<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 (DATE OF EARLIEST EVENT REPORTED): MARCH 23, 2000
PENNCORP FINANCIAL GROUP, INC.
(Exact name of Registrant as specified in charter)
DELAWARE 1-11422 13-3543540
(State or other jurisdiction (Commission file number) (I.R.S. employer
of incorporation) identification no.)
C/O SOUTHWESTERN FINANCIAL SERVICES CORPORATION
717 NORTH HARWOOD STREET
DALLAS, TEXAS 75201
(Address of principal executive offices)
Registrants' telephone number, including area code: (214) 954-7111
-------------------
<PAGE> 2
ITEM 5. OTHER EVENTS.
As previously reported, on February 7, 2000, PennCorp Financial Group,
Inc. (the "Company") filed a voluntary petition for relief under chapter 11 of
title 11 of the United States Code in the Bankruptcy Court for the District of
Delaware (the "Chapter 11 Case"). In connection with the Chapter 11 Case, on
March 23, 2000 the Company's Board of Directors approved a recapitalization
transaction (the "Recapitalization") proposed by Inverness/Phoenix Capital LLC
and Vicuna Advisors, LLC, on behalf of the unofficial ad hoc committee of
preferred stockholders, and Bernard Rapoport and John Sharpe as a "higher and
better offer." On March 24, 2000, the selection of the Recapitalization by the
Board of Directors was approved by the Delaware Bankruptcy Court. Accordingly,
the Company issued a Press Release dated March 24, 2000 (the "Press Release")
regarding the Recapitalization and the Bankruptcy Courts' approval thereof,
which is attached hereto as Exhibit 99.1 and incorporated herein by reference.
The descriptions of certain documents contained in the Press Release do
not purport to be complete and are qualified in their entirety by reference to
the documents filed as exhibits to this Current Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
10.1 - Offer Letter dated as of March 15, 2000, by and among
Inverness/Phoenix Capital, LLC, Vicuna Advisors, LLC,
Bernard Rapoport, John Sharpe and PennCorp Financial Group,
Inc.
10.2 - Offer Supplement Letter dated as of March 20, 2000, by and
among Inverness/Phoenix Capital, LLC, Vicuna Advisors, LLC,
Bernard Rapoport, John Sharpe and PennCorp Financial Group,
Inc.
10.3 - Equity Commitment Letter dated as of March 15, 2000, by
Bernard Rapoport.
10.4 - Equity Commitment Letter dated as of March 15, 2000, by John
Sharpe.
10.5 - Revised Standby Underwriting Commitment Letter dated as of
March 22, 2000, by and among Inverness/Phoenix Capital, LLC,
Vicuna Advisors, LLC and PennCorp Financial Group, Inc.
10.6 - Amended and Restated Escrow Agreement dated as of March 21,
2000, by and among and among Inverness/Phoenix Capital, LLC,
Vicuna
2
<PAGE> 3
Advisors, LLC, PennCorp Financial Group, Inc.,
Bernard Rapoport, John Sharpe and Citibank N.A., as the
escrow agent.
10.7 - Lock-Up Agreement dated as of March 15, 2000, by and between
PennCorp Financial Group, Inc. and certain preferred
stockholders listed therein.
99.1 - Press Release dated as of March 24, 2000
99.2 - Letter dated as of March 21, 2000, by ING (U.S.) Capital LLC
and ING Barings LLC
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
PENNCORP FINANCIAL GROUP, INC.
Date: March 30, 2000 By: /s/ Scott D. Silverman
--------------------------------
Scott D. Silverman
Executive Vice President, Chief
Administrative Officer and
General Counsel
4
<PAGE> 5
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.1 - Offer Letter dated as of March 15, 2000, by and among
Inverness/Phoenix Capital, LLC, Vicuna Advisors, LLC,
Bernard Rapoport, John Sharpe and PennCorp Financial Group,
Inc.
10.2 - Offer Supplement Letter dated as of March 20, 2000, by and
among Inverness/Phoenix Capital, LLC, Vicuna Advisors, LLC,
Bernard Rapoport, John Sharpe and PennCorp Financial Group,
Inc.
10.3 - Equity Commitment Letter dated as of March 15, 2000, by Benard
Rapoport.
10.4 - Equity Commitment Letter dated as of March 15, 2000, by John
Sharpe.
10.5 - Revised Standby Underwriting Commitment Letter dated as of
March, 22, 2000, by and among Inverness/Phoenix Capital, LLC,
Vicuna Advisors, LLC and PennCorp Financial Group, Inc.
10.6 - Amended and Restated Escrow Agreement dated as of March 21,
2000, by and among and among Inverness/Phoenix Capital, LLC,
Vicuna Advisors, LLC and PennCorp Financial Group, Inc.,
Bernard Rapoport, John Sharpe and Citibank N.A., as the escrow
agent.
10.7 - Lock-Up Agreement dated as of March 15, 2000, by and between
PennCorp Financial Group, Inc. and certain preferred
stockholders listed therein.
99.1 - Press Release dated March 24, 2000
99.2 - Letter dated as of March 21, 2000, by ING (U.S.) Capital LLC
and ING Barings LLC
</TABLE>
<PAGE> 1
EXHIBIT 10.1
March 15, 2000
PennCorp Financial Group, Inc.
717 North Harwood Street
Dallas, Texas 75201
Attention: The Board of Directors
Gentleman:
Inverness/Phoenix Capital, LLC ("Inverness") and Vicuna
Advisors, L.L.C., in its capacity as investment manager to certain Delaware
entities ("Vicuna"), on behalf of the members of the Ad Hoc Committee of the
Preferred Shareholders (the "Ad Hoc Committee") of PennCorp Financial Group,
Inc. (the "Company") holding 74.6% of the Company's $3.375 Convertible Preferred
Stock and $3.50 Series II Convertible Preferred Stock (collectively, the
"Preferred Stock"), Bernard Rapoport ("Rapoport") and John Sharpe ("Sharpe" and
together with Inverness, Vicuna and Rapoport, the "Offerors"), are pleased to
submit this proposal to recapitalize the Company (the "Recapitalization") as
outlined in the Summary of Terms and Conditions attached hereto as Exhibit A
(the "Terms Summary"). Capitalized terms not otherwise defined in this letter
shall have the meanings ascribed to them in the Terms Summary. This letter and
the Terms Summary are intended to be a competing offer for an "Alternative
Transaction" as such term is defined in the Order of the United States
Bankruptcy Court, District of Delaware, dated February 28, 2000, with respect to
the Bankruptcy (the "Sales Procedures Order").
In furtherance of the Recapitalization proposal, attached
hereto is (i) a letter agree ment of Rapoport agreeing to purchase $20,000,000
of New Common, (ii) a letter agreement of Sharpe agreeing to purchase $3,000,000
of New Common, (iii) a standby underwriting commitment from Inverness and Vicuna
with respect to the Rights Offering, (iv) definitive agreements from ING Barings
with respect to the New Senior Facility, (v) a definitive reinsurance agreement
from the Reinsurance Group of America Incorporated with respect to the financing
of the reinsurance of SW Life's and SLT's deferred annuity blocks of business,
(vi) a Lock-up Agreement executed by each member of the Ad Hoc Committee
memorializing its agreement to vote in favor of the Recapitalization, (vii) the
Escrow Agreement (as defined below) executed by each Offeror, and (viii) the
Form A of Inverness and Rapoport and the Form C of Vicuna submitted to the Texas
Department of Insurance (the "Texas Filings"). The Texas Filings represent the
only insurance regulatory approvals necessary to effect the Recapitalization,
and the Texas Department of Insurance has indicated to the Offerors and the
Company that it will approve the Texas Filings.
In connection with the foregoing, and in compliance with the
Sales Procedures Order, on the date hereof, Inverness has paid $5,000,000 to
Citibank, N.A. (the "Escrow Agent") to be held in escrow by the Escrow Agent
after the date hereof pursuant to the terms of an escrow agreement in the form
attached hereto as Exhibit B (the "Escrow Agreement"). Upon the Company's
acceptance of this offer as the Final Accepted Offer (as defined in the Sales
Procedure Order), the Offerors shall pay an additional $42,500,000 to the Escrow
Agent to be held in the escrow by the Escrow Agent pursuant to the terms of the
Escrow Agreement.
<PAGE> 2
This offer shall remain open through 11:59 p.m. Eastern time
on March 24, 2000. Selection of this offer by the Company as the Final Accepted
Offer shall constitute acceptance of this offer. Upon acceptance of this offer
and payment by the Offerors of the additional $42,500,000 to the Escrow Agent,
(i) the Company and the Ad Hoc Committee shall co-propose a chapter 11 plan of
reorganization for the Company incorporating the terms of the Recapitalization
in the form of Annex I attached to the Terms Summary, (ii) the Company, the
Offerors and the Ad Hoc Committee shall use their mutual commercially reasonable
efforts to obtain confirmation of and to consummate such plan as soon as
practicable and (iii) the Company shall withdraw its motion for, and cease its
efforts to obtain, approval of the sale of SW Life and SLT. If you are in
agreement with the foregoing, please execute this letter in the space provided
below.
Very truly yours,
Inverness/Phoenix Capital, LLC
By: /s/ JAMES C. COMIS
---------------------
Its: Managing Director
--------------------
Vicuna Advisors, LLC, as
investment advisor
By: /s/ JOSH WELCH
---------------------
Its: Managing Member
--------------------
/s/ BERNARD RAPOPORT
------------------------
Bernard Rapoport
/s/ JOHN SHARPE
------------------------
John Sharpe
Agreed and Accepted:
- -------------------
PENNCORP FINANCIAL GROUP, INC.
By: /s/ KEITH A. MAIB
------------------------
Its: President and Chief
Executive Officer
-----------------------
<PAGE> 1
EXHIBIT 10.2
March 20, 2000
PennCorp Financial Group, Inc.
717 North Harwood Street
Dallas, Texas 75201
Attention: The Board of Directors
Gentleman:
Reference is made to (i) that certain offer letter dated March
15, 2000 (the "Offer Letter") pursuant to which Inverness/Phoenix Capital LLC
("Inverness"), Vicuna Advisors, L.L.C., in its capacity as investment manager to
certain Delaware entities ("Vicuna"), Bernard Rapoport ("Rapoport") and John
Sharpe ("Sharpe" and together with Inverness, Vicuna and Rapoport, the
"Offerors") submitted an offer to recapitalize PennCorp Financial Group, Inc.
