WACO
CONSENT
and
WAIVER
and
AMENDMENT
Dated as of January 31, 2000
under
CREDIT AGREEMENT
Dated as of March 12, 1997
PENNCORP FINANCIAL GROUP, INC., a Delaware corporation (the "Company"), the
lenders signatory to the Credit Agreement referred to below that are parties
hereto, the Managing Agents and the Co-Agents named therein (the "Agents") and
THE BANK OF NEW YORK, as administrative agent for the Banks (the "Administrative
Agent"), hereby agree as follows (with certain terms used herein being defined
in, or incorporated by reference pursuant to, Section 2 hereof):
1. CREDIT AGREEMENT. (a) Reference is hereby made to the Credit Agreement,
dated as of March 12, 1997, among the Company, the Banks, the Agents and the
Administrative Agent (as amended, modified or waived prior to the date hereof,
the "Credit Agreement").
2. DEFINITIONS. (a) All terms defined in the Credit Agreement are used
herein with the meanings therein ascribed to them.
(b) For purposes of this Consent:
"AMERICAN-AMICABLE" means American-Amicable Holdings Corporation, a
Delaware corporation.
"AMERICAN-AMICABLE BALANCE SHEET" means the balance sheet of
American-Amicable attached hereto as Exhibit A.
"CHAPTER 11 CASE" has the meaning assigned to it in Section 4(c).
"EXECUTIVE EMPLOYMENT AGREEMENT" shall mean the (i) Employment Agreement
dated January 28, 2000 between the Company and Xxxxx Xxxx, (ii) Employment
Agreement dated January 28, 2000 between the Company and Xxxxx Xxxxxxxxx, and
(iii) Employment
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Agreement dated January 28, 2000 between the Company and Xxxxx XxXxxxxxx, in
each case, as amended and as in effect on the Waco Consent Effective Date.
"PIONEER LIFE" means Pioneer Security Life Insurance Company, a Texas
insurance company.
"PIONEER LIFE BALANCE SHEET" means the balance sheet of Pioneer Life
attached hereto as Exhibit B.
"SPECIFIED TRANSACTION" shall mean the Transactions numbered 1 and 4 on
Schedule 1 hereto.
"SWISS RE SALE CONTRACT" means the Stock Purchase Agreement, dated January
7, 2000, between Reassure America Life Insurance Company, an Illinois insurance
company, and the Company, as such form may be AMENDED OR MODIFIED FROM TIME TO
TIME AFTER THE SWISS RE CONSENT EFFECTIVE DATE, PROVIDED, that any such
amendment or modification was, in the sound business judgment of the Company and
its Board of Directors, in the BEST INTERESTS OF THE COMPANY, AND, PROVIDED,
FURTHER, that any such amendment or modification of Section 2.1 of the Swiss Re
Sale Contract, which reduces the total consideration payable to the Company, was
consented to in writing by the Majority Bank except for any amendment or
modification to allow for the assumption of transaction bonuses in an amount not
greater than $1,400,000.
"TRANSACTION" means a transaction listed on Schedule 1.
"TRANSFER" means a transfer, as a repayment of Indebtedness, a dividend, or
a capital CONTRIBUTION, OF PROPERTY UNDER A TRANSACTION. "TRANSFER", when used
as a verb, has a correlative meaning.
"TRANSFEROR" means a Person that Transfers any Property in a Transaction.
"WACO CASH PROCEEDS" has the meaning assigned to it in Section 7(a).
"WACO CONSENT EFFECTIVE DATE" means the date on which each of the
conditions specified in Section 8 hereof shall have been fulfilled.
"WACO SALE CONTRACT" means the (a) Stock Purchase Agreement, dated January
8, 2000, between Pioneer-Occidental Holdings Company, a Delaware corporation,
and American-Amicable, in the form attached hereto as Exhibit C, as such form
may be amended or modified from time to time after the Waco Consent Effective
Date, PROVIDED, that such amendment or modification was, in the sound business
judgment of the Company and its Board of DIRECTORS, IN THE BEST INTERESTS OF THE
COMPANY, AND, PROVIDED, FURTHER, that any amendment or modification of Section
2.2 of the Waco Sale Contract, which reduces the total consideration to be paid
to American-Amicable and its Subsidiaries, was consented to in writing by the
Majority Banks, except for any amendment or modification to allow for the
assumption of transaction bonuses in an amount not greater than $400,000, and
(b) Transactions related thereto.
