<PAGE> 1
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: January 13, 1998
PENNCORP FINANCIAL GROUP, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
1-11422 13-3543540
- ----------------------------- -----------------------------
(Commission File Number) (I.R.S. Employer
Identification Code)
590 MADISON AVENUE, NEW YORK, NEW YORK 10022
- ---------------------------------------- --------------------------------
(Address of Principal Executive Offices) (Zip Code)
(212) 896-2700
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
<PAGE> 2
Page 2 of 6
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 2, 1998, PennCorp Financial Group, Inc. (the "Company" or
"PennCorp"), acquired all the outstanding Common Stock and Common Stock Warrants
(the "SW Financial Controlling Interest") of Southwestern Financial Corporation,
a Delaware corporation ("SW Financial"), not currently owned by the Company from
the Knightsbridge Capital Fund I, L.P. (the Knightsbridge Fund"), David J.
Stone, Chairman and Chief Executive Officer of PennCorp ("Stone") and Steven W.
Fickes, President and Chief Financial Officer of PennCorp ("Fickes") for
$73,777,495.61 in cash (excluding expenses) (the "Base Purchase Price").
However, if the amended stipulation of settlement of the pending
shareholder derivative suits relating to the SW Financial investment, initiated
against the Company and the members of the PennCorp Board of Directors ("Amended
Proposed Settlement"), is not approved by the Delaware Chancery Court, Stone and
Fickes will retain their SW Financial warrants and will receive their portion of
the increased consideration for the SW Financial Controlling Interest and the
Company will purchase the SW Financial Controlling Interest for approximately
$77,444,000 (the "Revised Base Purchase Price").
In addition, if, during the 12 months ending November 25, 1998, the
Company enters into a definitive agreement to sell SW Financial (directly or in
connection with a sale of the Company or its assets substantially as a whole),
or its constituent parts, the Company will pay the holders of the SW Financial
Controlling Interest, including Stone and Fickes, a one-time "price protection"
payment.
<PAGE> 3
Page 3 of 6
The Company borrowed funds under its revolving credit agreement with The
Bank of New York as Administrative Agent (i) to fund the purchase price for the
SW Financial Controlling Interest, (ii) to make required capital contributions
to SW Financial which, in turn, used such proceeds to repay in full its Senior
Bank Credit Facility.
Complete information relating to the acquisition by PennCorp of the SW
Financial Controlling Interest appears in the Company's Proxy Statement
relating to its Annual Meeting of Stockholders held on December 31, 1997 as
filed with the Securities and Exchange Commission on December 2, 1997, and is
incorporated in this Form 8-K by reference.
<PAGE> 4
Page 4 of 6
ITEM 5. OTHER EVENTS
The Company held its Annual Meeting of Stockholders on December 31, 1997
(the "Annual Meeting"). At the Annual Meeting, Stockholders approved, among
other proposals, the purchase by the Company of all the outstanding common stock
and common stock warrants of Southwestern Financial Corporation not already
owned by the Company, and the purchase by the Company of the Fickes and Stone
Knightsbridge Interests. Such purchases were consummated on January 2, 1998 and
January 5, 1998, respectively. For further information relating to the
acquisition by the Company of the SW Financial Controlling Interest and the
Fickes and Stone Knightsbridge Interests, please refer to the Company's Proxy
Statement relating to its Annual Meeting of Stockholders held on December 31,
1997 as filed with the Securities and Exchange Commission on December 2, 1997,
which is incorporated in this Form 8-K by reference.
<PAGE> 5
Page 5 of 6
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
The audited consolidated balance sheet of Southwestern Financial
Corporation and Subsidiaries as of December 31, 1996, and the related
consolidated statements of income, stockholders' equity, and cash flows
for the year ended December 31, 1996 (As Restated), and the unaudited
consolidated balance sheet of Southwestern Financial Corporation and
Subsidiaries as of December 31, 1995 (As Restated), the Notes thereto
and the Independent Auditors' Report with respect thereto appear as
Exhibit 99.5 to the Company's Current Report on Form 8-K dated November
14, 1997 as filed with the Securities and Exchange Commission on
November 14, 1997, and are incorporated in this Form 8-K by reference.
The unaudited consolidated condensed balance sheets as of September 30,
1997 and December 31, 1996 (As Restated) and statements of income for
the three-month periods ended September 30, 1997 and September 30, 1996
(As Restated) and for the nine-month periods ended September 30, 1997
and September 30, 1996 (As Restated) for Southwestern Financial
Corporation and Subsidiaries appear in Footnote 3 to the Notes to
Unaudited Consolidated Condensed Financial Statements of the Company
and its Subsidiaries contained in the Company's Current Report on Form
10-Q for the quarterly period ended September 30, 1997 as filed with
the Securities and Exchange Commission, and are incorporated in this
Form 8-K by reference.
(b) Pro Forma Financial Information.