(the "Company") as outlined in the Summary of Terms and Conditions attached
thereto as Exhibit A, which is hereby revised and amended and attached hereto
(the "Terms Summary"), (ii) that certain equity commitment letter of Rapoport,
dated March 15, 2000 (the "Rapoport Letter"), (iii) that certain equity
commitment letter of Sharpe, dated March 15, 2000 (the"Sharpe Letter") and (iv)
that certain standby commitment letter of Inverness and Vicuna, dated March 15,
2000 (the "Standby Commitment Letter"). Capitalized terms not otherwise defined
in this letter shall have the meanings ascribed to them in the Terms Summary.
This letter is intended to amend and supplement the Offer Letter, the Rapoport
Letter, the Sharpe Letter and the Standby Commitment Letter.
The Offerors have conducted negotiations with the holders of
the Company's 9.25% Senior Subordinated Notes (the "Notes") in an effort to
garner their support for the Recapitalization. In furtherance thereof, the
Offerors hereby agree that if (i) the holders of the Notes endorse the
Recapitalization at the meeting of the Company's board of directors on March 21,
2000 and do not withdraw such support thereafter and (ii) the Company selects
the Recapitalization as the Final Accepted Offer (as defined in the Offer
Letter), then the initial deposit of $5,000,000 (the "Initial Deposit") paid by
Inverness into an escrow account with Citibank, N.A., as the Escrow Agent, on
March 15, 2000 pursuant to the terms of the Offer Letter and the Escrow
Agreement, shall, notwithstanding anything to the contrary contained in the
Offer Letter or the Escrow Agreement, be paid to the Company in the event that
the Recapitalization has not been consummated by July 31, 2000 due to a failure
of a condition set forth in the Terms Summary, the Rapoport Letter, the Sharpe
Letter or the Standby Commitment Letter, other than (1) the failure of the
Bankruptcy Court to approve the Recapitalization or (2) the failure of the
Company to receive the proceeds of the New Senior Facility because of a
"material adverse change" resulting from (A) the suspension of the trading in
securities generally on the New York Stock Exchange or the American Stock
Exchange, (B) the establishment of minimum or maximum prices on such exchange,
(C) declaration by the
<PAGE> 2
State of New York or United States authorities of a banking moratorium, (D) any
material change in the general financial markets of the United States that in
the reasonable judgement of the senior lenders under the New Senior Facility
would materially and adversely affect the consummation of the Recapitalization,
(E) an outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international calamity or
emergency, or (F) an outbreak or escalation of hostilities between the United
States and any foreign power. If the Initial Deposit is paid to the Company
pursuant to this letter, such payment shall be deemed an expense of Inverness
incurred in connection with the Recapitalization, subordinate to all allowed
unsecured claims against the Company, including the Notes.
Notwithstanding the foregoing, in the event that the Initial
Deposit becomes payable to the Company pursuant to the terms of this letter as a
result of the failure of the Company to receive the proceeds of the New Senior
Facility, then, upon the election of the holders of a majority of the
outstanding principal amount of the Notes in their sole discretion, the terms of
the Notes will be revised to be consistent with the terms of the New Senior
Facility (i.e. maturity, rate of interest and senior secured position) and such
holders by delivery of a written notice thereof to the Offerors and the Company
and the condition precedent contained in each of the Terms Summary, the Rapoport
Letter, the Sharpe Letter and the Standby Commitment Letter that the Company
shall have received the proceeds from the New Senior Facility shall, in each
case, be deleted. In such event, the Initial Deposit shall be applied against
the purchase price for New Common Stock purchased by Inverness pursuant to the
Standby Underwriting Commitment upon consummation of the Recapitalization in
accordance with the terms of the Escrow Agreement.
Please execute this letter in the space provided below to
indicate the Company's acceptance of the offer of the Offerors, as set forth in
the Offer Letter and as amended and modified by this letter.
<PAGE> 3
Very truly yours,
Inverness/Phoenix Capital, LLC
By: /s/ JAMES C. COMIS
---------------------
Its: Managing Director
--------------------
Vicuna Advisors, L.L.C.,
as investment advisor
By: /s/ JOSH WELCH
---------------------
Its: Managing Member
--------------------
/s/ JOHN SHARPE
-------------------------
John Sharpe
/s/ BERNARD RAPOPORT
-------------------------
Bernard Rapoport
Acknowledged:
- ------------
PennCorp Financial Group, Inc.
By: /s/ KEITH A. MAIB
---------------------
Its: President and Chief
Executive Officer
--------------------
<PAGE> 1
EXHIBIT 10.3
March 15, 2000
PennCorp Financial Group, Inc.
717 North Harwood Street
Dallas, Texas 75201
Attention: The Board of Directors
Gentleman:
In connection with the proposed recapitalization (the
"Recapitalization") of PennCorp Financial Group, Inc. (the "Company") on the
terms set forth in Exhibit A attached hereto (the "Terms Summary"), the Company
will offer the undersigned the opportunity to purchase 1,600,000 shares of New
Common (as defined in the Term Summary) for a purchase price of $12.50 per share
and an aggregate purchase price of $20,000,000, in each case payable in
immediately available funds. The undersigned, subject to the terms and
conditions set forth herein and in Exhibit A, hereby agrees that at the closing
of the Recapitalization he will purchase such shares of New Common. Capitalized
terms not otherwise defined in this letter shall have the meanings ascribed to
them in the Terms Summary. In connection therewith, the undersigned has agreed
to deposit such $20,000,000 into an escrow account pursuant to the terms and
conditions set forth in an Escrow Agreement, dated as of the date hereof, among
the Company, the undersigned, Inverness/Phoenix Capital, LLC ("Inverness"),
Vicuna Advisors, L.L.C., in its capacity as investment manager to certain
Delaware entities ("Vicuna") and John Sharpe (the "Escrow Agreement"). The funds
deposited by the undersigned pursuant to the Escrow Agreement will be credited
toward the purchase price for the New Common to be acquired by the undersigned
hereunder upon delivery of such funds to the Company.
Such purchase of New Common is subject the following
conditions: (i) the New Senior Facility shall have been funded and the
Reinsurance Transaction shall have been consummated; (ii) all conditions imposed
by the Texas Department of Insurance with respect to the payment by SW Life and
SLT of the Extraordinary Dividend shall have been satisfied; (iii) the approval
of the Texas Department of Insurance shall have been received and the expiration
or early termination of the applicable waiting periods under the Hart Scott
Rodino Anti-Trust Improvements Act of 1976, as amended, shall have occurred;
(iv) the board of directors of PFG shall have approved the Recapitalization and
shall not have terminated it in response to a superior proposal; (v) with
respect to the Bankruptcy, an order confirming the plan of reorganization that
incorporates the Recapitalization shall have been entered by the Bankruptcy
Court and such order shall be unstayed and in full force and effect; and (vi)
the closing of the Recapitalization occurring not later than December 31, 2000.
Upon satisfaction of each of the conditions set forth above, the undersigned
shall deliver a written notice to the Escrow Agent under the Escrow Agreement
authorizing the release of the Escrow Funds (as defined therein) to the Company
pursuant to the terms thereof.
<PAGE> 2
This letter shall be governed by and construed under the laws
of the State of New York, without regard to the conflict of law principles
thereof except to the extent pre-empted by the United States Bankruptcy Code.
Any judicial proceeding brought against the undersigned relating to a dispute
arising out of this letter will be brought exclusively in the Bankruptcy Court
and by its execution and delivery of this letter, the undersigned accepts the
exclusive jurisdiction of the Bankruptcy Court.
This letter shall terminate, and the undersigned shall have no
further obligations hereunder, (i) if an order approving the sale of SW Life and
SLT has been entered by the Bankruptcy Court, and such order has become final or
(ii) in the event the Recapitalization has not been consummated on or prior to
December 31, 2000.
Very truly yours,
/s/ BERNARD RAPOPORT
Bernard Rapoport
<PAGE> 1
EXHIBIT 10.4
March 15, 2000
PennCorp Financial Group, Inc.
717 North Harwood Street
Dallas, Texas 75201
Attention: The Board of Directors
Gentleman:
In connection with the proposed recapitalization (the
"Recapitalization") of PennCorp Financial Group, Inc. (the "Company") on the
terms set forth in Exhibit A attached hereto (the "Terms Summary"), the Company
will offer the undersigned the opportunity to purchase 240,000 shares of New
Common (as defined in the Term Summary) for a purchase price of $12.50 per share
and an aggregate purchase price of $3,000,000, in each case payable in
immediately available funds. The undersigned, subject to the terms and
conditions set forth herein and in Exhibit A, hereby agrees that at the closing
of the Recapitalization he will purchase such shares of New Common. Capitalized
terms not otherwise defined in this letter shall have the meanings ascribed to
them in the Terms Summary. In connection therewith, the undersigned has agreed
to deposit such $3,000,000 into an escrow account pursuant to the terms and
conditions set forth in an Escrow Agreement, dated as of the date hereof, among
the Company, the undersigned, Inverness/Phoenix Capital, LLC ("Inverness"),
Vicuna Advisors, L.L.C., in its capacity as investment manager to certain
Delaware entities ("Vicuna") and Bernard Rapoport (the "Escrow Agreement"). The
funds deposited by the undersigned pursuant to the Escrow Agreement will be
credited toward the purchase price for the New Common to be acquired by the
undersigned hereunder upon delivery of such funds to the Company.
Such purchase of New Common is subject the following
conditions: (i) the New Senior Facility shall have been funded and the
Reinsurance Transaction shall have been consummated; (ii) all conditions imposed
by the Texas Department of Insurance with respect to the payment by SW Life and
SLT of the Extraordinary Dividend shall have been satisfied; (iii) the approval
of the Texas Department of Insurance shall have been received and the expiration
or early termination of the applicable waiting periods under the Hart Scott
Rodino Anti-Trust Improvements Act of 1976, as amended, shall have occurred;
(iv) the board of directors of PFG shall have approved the Recapitalization and
shall not have terminated it in response to a superior proposal; (v) with
respect to the Bankruptcy, an order confirming the plan of reorganization that
incorporates the Recapitalization shall have been entered by the Bankruptcy
Court and such order shall be unstayed and in full force and effect; and (vi)
the closing of the Recapitalization occurring not later than December 31, 2000.
Upon satisfaction of each of the conditions set forth above, the undersigned
shall deliver a written notice to the Escrow Agent under the Escrow Agreement
authorizing the release of the Escrow Funds (as defined therein) to the Company
pursuant to the terms thereof.
<PAGE> 2
The undersigned may assign his rights and obligations under
this letter to his affiliates; provided however, in the event of such assignment
the undersigned shall not be relieved of his obligations hereunder in the event
of a breach by any such assignee. This letter shall be governed by and construed
under the laws of the State of New York, without regard to the conflict of law
principles thereof except to the extent pre-empted by the United States
Bankruptcy Code. Any judicial proceeding brought against the undersigned
relating to a dispute arising out of this letter will be brought exclusively in
the Bankruptcy Court and by its execution and delivery of this letter, the
undersigned accepts the exclusive jurisdiction of the Bankruptcy Court.
