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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): FEBRUARY 4, 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
67200.0001
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
As previously reported, pursuant to a Stock Purchase Agreement (the
"Stock Purchase Agreement") dated as of January 8, 2000, by and between
American-Amicable Holdings Corporation ("AA Holdings"), a subsidiary of PennCorp
Financial Group, Inc. (the "Company"), and Pioneer-Occidental Holdings Company
("Holdings"), Holdings agreed to purchase all of the outstanding shares of
common stock of Pioneer Security Life Insurance Company ("Pioneer") and
Occidental Life Insurance Company of North Carolina for $102,000,000 in cash,
subject to certain adjustments (the "Waco Transaction"). In connection with the
consummation of the Waco Transaction (as described in the following paragraph),
the Stock Purchase Agreement was amended pursuant to an Amendment to Stock
Purchase Agreement dated as of February 4, 2000 (the "Amendment"), to provide,
among other things, (i) for the assignment to Holdings of that certain surplus
debenture dated July 1, 1997, made by Pioneer in the original principal amount
of $63,700,809, (ii) for the assumption by Holdings of certain employee benefit
obligations, and (iii) for the continuation, among other things, of a Cost
Sharing and Services Agreement dated effective October 14, 1995, between
American-Amicable Life Insurance Company and Pacific Life and Accident Insurance
Company. The description of the Amendment herein does not purport to be complete
and is qualified in its entirety by reference to the Amendment, which is filed
as an exhibit to this Current Report on Form 8-K.
On February 4, 2000, AA Holdings consummated the Waco Transaction.
After the payment of transaction fees and expenses, the settlement of
intercompany balances and the payment of certain amounts as required by the
Stock Purchase Agreement, AA Holdings received net proceeds of approximately $97
million. In addition, pursuant to the terms of the Stock Purchase Agreement, AA
Holdings received $13 million in cash, which represented the capital and surplus
of the insurance subsidiaries acquired by Holdings in the Waco Transaction in
excess of the minimum capital and surplus of such companies as required by the
Stock Purchase Agreement. Of such proceeds, approximately $100 million was paid
to the lenders under the Company's Credit Agreement dated as of March 12, 1997,
among the Company, the lenders signatory thereto, the Managing Agents and the
Co-Agents named therein and The Bank of New York, as administrative agent. A
press release dated February 4, 2000, announcing the consummation of the Waco
Transaction is filed as an exhibit to this Current Report on Form 8-K and such
press release is incorporated by reference herein.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
On February 7, 2000, 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"). The Company
continues to operate its business and to manage its affairs as a
debtor-in-possession. The Chapter 11 Case relates only to the Company and not
the Company's subsidiaries. A press release dated February 7, 2000, announcing
the filing of the Chapter 11 Case is filed as an exhibit to this Current Report
on Form 8-K and such press release is incorporated by reference herein.
ITEM 5. OTHER EVENTS.
As a result of the Waco Transaction and the pending sale of
Southwestern Life Insurance Company and Security Life & Trust Insurance Company
to Reassure America Life Insurance
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Company ("Reassure America"), pursuant to the Stock Purchase Agreement dated as
of January 10, 2000, by and between Reassure America and the Company, Keith A.
Maib, the President and Chief Executive Officer of the Company, James P.
McDermott, the Executive Vice President and Chief Financial Officer of the
Company, and Scott D. Silverman, the Executive Vice President, Chief
Administrative Officer and General Counsel of the Company (collectively, the
"Executives"), became entitled to terminate their existing employment agreements
(the "Old Employment Agreements") for "Good Reason" (as defined therein). As the
result thereof, the amounts of $3,403,467.08, $2,983,335.86 and $3,062,930.59
became due and owing to Messrs. Maib, McDermott and Silverman, respectively. In
order to ensure the continued services of the Executives, on January 28, 2000,
the Company entered into an Agreement with each Executive (collectively, the
"Agreements"), pursuant to which the Company entered into new Executive
Employment Agreements with each Executive (the "New Employment Agreements") and
paid to each Executive the amount indicated above.
The descriptions of the New Employment Agreements and the Agreements
above do not purport to be complete and are qualified in their entirety by
reference to the New Employment Agreements and the Agreements, which are 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 - Amendment to Stock Purchase Agreement dated as of February 4, 2000, by
and between American-Amicable Holdings Corporation and
Pioneer-Occidental Holdings Company.
10.2 - Executive Employment Agreement dated January 28, 2000, by and between
PennCorp Financial Group, Inc. and Keith A. Maib.
10.3 - Agreement dated January 28, 2000, by and between PennCorp Financial
Group, Inc. and Keith A. Maib.
10.4 - Executive Employment Agreement dated January 28, 2000, by and between
PennCorp Financial Group, Inc. and James P. McDermott.
10.5 - Agreement dated January 28, 2000, by and between PennCorp Financial
Group, Inc. and James P. McDermott.
