EXECUTION COPY
SWISS RE
CONSENT
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. 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.
"Pacific Life" means Pacific Life and Accident Insurance Company, a Texas
insurance company.
"Pacific Life Balance Sheet" means the balance sheet of Pacific Life,
attached hereto as Exhibit B.
"Pioneer Life" means Pioneer Security Life Insurance Company, a Texas
insurance company.
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"Pioneer Life Balance Sheet" means the balance sheet of Pioneer Life
attached hereto as Exhibit C.
"Security Life" shall mean Security Life and Trust Insurance Company, a
Texas insurance company.
"Southwestern Financial" shall mean Southwestern Financial Corporation, a
Delaware corporation.
"Southwestern Life" shall mean Southwestern Life Insurance Company, a Texas
insurance company.
"Specified Transaction" shall mean the Transactions numbered 4, 6, 12 and
13 on Schedule 1 hereto.
"Swiss Re Consent Effective Date" means the date on which the condition
specified in Section 7 hereof shall have been fulfilled.
"Swiss Re Sale Contract" means the (a) Stock Purchase Agreement, dated
January 7, 2000, between Reassure America Life Insurance Company, an Illinois
insurance company, and the Company, in the form attached hereto as Exhibit D, 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 Banks, except for any amendment or modification to allow for the
assumption of transaction bonuses in an amount not greater than $1,400,000, and
(b) the Transactions related thereto.
"Transaction" means a transaction listed on Schedule 1.
"Transfer" means a transfer, whether as a payment, a dividend, a capital
contribution or otherwise, 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 Consent" means the Waco Consent and Waiver and Amendment, dated as of
January 31, 2000 under the Credit Agreement.
3. Consent. (a) Upon the Swiss Re 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 (i) the consummation of the
Transactions and (ii) to the release from any applicable Security Interest of
the Properties that are the subjects of such Transactions.
(b) The consent under Section 3(a)(i) is limited to Sections 8.06(b) and
(c), 8.08, 8.15, 8.17, 8.18, 8.21, 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 of
such Section or Sections as may be applicable
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to such Transfer, and the release under Section 3(a)(ii) is limited to the
Properties that are the subjects of the Transactions.
4. Waiver. 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.
5. 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) The copy of the Swiss Re Sale Contract attached as Exhibit D 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 amended
or modified subsequent to its having been furnished to the Administrative Agent
and prior to the Swiss Re Effective Date, except by amendments and modifications
of which the Banks have been furnished copies.
(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
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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 Section 3 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 Swiss Re 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.
(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 Swiss Re Consent Effective Date and, in the
case of the representations and warranties made pursuant to Section 5(c), at and
as of the time of each Transaction.
6. Events of Default. Each of the following shall, for all purposes of the
Credit Agreement and the Security Agreement, constitute an Event of Default (in
addition to any Event of Default set forth in such agreement), 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) 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;
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(b) 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 two 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 sold pursuant to the Swiss Re Contract.
7. Condition 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; and
(b) the Waco Consent shall have been executed and delivered by the Company,
the Majority Banks and the Administrative Agent.
8. Governing Law. This Consent shall be governed by, and construed in
accordance with, the law of the State of New York.
9. 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 Swiss Re Consent to
be duly executed as of the day and year first above written.
PENNCORP FINANCIAL GROUP, INC.
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: EVP
THE BANK OF NEW YORK, as Administrative
Agent, Collateral Agent and as a Bank
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President
THE CHASE MANHATTAN BANK, as a Managing
Agent and as a Bank
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
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/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇
Title: Managing Director
FLEET NATIONAL BANK, as a
Co-Agent and as a Bank
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: SVP
MELLON BANK, N.A., as a Co-Agent
and as a Bank
By: /s/▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: First Vice President
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BANK OF MONTREAL, as a Co-Agent
and as a Bank
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Director
CIBC INC., as a Co-Agent and as a Bank
By: /s/▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Assistant Vice President
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇
Title: Assistant Vice President
FIRST UNION NATIONAL BANK
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
BEAR ▇▇▇▇▇▇▇ & CO., INC.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Managing Director
DK ACQUISITION PARTNERS, L.P.
By: ▇.▇. ▇▇▇▇▇▇▇▇ & Co.,
its General Director
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: General Partner
ING (U.S.) CAPITAL CORPORATION
By: /s/▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Senior Associate
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Schedule 1
TRANSACTIONS
1) The transfer by Pioneer Life of the shares of Security Life to
American-Amicable as a dividend and a repayment on its Surplus Note.
2) The transfer by Security Life of its note from American-Amicable to
American-Amicable.
3) The transfer by American-Amicable of the shares of Security Life to the
Company as a dividend.
4) The transfer by Security Life of the preferred shares of Southwestern
Financial to the Company.
5) The transfer by the Company of the shares of Security Life to Pacific Life
in return for a Surplus Note of approximately $35,000,000 (the "PLAIC
Note") and a capital contribution by the Company to Pacific Life of
approximately $56,000,000.
6) The transfer by the Company of the PLAIC Note to Southwestern Financial.
7) The dividend by Southwestern Life of its note from American-Amicable to
Pacific Life for an approximate value of $15,300,000 (the
"American-Amicable Note").
8) The transfer by Pacific Life of the American-Amicable Note to Southwestern
Financial as partial repayment of its Surplus Note.
9) The transfer by Southwestern Financial of the American-Amicable Note to the
Company as a dividend.
10) The cancellation by the Company of the American-Amicable Note (and all
other notes made by American-Amicable and held by the Company) as a capital
contribution by the Company to American-Amicable.
11) The repayment by Pacific Life of its Surplus Note to Southwestern Financial
by transferring the Common Stock of Southwestern Life to Southwestern
Financial.
12) The dividend by Southwestern Financial of the common stock of Southwestern
Life to the Company.
13) The transfer by Pacific Life of the shares of Security Life as a dividend
to the Company.
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