This letter shall terminate, and the undersigned shall have no
further obligations hereunder, (i) if an order approving the sale of SW Life and
SLT has been entered by the Bankruptcy Court, and such order has become final or
(ii) in the event the Recapitalization has not been consummated on or prior to
December 31, 2000.
Very truly yours,
/s/ JOHN SHARPE
John Sharpe
<PAGE> 1
EXHIBIT 10.5
March 22, 2000
PennCorp Financial Group, Inc.
717 North Harwood Street
Dallas, Texas 75201
Attention: The Board of Directors
Gentleman:
In connection with a proposed recapitalization (the
"Recapitalization") of PennCorp Financial Group, Inc. (the "Company") on the
terms set forth in Exhibit A attached hereto (the "Terms Summary"), the Company
will grant rights (the "Rights Offering") to purchase 1,960,000 shares of New
Common (as defined in the Terms Summary) to all of the holders of Preferred
Stock (as defined in the Terms Summary) (the "Offerees") for $12.50 per share
and an aggregate purchase price of $24,500,000, in each case, payable in
immediately available funds. Capitalized terms not otherwise defined in this
letter shall have the meanings ascribed to them in the Terms Summary. At the
closing of the Rights Offering, (i) Inverness / Phoenix Capital, LLC and its
affiliates ("Inverness") hereby agree to purchase up to 1,680,000 shares of New
Common not otherwise subscribed for by the Offerees (the "Inverness Standby
Commitment") for a purchase price per share of $12.50 up to an aggregate
purchase price of $21,000,000 and (ii) Vicuna Advisors, L.L.C., in its capacity
as investment manager to certain Delaware entities ("Vicuna" and together with
Inverness, the "Standby Underwriters") hereby agree to purchase up to 280,000
shares of New Common not otherwise subscribed for by the Offerees for a purchase
price per unit of $12.50 up to an aggregate purchase price of $3,500,000 (the
"Vicuna Standby Commitment"). In connection therewith, the Company agrees, at
the closing of the Rights Offering, to pay the Standby Underwriters an
underwriting commitment fee of $1,375,000 in cash. To the extent that shares of
New Common are purchased by the Offerees pursuant to the exercise of Rights, the
obligation of each Standby Underwriter to purchase New Common hereunder shall be
reduced pro rata in accordance with its Standby Percentage. For purposes hereof,
the "Standby Percentage" for Inverness is 85.7% and for Vicuna is 14.3%.
In connection with their obligations hereunder, Inverness has
deposited $5,000,000, and has agreed to deposit an additional $16,000,000, into
an escrow account, and Vicuna has agreed to deposit $3,500,000 into such escrow
account, in each case pursuant to the terms of an Escrow Agreement, dated as of
the date hereof, among the Company, Inverness, Vicuna, Bernard Rapoport and John
Sharpe (the "Escrow Agreement"). The funds deposited by the Standby Underwriters
pursuant to the Escrow Agreement will be credited toward the purchase price for
the New Common to be acquired by them hereunder upon delivery of such funds to
the Company.
<PAGE> 2
PennCorp Financial Group, Inc.
March 22, 2000
Page 2
The obligations of Inverness under the Inverness Standby
Commitment and Vicuna under the Vicuna Standby Commitment are subject to the
following conditions: (i) the New Senior Facility shall have been funded and the
Reinsurance Transaction shall have been consummated; (ii) all conditions imposed
by the Texas Department of Insurance with respect to the payment by SW Life and
SLT of the Extraordinary Dividend shall have been satisfied; (iii) the approval
of the Texas Department of Insurance shall have been received and the expiration
or early termination of all applicable waiting periods under the Hart Scott
Rodino Anti-Trust Improvements Act of 1976, as amended shall have occurred; (iv)
the board of directors of PFG shall have approved the Recapitalization and shall
not have terminated it in response to a superior proposal; (v) with respect to
the Bankruptcy, an order confirming the plan of reorganization that incorporates
the Recapitalization shall have been entered by the Bankruptcy Court and such
order shall be unstayed and in full force and effect; and (vi) the closing of
the Recapitalization occurring not later than December 31, 2000. Upon
satisfaction of each of the conditions set forth above, each of the undersigned
shall deliver a written notice to the Escrow Agent under the Escrow Agreement
authorizing the release of the Escrow Funds (as defined therein) to the Company
pursuant to the terms thereof.
In the event that the Company selects the Recapitalization as
the Final Accepted Offer (as such term is defined in the Order of the United
States Bankruptcy Court, District of Delaware, dated February 28, 2000, with
respect to the Bankruptcy), provided that the Recapitalization is consummated,
the Company agrees to indemnify and hold the undersigned, its affiliates, and
the directors, officers, employees, managers and representatives of any of them,
harmless from and against all claims, expenses (including, but not limited to,
attorneys' fees), damages, and liabilities ("Claims") of any kind which may be
incurred by, or asserted against, any such person in connection with, or arising
out of, this letter, the Recapitalization, or any related investigation,
litigation or proceeding (other than Claims arising out of the undersigneds'
intentional misconduct or bad faith). Under no circumstances shall the
undersigned or any of its affiliates be liable for any punitive, exemplary,
consequential or indirect damages which may be alleged to result in connection
with this letter or the Recapitalization. Any such indemnification under this
letter shall be subject to the approval by the Bankruptcy Court of this
provision with respect to indemnification and the Company agrees to use its
reasonable efforts to obtain such approval as soon as practicable after its
selection of the Recapitalization as the Final Accepted Offer; it being
understood that such Bankruptcy Court approval shall not be a condition
precedent to the Standby Underwriters' obligations hereunder. Any such
indemnification claim shall be subordinate to general unsecured claims in the
Bankruptcy.
The parties to this letter agreement hereby agree that each of
Inverness and Vicuna may assign its respective rights and obligations under this
letter agreement to its affiliates; provided however, in the event of such
assignment neither Inverness nor Vicuna shall be relieved of its obligations
hereunder. This letter shall terminate, and the Standby Underwriters shall have
no further obligations hereunder, (i) if an order approving the sale of SW Life
and SLT has been entered by the Bankruptcy Court, and such order has become
final or (ii) in the event the Recapitalization has not been consummated on or
prior to December 31, 2000.
<PAGE> 3
PennCorp Financial Group, Inc.
March 22, 2000
Page 3
This letter shall be governed by and construed under the laws
of the State of New York, without regard to the conflict of law principles
thereof except to the extent pre-empted by the United States Bankruptcy Code.
Any judicial proceeding brought against any of the parties to this letter
relating to a dispute arising out of this letter will be brought exclusively in
the Bankruptcy Court and by its execution and delivery of this letter, each
party hereto accepts the exclusive jurisdiction of the Bankruptcy Court.
This letter hereby amends and restates that certain standby
underwriting commitment letter of the Standby Underwriters, dated March 15,
2000, in its entirety.
<PAGE> 4
If you are in agreement with the foregoing, please execute
this letter in the space provided below.
Very truly yours,
Inverness/Phoenix Capital, LLC
By: /s/ JAMES C. COMIS
----------------------
Its: Managing Director
---------------------
Vicuna Advisors, LLC, as
investment advisor
By: /s/ JOSH WELCH
----------------------
Its: Managing Member
---------------------
Agreed and Accepted:
- -------------------
PENNCORP FINANCIAL GROUP, INC.
By: /s/ KEITH A. MAIB
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Its: President and Chief
Executive Officer
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EXHIBIT 10.6
AMENDED AND RESTATED
ESCROW AGREEMENT
THIS AMENDED AND RESTATED ESCROW AGREEMENT (this "Agreement") is made
and entered into this 21st day of March, 2000, by and among Inverness/Phoenix
Capital, LLC, a Delaware limited liability company ("Inverness"), Vicuna
Advisors, L.L.C., a Delaware limited liability company, in its capacity as
investment manager to certain Delaware entities ("Vicuna"), Bernard Rapoport
("Rapoport"), John Sharpe ("Sharpe" and together with Inverness, Vicuna and
Rapoport, the "Offerors"), PennCorp Financial Group, Inc., a Delaware
corporation (the "Company") and Citibank N.A., a national banking association
duly organized and validly existing under the laws of the United States of
America (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Offerors and the Escrow Agent executed an Escrow Agreement
dated as of March 15, 2000 by and among the Offerors, the Escrow Agent and the
Company (the "Escrow Agreement").
WHEREAS, the Offerors have executed and delivered to the Company a
letter agreement dated as of March 15, 2000, as amended and supplemented (the
"Offer Letter") pursuant to which the Offerors have made an offer to
recapitalize the Company (the "Recapitalization").
WHEREAS, the Offer Letter contemplates the execution and delivery of
the Escrow Agreement and the deposit by Inverness with the Escrow Agent of cash
funds of $5,000,000.
WHEREAS, the Offer Letter contemplates that, upon selection of the
Recapitalization by the Company as the Final Accepted Offer (as defined in the
Offer Letter), the Offerors will deposit with the Escrow Agent an additional
$42,500,000 of cash funds.
WHEREAS, in furtherance of the Recapitalization, Inverness and Vicuna
have executed and delivered to the Company that certain standby underwriting
commitment, dated as of March 15, 2000 (the "Standby Commitment"), Rapoport has
executed and delivered to the Company that certain equity purchase commitment,
dated as of March 15, 2000 (the "Rapoport Commitment") and Sharpe has executed
and delivered to the Company that certain equity purchase commitment, dated as
of March 15, 2000 (the "Sharpe Commitment").
WHEREAS, in furtherance of the Recapitalization, the Offerors and the
Escrow Agent desire to restate and amend the Escrow Agreement and supersede it
by means of this Agreement.
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed as follows:
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1. Appointment of Escrow Agent. The Offerors and the Company each
hereby appoint Citibank, N.A. as Escrow Agent to receive, hold, administer and
deliver the Escrow Fund (as hereinafter defined) in accordance with this
Agreement, and the Escrow Agent hereby accepts such appointment, all subject to
and upon the terms and conditions set forth herein.