The unaudited pro forma statements of operations of the Company for the
year ended December 31, 1996 and for the nine months ended September
30, 1997, and the unaudited pro forma balance sheet of the Company as
of September 30, 1997 and the Notes thereto, which have been prepared
to illustrate the pro forma effects of (i) the sale of 5,131,300 shares
of PennCorp Common Stock in February 1996 and the use of the proceeds
therefrom, (ii) PennCorp's acquisition of United Life & Annuity
Insurance Company on July 24, 1996, including the financing thereof,
(iii) the sale of 2,875,000 shares of PennCorp $3.50 Series II
Convertible Preferred Stock in August 1996 and the use of the proceeds
therefrom, (iv) the March 14, 1997 redemption of the Series B
Redeemable Preferred Stock, (v) consolidation of the results of
operations and financial position of SW Financial due to the
acquisition of the SW Financial Controlling Interest by PennCorp,
including the financing thereof, and (vi) the acquisition of The Fickes
and Stone Knightsbridge Interests, including the financing thereof,
appear on pages 26-36 of the Company's Proxy Statement relating to its
Annual Meeting of Stockholders held on December 31, 1997 as filed with
The Securities and Exchange Commission on December 2, 1997, and are
incorporated in this Form 8-K by reference.
(c) Exhibits.
99.1 Amended and Restated Assignment Agreement dated as of January 2,
1998 by and between PennCorp Financial Group, Inc. and
Knightsbridge Capital Fund I, L.P.
99.2 Amended and Restated Assignment Agreement dated as of January 2,
1998 by and between PennCorp Financial Group, Inc., David J.
Stone, Steven W. Fickes, the Steven Wayne Fickes, Jr. Trust
dated December 21, 1995 and the Kathryn Elizabeth Fickes Trust
dated December 21, 1995.
99.3 Consent of KPMG Peat Marwick LLP.
<PAGE> 6
Page 6 of 6
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, hereunto duly authorized.
PENNCORP FINANCIAL GROUP, INC.
Date: January 13, 1998 /s/Scott D. Silverman
--------------------------------------
Scott D. Silverman
Senior Vice President, General Counsel
and Secretary
<PAGE> 7
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
99.1 Amended and Restated Assignment Agreement dated as of
January 2, 1998 by and between PennCorp Financial Group,
Inc. and Knightsbridge Capital Fund I, L.P.
99.2 Amended and Restated Assignment Agreement dated as of
January 2, 1998 by and between PennCorp Financial Group,
Inc., David J. Stone, Steven W. Fickes, the Steven Wayne
Fickes, Jr. Trust dated December 21, 1995 and the Kathryn
Elizabeth Fickes Trust dated December 21, 1995.
99.3 Consent of KPMG Peat Marwick LLP.
</TABLE>
<PAGE> 1
EXHIBIT 99.1
AMENDED AND RESTATED ASSIGNMENT AGREEMENT
THIS AMENDED AND RESTATED ASSIGNMENT AGREEMENT, dated as of January 2, 1998
("Amended Assignment Agreement") is by and between PennCorp Financial Group,
Inc., a Delaware corporation ("PennCorp") and Knightsbridge Capital Fund I,
L.P., a Delaware limited partnership ("Knightsbridge").
PRELIMINARY STATEMENT
WHEREAS, Knightsbridge owns 2,323,232 shares of Class A common stock, $.01
par value (the "Shares") of Southwestern Financial Corporation (the "Company")
and warrants to purchase 1,151,936 shares of Class A common stock of the Company
(the "Warrants");
WHEREAS, Knightsbridge desires to sell and PennCorp desires to purchase
from the Knightsbridge, the Shares and the Warrants;
WHEREAS, Knightsbridge and PennCorp are parties to an Assignment Agreement,
dated as of January 31, 1997, pursuant to which Knightsbridge agreed to sell,
and PennCorp agreed to buy from Knightsbridge, the Shares and the Warrants; and
WHEREAS, Knightsbridge and PennCorp have agreed to revise the terms on
which the purchase of the Shares and the Warrants shall occur.
NOW THEREFORE, in consideration of the promises and the mutual agreements
set forth below, Knightsbridge and PennCorp hereby agree as follows:
1. (a) If the Closing (as defined in the Transfer Agreement, dated as of
January 31, 1997, among PennCorp, Stone, Fickes and Knightsbridge Capital,
L.L.C.) shall occur, PennCorp hereby agrees to pay Knightsbridge the amount of
$59,973,461.08 (representing the sum of (i) $20.57248 per Share plus (ii)
$10.57248 per Warrant) via wire transfer immediately available funds (the "First
Payment"); provided, however, that if the Closing shall not have occurred on or
before February 28, 1998, the First Payment shall bear interest at the rate of
13% per annum from and including March 1, 1998 through the date of the Closing.
1
<PAGE> 2
(b) Knightsbridge acknowledges and agrees that Stone and Fickes, among
others, are parties to an Amended Stipulation and Agreement of Compromise and
Settlement relating to a proposed settlement (the "Proposed Settlement") of the
shareholder derivative cases styled Tozour Energy Systems Retirement Plan v.