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3. CONSENT. (a) Upon the Waco Consent Effective Date, the Majority Banks
hereby consent, under the sections of the Credit Agreement and to the extent
specified in Section 3(b) hereof, to the consummation of the Transactions.
(b) The consent under Section 3(a) is limited to Sections 8.06(b) and (c),
8.08(b), 8.15, 8.17, 8.18, 8.21(b), 8.22, 8.23, 8.24 and 8.29 of the Credit
Agreement, and then only to the extent necessary to avoid a violation of such
Section or Sections as may be applicable to such Transfer.
4. WAIVERS. (a) The Majority Banks hereby waive compliance with Section
8.06(c) of the Credit Agreement to the extent that any non-compliance results
solely from the sale of Property pursuant to the Waco Sale Contract, and the
Security Interest in such Property shall be deemed to have been released upon
the receipt by the Administrative Agent of the Waco Cash Proceeds (as defined in
Section 7(a) hereof).
(b) The Majority Banks hereby waive the application of and the Company's
obligation to comply with Section 2.04(b) of the Credit Agreement; provided that
the waiver granted in this Section 4(b) shall cease to be effective, and Section
2.04(b) shall thereupon again be effective, if the Swiss Re Sale Contract is
terminated pursuant to Section 9.2(b)(i) thereof; and
(c) The Majority Banks hereby waive the Event of Default under Section 9(g)
of the Credit Agreement to the extent that such Event of Default results from
and only from (a) the resolution by the Company's Board of Directors determining
to file a petition commencing a case (the "Chapter 11 Case") under Chapter 11 of
Title 11 of the United States Code, as contemplated by the Swiss Re Sale
Contract, and (b) the Company's actions (other than the actual filing of such a
petition) in furtherance of such a filing (whether taken before or after such
resolution). The Majority Banks expressly do not waive the Event of Default
under Section 9(g) of the Credit Agreement to the extent that such an Event of
Default results from the filing by the Company of a petition commencing the
Chapter 11 Case.
(d) The Majority Banks hereby waive until February 11, 2000 any
non-compliance by the Company with Sections 8.10, 8.11, 8.12 and 8.13, to the
extent that such non-compliance results from and solely from the Transactions
and the sale of Property pursuant to the Waco Sale Contract.
5. (a) AMENDMENTS TO THE CREDIT AGREEMENT. Upon and after the Waco Consent
Effective Date, the Credit Agreement shall be amended as follows:
(i) Section 1.01 is hereby amended (A) to add, in alphabetical order, the
following new definition:
"FORBEARANCE AGREEMENT" means, when and if the same becomes effective, the
Forbearance Agreement among American-Amicable Holdings Corporation, Southwestern
Financial Corporation, Southwestern Financial Services Corporation, PennCorp
Occidental Corp., KB Investment L.L.C., KB Management L.L.C., the Banks that are
signatories thereto, the Agents and the Administrative Agent and Collateral
Agent in the form attached hereto as Exhibit D, with such changes thereto as may
have been approved in writing by the Majority Banks.
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(B) to amend the following existing definition to read as follows:
"LOAN DOCUMENTS" shall mean (i) this Agreement and the Notes and, from and
after the execution and delivery thereof by each Securing Party, the Security
Agreements, (ii) the Forbearance Agreement and (iii) all other agreements,
documents and instruments with, for the benefit of or in favor of the
Administrative Agent or any Bank, relating to, arising out of, delivered
pursuant to or in any way connected with (A) any agreement, document or
instrument referred to in clause (i) or clause (ii) or (B) any of the
transactions contemplated by any agreement, document or instrument referred to
in clause (i) or clause (ii).