2. Establishment of Escrow Fund. Inverness herewith deposits with the
Escrow Agent, and the Escrow Agent hereby acknowledges receipt from Inverness
of, $5,000,000 (the "Initial Deposit"). Upon the Company's selection of the
Recapitalization as the Final Accepted Offer, the Offerors shall deposit with
the Escrow Agent, and the Escrow Agent shall acknowledge receipt from the
Offerors of, $42,500,000 (the "Final Deposit" and together with the Initial
Deposit, the "Deposit"), of which (i) $16,000,000 shall be deposited by
Inverness (the "Inverness Final Deposit" and together with the Initial Deposit,
the "Inverness Deposit"), (ii) $3,500,000 shall be deposited by Vicuna (the
"Vicuna Deposit"), (iii) $20,000,000 shall be deposited by Rapoport (the
"Rapoport Deposit") and (iv) $3,000,000 shall be deposited by Sharpe (or his
affiliates) (the "Sharpe Deposit"). All cash, earnings, interest and income from
the Deposit which may from time to time be held by the Escrow Agent pursuant to
the terms hereof are hereinafter referred to as the "Escrow Earnings." The
Deposit and the Escrow Earnings (collectively sometimes referred to herein as
the "Escrow Fund") shall be held by the Escrow Agent in accordance with the
terms and conditions hereinafter set forth. It is the parties' intention that
the Escrow Agent shall dispose of the Escrow Fund in accordance with the express
provisions of this Agreement, and shall not make, be required to make or be
liable in any manner for its failure to make, any determination under the Offer
Letter, or any other agreement, including, without limitation, any determination
of whether either the Offerors or the Company has complied with the terms of the
Offer Letter or are entitled to delivery of payment of any or all of the Escrow
Fund or to any other right or remedy thereunder. The obligations of each Offeror
under this Section 2 are several and not joint.
3. Investment of Escrow Fund by Escrow Agent. The Escrow Agent shall
invest and reinvest the funds held in the Escrow Fund as the Offerors shall
direct (subject to applicable minimum investments) by the furnishing of a
written direction by all of the Offerors (a "Written Direction"); provided,
however, that no investment or reinvestment may be made except in the following:
(a) direct obligations of the United States of America or
obligations the principal of and the interest on which are
unconditionally guaranteed by the United States of America;
(b) certificates of deposit issued by any bank, bank and trust
company, or national banking association (including Escrow Agent and
its affiliates), which certificates of deposit are insured by the
Federal Deposit Insurance Corporation or a similar governmental agency;
(c) repurchase agreements with any bank, trust company, or
national banking association (including Escrow Agent and its
affiliates); or
(d) any money market fund substantially all of which is
invested in the foregoing investment categories, including any money
market fund managed by Escrow Agent and any of its affiliates.
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If Escrow Agent has not received a Written Direction at any time that
an investment decision must be made, Escrow Agent shall invest the Escrow Fund,
or such portion thereof as to which no Written Direction has been received, in
investments described in clause (d) above. Each of the foregoing investments
shall be made in the name of Escrow Agent on behalf of the Offerors. No
investment shall be made in any instrument or security that has a maturity of
greater than 30 days. Notwithstanding anything to the contrary contained herein,
Escrow Agent may (but shall have no obligation), without notice to the Offerors
or the Company, sell or liquidate any of the foregoing investments at any time
if the proceeds thereof are required for any release of funds permitted or
required hereunder, and Escrow Agent shall not be liable or responsible for any
loss, cost or penalty resulting from any such sale or liquidation. With respect
to any funds received by Escrow Agent for deposit into the Escrow Funds or any
Written Direction received by Escrow Agent with respect to investment of any
funds in the Escrow Funds after ten o'clock, a.m., New York, New York time, the
Escrow Agent shall not be required to invest such funds or to effect such
investment instruction until the next day upon which banks in New York, New York
are open for business.
The parties to this Agreement acknowledge that non-deposit investment
products are not obligations of, or guaranteed, by the Escrow Agent nor any of
its affiliates, are not FDIC insured, and are subject to investment risks,
including the possible loss of principal amount invested. Only deposits in the
United States are subject to FDIC insurance.
4. Release of Escrow Fund. The Escrow Agent shall hold the Escrow
Fund until it delivers the Escrow Fund as provided in this Section 4, as
follows:
(a) If the Escrow Agent receives written instructions in the
form of Exhibit A signed by each Offeror and the Company, stating that the
consummation of the Recapitalization shall occur, the Escrow Agent shall
promptly deliver the Escrow Fund in accordance with said instructions.
(b) If the Escrow Agent receives written instructions signed
by each Offeror and the Company stating that the consummation of the
Recapitalization did not occur and directing payment of the Escrow Fund to
either the Offerors or the Company, the Escrow Agent shall promptly deliver the
Escrow Fund in accordance with such instructions.
(c) Except as set forth in (a) or (b) above, the Escrow Agent
shall distribute the Escrow Fund upon notice from either the Offerors or the
Company only in accordance with the procedures set forth in this subsection.
(i) Upon written notice from the Offerors, with
evidence of service on the Company, that the Company has not selected the
Recapitalization as the Final Accepted Offer and evidence of such non-acceptance
(including, without limitation, an order of the Bankruptcy Court) ("Rejection
Notice"), Escrow Agent shall, fifteen (15) calendar days after receipt of such
notice, deliver the Escrow Fund to the Offerors.
(ii) Upon written notice from the Company to
Escrow Agent, with evidence of service on the Offerors, that the
Recapitalization has been terminated due to Inverness'
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or Vicuna's material breach of the Standby Commitment, Rapoport's material
breach of the Rapoport Commitment or Sharpe's material breach of the Sharpe
Commitment or the breach by any Offeror of the commitment letter related to the
New Senior Facility (as defined in the Offer Letter), the offer letter related
to Reinsurance Transaction (as defined in the Offer Letter), the Offer Letter or
any other material agreement entered into by such Offeror in connection with the
Recapitalization (the "Company's Notice"), Escrow Agent shall deliver the Escrow
Fund to the Company five (5) calendar days after receipt of the Company's Notice
unless any Offeror shall, prior to the expiration of the aforesaid 5-day period,
give written notice to Escrow Agent and the Company of its countervailing claim
to the Escrow Fund ("Offerors' Rebuttal Notice"). For purposes of clarification,
a breach by the Company through no fault of the Offerors, the senior lenders
under the New Senior Facility or the reinsurer under the Reinsurance Transaction
of any of the agreements described above shall not constitute grounds for
delivery of the Company's Notice. Any distribution of the Escrow Fund pursuant
to this clause (ii) shall be deemed liquidated damages.
(iii) Upon written notice from the Offerors to Escrow
Agent, with evidence of service on the Company that the Recapitalization has
been terminated for a reason other than Inverness' or Vicuna's material breach
of the Standby Commitment, Rapoport's material breach of the Rapoport Commitment
or Sharpe's material breach of the Sharpe Commitment or the breach by any
Offeror of the commitment letter related to the New Senior Facility (as defined
in the Offer Letter), the offer letter related to Reinsurance Transaction (as
defined in the Offer Letter), the Offer Letter or any other material agreement
entered into by such Offeror in connection with the Recapitalization (the
"Offerors' Notice"), Escrow Agent shall deliver the Escrow Fund to the Offerors
fifteen (15) calendar days after receipt of Offerors' Notice unless the Company
shall, prior to the expiration of the aforesaid 15-day period, give notice to
Escrow Agent and the Offerors of its countervailing claim to the Escrow Fund
(the "Company's Rebuttal Notice").
(iv) After timely receipt by Escrow Agent of the
Company's Rebuttal Notice or the Offerors' Rebuttal Notice, Escrow Agent shall
not deliver the Escrow Fund until such time as Escrow Agent receives (a) a
written agreement signed by the Offerors and the Company providing instructions
as to the disposition of the Escrow Fund or (b) a certified copy of an order or
judgment which has become final (meaning that the order or judgment is no longer
subject to appeal or review by a court of competent jurisdiction) of the United
States District Court (the "Bankruptcy Court") having jurisdiction over the
Bankruptcy (as defined in the Offer Letter) with respect to the disposition of
the Offerors' or the Company's claim. Escrow Agent shall deliver the Escrow Fund
in accordance with said agreement, order or judgment.
(v) Notwithstanding the foregoing, after receipt by
Escrow Agent of the Company's Rebuttal Notice or the Offerors' Rebuttal Notice,
Escrow Agent may (a) deposit the Escrow Fund with a new Escrow Agent agreed to
in writing by the Company and the Offerors or the Bankruptcy Court or (b)
commence an action in interpleader in the Bankruptcy Court and deposit the
Escrow Fund with such court at the expense of the Company if the
Recapitalization is consummated or at the expense of the Offerors if the
Recapitalization in not consummated.
(d) All deliveries of funds by the Escrow Agent to the Company
or the Offerors as provided for herein shall be by wire transfer in immediately
available funds. In the event funds
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transfer instructions are given (other than in writing at the time of execution
of this Agreement), whether in writing, by telecopier or otherwise, the Escrow
Agent is authorized to seek confirmation of such instructions by telephone call
back to the person or persons designated in Exhibit B attached hereto, and the
Escrow Agent may rely upon the confirmations of anyone purporting to be the
person or persons so designated in Exhibit C attached hereto. To assure accuracy
of the instructions the Escrow Agent receives, the Escrow Agent may record such
call backs. If the Escrow Agent is unable to verify the instructions, or is not
satisfied with the verification it receives, it will not execute the instruction
until all issues have been resolved. The persons and telephone numbers for call
backs may be changed only in writing actually received and acknowledged by the
Escrow Agent. The parties agree to notify the Escrow Agent of any errors, delays
or other problems within thirty (30) days after receiving notification that a
transaction has been executed. If it is determined that the transaction was
delayed or erroneously executed as a result of the Escrow Agent's error, the
Escrow Agent's sole obligation is to pay or refund such amounts as may be
required by applicable law. In no event shall the Escrow Agent be responsible
for any incidental or consequential damages or expenses in connection with the
instruction. Any claim for interest payable will be at the Escrow Agent's
published savings account rate in effect in New York, New York.
(e) Notwithstanding anything to the contrary in this
Agreement:
(1) The Escrow Agent may deposit the Escrow Fund
with the clerk of the Bankruptcy Court upon commencement of an action in the
nature of interpleader or in the course of any court proceedings.
(2) If at any time the Escrow Agent receives a
final non-appealable order of the Bankruptcy Court, or written instructions
signed by both the Company and the Offerors, directing delivery or payment of
any part of the Escrow Fund, the Escrow Agent shall comply with such order or
instruction.
(3) Upon any delivery or deposit of the Escrow
Fund as provided in this Section 4(e), the Escrow Agent shall thereupon be
released and discharged from any and all further obligations arising in
connection with this Agreement.