10.6 - Executive Employment Agreement dated January 28, 2000, by and between
PennCorp Financial Group, Inc. and Scott D. Silverman.
10.7 - Agreement dated January 28, 2000, by and between PennCorp Financial
Group, Inc. and Scott D. Silverman.
99.1 - Press Release dated February 4, 2000.
99.2 - Press Release dated February 7, 2000.
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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: February 11, 2000 By: /s/ Scott D. Silverman
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Scott D. Silverman
Executive Vice President,
Chief Administrative Officer and
General Counsel
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EXHIBIT 10.1
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AMENDMENT TO STOCK PURCHASE AGREEMENT
This Amendment to Stock Purchase Agreement (this "Amendment"), dated
as of February 4, 2000, is by and between Pioneer-Occidental Holdings Company, a
Delaware corporation, ("Buyer"), and American-Amicable Holdings Corporation, a
Delaware corporation ("Seller").
RECITALS:
WHEREAS, Buyer and Seller are parties to that certain Stock Purchase
Agreement, dated January 8, 2000 (as amended, the "Agreement"), pursuant to
which Buyer agreed to buy and Seller agreed to sell all of the outstanding
shares of the common stock (the "Shares") of each of Pioneer Security Life
Insurance Company, a Texas insurance corporation ("Pioneer") and Occidental Life
Insurance Company of North Carolina, a Texas insurance corporation
("Occidental"); and
WHEREAS, Buyer and Seller desire to amend the Agreement as provided
for and on the conditions herein stated.
NOW THEREFORE, for other good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged by each of the parties hereto, the
parties hereto agree as follows:
1. DEFINITIONS. All initially capitalized terms used in this
Amendment shall have the meanings assigned thereto in the Agreement unless
otherwise defined herein.
2. AMENDMENTS. As of, and with effect from, the Execution Date, the
Agreement is hereby amended as follows:
2.1 Section 1.1 of the Agreement is hereby amended by the addition of
the following definition:
"Note" means that certain surplus debenture, made July 1, 1997, by
Pioneer in favor of Seller, as amended, in the original principal
amount of $63,700,809.
2.2 Section 2.1 of the Agreement is hereby amended and restated in
its entirety as follows:
SECTION 2.1 Purchase and Sale of Shares and Note. On the terms and
subject to the conditions hereof, and in reliance upon the respective
representations, warranties, covenants and agreements of each of the
respective parties to this Agreement, at the Closing, Seller will
sell, assign, transfer and convey to Buyer and Buyer will purchase
and acquire from
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Seller, the Shares and the Note, free and clear of all Liens, except
Liens created by Buyer.
2.3 The heading to Section 2.2 of the Agreement is hereby amended to
be "Consideration for the Shares and Note".
2.4 Section 2.2 of the Agreement is hereby further amended by
inserting the words "and the Note" immediately after the word "Shares" where it
appears in the second line thereof.
2.5 Article III of the Agreement is hereby amended by the addition of
the following Section 3.25 thereto:
Section 3.25. Survival of Intercompany Agreements. Notwithstanding
anything in the Agreement to the contrary, including without
limitation Sections 3.24 and 6.1(f) of the Agreement, Buyer and
Seller agree that that certain Cost Sharing and Services Agreement,
dated effective October 14, 1995 between AA Life and Pacific Life and
Accident Insurance Company (the "PLAIC Cost Sharing and Services
Agreement") shall not terminate at the Closing, but shall continue in
effect as provided for herein.
2.6 Section 5.1(h)(iii) of the Agreement is hereby amended by
replacing the amount "$1,200,000" with "$1,475,000" where it appears in such
subsection (iii).
2.7 Section 5.9(a) of the Agreement is hereby amended and restated in
its entirety as follows:
(a) On the Closing Date, all Target Employees shall remain employees
of the Target Companies. At and following the Closing Date, Buyer
shall be liable for, and shall indemnify and hold Seller and its
affiliates harmless from, any and all obligations or liabilities,
contingent or otherwise, relating to or arising from the employment
or termination of employment of the Target Employees. Without
limiting the generality of the foregoing, Buyer shall assume and be
liable for, and shall indemnify and hold Seller and its affiliates
harmless from, all obligations and other liabilities under each
employment, severance, bonus or retention agreement to which any
Target Company is a party.
2.8 Section 5.9 of the Agreement is hereby further amended by the
addition of the following subsections (f) and (g) thereto:
(f) Notwithstanding any other provision of the Agreement to the
contrary, for the period from the Closing Date through the last day
of the calendar month in which the Closing occurs (the "Transition
Period"), Seller shall administer the Benefit Plans set forth on
Exhibit A to the
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Amendment (the "Transition Benefit Plans") consistent with past
practice in accordance with the terms of such Transition Benefit
Plans and in compliance with applicable laws. Buyer shall bear the
costs of administering the Transition Benefit Plans for the
Transition Period. Buyer shall indemnify, defend and hold harmless
Seller and its affiliates from and against all financial obligations,
tax or otherwise, based upon, arising out of or otherwise in respect
of the services provided by Seller pursuant to this Section 5.9(f);
provided, however, that Seller shall not, in the performance of its
responsibilities under this Section 5.9(f) of the Agreement,
intentionally violate the terms of such Transition Benefit Plans or
Benefit Plans as applicable, and applicable laws including, but not
limited to, ERISA and the Code.