(B) AMENDMENTS TO THE SECURITY AGREEMENTS. Upon and after the Waco Consent
Effective Date, Section 4.01(c) of each of the Security Agreements (as defined
in the Credit Agreement) shall be amended to read as follows:
"(C) SALE OF COLLATERAL. Except during the continuance of an Event of
Default, the Company may, solely to the extent permitted by the Loan Documents,
sell or otherwise dispose of the Collateral."
6. REPRESENTATIONS AND WARRANTIES. In order to induce the Majority Banks to
grant the consents, releases and waiver effected hereunder, the Company hereby
represents and warrants as follows:
(a) The Company has the power, and has taken all necessary action
(including, if a corporation, any necessary stockholder action) to authorize it,
to execute, deliver and perform in accordance with its terms this Consent. This
Consent has been duly executed and delivered by the Company and is a legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally, whether at law or in equity
(including principles of good faith and fair dealing). The execution, delivery
and performance in accordance with its respective terms by the Company of this
Consent do not and (absent any change in any Applicable Law or applicable
Contract) will not (i) require any Governmental Approval or any other consent or
approval (including any consent or approval of the stockholders of the Company)
to have been obtained by the Company or any of its Affiliates, other than
Governmental Approvals and other consents and approvals that have been obtained,
are final and not subject to review on appeal or to collateral attack, are in
full force and effect, or (ii) violate, conflict with, result in a breach of,
constitute a default under, or result in or require the creation of any Lien
(other than the Security Interest) upon any assets of any such Person under, (A)
any Contract to which any such Person is a party or by which any such Person or
any of its properties may be bound or (B) any Applicable Law.
(b) (i) The copy of the Waco Sale Contract attached as Exhibit C hereto (i)
is in substantially the form approved by the Company's Board of Directors at the
meeting of the Board of Directors of the Company held on January 6, 2000, (ii)
is in the form executed by the parties thereto, and (iii) has not been
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amended or modified subsequent to its having been furnished to the
Administrative Agent and prior to the Waco Effective Date, except by amendments
and modifications of which the Administrative Agent have been furnished copies.
(ii) The copies of the Executive Employment Agreements attached hereto in
the respective forms of Exhibits X-0, X-0 and D-3 are in the forms in which such
Contracts exist on the Waco Consent Effective Date.
(c) (i) Either (A) each Transferor will, under its Transfer, receive not
less than the reasonable equivalent Value of the assets being Transferred by it
thereunder, or (B) both before and after giving effect to each Transaction (1)
both the Fair Value and the Present Fair Saleable Value of the remaining assets
of the Transferor transferring assets thereunder will be greater than the total
amount of such Transferor's Debts, (2) the Present Fair Saleable Value of the
remaining assets of such Transferor will exceed the amount that will be required
to pay the probable liability of such Transferor's on its Debts as they become
absolute and mature and (3) such Transferor (aa) will be able to realize upon
its assets and pay its Debts as they mature in the normal course of business,
and (bb) will not be engaged in a business or a transaction, nor be about to
engage in a business or a transaction, (I) for which its property would
constitute unreasonably small capital or (II) in relation to which its assets
would be unreasonably small;
(ii) Each Transferor transferring assets under a Transaction, at the time
of such transfer, (A) will not intend to or believe that it will incur Debts
that will be beyond its ability to pay as such Debts mature and (B) will not
intend, in consummating such Transaction, to hinder, delay or defraud either
present or future creditors or any other Person to which any of its Debts is or
will become owing.
(iii) As used herein, "Value" means (A) "value" as defined under Section
548(d)(2)(A) of the Bankruptcy Code; (B) "fair consideration" within the meaning
of Section 3 of the Uniform FRAUDULENT CONVEYANCE ACT AND (C) "VALUE" WITHIN THE
MEANING OF THE UNIFORM FRAUDULENT TRANSFER ACT; "DEBT" means any Liability that
constitutes "debt" or "Debt" under Section 101(11) of the Bankruptcy Code or
under the Uniform FRAUDULENT CONVEYANCE ACT, THE UNIFORM FRAUDULENT TRANSFER ACT
OR ANY ANALOGOUS APPLICABLE LAW; "FAIR VALUE" means, with respect to any asset,
the amount that an independent willing buyer would pay an independent willing
seller for such asset on a going concern basis, each having reasonable knowledge
of the relevant facts and neither being under any compulsion to act, but with
the transaction to be consummated within one year; and "PRESENT FAIR SALEABLE
VALUE" means, with respect to any asset, the amount that an independent willing
buyer would pay an independent willing seller for such asset on a going concern
basis, each having reasonable knowledge of the relevant facts and neither being
under any compulsion to act, but with the transaction to be consummated within
six months.