5. Escrow Agent.
(a) The Escrow Agent shall be entitled to reimbursement for
all reasonable fees, expenses, disbursements and advances incurred or made by it
in performance of its duties hereunder (including reasonable fees, expenses and
disbursements of its counsel). Such reimbursement for fees, expenses,
disbursements and advances shall be paid by the Company if the Recapitalization
is consummated or by the Offerors if the Recapitalization is not consummated;
provided that each of the Company and the Offerors remain jointly and severally
liable for such amount. The Escrow Agent fee shall be of $12,000 (the "Escrow
Agent Fee") which shall be paid by the Offerors upon execution of this
Agreement; provided that if the Recapitalization is consummated, then in such
event the Offerors shall have the right to collect such Escrow Agent Fee from
the Company.
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(b) The Escrow Agent shall have no liability or obligation
with respect to the Escrow Fund except for Escrow Agent's willful misconduct,
bad faith or gross negligence. Escrow Agent's sole responsibility shall be for
the safekeeping, investment, and disbursement of the Escrow Fund in accordance
with the terms of this Agreement. Escrow Agent shall have no implied duties or
obligations and shall not be charged with knowledge or notice of any fact or
circumstance not specifically set forth herein. Escrow Agent may conclusively
rely upon any instrument (whether in its original or facsimile form), and shall
have no liability for acting in accordance with such instrument, not only as to
its due execution, validity and effectiveness, but also as to the truth and
accuracy of any information contained therein, which Escrow Agent shall in good
faith believe to be genuine, to have been signed or presented by the person or
parties purporting to sign the same and to conform to the provisions of this
Agreement. In no event shall Escrow Agent be liable for incidental, indirect,
special, consequential or punitive damages. Escrow Agent shall not be obligated
to take any legal action or commence any proceeding in connection with the
Escrow Fund, any account in which the Escrow Fund is deposited, this Agreement
or the Offer Letter, or to appear in, prosecute or defend any such legal action
or proceeding. Escrow Agent may consult legal counsel selected by it in the
event of any dispute or question as to the construction of any of the provisions
hereof or of any other agreement or of its duties hereunder, or relating to any
dispute involving any party hereto, and shall incur no liability and shall be
fully indemnified from any liability whatsoever in acting in accordance with the
opinion, advice or instruction of such counsel. The Company and each Offeror,
jointly and severally, shall promptly pay, upon demand, the reasonable fees and
expenses of any such counsel; provided, however, that in the event that the
Company pays any amount of such fees and expenses and the Recapitalization is
not consummated, then in such event the Company shall have the right to collect
such payment from the Offerors; and provided further, that in the event that the
Offerors pay any amount of such fees and expenses and the Recapitalization is
consummated, then in such event the Offerors shall have the right to collect
such payment from the Company.
(c) The Escrow Agent is authorized, in its sole discretion, to
comply with orders issued or process entered by the Bankruptcy Court with
respect to the Escrow Fund, without determination by the Escrow Agent of such
court's jurisdiction in the matter. If any portion of the Escrow Fund is at any
time attached, garnished or levied upon under order of the Bankruptcy Court, or
in case the payment, assignment, transfer, conveyance or delivery of any such
property shall be stayed or enjoined by any court order of the Bankruptcy Court,
or in case any order, judgment or decree of the Bankruptcy Court shall be made
or entered by any court affecting such property or any part thereof, then and in
any such event, the Escrow Agent is authorized, in its sole discretion, to rely
upon and comply with any such order, writ, judgment or decree which it is
advised by legal counsel selected by it is binding upon it without the need for
appeal or other action; and if the Escrow Agent complies with any such order,
writ, judgment or decree, it shall not be liable to any of the parties hereto or
to any other person or entity by reason of such compliance even though such
order, writ, judgment or decree may be subsequently reversed, modified,
annulled, set aside or vacated.
(d) From and at all times after the date of this Agreement,
the Company and the Offerors, jointly and severally, shall, to the fullest
extent permitted by law and to the extent provided herein, fully indemnify and
hold harmless Escrow Agent, its affiliates and their respective directors,
officers, employees and agents (collectively, the "Indemnified Parties") against
any and all actions,
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claims (whether or not valid), losses, damages, liabilities, costs and expenses
of any kind or nature whatsoever (including without limitation reasonable
attorneys' fees, costs and expenses) incurred by or asserted against any of the
Indemnified Parties from and after the date hereof, whether direct, indirect or
consequential, as a result of or arising from or in any way relating to any
claim, demand, suit, action or proceeding (including any inquiry or
investigation) by any person, whether threatened or initiated, asserting a claim
for any legal or equitable remedy against any person under any statute or
regulation, including, but not limited to, any federal or state securities laws,
or under any common law or equitable cause or otherwise, arising from or in
connection with the negotiation, preparation, execution, performance or failure
of performance of this Agreement or any transactions contemplated herein,
whether or not any such Indemnified Party is a party to any such action,
proceeding, suit or the target of any such inquiry or investigation; provided,
however, that no Indemnified Party shall have the right to be indemnified
hereunder for any liability finally determined by the Bankruptcy Court, subject
to no further appeal, to have resulted solely from the gross negligence, bad
faith or willful misconduct of such Indemnified Party. If any such action or
claim shall be brought or asserted against any Indemnified Party, such
Indemnified Party shall promptly notify the Company and the Offerors in writing,
and the Company and the Offerors shall assume the defense thereof, including the
employment of counsel and the payment of all expenses. Such Indemnified Party
shall, in its sole discretion, have the right to employ separate counsel (who
may be selected by such Indemnified Party in its sole discretion) in any such
action and to participate in the defense thereof, and the fees and expenses of
such counsel shall be paid by such Indemnified Party, except that the Company
and/or the Offerors shall be required to pay such fees and expenses if (a) the
Company and/or the Offerors agree to pay such fees and expenses, (b) the Company
and/or the Offerors shall fail to assume the defense of such action or
proceeding or shall fail, in the reasonable discretion of such Indemnified
Party, to employ counsel satisfactory to the Indemnified Party in any such
action or proceeding, (c) the Company or the Offerors are the plaintiff in any
such action or proceeding or (d) the named or potential parties to any such
action or proceeding (including any potentially impleaded parties) include both
the Indemnified Party and the Company and/or the Offerors, and the Indemnified
Party shall have been advised by counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Company or the Offerors. The Company and the Offerors shall be
jointly and severally liable to pay fees and expenses of counsel pursuant to the
preceding sentence, except that any obligation to pay under clause (a) shall
apply only to the party so agreeing. All such fees and expenses payable by the
Company and/or the Offerors pursuant to the foregoing sentence shall be paid
from time to time as incurred, both in advance of and after the final
disposition of such action or claim. All of the foregoing losses, damages, costs
and expenses of the Indemnified Parties shall be payable by the Company and the
Offerors, jointly and severally, upon demand by such Indemnified Party;
provided, however, that in the event that the Company pays any amount of such
fees and expenses and the Recapitalization is not consummated, then in such
event the Company shall have the right to collect such payment from the
Offerors; and provided further, that in the event that the Offerors pay any
amount of such fees and expenses and the Recapitalization is consummated, then
in such event the Offerors shall have the right to collect such payment from the
Company. The obligations of the Company and the Offerors under this Section 5(d)
shall survive any termination of this Agreement and the resignation or removal
of Escrow Agent shall be independent of any obligation of the Escrow Agent.
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The parties agree that neither the payment by the Company or
the Offerors of any claim by Escrow Agent for indemnification hereunder nor the
disbursement of any amounts to Escrow Agent from the Escrow Funds in respect of
a claim by Escrow Agent for indemnification shall impair, limit, modify, or
affect, as between the Company and the Offerors, the respective rights and
obligations of the Company and the Offerors under the Offer Letter, the Standby
Commitment or the Rapoport Commitment.
(e) Escrow Agent shall not be subject to, nor required to comply with,
any other agreement between or among any or all of the Offerors and the Company
or to which the Offeror or the Company is a party, even though reference thereto
may be made herein, or to comply with any direction or instruction (other than
those contained herein or delivered in accordance with this Escrow Agreement)
from any Offeror or the Company or any entity acting on its behalf. Escrow Agent
shall not be required to, and shall not, expend or risk any of its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder.
If any fees, expenses or costs incurred by, or any obligations owed to,
Escrow Agent hereunder are not promptly paid when due, Escrow Agent may
reimburse itself therefor from the Escrow Fund and may sell, convey or otherwise
dispose of any assets of Escrow Fund for such purpose. As security for the due
and punctual performance of any and all of Offerors and the Company's
obligations to Escrow Agent hereunder, now or hereafter arising, Offerors and
the Company, individually and collectively, hereby pledge, assign and grant to
Escrow Agent a continuing security interest in, and a lien on, the Escrow Fund
and all distributions thereon or additions thereto. The security interest of
Escrow Agent shall at all times be valid, perfected and enforceable by Escrow
Agent against the Company and the Offerors and all third parties in accordance
with the terms of this Escrow Agreement.
Escrow Agent shall not incur any liability for not performing any act
or fulfilling any duty, obligation or responsibility hereunder by reason of any
occurrence beyond the control of Escrow Agent (including but not limited to any
act or provision of any present or future law or regulation or governmental
authority, any act of God or war, or the unavailability of the Federal Reserve
Bank wire or telex or other wire or communication facility).
Unless otherwise specifically set forth herein, Escrow Agent shall
proceed as soon as practicable to collect any checks or other collection items
at any time deposited hereunder. All such collections shall be subject to Escrow
Agent's usual collection practices or terms regarding items received by Escrow
Agent for deposit or collection. Escrow Agent shall not be required, or have any
duty, to notify anyone of any payment or maturity under the terms of any
instrument deposited hereunder, nor to take any legal action to enforce payment
of any check, note or security deposited hereunder or to exercise any right or
privilege which may be afforded to the holder of any such security.
In the event of any ambiguity or uncertainty hereunder or in any
notice, instruction or other communication received by Escrow Agent hereunder,
Escrow Agent may, in its sole discretion, refrain from taking any action other
than retain possession of the Escrow Fund, unless Escrow Agent
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receives written instructions, signed by the Company and the Offerors, which
eliminates such ambiguity or uncertainty.