(g) Notwithstanding any other provision of the Agreement to the
contrary, in connection with the Seller's February 15, 2000 payroll,
Seller shall (i) administer the payment of wages, withholding taxes,
social security taxes and unemployment taxes (the "Payroll
Obligations") of the Target Employees consistent with past practice
and in compliance with applicable laws. Buyer shall bear the costs of
(i) administering the Payroll Obligations for the Transition Period.
Buyer shall indemnify, defend and hold harmless Seller and its
affiliates from and against all financial obligations, tax or
otherwise, based upon, arising out of or otherwise in respect of the
services provided by Seller pursuant to this Section 5.9(g);
provided, however, that Seller shall not, in the performance of its
responsibilities under this Section 5.9(g), intentionally violate the
terms of any applicable laws including, but not limited to, ERISA and
the Code.
2.9 Article V of the Agreement is hereby further amended by the
addition of the following Section 5.14 thereto:
Section 5.14 Survival of PLAIC Cost Sharing and Services Agreement
(a) Notwithstanding any other provision of the Agreement to the
contrary, the PLAIC Cost Sharing and Services Agreement shall survive
closing and continue to operate according to its terms and
conditions. Notwithstanding any other provision of the Agreement to
the contrary, the insurance policies owned by PLAIC (the "PLAIC
Insurance Policies"), which policies are currently administered under
the PLAIC Cost Sharing and Services Agreement, shall continue to be
administered thereunder until the closing of the transaction
contemplated by Section 7.1 of that certain Stock Purchase Agreement,
dated January 7, 2000, between Reassure America Life Insurance
Company and PennCorp (the "Reassure Closing"). Upon the Reassure
Closing, Buyer shall cause Pioneer Security to (i) assume (pursuant
to an Assumption and Reinsurance Agreement substantially in the form
attached as Exhibit B to the Amendment) and coinsure (pursuant to a
Coinsurance Agreement substantially in the form
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attached as Exhibit C to the Amendment) all of the PLAIC Insurance
Policies and (ii) enter into a Service and Administration Agreement
with Seller or an affiliate of Seller substantially in the form of
Exhibit D attached to the Amendment; and the PLAIC Cost Sharing and
Services Agreement shall terminate.
(b) Buyer will cause each of AA Life, Occidental, Pioneer American
and Pioneer to enter into an Investment Accounting Services Agreement
with KB Management, L.L.C. substantially in the form of the
Investment Accounting Services Agreement attached as Exhibit E to the
Amendment.
2.10 Article V of the Agreement is hereby further amended by the
addition of the following Section 5.15 thereto:
SECTION 5.15 Use of Name. Seller shall, not later than 30 days after
the Closing Date, (i) file an amendment to the certificate of incorporation of
Seller changing the name of Seller so as to permit the use of the name
"American-Amicable" by Buyer or an affiliate of Buyer or (ii) dissolve.
2.11 Section 3.1(b) of the Disclosure Schedule is hereby amended and
restated in its entirety as set forth in Exhibit F to this Amendment.
2.12 Section 3.3 of the Disclosure Schedule is hereby amended and
restated in its entirety as set forth in Exhibit G to this Amendment.
2.13 Section 3.7(d) of the Disclosure Schedule is hereby amended and
restated in its entirety as set forth in Exhibit H to this Amendment.
2.14 Section 3.12 of the Disclosure Schedule is hereby amended and
restated in its entirety as set forth in Exhibit I to this Amendment.
2.15 Section 3.13(a) of the Disclosure Schedule is hereby amended and
restated in its entirety as set forth in Exhibit J to this Amendment.
2.16 Section 3.13(b) of the Disclosure Schedule is hereby amended and
restated in its entirety as set forth in Exhibit K to this Amendment.
2.17 Section 3.13(g)) of the Disclosure Schedule is hereby amended
and restated in its entirety as set forth in Exhibit L to this Amendment.
2.18 Section 6.1 of the Disclosure Schedule is hereby amended and
restated in its entirety as set forth in Exhibit M to this Amendment.
2.19 Annex G of the Agreement is hereby amended and restated in its
entirety as set forth in Exhibit N to this Amendment.
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3. GENERAL PROVISIONS. The parties hereby agree that, except as
expressly amended, restated, modified or supplemented herein, all of the
provisions set forth in the Agreement, including, without limitation, the
provisions of Article X of the Agreement, shall apply to and govern the terms
and conditions, execution and enforcement of this Amendment.