David J. Stone, et al. and PennCorp Financial Group, Inc., C.A. No. 14775, and
Miller v. David J. Stone, et al., C.A. No. 14795, each filed in the Chancery
Court of the State of Delaware. Knightsbridge acknowledges and agrees that if
the Proposed Settlement is approved by the Chancery Court and becomes final and
nonappealable, Stone and Fickes shall reconvey to Southwestern Financial
Corporation ("Southwestern") 335,564 warrants to purchase Class A common stock
of the Company beneficially owned by them for no additional consideration.
Knightsbridge acknowledges and agrees that Southwestern's cancellation of those
warrants will have an impact on the per share price to be paid by PennCorp to
acquire all the outstanding common stock and common stock warrants of the
Company not already owned by it. Accordingly, PennCorp and Knightsbridge agree
that if the Proposed Settlement is approved by Chancery Court and becomes final
and nonappealable, PennCorp shall pay to Knightsbridge the additional sum of
$923,832.56 representing the sum of $.26584 per Share and per Warrant) by wire
transfer of immediately available funds as further payment for the Shares and
Warrants (the "Second Payment"). In addition, if the Second Payment is not made
prior to February 28, 1998, the amount of the Second Payment shall bear interest
at the rate of 13% per annum from and including March 1, 1998 through the date
of payment. However, if the Chancery Court fails to approve the Proposed
Settlement (as currently proposed or as modified), or if the order approving the
Proposed Settlement is vacated, PennCorp shall not be obligated to make the
Second Payment. In that event, however, PennCorp shall be required to pay
interest on the amount of the First Payment at the rate of 13% per annum from
January 1, 1998 through and including the date of the Closing. If required to be
made, the Second Payment will be paid on the third business day following the
earlier of (i) the date on which the Chancery Court disapproves the Proposed
Settlement or (ii) the date on which the order of the Chancery Court approving
the Proposed Settlement shall have been vacated.
(c) As a further inducement to Knightsbridge to sell the Shares and
the Warrants, PennCorp agrees to make the following additional payment to
Knightsbridge, without duplication of any other payment made pursuant to this
paragraph (c), if the circumstances specified below shall occur (each a "Price
Protection Payment"):
2
<PAGE> 3
(A) If during the 12-month period ending November 25, 1998,
PennCorp enters into a definitive agreement to sell all the common
stock of the Company (or all or substantially all the assets of the
Company) for a purchase price (if other than in cash, as determined by
PennCorp's financial advisor and, in any event, calculated on an
enterprise value basis) in excess of $489,580,285.08 then, upon
consummation of the transaction contemplated by such definitive
agreement, PennCorp shall pay to Knightsbridge an amount in cash equal
to (I) the difference between (x) the purchase price paid for the
Company and (y) $489,580,285.08 multiplied by (II) (x) .2603, if the
Proposed Settlement is approved or (y) .2539, if the Proposed
Settlement is not approved;
(B) if during the 12-month period ending November 25, 1998, the
Company enters into a definitive agreement to sell all the common
stock of Southwestern Life Insurance Company (or all or substantially
all the assets of Southwestern Life Insurance Company) for a purchase
price (if other than in cash, as determined by PennCorp's financial
advisor and, in any event, calculated on an enterprise value basis) in
excess of $293,748,171.05 then, upon consummation of the transaction
contemplated by such definitive agreement, PennCorp shall pay to
Knightsbridge an amount in cash equal to (I) the difference between
(x) the purchase price paid for Southwestern Life Insurance Company
and (y) $293,748,171.05 multiplied by (II) (x) .2603, if the Proposed
Settlement is approved or (y) .2539, if the Proposed Settlement is not
approved;
(C) if during the 12-month period ending November 25, 1998, the
Company enters into a definitive agreement to sell all the common
stock of Union Bankers Insurance Company (or all or substantially all
the assets of Union Bankers Insurance Company) for a purchase price
(if other than in cash, as determined by PennCorp's financial advisor
and, in any event, calculated on an enterprise value basis) in excess
of $ $195,832,114.03 then, upon consummation of the transaction
contemplated by such definitive agreement, PennCorp shall pay to
Knightsbridge an amount in cash equal to (I) the difference between
(x) the purchase price paid for Union Bankers Insurance Company and
(y) $195,832,114.03 multiplied by (II) (x) .2603, if the
3
<PAGE> 4
Proposed Settlement is approved or (y) .2539 if the Proposed
Settlement is not approved; or
(d) if during the 12-month period ending November 25, 1998,
PennCorp enters into a definitive agreement to merge with a third
party or to sell all or substantially all its assets, for a per share
purchase price (if other than in cash, as determined by PennCorp's
financial advisor) in excess of $37.09, then, upon consummation of the
transaction contemplated by such definitive agreement, PennCorp shall
pay to Knightsbridge an amount in cash equal to (I) if the Proposed
Settlement is approved, [[(A) 2,092,023 multiplied by (B) the
difference between (x) the per share purchase price received in such
transaction and (y) $37.09, minus $6,277,000], multiplied by .8370] or
(II) if the Proposed Settlement is not approved, [[(A) 2,156,186
multiplied by (B) the difference between (x) the per share purchase
price received in such transaction and (y) $37.09, minus $7,907,000],
multiplied by .7744.