In the event of any dispute between or conflicting claims by or among
the Company and the Offerors and/or any other person or entity with respect to
any Escrow Fund, Escrow Agent shall be entitled, in its sole discretion, to
refuse to comply with any and all claims, demands or instructions with respect
to such Escrow Fund so long as such dispute or conflict shall continue, and
Escrow Agent shall not be or become liable in any way to the Company and the
Offerors for failure or refusal to comply with such conflicting claims, demands
or instructions. Escrow Agent shall be entitled to refuse to act until, in its
sole discretion, either (i) such conflicting or adverse claims or demands shall
have been determined by a final order, judgment or decree of the Bankruptcy
Court, which order, judgment or decree is not subject to appeal, or settled by
agreement between the conflicting parties as evidenced in a writing satisfactory
to Escrow Agent or (ii) Escrow Agent shall have received security or an
indemnity satisfactory to it sufficient to hold it harmless from and against any
and all losses which it may incur by reason of so acting. Escrow Agent may, in
addition, elect, in its sole discretion, to commence an interpleader action or
seek other judicial relief or orders as it may deem, in its sole discretion,
necessary. The costs and expenses (including reasonable attorneys' fees and
expenses) incurred in connection with such proceeding shall be paid by, and
shall be deemed a joint and several obligation of, the Offeror and the Company;
provided, however, that in the event that the Company pays any amount of such
fees and expenses and the Recapitalization is not consummated, then in such
event the Company shall have the right to collect such payment from the
Offerors; and provided further, that in the event that the Offerors pay any
amount of such fees and expenses and the Recapitalization is consummated, then
in such event the Offerors shall have the right to collect such payment from the
Company.
6. Successor Escrow Agent. The Escrow Agent (and any successor Escrow
Agent) may at any time resign as such by delivering notice of its resignation to
the Offerors and the Company and delivering the Escrow Fund to a successor
Escrow Agent jointly designated by the Offerors and the Company in writing, or
if the parties cannot agree on the successor Escrow Agent within thirty (30)
days of the notice, to the Bankruptcy Court, whereupon the resigning Escrow
Agent shall be discharged of and from any and all further obligations arising in
connection with this Agreement. After the resignation of any Escrow Agent, the
provision of the Agreement limiting the liability of the Escrow Agent and
indemnifying the Escrow Agent against liabilities, costs, fees and expenses
(including legal fees and expenses) shall continue to inure to the benefit of
the resigned Escrow Agent with respect to any action or omission taken or made
by it while it was the Escrow Agent under this Agreement.
7. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be deemed effective when delivered by
hand, or when telecopied with receipt confirmed, or when mailed by U.S. mail via
first class certified or registered mail, return receipt requested, or when
properly deposited for delivery by a nationally recognized commercial overnight
delivery service, prepaid, as follows:
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If to the Company:
PennCorp Financial Group, Inc.
c/o Southwestern Financial Services Corp.
717 North Harwood Street
Dallas, Texas 75201
Attention: Keith A. Maib, President and Chief Executive Officer
Telephone No.: (214) 954-7111
Telecopy No.: (214) 954-7906
With a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suit 1300
Dallas, Texas 75201-6950
Telephone No.: (214) 746-7700
Telecopy No.: (214) 746-7777
Attention: Martin A. Sosland
If to the Offerors:
Inverness/Phoenix Capital, LLC
660 Steamboat Road
Greenwich, Connecticut 06830
Telephone No.: (203) 629-9492
Telecopy No.: (203) 629-9574
Attention: James C. Comis
and to:
Vicuna Advisors, LLC
230 Park Avenue, 7th Floor
New York, New York 10169
Telephone No.: (212) 499-2938
Telecopy No.: (212) 499-2942
Attention: Josh Welch
and to:
Bernard Rapoport
1200 Wooded Acres Drive
Waco, Texas 76710
Telephone No.: (254) 751-8601
Telecopy No.: (254) 751-8670
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.
and to:
John Sharpe
2305 Cedar Spring Road
Suite 410
Dallas, TX 75201
Telephone No.: (214) 871-3378
Telecopy No.: (214) 871-3364
With a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Telephone No.: (312) 861-2000
Telecopy No.: (312) 861-2200
Attention: James L. Learner, P.C.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, NY 10019-5389
Telephone No.: (212) 424-8000
Facsimile No.: (212) 424-8500
Attention: Irena Goldstein
Heath, Davis & McCalla, P.C.
200 Perry Brooks Bldg.
Austin, Texas 78701
Telephone No.: (512) 478-5671
Telecopy No.: (512) 476-1451
Attention: Will D. Davis
Haynes & Boone
901 Main Street, 30th Floor
Dallas, Texas 75202-3789
Telephone No.: (214) 651-5552
Facsimile No.: (214) 651-5940
Attention: Michael Boone
11
<PAGE> 12
If to the Escrow Agent:
The Citibank Private Bank
Preferred Custody Services
120 Broadway, 2nd Floor
New York, NY 10271
Telephone No.: 212-266-4468
Telecopy No. 212-266-4550
Attention: John P. Howard
Such notice addresses and telecopy numbers may be changed upon written
notice to the other parties hereto.
8. Severability. Any provision of this Agreement which may be
determined by the Bankruptcy Court to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. It is expressly understood, however, that the parties hereto
intend each and every provision of this Agreement to be valid and enforceable
and hereby knowingly waive all rights to object to any provision of this
Agreement.
9. Assignment. This Agreement shall be binding upon and inure solely to
the benefit of the parties hereto and their respective successors and assigns,
and shall not be enforceable by or inure to the benefit of any third party. No
party may assign any of its rights or obligations under this Agreement without
the written consent of the other parties.
10. Amendments; Termination. This Agreement may only be modified or
terminated by a writing signed by all of the parties hereto, and no waiver
hereunder shall be effective unless in a writing signed by the party to be
charged; provided that until the Company becomes a party to this Agreement, this
Agreement may only be modified or terminated with the prior written consent of
the Company as a third party beneficiary; and provided further that until the
Company becomes a party to this Agreement, no waiver hereunder shall be
effective unless prior consented in writing by the Company as a third party
beneficiary.
11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed and delivered in counterpart signature pages and delivered via
facsimile transmission, and any such counterpart executed and delivered via
facsimile transmission shall be deemed an original for all intents and purposes.
12. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York, without regard to the conflict of law
principles thereof except to the extent pre-empted by the United States
Bankruptcy Code. Any judicial proceeding brought against any of the parties to
this Agreement relating to a dispute arising out of this Agreement will be
brought
12
<PAGE> 13
exclusively in the Bankruptcy Court and by its execution and delivery of this
Agreement, each party hereto accepts the exclusive jurisdiction of the
Bankruptcy Court.
13. Miscellaneous.
(a) This Agreement is for the exclusive benefit of the parties
hereto and their respective successors hereunder, and shall not be deemed to
give, either express or implied, any legal or equitable right, remedy, or claim
to any other entity or person whatsoever.
(b) Each of the Company, the Offerors and the Escrow Agent
hereby submits to the jurisdiction of the Bankruptcy Court and each agrees that
all proceedings relating hereto shall be brought in the Bankruptcy Court. Each
of the Company and the Offerors hereby waives the right to trial by jury and to
assert counterclaims in any such proceedings. To the extent that in any
jurisdiction the Company and the Offerors may be entitled to claim, for itself
or its assets, immunity from suit, execution, attachment (whether before or
after judgment) or other legal process, each hereby irrevocably agrees not to
claim, and hereby waives, such immunity.
(c) The rights and remedies conferred upon the parties hereto
shall be cumulative, and the exercise or waiver of any such right or remedy
shall not preclude or inhibit the exercise of any additional rights or remedies.
The waiver of any right or remedy hereunder shall not preclude the subsequent
exercise of such right or remedy.
(d) Each of the Company and the Offerors hereby represents and
warrants (i) that this Amended and Restated Escrow Agreement has been duly
authorized, executed and delivered on its behalf and constitutes its legal,
valid and binding obligation, subject in the case of the Company to Bankruptcy
Court approval, and (ii) that the execution, delivery and performance of this
Amended and Restated Escrow Agreement by it does not violate any applicable law
or regulation.
(e) This Agreement shall constitute the entire agreement of
the parties with respect to the subject matter and supersedes all prior oral or
written agreements in regard thereto.
(f) This Agreement shall terminate upon the distribution of
all Escrow Funds from the Account. The provisions of these terms and conditions
shall survive termination of this Escrow Agreement and/or the resignation or
removal of the Escrow Agent.
(g) The Escrow Agent does not have any interest in the Escrow
Fund deposited hereunder but is serving as escrow holder only and having only
possession thereof. The Offerors and the Company shall pay or reimburse the
Escrow Agent upon request for any transfer taxes or other taxes relating to the
Escrow Fund incurred in connection herewith and shall indemnify and hold
harmless the Escrow Agent any amounts that it is obligated to pay in the way of
such taxes. Any payments of income from this Escrow Account shall be subject to
withholding regulations then in force with respect to United States taxes. The
parties hereto will provide the Escrow Agent with appropriate W-9 forms for tax
I.D., number certifications, or W-8 forms for non-resident alien certifications.
It is understood that the Escrow Agent shall be responsible for income reporting
only with respect to income earned on investment of funds which are a part of
the Escrow Fund and is not
13
<PAGE> 14
responsible for any other reporting. Any income taxes generated from the Escrow
Fund shall be paid by the Offerors and the Escrow Agent shall deliver Form 1099
to and in the name of Inverness.
* * * * *
14
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the day and year first above written:
INVERNESS/PHOENIX CAPITAL, LLC
By: /s/ JAMES C. COMIS
---------------------------------
Its: Managing Director
--------------------------------
VICUNA ADVISORS, LLC, as
investment advisor
By:
---------------------------------
Its: Managing Member
--------------------------------
/s/ BERNARD RAPOPORT
-----------------------------------
BERNARD RAPOPORT
/s/ JOHN SHARPE
-----------------------------------
JOHN SHARPE
PENNCORP FINANCIAL GROUP, INC.
By: /s/ KEITH A. MAIB
---------------------------------
Its: President and Chief Executive
Officer
--------------------------------
CITIBANK, N.A.
By: [ILLEGIBLE]
---------------------------------
Its:
--------------------------------
<PAGE> 16
EXHIBIT A
____________, 2000
VIA FACSIMILE 212-266-4550
The Citibank Private Bank
Preferred Custody Services
120 Broadway, 2nd Floor
New York, NY 10271
Attn: John P. Howard
Re: Escrow Agreement (the "Escrow Agreement"), dated March __, 2000,
by and among Inverness/Phoenix Capital, LLC, a Delaware limited
liability company ("Inverness"), Vicuna Advisors, L.L.C., a
Delaware limited liability company ("Vicuna"), Bernard Rapoport
("Rapoport"), John Sharpe ("Sharpe" and together with Inverness,
Vicuna, and Rapoport the "Offerors"), PennCorp Financial Group,
Inc., a Delaware corporation (the "Company") and Citibank, N.A.
(the "Escrow Agent").
Ladies and Gentlemen:
This will confirm that the Recapitalization of the Company shall occur
on _________________, 2000.