(d) Each of the American-Amicable Balance Sheet and the Pioneer Life
Balance Sheet presents fairly, in all material respects, in accordance with
GAAP, the respective financial positions of American-Amicable and Pioneer Life
at their respective dates, and except as disclosed or reflected in such
financial statements, as at the Waco Consent Effective Date, neither such Person
had any Liability, contingent or otherwise, or any unrealized or anticipated
loss, that, singly or in the aggregate, has had or might have a Material Adverse
Effect on such Person.
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(e) Each of the foregoing representations and warranties shall constitute
representations and warranties subject to Section 9(d) of the Credit Agreement
and shall be made at and as of the Waco Consent Effective Date and, in the case
of the representations and warranties made pursuant to Section 6(c), at and as
of the time of each Transaction.
7. EVENTS OF DEFAULT. Each of the following shall, for all purposes of the
Credit Agreement and Security Agreements constitute an Event of Default (in
addition to any Event of Default set forth in such agreements), whatever the
reason for such event and whether it shall be voluntary or involuntary, or
within or without the control of the Company, any Subsidiary or any other Loan
Party, or be effected by operation of law or pursuant to any judgment or order
of any court or any order, rule or regulation of any governmental or
nongovernmental body:
(a) contemporaneously with the Closing (as that term is defined in the Waco
Sale Contract) American-Amicable shall not have paid to the Administrative
Agent, by wire transfer to a specified account with The Bank of New York (such
account to be specified to American-Amicable no later than two (2) Business Days
prior to the Closing), the net cash proceeds due pursuant to the Waco Sale
Contract, minus the deductions identified in Schedule 2 hereto, in a total
amount of not less than $95,000,000 (the "Waco Cash Proceeds"), such amount to
be applied first to interest which is then due and payable and then to the
payment of principal amount of the Loans; PROVIDED that it is understood that
Transaction number 2 on Schedule 1 hereto is not a part of the Waco Cash
Proceeds from the Waco Sale Contract;
(b) any representation and warranty made under Section 5 hereof shall at
any time prove to have been incorrect or misleading in any material respect at
any time when such representation and warranty was made;
(c) any Property that is (i) the subject of a Specified Transaction, (ii)
Collateral under a Security Agreement under which the Person receiving such
Property is the Pledgor, and (iii) of a type with respect to which the
applicable Security Interests may be perfected by possession, shall not have
been delivered to the applicable Secured Party within four Business Days of its
receipt, endorsed in blank if such Property is an instrument, or accompanied by
appropriate blank stock or bond powers, if such Property is a certificated
security, in each case after the completion of the Specified Transaction to the
extent the same is not disposed of pursuant to the Waco Sale Contract; or
(d) The Waco Sale Contract shall be terminated by the Company for any
reason other than in connection with the Company's acceptance of a Superior
Proposal (as defined in the Waco Sale Contract) to which the Majority Banks have
consented.
8. CONDITIONS TO EFFECTIVENESS. This Consent shall be effective as of the
date first written above, but shall not become effective as of such date until
the time as:
(a) this Consent has been executed and delivered by the Company, the
Majority Banks and the Administrative Agent;
(b) all amounts payable pursuant to Section 11.03 of the Credit Agreement
for which invoices have been delivered to the Company on or prior to such date,
have been paid in full; and
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(c) the Administrative Agent shall have received a copy of the no action
letters of the Texas Department of Insurance with respect to the transfer of
$20,400,000 in the aggregate, to the Company.