In the event that the Company, Southwestern Life Insurance Company or Union
Bankers Insurance Company are sold in a single transaction in which one or more
other direct or indirect subsidiaries of PennCorp also is sold to the same or a
related purchaser (a "Group Sale"), the amount of the purchase price allocable
to the Company, Southwestern Life Insurance Company or Union Bankers Insurance
Company for purposes of this Amended Assignment Agreement shall be determined by
reference to the purchase price allocated to the Company, Southwestern Life
Insurance Company or Union Bankers by the seller and purchaser involved in such
Group Sale. In addition, the parties acknowledge and agree that if one or more
of the events referred to in clauses (A) through (D) above occur during the
period ending November 25, 1998, (x) the aggregate amount of the payments to be
made pursuant to this paragraph (c) shall be calculated so as not to produce
duplicative results, and (y) if both Southwestern Life Insurance Company and
Union Bankers Insurance Company are sold (or there is executed an agreement for
their sale), then any payment to be made pursuant to this paragraph (c) shall be
made only to the extent the sum of the purchase prices for Southwestern Life
Insurance Company and Union Bankers Insurance Company exceeds $489,580,285.08.
2. Upon receipt of the First Payment, Knightsbridge shall be deemed to have
sold, assigned, conveyed and transferred all of its right, title and interest in
the Shares and Warrants and
4
<PAGE> 5
thereafter shall be entitled to receive, solely under the circumstances
specified above, the Second Payment and the Price Protection Payment, if
payable.
3. Knightsbridge hereby represents and warrants the following to
PennCorp:
(a) Knightsbridge is the record and beneficial owner of the Shares and
of the Warrants, and owns the Shares and Warrants free and clear of any
liens, claims, or encumbrances of any kind;
(b) Knightsbridge has the requisite power and authority to enter into
this Assignment Agreement and to consummate the transaction contemplated by
this Assignment Agreement, and the execution and delivery of this
Assignment Agreement by Knightsbridge and the consummation by Knightsbridge
of the transaction contemplated hereby have been duly authorized by all
necessary action on the part of Knightsbridge, and this Assignment
Agreement has been duly executed and delivered by Knightsbridge and,
assuming this Assignment Agreement constitutes the valid and binding
obligation of PennCorp, constitutes a valid and bind obligation of
Knightsbridge, enforceable against Knightsbridge in accordance with its
terms, except to the extent that such enforceability may be limited by or
subject to bankruptcy, insolvency, moratorium or other similar laws
affecting the enforcement of creditor's rights generally and that equitable
remedies are subject to the discretion of the courts;
(c) The execution and delivery of this Assignment Agreement do not,
and the consummation of the transactions contemplated by this Assignment
Agreement and compliance with the provisions hereof will not, (i) conflict
with any of the provisions of the organizational documents of
Knightsbridge, (ii) conflict with, result in a breach 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 loss of a
material benefit under, or require the consent of any person under, any
indenture or other agreement, permit, concession, franchise, license or
similar instrument or undertaking to which Knightsbridge is a party or by
which Knightsbridge or any of its assets is bound or affected, or (iii)
subject to compliance with the requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), contravene
any law, rule or regulation of any state
5
<PAGE> 6
or of the United States or any political subdivision thereof or therein,
or any order, writ, judgement, injunction, decree, determination or award
currently in effect; and
(d) No consent, approval or authorization of, or declaration of filing
with, of notice to, any governmental agency or regulatory authority is
required by or with respect to Knightsbridge in connection with execution
and delivery of this Assignment Agreement by Knightsbridge or the
consummation by Knightsbridge of the transactions contemplated hereby,
except as may be required by any state or federal insurance regulatory
authority or as required by the HSR Act.
4. PennCorp hereby represents and warrants the following to
Knightsbridge:
(a) PennCorp has the requisite power and authority to enter into this
Assignment Agreement and to consummate the transaction contemplated by this
Assignment Agreement, and the execution and delivery of this Assignment
Agreement by PennCorp and the consummation by PennCorp of the transaction
contemplated hereby have been duly authorized by all necessary action on
the part of PennCorp, and this Assignment Agreement has been duly executed
and delivered by PennCorp and, assuming this Assignment Agreement
constitutes the valid and binding obligation of Knightsbridge, constitutes
a valid and bind obligation of PennCorp, enforceable against PennCorp in
accordance with its terms, except to the extent that such enforceability
may be limited by or subject to bankruptcy, insolvency, moratorium or other
similar laws affecting the enforcement of creditor's rights generally and
that equitable remedies are subject to the discretion of the courts;
(b) The execution and delivery of this Assignment Agreement do not,
and the consummation of the transactions contemplated by this Assignment
Agreement and compliance with the provisions hereof will not, (i) conflict
with any of the provisions of the organizational documents of PennCorp,
(ii) conflict with, result in a breach 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 loss of a
material benefit under, or require the consent of any person under, any
indenture or other agreement, permit, concession, franchise, license or
similar instrument or undertaking to which PennCorp is a party or by which
PennCorp or any of its
6
<PAGE> 7
assets is bound or affected, or (iii) subject to compliance with the
requirements of the HSR Act, contravene any law, rule or regulation of any
state or of the United States or any political subdivision thereof or
therein, or any order, writ, judgement, injunction, decree, determination
or award currently in effect; and
(c) No consent, approval or authorization of, or declaration of filing
with, of notice to, any governmental agency or regulatory authority is
required by or with respect to PennCorp in connection with execution and
delivery of this Assignment Agreement by PennCorp or the consummation by
PennCorp of the transactions contemplated hereby, except as may have
already been received or as required by the HSR Act.