4. COUNTERPARTS. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same amendment.
5. ENTIRE AGREEMENT. This Amendment, the Agreement and the documents
referenced in Section 10.10 of the Agreement embody the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein or therein. There are no agreements, representations, warranties or
covenants other than those expressly set forth herein or therein. The Agreement
amended hereby supersedes all prior agreements and understandings between the
parties (other than the Confidentiality Agreement referenced with respect to
such subject matter).
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be signed on its behalf by its duly authorized officers, all as of
the day and year first above written.
PIONEER-OCCIDENTAL HOLDINGS COMPANY
By: /s/ Carl D. Thoma
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Name: Carl D. Thoma
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Title:
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AMERICAN-AMICABLE HOLDINGS CORPORATION
By: /s/ Scott D. Silverman
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Name: Scott D. Silverman
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Title:
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EXHIBIT A
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TRANSITION BENEFIT PLANS
Southwestern Financial Services Corporation Group Welfare Plans
Group Term Life Insurance Plan
Dependent Life Insurance
Accidental Death and Dismemberment Insurance
Long Term Disability Plan
Group Medical - AA Agents/Retirees/Raliegh & Misc. (Mutual of Omaha)
Voluntary Group Term Life Insurance
Employee Assistance Plan between Southwestern Financial Services and Plan 21
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EXHIBIT B
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ASSUMPTION AND REINSURANCE AGREEMENT
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This ASSUMPTION AND REINSURANCE AGREEMENT ("Agreement") is entered
into this ___ day of _____, 2000 by and between PACIFIC LIFE AND ACCIDENT
INSURANCE COMPANY, a Texas domiciled life insurance company (the "Company") and
PIONEER SECURITY LIFE INSURANCE COMPANY, a Texas domiciled life insurance
company (the "Reinsurer").
In consideration of the mutual promises, agreements and
understandings hereinafter set forth, the Company and the Reinsurer mutually
agree as follows:
1. REINSURANCE AND ASSUMPTION OF LIABILITIES
1.1 The Company does hereby agree to cede and transfer to the
Reinsurer, and by this Agreement does cede and transfer to the Reinsurer, and
the Reinsurer does hereby agree to acquire and assume from the Company, and by
this Agreement does acquire and assume from the Company, one hundred percent
(100%) of the liability of the Company as of the Initial Assumption Effective
Date with respect to (i) all Policy Liabilities (as defined in Paragraph 1.2 and
1.3) with respect to the policies and contracts described on Schedule 1.1a
attached hereto and incorporated herein by this reference and (ii) all
Reinsurance Assumed (as defined in Paragraph 1.2 and 1.3); provided, however,
that the liability shall not include (x) the Rejected Policies (as defined in
Paragraph 3.3) and (y) the Interim Policies (as defined in Paragraph 3.2) The
policies and contracts described on Schedule 1.1a constitute all of the policies
and contracts of the Company in full force and effect, or pending (i.e. those
applied for), on the Initial Assumption Effective Date, or not presently in
effect but which are subject to reinstatement in accordance with their
respective terms, and are hereafter referred to collectively as the "Policies".
1.2 a. For purposes of this Agreement, the term "Policy Liabilities"
means the gross liability of the Company on the Policies before deducting
cessions under the Company's reinsurance programs.
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b. For purposes of this Agreement, the term "Reinsurance Assumed"
shall mean all liabilities and obligations of the Company with respect to
policies and contracts for which the Company acts as reinsurer pursuant to the
reinsurance agreements identified on Schedule 1.2b attached hereto and
incorporated herein by this reference (the "Company Reinsurance Agreements").
1.3 All Policy Liabilities and Reinsurance Assumed for which the
Reinsurer is liable under this Agreement shall include all claims which could be
made against the Company with respect to the Policies and the Reinsurance
Assumed, whether on the basis of contract, misrepresentation, estoppel,
reliance, waiver or otherwise, subject, however, in all respects to the same
terms, conditions, interpretations, waivers, modifications, alterations and
cancellations as the Policies and Company Reinsurance Agreements, respectively.
The Reinsurer accepts and assumes the Policy Liabilities and Reinsurance Assumed
subject to all defenses, setoffs and counterclaims to which the Company would be
entitled with respect to the Policies and Company Reinsurance Agreements,
respectively. It is expressly understood and agreed by the parties that no such
defenses, setoffs or counterclaims are waived by the execution of this Agreement
or the consummation of the transactions contemplated under this Agreement, and
that on the Initial Assumption Effective Date the Reinsurer shall be fully
subrogated to all such defenses, setoffs and counterclaims.
1.4 On the Initial Assumption Effective Date, the Reinsurer shall be
the successor to the Company under the Policies and the Company Reinsurance
Agreements. The Policies and Company Reinsurance Agreements shall be direct
obligations of the Reinsurer and the Company shall have no liabilities thereof.