You are hereby directed to cause the delivery of the Rapoport Deposit
(as defined in the Escrow Agreement) by transferring the Rapoport Deposit to the
Company simultaneously with the consummation of the Recapitalization and in
accordance with the following wiring instructions:
--------------------------------
______, ________________________
ABA #
------------------------------------------------
Account Name:
----------------------------------------
Account #:
-------------------------------------------
Special Instructions: Please notify ______________ at
(___) ___-____ upon receipt
You are hereby directed to cause the delivery of the Sharpe Deposit (as
defined in the Escrow Agreement) by transferring the Sharpe Deposit to the
Company simultaneously with the consummation of the Recapitalization and in
accordance with the following wiring instructions:
--------------------------------
______, ________________________
ABA #
------------------------------------------------
Account Name:
----------------------------------------
<PAGE> 17
Account #:
---------------------------------------
Special Instructions: Please notify ______________ at
(___) ___-____ upon receipt
You are hereby directed to cause the delivery of [$__________1 OF] the
Inverness Deposit (as defined in the Escrow Agreement) by transferring
[$__________ OF] the Inverness Deposit to the Company simultaneously with the
consummation of the Recapitalization and in accordance with the following wiring
instructions:
--------------------------------
______, ________________________
ABA #
------------------------------------------------
Account Name:
----------------------------------------
Account #:
-------------------------------------------
Special Instructions: Please notify ______________ at
(___) ___-____ upon receipt
[YOU ARE HEREBY DIRECTED TO CAUSE THE DELIVERY OF $__________2 OF THE
INVERNESS DEPOSIT (AS DEFINED IN THE ESCROW AGREEMENT) BY TRANSFERRING
$__________ OF THE INVERNESS DEPOSIT TO INVERNESS SIMULTANEOUSLY WITH THE
CONSUMMATION OF THE RECAPITALIZATION AND IN ACCORDANCE WITH THE FOLLOWING WIRING
INSTRUCTIONS:
--------------------------------
______, ________________________
ABA #
------------------------------------------------
Account Name:
----------------------------------------
Account #:
-------------------------------------------
Special Instructions: Please notify ______________ at
(___) ___-____ upon receipt
You are hereby directed to cause the delivery of [$__________ OF] the
Vicuna Deposit (as defined in the Escrow Agreement) by transferring [$__________
OF] the Vicuna Deposit to the Company simultaneously with the consummation of
the Recapitalization and in accordance with the following wiring instructions:
--------------------------------
______, ________________________
ABA #
------------------------------------------------
Account Name:
----------------------------------------
Account #:
-------------------------------------------
Special Instructions: Please notify ______________ at
(___) ___-____ upon receipt
- -------------
(1) To reflect amount, if any, called under the Standby Commitment.
(2) To reflect, if any, not called under the Standby Commitment.
2
<PAGE> 18
[YOU ARE HEREBY DIRECTED TO CAUSE THE DELIVERY OF $__________ OF THE
VICUNA DEPOSIT (AS DEFINED IN THE ESCROW AGREEMENT) BY TRANSFERRING OF
$__________ OF THE VICUNA DEPOSIT TO VICUNA SIMULTANEOUSLY WITH THE CONSUMMATION
OF THE RECAPITALIZATION AND IN ACCORDANCE WITH THE FOLLOWING WIRING
INSTRUCTIONS:
--------------------------------
______, ________________________
ABA #
------------------------------------------------
Account Name:
----------------------------------------
Account #:
-------------------------------------------
Special Instructions: Please notify ______________ at
(___) ___-____ upon receipt
You are hereby directed to cause the delivery of the Escrow Earnings
(as defined in the Escrow Agreement) by transferring the Escrow Earnings to
Inverness for the ratable benefit of the Offerors simultaneously with the
Closing and in accordance with the following wiring instructions:
--------------------------------
______, ________________________
ABA #
------------------------------------------------
Account Name:
----------------------------------------
Account #:
-------------------------------------------
Special Instructions: Please notify ______________ at
(___) ___-____ upon receipt
3
<PAGE> 19
Upon such delivery, the Escrow Agreement shall terminate and you shall
be released from all further obligations under the Escrow Agreement.
Very truly yours,
INVERNESS/PHOENIX CAPITAL, LLC
By:
---------------------------------------
Its:
--------------------------------------
VICUNA ADVISORS, LLC
By:
---------------------------------------
Its:
--------------------------------------
------------------------------------------
BERNARD RAPOPORT
------------------------------------------
JOHN SHARPE
PENNCORP FINANCIAL GROUP, INC.
By:
---------------------------------------
Its:
--------------------------------------
<PAGE> 20
EXHIBIT B
Confirmation of Wire Instructions
1. Wire Instructions for Bernard Rapoport.
A. Bernard Rapoport: (254) 751-8601
B Will D. Davis: (512) 478-5671
2. Wire Instructions for John Sharpe.
A. John Sharpe: (214) 871-3378
B. Michael Boone: (214) 651-5552
3. Wire Instructions for Inverness.
A. Robert Sheehy: (203) 629-5593
B. Jordon L. Kruse: (312) 861-2279
4. Wire Instructions for Vicuna.
A. Josh Welch: (212) 499-2938
B. Irena Goldstein: (212) 424-8000
<PAGE> 21
EXHIBIT C
Designated Person
1. On behalf of Inverness.
James C. Comis
-------------------------
W. McComb Dunwoody
-------------------------
2. On behalf of Vicuna.
Josh Welch
-------------------------
Kenneth S. Cooper
-------------------------
3. On behalf of Bernard Rapoport.
Bernard Rapoport
-------------------------
4. On behalf of John Sharpe.
John Sharpe
-------------------------
5. On behalf of PennCorp Financial
Group, Inc.
[Keith A. Maib]
-------------------------
<PAGE> 1
EXHIBIT 10.7
AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into as of March 15, 2000,
by and between PennCorp Financial Group, Inc., a Delaware corporation (the
"Company"), and each other signatory party hereto (individually, a "Holder").
WHEREAS, the Company intends to solicit the approval of the holders of
its $3.375 Convertible Preferred Stock and $3.50 Series II Convertible Preferred
Stock (collectively, the "Preferred Stock"), to a recapitalization transaction,
the principal terms of which are attached hereto as Exhibit A (the
"Recapitalization");
WHEREAS, each of the Holders is an owner of shares of Preferred Stock;
and
WHEREAS, the Recapitalization is acceptable in all respects to each of
the Holders.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
SECTION 1. VOTE IN FAVOR OF THE RECAPITALIZATION. So long as the
Termination Event shall not have occurred, each Holder agrees (i) to vote its
shares of Preferred Stock in favor of the Recapitalization and vote to accept a
plan of reorganization incorporating the terms of the Recapitalization in the
Company's voluntary case under Chapter 11 of the United States Bankruptcy Code
and (ii) not to consent to, or vote for any other merger, consolidation, sale of
assets, reorganization, recapitalization, plan of reorganization or plan of
liquidation or any action relating to the consummation of which would either
frustrate the purposes of, or prevent or delay the consummation of the
Recapitalization.
SECTION 2. TRANSFER OF PREFERRED STOCK. Each Holder shall not, directly
or indirectly, sell, assign, hypothecate, grant an option on, or otherwise
dispose of (collectively, "transfer") any of the shares of Preferred Stock held
by such Holder on the date hereof; provided, however, that each Holder shall be
permitted to transfer any or all of its shares of Preferred Stock to (i) any
entity that agrees in a writing, in form and substance reasonably satisfactory
to the Company, to be bound by the terms of this Agreement or, (ii) any other
Holder.
SECTION 3. RELEASE. Effective as of the date of the consummation of the
Recapitalization, the Holders, for themselves and their respective affiliates,
assigns, heirs, executors, agents, employees, attorneys and representatives
(collectively, the "Releasors"), hereby RELEASE, SURRENDER, REMISE, ACQUIT, AND
FOREVER DISCHARGE the current and former officers and directors of the Company
and its present and former subsidiaries (the "Releasees") from any and all
claims, counterclaims, demands, damages,
Preferred Holder Agreement
<PAGE> 2
entitlements, actions, causes of action, suits in equity, liabilities, debts,
and accounts, whatsoever, which the Releasors now have, have ever had or may
hereafter have, whether known or unknown, suspected or unsuspected
(collectively, "Claims"), on account of or arising out of any matter with
respect to the operations or conduct of the business of the Company and its
present or former subsidiaries, other than Claims resulting from the intentional
misconduct or bad faith of a Releasee.
SECTION 4. REPRESENTATION OF OWNERSHIP. Each Holder represents that it
owns the shares of Preferred Stock set forth under its signature.
SECTION 5. TERMINATION OF OBLIGATIONS. The obligations of each Holder
hereunder shall terminate and be of no further force and effect (i) if an order
approving the sale of SW Life and SLT (as defined in Exhibit A attached hereto)
has been entered by the Bankruptcy Court (as defined in Exhibit A attached
hereto), and such order has become final or (ii) in the event the
Recapitalization has not been consummated on or prior to December 31, 2000
(each, a "Termination Event").
SECTION 6. DUE AUTHORIZATION. Each person who executes this Agreement
by or on behalf of each respective party represents that it has been duly
authorized or empowered to execute and deliver this Agreement on behalf of such
party.
SECTION 7. AMENDMENTS. No modification or amendment of the terms of
this Agreement shall be valid unless such modification or amendment, in writing,
has been signed by each of the signatories party hereto.
SECTION 8. GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of New York, without regard to the
conflict of law principles thereof except to the extent pre-empted by the United
States Bankruptcy Code. Any judicial proceeding brought against any of the
parties to this Agreement relating to a dispute arising out of this Agreement
will be brought exclusively in the Bankruptcy Court and by its execution and
delivery of this Agreement, each party hereto accepts the exclusive jurisdiction
of the Bankruptcy Court.
SECTION 9. SEVERABILITY OF PROVISIONS. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provisions in any other
jurisdiction.
SECTION 10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signature of more than one
party and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
Preferred Holder Agreement
<PAGE> 3
SECTION 11. HEADINGS. The Section headings of this Agreement are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Agreement.
Preferred Holder Agreement
<PAGE> 4
IN WITNESS WHEREOF, the parties hereof have caused this Agreement to be
executed and delivered by their respective duly authorized officers as of the
date first set forth above.
PENNCORP FINANCIAL GROUP, INC.