5. Knightsbridge, concurrently with the receipt of the First Payment,
agrees to deliver or cause to be delivered to PennCorp a receipt from
Knightsbridge, in form and substance reasonably satisfactory to PennCorp,
evidencing the delivery of such Payment by PennCorp and certificates
representing the Common Stock and Warrants, duly endorsed (or accompanied by
duly executed stock powers).
6. All notices, requests, demands and other communications required or
permitted hereunder shall be made n writing by hand- delivery, first-class mail
(registered or return receipt requested), telex, telecopier or air courier
guaranteeing overnight delivery:
If to PennCorp Financial Group, Inc.
PennCorp Financial Group, Inc.
590 Madison Avenue
New York, NY 10022
Telephone: (212) 896-2710
Telecopy: (212) 896-2755
If to Knightsbridge Capital Fund I, L.P.:
Knightsbridge Capital Fund I, L.P.
590 Madison Avenue
New York, NY 10022
Telephone: (212) 896-2710
Telecopy: (212) 896-2755
7. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, applicable to
7
<PAGE> 8
contracts executed in and to be performed entirely within that state.
8. This Assignment Agreement may be executed in several counterparts, each
of which shall be deemed to be an original and all of which shall constitute one
and the same instrument.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Amended Assignment
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
PENNCORP FINANCIAL GROUP, INC.
By:/s/ Scott D. Silverman
-----------------------------------
Name: Scott D. Silverman
Title: Senior Vice President,
General Counsel and
Secretary
KNIGHTSBRIDGE CAPITAL FUND I, L.P.
By: Knightsbridge Capital LLC
Its: General Partner
By:/s/ David J. Stone
-----------------------------------
Name: David J. Stone
Title: Manager
9
<PAGE> 1
EXHIBIT 99.2
AMENDED AND RESTATED ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT, dated as of January 2, 1998 ("Amended Assignment
Agreement") is by and between PennCorp Financial Group, Inc., a Delaware
corporation ("PennCorp"), David J. Stone, an individual ("Stone"), Steven W.
Fickes, an individual ("Fickes"), the Steven Wayne Fickes, Jr. Trust dated
December 21, 1995 and the Kathryn Elizabeth Fickes Trust dated December 21, 1995
(Stone, Fickes and the Trusts each a "Seller" and collectively, the "Sellers").
PRELIMINARY STATEMENT
WHEREAS, the Sellers collectively beneficially own 676,768 shares of Class
A common stock, $.01 par value (the "Shares") of Southwestern Financial
Corporation, a Delaware corporation (the "Company") and Stone and Fickes own
warrants to purchase 335,564 shares of Class A common stock of the Company (the
"Warrants"), all as shown on the signature pages hereto;
WHEREAS, the Sellers desire to sell and PennCorp desires to purchase from
the Sellers, the Shares and, subject to Section 1(b) below, the Warrants;
WHEREAS, Stone, Fickes and PennCorp are parties to an Assignment Agreement,
dated as of January 31, 1997, pursuant to which they agreed to sell, and
PennCorp agreed to buy from them, the Shares and, under the circumstances
specified therein, the Warrants; and
WHEREAS, Fickes has advised PennCorp that he had previously transferred an
aggregate of 60,000 shares of Class A common stock of the Company to the Trusts
and that each Trust should have been a party to the January 31, 1997 Assignment
Agreement;
WHEREAS, Stone, Fickes and PennCorp have agreed to revise the terms on
which the purchase of the Shares and, if applicable, the Warrants shall occur.
NOW THEREFORE, in consideration of the promises and the mutual agreements
set forth below, the Sellers and PennCorp hereby agree as follows:
1. (a) If the Closing (as defined in that certain Transfer Agreement dated
as of the date hereof among PennCorp, Knightsbridge Capital, L.L.C. and the
Sellers (the "Transfer Agreement")) shall occur, PennCorp hereby agrees to pay
on the Closing Date (as defined in the Transfer Agreement) each of the
1
<PAGE> 2
Sellers the amount of $18.81047 per Share for the Shares in immediately
available funds by wire transfer of immediately available funds (the "First
Payment"); provided, however, that if the Closing shall not have occurred on or
before February 28, 1998, the First Payment shall bear interest at the rate of
13% per annum from and including March 1, 1998 through the date of the Closing.