9. TERMINATION OF COMMITMENTS; ACCELERATION OF LOAN. (a) Simultaneously
with the payment to the Administrative Agent contemplated by Section 7(a), the
Commitments shall be terminated in full, and this Section 9(a) shall be deemed
to be a notice of termination that complies with the provisions of Sections 2.04
and 4.05 of the Credit Agreement.
(b) Simultaneously with the payment to the Administrative Agent
contemplated by Section 7(a), the Loans (a) shall be deemed to have become due
in the amount of such payment, and this Section 9(b) shall be deemed to be a
notice of prepayment, that complies with Sections 3.03(a) and 4.05 of the Credit
Agreement.
10. GOVERNING LAW. This Consent shall be governed by, and construed in
accordance with, the law of the State of New York.
11. COUNTERPARTS. This Consent may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Consent by signing any
such counterpart.
[REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK)
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IN WITNESS WHEREOF, the parties hereto have caused this Waco Consent to
be duly executed as of the day and year first above written.
PENNCORP FINANCIAL GROUP, INC.
By: /s/Xxxxx X. Xxxxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Executive Vice President
THE BANK OF NEW YORK, as
Administrative Agent, Collateral Agent and
as a Bank
By: /s/Xxxxx X. Xxxx
--------------------------------------
Name: Xxxxx X. Xxxx
Title: Vice President
THE CHASE MANHATTAN BANK, as a Managing
Agent and as a Bank
By: /s/Xxxxx X. Xxxxx
--------------------------------------
Name: Xxxxx X. Xxxxx
Title: M.D.
BANK OF AMERICA, N.A., formerly known as
Nations Bank, N.A., as a Managing
Agent and as a Bank
By: /s/Xxxxxxx X. Xxxxxxxxxxx XX
--------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx XX
Title: Managing Director
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FLEET NATIONAL BANK, as a
Co-Agent and as a Bank
By: /s/Xxxxxx X. Xxxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: SVP
MELLON BANK, N.A., as a Co-Agent
and as a Bank
By: /s/Xxxx X. Xxxx
--------------------------------------
Name: Xxxx X. Xxxx
Title: First Vice President
BANK OF MONTREAL, as a Co-Agent
and as a Bank
By: /s/Xxxxxx X. XxXxxx
--------------------------------------
Name: Xxxxxx X. XxXxxx
Title: Director
CIBC INC., as a Co-Agent and as a Bank
By: /s/ Xxxxxx Xxxxxxx
--------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Executive Director
CIBC World Markets Corp,
as Agent
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES, as a Co-Agent
and as a Bank
By: /s/Xxxxxxx X. Xxxxxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Senior Vice President
By: /s/Xxxxxx X. Xxxxxxxx, XX
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx, XX
Title: Assistant Vice President
FIRST UNION NATIONAL BANK
By: /s/Xxxxxx X. Xxxxxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxxxxx
Title: Senior Vice President
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BEAR XXXXXXX & CO., INC.
By: /s/Xxxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Senior Managing Director
DK ACQUISITION PARTNERS, L.P.
By: /s/Xxxxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: General Partner
ING (U.S.) CAPITAL CORPORATION
By: /s/Xxxx Xxxxxxxx
--------------------------------------
Name: Xxxx Xxxxxxxx
Title: Senior Associate
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Schedule 1
TRANSACTIONS
1. The dividend and partial payment of interest on its Surplus Note by
Pioneer Security Life Insurance Company ("Pioneer Life") to American-Amicable of
all of the issued and outstanding shares of the capital stock of Occidental Life
Insurance Company of North Carolina, a Texas insurance corporation
("Occidental").
2. The dividend by Pioneer Life to American-Amicable of its capital
and surplus in excess of $1,200,000.
3. The purchase by American-Amicable from A-A Texas and Pioneer
American Life Insurance Company ("Pioneer American"), of all of the issued and
outstanding shares of Preferred Stock of Southwestern Financial Corporation, a
Delaware corporation (the "SFC Stock") owned by each of A-A Texas and Pioneer
American.
4. The dividend by American-Amicable of cash and the SFC Stock to the
Company.