The Reinsurer shall substitute itself in the place of the Company as if named in
the place of the Company. The Insureds and Reinsureds (as defined in the
following sentence) may thereafter disregard the Company as a party to the
Policies and Company Reinsurance Agreements, respectively, and may treat the
Reinsurer as if it had been originally obligated under the Policies and Company
Reinsurance Agreements. For the purposes of this Agreement, "Insured" or
"insureds" means any person or entity entitled to claim or receive benefits
under any Policy or Policies and "Reinsured" or "Reinsureds" means any entity
entitled to claim or receive benefits under any Company Reinsurance Agreement.
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After the Initial Assumption Effective Date, the Insureds and Reinsureds shall
have the right to file claims arising under the Policies and Company Reinsurance
Agreements directly with the Reinsurer. The Insureds and Reinsureds shall have a
direct right of action against the Reinsurer and the Reinsurer hereby consents
to be subject to direct action taken by any Insured or Reinsured. The rights of
any Insured, beneficiary, or Reinsured shall be limited to and consist of those
rights set forth in the Policy (including any rider or endorsement to the
Policy) or Company Reinsurance Agreement, as applicable, and any other rights
which such insured, beneficiary or Reinsured may have against Company with
respect to such Policy or Company Reinsurance Agreement and no Insured or
Reinsured shall have the right to receive a greater amount under or with respect
to the Policy or Company Reinsurance Agreement than such party would have had in
the absence of this Agreement.
1.5 In assessing the rights of any Insured or Reinsured under a
Policy or Company Reinsurance Agreement, no effect shall be given to the
bankruptcy, liquidation, insolvency, reorganization or moratorium of the
Company, or the effect of laws or legal procedures affecting enforcement of
creditors' rights against the Company generally.
2. ASSIGNMENT OF REINSURANCE AGREEMENTS
2.1 The Company shall use its best efforts to transfer as of the
Initial Assumption Effective Date all rights and obligations of the Company
under the reinsurance agreements in effect on the Closing Date between the
Company and any reinsurer relating to the Policies (the "Reinsurance
Agreements"), including amounts held by or which may become due from reinsurers
on the Policies. The Reinsurer shall assume all such rights and obligations
transferred.
2.2 The Company shall aid the Reinsurer in collection of all amounts
due from other reinsurers and shall forward to the Reinsurer any funds collected
from reinsurers on the Policies.
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2.3 If necessary to effect the transfer of any Reinsurance Agreement,
the Company hereby, with the concurrence of the reinsurer under such Reinsurance
Agreement, effective upon the concurrence, appoints the Reinsurer as
attorney-in-fact for the Company to act for and on behalf of the Company with
respect to letters of credit outstanding for the benefit of the Company under
the Reinsurance Agreements. The Company and the Reinsurer shall each use their
best efforts, to the extent mutually agreed to be necessary, to cause the
reinsurers of the Company under the Reinsurance Agreements to have replacement
letters of credit issued directly for the benefit of the Reinsurer.
3. CONSIDERATION
3.1 As consideration for the cession by the Company and assumption by
the Reinsurer of the liabilities of the Company described herein, including but
not limited to the Policy Liabilities, and subject to the adjustment provided in
the following Paragraphs 3.2 and 3.3, the Company hereby sells, conveys,
transfers, assigns and delivers to the Reinsurer cash, marketable securities and
receivables of the Company (but not including state insurance charters and
licenses, and the Company's rights under the Coinsurance Agreement and the
Service and Administration Agreement of even date herewith entered into with the
Reinsurer) equal to one hundred percent (100%) of all Policy Liabilities and all
Reinsurance Assumed as of the Initial Assumption Effective Date, (collectively,
the "Assets"). On the Initial Assumption Effective Date, the Company will
execute and deliver to the Reinsurer assignments, bills of sale, deeds or other
documents in a form mutually acceptable to the Company and Reinsurer conveying
to the Reinsurer all of the Company's right, title and interest in and to the
Assets. The Company and the Reinsurer further agree that, without further
consideration, the Company and the Reinsurer, at any time, shall execute and
deliver all endorsements, assignments and other instruments of conveyance and
transfer, in form and substance mutually acceptable to the Company and the
Reinsurer, and shall take all such further action as the Reinsurer reasonably
may request and as may be necessary to transfer effectively and vest in the
Reinsurer title to the Assets.
3.2 The consideration paid pursuant to the foregoing Paragraph 3.1
shall included consideration of an amount equal to the outstanding statutory
reserves as of the Initial
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Assumption Effective Date for all Interim Policies. For purposes of this
Agreement, the term "Interim Policy" shall mean a policy whose transfer to the
Reinsurer by way of assumption pursuant to Paragraph 1.1 hereof is not permitted
because not all of the regulatory approvals or the policyholder approvals with
respect to such Policy have been received by the Initial Assumption Effective
Date.