The aggregate amount of the First Payment is $12,730,326.56, which the Sellers
acknowledge and agree that they shall share pro rata in accordance with their
respective ownership interests in the Company.
(b) The parties acknowledge and agree that Stone and Fickes, among
others, are parties to an Amended Stipulation and Compromise of Settlement
relating to a proposed settlement (the "Proposed Settlement") of the shareholder
derivative cases styled Tozour Energy Systems Retirement Plan v. David J. Stone
et al. and Penncorp Financial Group, Inc., C.A. No. 14775, and Miller v. David
J. Stone, et al., C.A. No. 14795, each filed in the Chancery Court of the State
of Delaware. PennCorp acknowledges and agrees that if the Proposed Settlement
(as currently proposed or as modified by the Chancery Court) is approved by the
Chancery Court, and the order of the Chancery Court approving the Proposed
Settlement has become final and nonappealable, Stone and Fickes shall, pursuant
to such Proposed Settlement, reconvey the Warrants to the Company for no
additional consideration. PennCorp acknowledges and agrees that in such event,
it will have no right to purchase the Warrants. In such event, however, PennCorp
agrees to pay each of the Sellers, as additional consideration for the Shares
sold pursuant to Section 1(a) hereof, $0.22146 per Share, which shall be paid by
wire transfer of immediately available funds on the date set forth in the last
sentence of this Section 1(b) (the "Accepted Settlement Payment"). The aggregate
amount of the Accepted Settlement Payment is $149,875.41, which the Sellers
acknowledge and agree that they shall share pro rata in accordance with their
respective ownership interests in the Company; provided, however, that if the
Accepted Settlement Payment is not made until a date after March 1, 1998, the
amount of the Accepted Settlement Payment shall bear interest at the rate of 13%
per annum from and including March 1998 through the date of payment.
Sellers and PennCorp further agree, however, that if the Chancery Court
fails to approve the Proposed Settlement (as currently proposed or as modified
by the Chancery Court), or if the order approving the Proposed Settlement is
vacated, then in lieu of, and not in addition to the Accepted Settlement
Payment, (x) PennCorp shall pay each of the Sellers, as additional consideration
for the Shares sold pursuant to Section 1(a)
2
<PAGE> 3
hereof, $1.76201 per Share and (y) Stone and Fickes shall assign and PennCorp
shall purchase the Warrants, in lieu of reconveying the Warrants to Southwestern
Financial Corporation, at a price of $10.57248 per Warrant (representing a per
share price of $20.57248 minus the exercise price of $10 per share payable under
the Warrants), which shall be paid to Stone and Fickes by wire transfer of
immediately available funds on the date set forth in the last sentence of this
Section 1(b) (the "Rejected Settlement Payment"). In the event PennCorp shall be
required to make the Rejected Settlement Payment, it shall also pay the Sellers
interest on the amount of the First Payment and on the amount of the Rejected
Settlement Payment at the rate of 13% per annum from January 1, 1998 through and
including the date of the Closing. The date on which PennCorp shall be obligated
to make the Accepted Settlement Payment or the Rejected Settlement Payment, as
the case may be, shall be the third business day following the earliest of (i)
the date on which the Chancery Court disapproves the Proposed Settlement, (ii)
the date on which the order of the Chancery Court approving the Proposed
Settlement shall have been vacated, or (iii) the date on which the order of the
Chancery Court approving the Proposed Settlement shall become final and
nonappealable.
(c) As a further inducement to the Sellers to sell the Shares and, if
applicable, the Warrants, PennCorp agrees to make the following additional
payment to the Sellers, without duplication of any other payment made pursuant
to this paragraph (c), if the circumstances specified below shall occur (each a
"Price Protection Payment"):
(A) If during the 12-month period ending November 25, 1998,
PennCorp enters into a definitive agreement to sell all the common
stock of the Company (or all or substantially all the assets of the
Company) for a purchase price (if other than in cash, as determined by
PennCorp's financial advisor and, in any event, calculated on an
enterprise value basis) in excess of $489,580,285.08 then, upon
consummation of the transaction contemplated by such definitive
agreement, PennCorp shall pay (X) to Stone 50% of an amount in cash
equal to [(I) the difference between (x) the purchase price paid for
the Company and (y) $489,580,285.08 multiplied by (II) (x) .0507, if
the Proposed Settlement is approved or (y) .0740, if the Proposed
Settlement is not approved] (the "Company Sale Amount"), (Y) to Fickes
41.14% of the Company Sale Amount and (Z) to each Trust 4.43% of the
Company Sale Amount;
3
<PAGE> 4
(B) if during the 12-month period ending November 25, 1998, the
Company enters into a definitive agreement to sell all the common
stock of Southwestern Life Insurance Company (or all or substantially
all the assets of Southwestern Life Insurance Company) for a purchase
price (if other than in cash, as determined by PennCorp's financial
advisor and, in any event, calculated on an enterprise value basis) in
excess of $293,748,171.05 then, upon consummation of the transaction
contemplated by such definitive agreement, PennCorp shall pay (X) to
Stone 50% of an amount in cash equal to [(I) the difference between