By: /s/ KEITH A. MAIB
------------------------------------------
Name: Keith A. Maib
----------------------------------------
Title: President and Chief Executive Officer
---------------------------------------
Preferred Holder Agreement
<PAGE> 5
HOLDERS
AIG - Soundshore Partners Camden Asset Management
By: [ILLEGIBLE] By: /s/ JOHN B. WAGNER
----------------------------------- --------------------------------
Its: Its: Managing Director
---------------------------------- -------------------------------
Preferred Shares: 41,170 Preferred Shares: 80,097
--------------------- ------------------
Forest Investment Management Highbridge Capital Management LLC
By: /s/ MICHAEL A. BOYD By: /s/ CAROLYN RUBIN
----------------------------------- --------------------------------
Its: Chairman Its: Managing Director
---------------------------------- -------------------------------
Preferred Shares: 424,000 Preferred Shares: 63,640
--------------------- ------------------
Inverness/Phoenix Partners L.P. Executive Capital Partners I, L.P.
By: /s/ JAMES C. COMIS By: /s/ JAMES C. COMIS
----------------------------------- --------------------------------
Its: Managing Director Its:
---------------------------------- -------------------------------
Preferred Shares: 1,007,789 Preferred Shares: 33,354
--------------------- ------------------
Brown's Dock, L.L.C. Loeb Partners Corp
By: /s/ JAMES C. COMIS By: [ILLEGIBLE]
----------------------------------- --------------------------------
Its: Its:
---------------------------------- -------------------------------
Preferred Shares: 530,257 Preferred Shares: 29,000
--------------------- ------------------
Paloma Securities LLC Paloma Strategic Securities Limited
By: /s/ MICHAEL J. BERNER By: /s/ MICHAEL J. BERNER
----------------------------------- --------------------------------
Its: Vice President Its: Executive Vice President
---------------------------------- -------------------------------
Preferred Shares: 317,000 Preferred Shares: 70,900
--------------------- ------------------
Q Investments, LP Steadfast Financial LLC
By: /s/ ROBERT MCCORMICK By: /s/ ANDREW FOOT
----------------------------------- --------------------------------
Its: Vice President Its:
---------------------------------- -------------------------------
Preferred Shares: 57,270 Preferred Shares: 246,400
--------------------- ------------------
Vicuna Advisors LLC W.G. Trading
By: /s/ JOSH WELCH By: /s/ ERIC GREENBERG
----------------------------------- --------------------------------
Its: Managing Member Its: Senior Trader
---------------------------------- -------------------------------
Preferred Shares: 796,600 Preferred Shares: approx. 158,000
--------------------- ------------------
/s/ WILLIAM M. MCCORMICK
- --------------------------------------
William M. McCormick
Preferred Shares: 10,000
---------------------
Preferred Holder Agreement
<PAGE> 1
EXHIBIT 99.1
NEWS RELEASE
- -------------------------------------
[SITRICK AND COMPANY INC. LETTERHEAD]
Media Contact: Ann Julsen
Maya Pogoda
Sitrick and Company
(310) 788-2850
FOR IMMEDIATE RELEASE
PENNCORP FINANCIAL ANNOUNCES RECAPITALIZATION AGREEMENT
NEW YORK, N.Y. - MARCH 24, 2000 - PennCorp Financial Group, Inc. announced
today that its Board of Directors has selected a recapitalization transaction
proposed by Inverness/Phoenix Capital LLC and Vienna Advisors, LLC on behalf of
the unofficial ad hoc committee of preferred stockholders, and Bernard Rapoport
and John Sharpe as the final accepted offer pursuant to the bidding procedures
approved by the Delaware Bankruptcy Court last month. The selection of the
recapitalization transaction was approved by the Delaware Bankruptcy Court at
a hearing today.
Inverness and Vienna currently represent 45.8 percent of the holders of
the Company's two outstanding series of preferred stock. Messrs. Rapoport and
Sharpe have committed to invest a total of $23 million in the recapitalized
company, and Inverness and Vienna have committed to fully underwrite a total
$24.5 million rights offering of equity in the recapitalized company. As a
result, the Company will not proceed with the previously announced proposed
sale of Southwestern Life Insurance Company and Security Life and Trust
Insurance Company to Reassure America Life Insurance Company. Pursuant to its
agreement with Reassure America, the Company is obligated to pay Reassure
America, upon consummation of the recapitalization transaction, a
<PAGE> 2
termination payment of $5.2 million plus reimbursement of expenses not to
exceed $800,000. The Official Committee of Unsecured Creditors appointed in
the Company's Chapter 11 case supports the Board's decision.
The Company has received irrevocable commitments from holders of
approximately 71 percent of the Company's two outstanding series of preferred
stock that they will vote in favor of the proposed recapitalization transaction
upon solicitation by the Company which when voted will satisfy the voting
requirements for confirmation of the plan of reorganization. The Company also
reports that to date, Inverness, Vienna, Mr. Rapoport and Mr. Sharpe have
deposited $47.5 million into an escrow account, and that those funds will be
used to make their to make their respective committed equity investments in the
recapitalized company once the recapitalization transaction is consummated. A
portion of such funds may be forfeited to the Company under certain
circumstances.
The proposed recapitalization transaction provides that the preferred
stockholders will receive one share of common stock of the reorganized company
for each share of outstanding preferred stock. In addition, the preferred
stockholders will have an opportunity pursuant to the rights offering to
purchase .3787 shares of common stock of the reorganized company for each
share of outstanding preferred stock owned at a purchase price of $12.50 per
share. Under the proposed recapitalization transaction, all existing shares of
the Company's common stock will be cancelled for no value, and the Company's
existing senior and subordinated debt, with principal currently aggregating
approximately $180 million, will be paid in full in cash. Any and all other
claims and liabilities of the Company will be paid in accordance with their
terms.
<PAGE> 3
Consummation of the recapitalization is subject to certain conditions
including regulatory approvals, the consummation of a $95 million credit
facility with ING Barrings in New York, the consummation of a proposed
transaction whereby Southwestern Life and Security Life & Trust will reinsure
substantially all of their existing deferred annuity blocks of business to RGA
Reinsurance Company, an order confirming the Company's plan of reorganization
that incorporates the proposed recapitalization transaction shall have been
entered by the bankruptcy court and such order shall be unstayed and in full
force and effect, and the closing of the recapitalization occurring not later
than December 31, 2000. The definitive agreement for the credit facility and
the reinsurance transaction will contain conditions to consummation including
no material adverse change as defined in the proposed credit agreement.
The Texas Department of Insurance has indicated to the Company that it
sees no basis at this time for not approving the pending Form A-Change of
Control Application submitted by the Inverness group and Benard Rapoport.
The Company intends to file a plan of reorganization incorporating the
recapitalization proposal within the next two weeks and to seek confirmation of
such plan by the Bankruptcy Court by June 5, 2000, with consummation
anticipated to occur promptly following confirmation.
PennCorp Financial Group, Inc. is an insurance holding company. Through its
subsidiaries, the Company underwrites and markets life insurance and accident
and sickness insurance throughout the United States.
Cautionary Statement for purposes of the Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995:
<PAGE> 4
All Statements in the press release including words such as "anticipate,"
"believe," "plan," "estimate," "expect," "intend," and other similar expressions
constitute forward-looking statements under the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are subject to known and
unknown risks, uncertainties and other factors contemplated by the
forward-looking statements. Such factors include, among other things: (1)
general economic conditions and other factors, including prevailing interest
rates levels and stock market performance, which may affect the ability of
PennCorp to sell its products, the market value of PennCorp's investments and
lapse rate profitability of policies; (2) PennCorp's ability to achieve
anticipated levels of operational efficiencies and cost-saving initiatives; (3)
customer response to new products, distribution channels and marketing
initiatives; (4) mortality, morbidity, and other factors that may affect the
profitability of PennCorp's insurance product; (5) changes in the Federal income
tax laws and regulations which may affect the relative tax advantages of some of
PennCorp's products; (6) increasing competition in the sale of insurance and
annuities; (7) regulatory changes or actions, including those relating to
regulation of insurance products and of insurance companies; (8) ratings
assigned to PennCorp's insurance subsidiaries by independent rating
organizations such as A.M. Best Company ("A.M. Best"), which the Company
believes are particularly important to the sale of annuity and other
accumulation products; (9) PennCorp's continued ability to address Year 2000
issues; (10) PennCorp's ability to consummate its contemplated recapitalization
transaction; (11) unanticipated litigation, and (12) other risk factors and
uncertainties cited in PennCorp's periodic filings with the Securities and
Exchange Commission. There can be no assurance that other factors not currently
anticipated by management will not also materially and adversely affect the
Company.
<PAGE> 1
EXHIBIT 99.2
ING BARINGS [LETTERHEAD]
March 21, 2000
Inverness Management LLC
660 Steamboat Road
Greenwich, CT 06830
Attn: Mr. James C. Comis, III
Managing Director
Ladies and Gentlemen:
In connection with a proposed recapitalization (the "Recapitalization") of
PennCorp Financial Group, Inc. (the "Company") on the terms set forth in Exhibit
A hereto (the "Terms Summary"), we hereby confirm that ING (U.S.) Capital LLC
("ING"), in its capacity as a Lender and Administrative Agent, has negotiated
the draft of the Credit Agreement attached hereto as Exhibit B (the "Credit
Agreement") with Inverness Management LLC ("Inverness") and certain other
preferred shareholders (collectively, the "Preferred Shareholders") of the
Company. Capitalized terms used but not defined herein shall have meanings
assigned to such terms in the Credit Agreement.
ING confirms that the Credit Agreement is in substantially final form and
represents, as of the date hereof, the negotiations between ING and the
Preferred Shareholders relating to (i) an $80,000,000 senior secured amortizing
term loan and (ii) a $15,000,000 revolving loan to be provided to the Company
(collectively, the "Senior Facility") on substantially the terms and conditions
as are set forth therein. To the extent inconsistent therewith, the Credit
Agreement shall supercede the Summary of Terms and Conditions annexed as Exhibit
A to the Commitment Letter between ING and Inverness, dated as of February 22,
2000; provided that the Credit Agreement may be amended or modified from time to
time, at the sole discretion of ING, to effect such changes as may be necessary
to effect a satisfactory syndication of the Senior Facility (provided that the
total amount of the Senior Facility shall not be reduced) or in the event that
ING becomes aware of any information not previously disclosed to it which is
material and adverse to ING or the Lenders. We are pleased to confirm that the
results or our due diligence have been satisfactory to date.
<PAGE> 2
This Letter is limited as specified herein and shall not constitute a
modification, acceptance or waiver of any other provision of the Commitment
Letter.
THIS LETTER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW
YORK.
Very truly yours,
ING (U.S) Capital LLC
By: [ILLEGIBLE]
----------------
Name: [ILLEGIBLE]
Title: Director
ING Barings LLC
By: [ILLEGIBLE]
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Name: [ILLEGIBLE]
Title: Director