3.3 The consideration paid to the Reinsurer pursuant to the foregoing
Paragraphs 3.1 and 3.2 shall be reduced on the Adjustment Date (defined below)
by an amount equal to the outstanding statutory reserves as of the Adjustment
Date on all Rejected Policies (the "Reduction Amount"). For purposes of this
Agreement, (i) the term "Rejected Policy" shall mean a Policy whose transfer to
the Reinsurer is rejected by the policyholder or which transfer is deemed by
operation of law to have been rejected unless such policy can be legally
reinsured pursuant to the terms of the Agreement notwithstanding such rejection,
and (ii) the term "Adjustment Date" shall mean that date which is within thirty
(30) days following the date on which all Policies have been accepted or
rejected for transfer, to the Reinsurer and which date shall be mutually
acceptable to the parties. The Reduction Amount shall thereafter be transferred
by a mutually acceptable means.
4. COINSURANCE
As of the Initial Assumption Effective Date, the Company hereby cedes
to Reinsurer and the Reinsurer hereby reinsures on a 100% coinsurance basis all
of the Company's liabilities of any kind or character relating to or arising
under each Interim Policy. Coinsurance hereunder shall continue with respect to
each Interim Policy under Paragraph 1.1 hereof. Coinsurance hereunder shall also
continue with respect to an Interim Policy that becomes a Rejected Policy and at
such time the Policy will be treated as a Rejected Policy, not as an Interim
Policy. The terms of the coinsurance are contained in a Coinsurance Agreement
executed concurrently with this Agreement by the Company and the Reinsurer.
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5. CLOSING
The closing of the assumption reinsurance transactions contemplated
by this Agreement shall take place on the Initial Assumption Effective Date and
shall provide for the assignment of the Reinsurance Agreements and the
assumption of Policies issued to policyholders residing in jurisdictions that
have issued insurance regulatory approvals prior to the Initial Assumption
Effective Date or that do not require prior approval of the assumption
hereunder. The Initial Assumption Effective Date shall be defined as 12:01 A.M.
on ______, 2000. To the extent an insurance department authority with
jurisdiction over any Policy requires a later effective date for an assumption,
the effective date as to such Policy shall be in compliance with any such
requirement. One or more subsequent assumption closings and closing dates
("Subsequent Assumption Closing Dates") shall be scheduled by Reinsurer, with
the consent of Company, as of a month end following the satisfaction of all
conditions and insurance department approvals required to complete an assumption
of such Policy after the Initial Assumption Effective Date.
6. TERM
This Agreement shall become effective on the Initial Assumption
Effective Date and shall continue in full force and effect until such time as
all liabilities, including but not limited to liabilities with respect to the
Policies and the Company Reinsurance Agreements, have been discharged or have
otherwise expired. This Agreement shall be perpetual, permanent and
noncancellable by each of the Reinsurer and the Company, shall not be subject to
commutation, and neither the Reinsurer nor the Company shall have the right or
power to cause the reversion or recapture of the Policies of the Company
Reinsurance Agreements.
7. CONDITIONS AND REGULATORY APPROVALS
Prior to the Initial Assumption Effective Date, the Company and the
Reinsurer shall obtain all of the consents or approvals of the insurance
department of Texas and all other insurance regulatory authorities (whether
through positive notification of approval or non-objection) which are necessary
for the consummation on the Initial Assumption
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Effective Date of the transactions contemplated by this Agreement to be
consummated on the Initial Assumption Effective Date. Notwithstanding the
foregoing sentence, it is specifically understood and agreed to by the parties
that the approval of all insurance regulatory authorities other than Texas shall
be neither necessary nor a condition precedent to the consummation on the
Initial Assumption Effective Date of the transactions contemplated by the
Agreement.
8. CERTIFICATE OF ASSUMPTION
8.1 The Reinsurer shall issue to each policyholder or contractholder
insured under a Policy listed on Schedule 1.1a and assumed hereunder a
certificate of assumption substantially in the form attached hereto as Exhibit
"A" or in such form and containing such provisions as may be required by the
insurance regulatory authorities in a particular jurisdiction (the "Certificate
of Assumption"). Such Certificate of Assumption shall be issued by the Reinsurer
within thirty (30) days after the Initial Assumption Effective Date or on
Subsequent Assumption Closing Dates, whichever is applicable.
8.2 The Reinsurer shall issue to each Reinsured under a Company
Reinsurance Agreement a certificate of assumption or other appropriate evidence
of assignment satisfactory to the Reinsurer and each Reinsured.