(x) the purchase price paid for Southwestern Life Insurance Company
and (y) $293,748,171.05 multiplied by (II) (x) .0507, if the Proposed
Settlement is approved or (y) .0740, if the Proposed Settlement is not
approved] (the "Southwestern Life Sale Amount"), (Y) to Fickes 41.14%
of the Southwestern Sale Amount and (Z) to each Trust 4.43% of the
Southwestern Sale Amount;
(C) if during the 12-month period ending November 25, 1998, the
Company enters into a definitive agreement to sell all the common
stock of Union Bankers Insurance Company (or all or substantially all
the assets of Union Bankers Insurance Company) for a purchase price
(if other than in cash, as determined by PennCorp's financial advisor
and, in any event, calculated on an enterprise value basis) in excess
of $195,832,114.03 then, upon consummation of the transaction
contemplated by such definitive agreement, PennCorp shall pay (X) to
Stone 50% of an amount in cash equal to [(I) the difference between
(x) the purchase price paid for Union Bankers Insurance Company and
(y) $195,832,114.03 multiplied by (II) (x) .0507, if the Proposed
Settlement is approved or (y) .0740 if the Proposed Settlement is not
approved] (the "Union Bankers Sale Amount"), (Y) to Fickes 41.14% of
the Union Bankers Sale Amount and (Z) to each Trust 4.43% of the Union
Bankers Sale Amount; or
(D) if during the 12-month period ending November 25, 1998,
PennCorp enters into a definitive agreement to merge with a third
party or to sell all or substantially all its assets, for a per share
purchase price (if other than in cash, as determined by PennCorp's
financial advisor) in excess of $37.09, then, upon consummation of the
transaction contemplated by such definitive agreement, PennCorp shall
pay to (X)
4
<PAGE> 5
to Stone 50% of an amount in cash equal to {(I) if the Proposed
Settlement is approved, [[(A) 2,092,023 multiplied by (B) the
difference between (x) the per share purchase price received in such
transaction and (y) $37.09, minus $6,277,000], multiplied by .1630] or
(II) if the Proposed Settlement is not approved, [[(A) 2,156,186
multiplied by (B) the difference between (x) the per share purchase
price received in such transaction and (y) $37.09, minus $7,907,000],
multiplied by .2256} (the "PennCorp Sale Amount"), (Y) to Fickes
41.14% of the PennCorp Sale Amount and (Z) to each Trust 4.43% of the
PennCorp Sale Amount.
In the event that the Company, Southwestern Life Insurance Company or Union
Bankers Insurance Company are sold in a single transaction in which one or more
other direct or indirect subsidiaries of PennCorp also is sold to the same or a
related purchaser (a "Group Sale"), the amount of the purchase price allocable
to the Company, Southwestern Life Insurance Company or Union Bankers Insurance
Company for purposes of this Amended Assignment Agreement shall be determined by
reference to the purchase price allocated to the Company, Southwestern Life
Insurance Company or Union Bankers by the seller and purchaser involved in such
Group Sale. In addition, the parties acknowledge and agree that if one or more
of the events referred to in clauses (A) through (D) above occur during the
period ending November 25, 1998, (x) the aggregate amount of the payments to be
made pursuant to this paragraph (c) shall be calculated so as not to produce
duplicative results and (y) if both Southwestern Life Insurance Company and
Union Bankers Insurance Company are sold (or there is executed an agreement for
their sale), then any payment to be made pursuant to this paragraph (c) shall be
made only to the extent the sum of the purchase prices for Southwestern Life
Insurance Company and Union Bankers Insurance Company exceeds $489,580,285.08.
2. Upon receipt of the First Payment, each Seller shall be deemed to have
sold, assigned, conveyed and transferred all of his right, title and interest in
and to the Shares to PennCorp and thereafter shall be entitled to receive,
solely under the circumstances specified above, the Approved Settlement Payment,
the Rejected Settlement Payment or the Price Protection Payment, as the case may
be.
3. Each Seller hereby represents and warrants as to himself the following
to PennCorp:
5
<PAGE> 6
(a) Such Seller is or as of the Closing Date will be the record and
beneficial owner of the Shares and of the Warrants to be sold to PennCorp,
and owns the Shares and Warrants free and clear of any liens, claims, or
encumbrances of any kind;
(b) Assuming this Assignment Agreement constitutes the valid and
binding obligation of PennCorp, this Assignment Agreement constitutes a
valid and bind obligation of such Seller, enforceable against such Seller
in accordance with its terms, except to the extent that such enforceability
may be limited by or subject to bankruptcy, insolvency, moratorium or other
similar laws affecting the enforcement of creditor's rights generally and
that equitable remedies are subject to the discretion of the courts; and
(c) The execution and delivery of this Assignment Agreement do not,
and the consummation of the transactions contemplated by this Assignment
Agreement and compliance with the provisions hereof will not require the
consent of any person under any agreement, permit, concession, franchise,
license or similar instrument or undertaking to which such Seller is a
party or by which such Seller's assets is bound or affected, or contravene
any law, rule or regulation of any state or of the United States or any
political subdivision thereof or therein, or any order, writ, judgement,
injunction, decree, determination or award currently in effect.
