under no
obligation to register the Shares on the Interlaken Partnership's behalf
or to assist the Interlaken Partnership in complying with any exemption
from registration under the Securities Act or any state securities laws.
(vi) Any information which the Interlaken Partnership has
heretofore furnished and herewith furnishes to the Company, including
information with respect to its financial position and business
experience, is correct and complete as of the date of this Agreement and,
if there should be any material change in such information prior to the
Closing Date, it will immediately furnish such revised or corrected
information to the Company.
(vii) In making its decision to purchase the Shares herein
subscribed for, the Interlaken Partnership has relied solely upon the
information contained in the Memorandum, the matters described in Section
4(e)(iii)(B), and upon independent investigations made by it. In
addition, it is not subscribing pursuant hereto for any Shares as a
result of or subsequent to (i) any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media
or broadcast over television or radio or (ii) any seminar or meeting
whose attendees, including any partner of the Interlaken Partnership, had
been invited as a result of, subsequent to or pursuant to any of the
foregoing.
(viii) The Interlaken Partnership represents that it is an
"accredited investor" as that term is defined in Rule 501(a) under the
Act, which definition is set out in Exhibit B to this Agreement.
SECTION 5. Legends. Any certificates evidencing shares of the
Company's capital stock issued pursuant hereto shall bear the following
legends reflecting the restrictions on the transfer of such securities imposed
by law and the Certificate of Incorporation:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
and may not be transferred or sold except pursuant to an effective
registration statement under the Act or in a transaction which, in
the opinion of counsel reasonably satisfactory to GEN Corporation,
qualifies as an exempt transaction under the Act and the rules and
regulations promulgated thereunder."
<PAGE>7
"The shares represented by this certificate are also subject to
certain restrictions on transfer contained in the Certificate of
Incorporation of the Company. Copies of the Certificate of
Incorporation of the Company are on file with the Secretary of the
Company at 165 Mason Street, Greenwich, Connecticut 06830, and will
be furnished to the holder of this certificate upon written request
to the Secretary of the Company at such address."
SECTION 6. Indemnification. (a) Subject to the limitations and
conditions set forth in this Agreement and notwithstanding the delivery of the
Shares and regardless of any investigation at any time made by or on behalf of
the Interlaken Partnership or of any knowledge or information that the
Interlaken Partnership may have, the Company hereby indemnifies and agrees to
fully defend, save and hold the Interlaken Partnership harmless if such party
shall at any time or from time to time suffer any Loss arising out of or
resulting from, or shall pay or become obligated to pay any sum on account of,
any and all Events of Breach (as defined below) of the Company.
(b) Subject to the limitations and conditions set forth in this
Agreement and notwithstanding the payment of the Purchase Price and regardless
of any investigation at any time made by or on behalf of the Company or of any
knowledge or information that the Company may have, the Interlaken Partnership
indemnifies and agrees to fully defend, save and hold the Company harmless if
the Company shall at any time or from time to time suffer any Loss arising out
of or resulting from, or shall pay or become obligated to pay any sum on
account of, any and all Events of Breach (as defined below) of the Interlaken
Partnership.
(c) As used herein, "Event of Breach" shall be and mean any one or
more of the following:
(i) any untruth or inaccuracy in any representation by a party
hereto or the breach of any warranty by a party contained, or with
respect to the Company referenced, in this Agreement; or
(ii) any failure by a party hereto duly to perform or observe
any term, provision, covenant, agreement or condition on the part of such
party to be performed or observed under this Agreement.
(d) The obligation of the Company to indemnify the Interlaken
Partnership pursuant to subsection (a) above with respect to Events of Breach
set forth in subsection (c)(i) shall
<PAGE>8
survive as set forth in Section 8.3(b) of the Purchase Agreement. The
obligation of the Interlaken Partnership to indemnify the Company pursuant to
subsection (b) above with respect to Events of Breach set forth in subsection
(c)(i) shall survive until December 31, 1996, except that the representations
and warranties contained in Section 4(b), 4(d) and 4(e) shall survive
indefinitely. The obligations of the Company and the Interlaken Partnership
to indemnify each other for Events of Breach set forth in Subsection (c)(ii)
shall survive indefinitely.
(e) The notice and claim procedures to be followed by the parties
hereto shall be the same notice and claim procedures as set forth in Section
8.2 of the Purchase Agreement. In no event shall the liability of the
Interlaken Partnership, taken as a whole, to the Company, or the Company to
the Interlaken Partnership, taken as a whole, exceed the Purchase Price.
SECTION 7. Notices. (a) All communications under this Agreement
shall be in writing and shall be delivered by hand, by facsimile or by
overnight courier or by registered or certified mail, postage prepaid: (i) if
to the Company, at 165 Mason Street, Greenwich, Connecticut 06830, Attention:
William L. Mahone, facsimile number (203) 629-8554, or at such other address
as the Company may have furnished to the Interlaken Partnership in writing;
and (ii) if to the Interlaken Partnership, at 165 Mason Street, Greenwich, CT
06830, Attention: Andrew M. Bursky, facsimile number (203) 629-8554, or at
such other address as the Interlaken Partnership may have furnished to the
Company in writing.
(b) Any notice so addressed shall be deemed to be given: if
delivered by hand or by facsimile, on the date of such delivery, in the case
of notices by facsimile, subject to telephonic confirmation of receipt; if
mailed by courier, on the first business day following the date of such
mailing; and if mailed by registered or certified mail, on the third business
day after the date of such mailing.