9. PREMIUMS AND OTHER INCOME
Premiums and other income amounts due or paid on the Policies and the
Company Reinsurance Agreements on and after the Initial Assumption Effective
Date and any loan repayments (and interest payments thereon) made on the
Policies on or after the Initial Assumption Effective Date shall be the sole
property of the Reinsurer. From and after the Initial Assumption Effective Date,
all policyholders and contractholders under the Policies and all Reinsureds
under the Company Reinsurance Agreements shall pay all premiums and make any
loan repayments (and interest payments thereon) on such contracts and policies
and pay all income amounts directly to the Reinsurer. All monies, checks,
drafts, orders, postal notes or other instruments received by the Company after
the Initial Assumption Effective Date for such premiums, loan repayments and
other income amounts shall be transferred and delivered to the
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Reinsurer, and any such instruments when so delivered shall bear all
endorsements required to effect such transfer and delivery. From and after the
Initial Assumption Effective Date, the Reinsurer shall be authorized, and hereby
is authorized, to endorse for payment any such instruments payable to, or to the
order of, the Company and received by the Reinsurer under this Paragraph 9.
10. PREMIUM TAXES
The Reinsurer shall pay all premium taxes as may be required by law
on premiums received with respect to the Policies on or after the Initial
Assumption Effective Date.
11. RESERVES
As of the Initial Assumption Effective Date and except as limited by
Paragraph 3.2 and 3.3 hereof, the Company hereby transfers and irrevocably
assigns to the Reinsurer, and the Reinsurer hereby accepts, the total aggregate
policy and claims reserves for the Policies and the Company Reinsurance
Agreements. From and after the Initial Assumption Effective Date, the Reinsurer
shall maintain proper policy reserves, claims reserves and any other applicable
and appropriate reserves for all Policies and Company Reinsurance Agreements
hereunder and such reserves shall in no event be less than the aggregate
reserves required by the Insurance Department of any state or political unit
having jurisdiction over the Policies and Company Reinsurance Agreements after
the Initial Assumption Effective Date.
12. REINSURANCE CREDIT
With respect to the Reinsurance Assumed, the Reinsurer hereby
covenants and agrees to provide and maintain at all relevant times a letter of
credit, deposit or such other security as may be required under the terms of any
of the Company Reinsurance Agreements or the laws or regulations of any
jurisdiction and necessary for any Reinsured to take full statement credit
therefor.
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13. ADMINISTRATION AND SERVICING OF REINSURED POLICIES
Commencing as of the Initial Assumption Effective Date and except as
hereinafter provided, all administration and servicing of the Policies and the
supervision and payment of all claims incurred under the Policies shall be
provided by the Reinsurer, and the expense of such administration, servicing,
supervision and payment shall be borne solely by the Reinsurer. The obligations
of the Reinsurer under this Agreement shall be the same as those of the Company
in accordance with the terms of the Policies.
The Reinsurer reserves the right, and shall be authorized to make any
defense at law or in equity to any action or claim instituted or made under any
Policy which could have been instituted or made by the Company had this
Agreement not been executed. All of the provisions, conditions, limitations, and
exclusions contained in the Policies shall remain in effect and be applicable in
accordance with the terms and conditions of the Policies, except as they may be
specifically amended by the Reinsurer after the Initial Assumption Effective
Date; provided, however, any such amendments shall not impose any additional
liability on the Company under the Policies.
14. RECORDS AND ACCOUNTING
14.1 The Company shall promptly transfer and deliver to the Reinsurer
all of its original statistical and sales data, records, papers, documents,
books, memoranda and files pertaining to the Policies (referred to collectively
as the "Records"). The Company reserves the right to keep copies of any Records.
The Company and the Reinsurer each agree to provide the other party all data
information with respect to the Policies sufficient to enable each to prepare
annual or other required financial statements.
14.2 All reserves for unearned premium and unpaid losses will be
accounted for by the Company as ceded reinsurance and by the Reinsurer as
assumed reinsurance as of the Initial Assumption Effective Date. All premiums
earned and all losses incurred after the Initial Assumption Effective Date will
be accounted for as direct business of the Reinsurer.
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The Company will have no further obligations for accounting for the business
under this Agreement after the Initial Assumption Effective Date.
14.3 With respect to the Agreement, the Company and the Reinsurer
hereby make the election provided in Section 1.848-2(g) (8) of the Treasury
Regulations issued under Section 848 of the Internal Revenue Code of 1986, as
amended. The specifics of such election are set forth on Schedule 14.3 attached
hereto and incorporated herein by this reference.
15. INDEMNIFICATION
15.1 The Reinsurer shall indemnify the Company against and hold it
harmless from, (j) all liabilities arising with respect to the Policies and the
Company Reinsurance Agreements and (ii) all other losses, claims, damages and
liabilities and shall reimburse the Company for all expenses of any kind or
nature whatsoever (including, without limitation, reasonable attorneys's fees)
as incurred, that are based upon or arise out of (x) the breach or alleged
breach of any obligation of the Reinsurer provided for in the Agreement or (y)
the failure or alleged failure by the Reinsurer to discharge any obligations of
the Company to the extent that the same are assumed by the Reinsurer pursuant to
this Agreement.
15.2 The Company shall indemnify the Reinsurer against, and hold it
harmless from, all losses claims, damages and liabilities and shall reimburse
the Reinsurer for all expenses of any kind or nature whatsoever (including,
without limitation, reasonable attorneys's fees) as incurred in connection
therewith, that are based upon or arise out of the breach of any obligation of
the Company provided for in this Agreement.