4. PennCorp hereby represents and warrants the following to each Seller:
(a) PennCorp has the requisite power and authority to enter into this
Assignment Agreement and to consummate the transaction contemplated by this
Assignment Agreement, and the execution and delivery of this Assignment
Agreement by PennCorp and the consummation by PennCorp of the transaction
contemplated hereby have been duly authorized by all necessary action on
the part of PennCorp, and this Assignment Agreement has been duly executed
and delivered by PennCorp and, assuming this Assignment Agreement
constitutes the valid and binding obligation of each Seller, constitutes a
valid and bind obligation of PennCorp, enforceable against PennCorp in
accordance with its terms, except to the extent that such enforceability
may be limited by or subject to bankruptcy, insolvency, moratorium or other
similar laws affecting the enforcement of creditor's rights generally and
6
<PAGE> 7
that equitable remedies are subject to the discretion of the courts; and
(b) The execution and delivery of this Assignment Agreement do not,
and the consummation of the transactions contemplated by this Assignment
Agreement and compliance with the provisions hereof will not require the
consent of any person under any agreement, permit, concession, franchise,
license or similar instrument or undertaking to which PennCorp is a party
or by which PennCorp's assets is bound or affected, or contravene any law,
rule or regulation of any state or of the United States or any political
subdivision thereof or therein, or any order, writ, judgement, injunction,
decree, determination or award currently in effect.
5. (a) The Sellers, concurrently with the receipt of the First Payment,
agree to deliver or cause to be delivered to PennCorp (i) a receipt from the
Sellers, in form and substance reasonably satisfactory to PennCorp, evidencing
the delivery of such payment by PennCorp and (ii) certificates representing the
Shares, duly endorsed (or accompanied by duly executed stock powers).
(b) Stone and Fickes, concurrently with the receipt of the Approved
Settlement Payment, if any, agree to deliver or cause to be delivered to
PennCorp (i) a receipt from the Sellers, in form and substance reasonably
satisfactory to PennCorp, evidencing the delivery of such payment by PennCorp
and (ii) certificates representing the Warrants, duly endorsed (or accompanied
by duly executed stock powers).
(c) Stone and Fickes, concurrently with the receipt of the Rejected
Settlement Payment, if any, agree to deliver or cause to be delivered to
PennCorp (i) a receipt from the Sellers, in form and substance reasonably
satisfactory to PennCorp, evidencing the delivery of such payment by PennCorp
and (ii) certificates representing the Warrants, duly endorsed (or accompanied
by duly executed stock powers).
6. All notices, requests, demands and other communications required or
permitted hereunder shall be mace in writing by hand- delivery, first-class mail
(registered or return receipt requested), telex, telecopier or air courier
guaranteeing overnight delivery:
7
<PAGE> 8
If to PennCorp Financial Group, Inc.:
PennCorp Financial Group, Inc.
590 Madison Avenue
New York, NY 10022
Telephone: (212) 896-2710
Telecopy: (212) 896-2755
If to David J. Stone:
David J. Stone
c/o PennCorp Financial Group, Inc.
590 Madison Avenue
New York, NY 10022
Telephone: (212) 896-2710
Telecopy: (212) 896-2755
If to Steven W. Fickes:
c/o PennCorp Financial, Inc.
3 Bethesda Metro Center, Suite 1600
Bethesda, MD 20814
Telephone: (301) 656-1777
Telecopy: (301) 657-4770
7. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, applicable to contracts executed in and
to be performed entirely within that state.
8. This Assignment Agreement may be executed in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Amended Assignment
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
PENNCORP FINANCIAL GROUP, INC.
By:/s/ Scott D. Silverman
------------------------------------
Name: Scott D Silverman
Title: Senior Vice President,
General Counsel and
Secretary
/s/ David J. Stone
------------------------------------
David J. Stone
338,384 shares of Common Stock
167,827 Warrants
/s/ Steven W. Fickes
------------------------------------
Steven W. Fickes
278,384 shares of Common Stock
167,827 Warrants
STEVEN WAYNE FICKES, JR. TRUST
DATED DECEMBER 21, 1995
By: /s/ Karen Fickes
-------------------------------
Name: Karen Fickes
Its: Trustee
30,000 shares of Common Stock
KATHRYN ELIZABETH FICKES TRUST
DATED DECEMBER 21, 1995
By: /s/ Karen Fickes
-------------------------------
Name: Karen Fickes
Its: Trustee
30,000 shares of Common Stock
9
<PAGE> 1
EXHIBIT 99.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
PennCorp Financial Group, Inc.:
We consent to the use of our report on Southwestern Financial Corporation and
Subsidiaries incorporated herein by reference.
KPMG Peat Marwick LLP
Dallas, Texas
January 12, 1998