SECTION 8. Fees and Expenses. Except as otherwise expressly
provided in this Agreement, all costs, fees and expenses incurred in
connection with this Agreement ("Costs") shall be paid by the party incurring
such Costs.
SECTION 9. Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person.
<PAGE>9
SECTION 10. Entire Agreement. This Agreement, together with the
exhibits and schedules hereto, represents the entire agreement and
understanding of the parties with reference to the transactions set forth
herein and no representations or warranties have been made in connection with
this Agreement other than those expressly set forth herein or in the exhibits,
schedules or certificates delivered in accordance herewith. This Agreement
supersedes all prior negotiations, discussions, correspondence,
communications, understandings and agreements between the parties relating to
the subject matter of this Agreement, all of which are merged into this
Agreement.
SECTION 11. Waivers and Amendments. The Interlaken Partnership and
the Company may by written notice to the other (i) extend the time for the
performance of any of the obligations or other actions of the other; (ii)
waive any inaccuracies in the representations or warranties of the other
contained in this Agreement; (iii) waive compliance with any of the covenants
of the other contained in this Agreement; (iv) waive performance of any of the
obligations of the other created under this Agreement; or (v) waive
fulfillment of any of the conditions to its own obligations under this
Agreement, provided, however, that no such arrangement shall: (a) reduce the
number of Shares to be issued to the Interlaken Partnership hereunder; (b)
increase the price payable for such Shares; or (c) expand the representations,
warranties, covenants and agreements of the Interlaken Partnership hereunder,
in each case without the consent of the Interlaken Partnership. The waiver by
any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach, whether or not
similar. This Agreement may be amended, modified or supplemented only by a
written instrument executed by the parties hereto.
SECTION 12. Severability. This Agreement shall be deemed
severable, and the invalidity or unenforceability of any term or provision
hereof shall not affect the validity or enforceability of this Agreement or of
any other term or provision hereof.
SECTION 13. Titles and Headings. The titles and headings
contained in this Agreement are solely for convenience of reference and shall
not affect the meaning or interpretation of this Agreement or of any term or
provision hereof.
SECTION 14. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original and all of
which together shall be considered one and the same agreement.
<PAGE>10
SECTION 15. Enforcement of the Agreement. The parties hereto agree
that irreparable damage would occur if any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereto, this being in addition to any
other remedy to which they are entitled at law or in equity.
SECTION 16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW PROVISIONS THEREOF.
SECTION 17. Binding Effect. This Agreement shall inure to the
benefit of and be binding upon each of the parties hereto and their respective
successors, heirs, executors, personal representatives, administrators,
distributees, devisees, legatees and, subject to the provisions hereof,
assigns.
<PAGE>11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
GEV CORPORATION
By:/s/ Catherine B. James
Name: Catherine B. James
Title: President
INTERLAKEN INVESTMENT PARTNERS L.P.
By: INTERLAKEN MANAGEMENT
PARTNERS, L.P.
General Partner
By: LAKE MANAGEMENT, INC.
General Partner
By:/s/ William R. Berkley
Name: William R. Berkley
Title: Chairman
<PAGE>12
EXHIBIT A PROVIDED SEPARATELY
<PAGE>13
EXHIBIT B
Definition of Accredited Investor
Rule 501(a) promulgated under the Securities Act as
amended (the "Act") , provides as follows:
"Accredited Investor" shall mean any person who comes within any of
the following categories, or who the issuer reasonably believes comes within
any of the following categories, at the time of the sale of the securities to
that person:
(1) Any bank as defined in section 3(a)(2) of the Securities Act,
or any savings and loan association or other institution as defined in
section 3(a)(5)(A) of the Securities Act whether acting in its individual
or fiduciary capacity; any broker or dealer registered pursuant to
section 15 of the Exchange Act; any insurance company as defined in
section 2(13) of the Securities Act; any investment company registered
under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that Act; any Small Business
Investment Company licensed by the U.S. Small Business Administration
under section 301(c) or (d) of the Small Business Investment Act of 1958;
any plan established and maintained by a state, its political
subdivisions or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit plan within the
meaning of the Employee Retirement Income Security Act of 1974 if the
investment decision is made by a plan fiduciary, as defined in Section
3(21) of such act, which is either a bank, savings and loan association,
insurance company, or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a self-
directed plan, with investment decisions made solely by persons that are
accredited investors;
(2) Any private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940;
(3) Any organization described in section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000;
(4) Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any director,
executive officer, or general partner of a general partner of the issuer;
(5) Any natural person whose individual net worth or joint net
worth with that person's spouse, at the time of his purchase exceeds
$1,000,000;
<PAGE>13
(6) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current
year;
(7) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered,
whose purchase is directed by a sophisticated person as described in
section 230.506(b)(2)(ii); and
(8) Any entity in which all of the equity owners are accredited
investors.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet, income statement, cash flow and capital statement of Pioneer
Companies, Inc. and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 458
<SECURITIES> 0
<RECEIVABLES> 600
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1058
<PP&E> 33
<DEPRECIATION> (13)
<TOTAL-ASSETS> 1078
<CURRENT-LIABILITIES> 432
<BONDS> 0
<COMMON> 1951
0
0
<OTHER-SE> (1305)
<TOTAL-LIABILITY-AND-EQUITY> 1078
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> (152)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (152)
<INCOME-TAX> 0
<INCOME-CONTINUING> (152)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (152)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