15.3 Defense of Claims and Demands by Third Parties Against the
Company. In the event of any claim or demand against the Company or any of its
officers, directors, affiliates, successors and assigns which is subject to the
right of indemnification provided in Paragraph 15.1 hereof, the Reinsurer shall
have the right to assume the control of the defense, compromise or settlement
thereof at its own expense, with employment of counsel satisfactory to the
Company, provided that any compromise or settlement shall be approved by the
Company,
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which approval shall not be unreasonably withheld. If Reinsurer assumes
control, the Company shall have the right to participate in such defense,
compromise or settlement; provided, however, that no costs incurred by the
Company thereafter in connection with such participation shall be considered
costs, expenses or damages subject to indemnification hereunder. If the
Reinsurer does not elect to defend any such claim or demand, the Company or any
of its officers, directors, affiliates, successors or assigns, as appropriate,
may do so, but shall have no obligation to do so. The Reinsurer shall not be
liable for any settlement or any claim or demand, which it is defending,
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with such written consent, or if there be a final
judgment for the plaintiff in any such claim or demand, the Reinsurer agrees to
indemnify and hold harmless the Company to the extent provided in this Article
15 by reason of such settlement or judgment, which indemnification shall include
compensation for damages incurred as a result of non-monetary penalties.
15.4 Defense of Claims and Demands by Third Parties Against the
Reinsurer. In the event of any claim or demand against the Reinsurer or any of
its officers, directors, affiliates, successors and assigns which is subject to
the right of indemnification provided in Paragraph 15.2 hereof, the Company
shall have the right to assume the control of the defense, compromise or
settlement thereof at its own expense, with employment of counsel satisfactory
to the Reinsurer, provided that any compromise or settlement shall be approved
by the Reinsurer, which approval shall not be unreasonably withheld. If the
Company assumes control, the Reinsurer shall have the right to participate in
such defense, compromise or settlement; provided, however, that no costs
incurred by the Reinsurer thereafter in connection with such participation shall
be considered costs, expenses or damages subject to indemnification hereunder.
If the Company does not elect to defend any such claim or demand, the Reinsurer
or any of its officers, directors, affiliates, successors or assigns, as
appropriate, may do so, but shall have no obligation to do so. The Company shall
not be liable for any settlement of any claim or demand, which it is defending,
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with such written consent, or if there be a final
judgment for the plaintiff in any such claim or demand, the Company agrees to
indemnify and hold harmless the Reinsurer to the extent provided in the Article
15 by reason of such settlement or judgment,
11
<PAGE>
which indemnification shall include compensation for damages incurred as a
result of non-monetary penalties.
15.5 Notice of Claims. Each party shall give prompt written notice to
the other party of any facts, which are likely to result in a claim under any of
the indemnification provisions of the Article 15.
15.6 Assumption of Defense of On-Going Litigation. In accordance with
this Agreement, it is understood and intended by the parties that the Reinsurer
shall immediately on the Initial Assumption Effective Date assume the defense or
prosecution of any and all litigation to which the Company is a party and which
is ongoing as of the Closing Date, including but not limited to the payment of
all fees, costs, expenses, judgements and settlements incurred in connection
therewith.
16. REPRESENTATIONS AND WARRANTIES
16.1.1 The Reinsurer hereby makes the following representations and
warranties to the Company:
a. The Reinsurer is a stock corporation duly organized, validly
existing and in good standing under the law of the State of Texas.
b. The Reinsurer has all licenses and authorization necessary to
provide the reinsurance described herein;
c. All corporate action necessary for the execution and performance
of this Agreement has been taken by the Reinsurer. The Reinsurer has full
corporate authority to enter into and perform this Agreement, and this Agreement
has been executed by duly authorized officers of the Reinsurer;
12
<PAGE>
d. Neither the execution nor the performance of the terms of this
Agreement will in any material way conflict with, result in a breach of or
constitute a default under any order, judgment or decree by which the Reinsurer
is bound, or under the corporate charter or articles of incorporation or By-Laws
of the Reinsurer, or require the consent of any other person to any contract of
instrument to which the Reinsurer is a party, except as provided in this
Agreement or as will be obtained.
16.2 The Company hereby makes the following representations and
warranties to the Reinsurer:
a. The Company is a stock corporation duly organized, validly
existing and in good standing under the law of the State of Texas;
b. All corporate action necessary for the execution and performance
of this Agreement has been taken by the Company. The Company has full corporate
authority to enter into and perform this Agreement, and this Agreement has been
executed by duly authorized officers of the Company;
c. Neither the execution nor the performance of the terms of this
Agreement will in any material way conflict with, result in a breach of or
constitute a default under any order, judgment or decree by which the Company is
bound, or under the corporate charter or articles of incorporation or By-Laws of
the Company, or require the consent of any other person to any contract of
instrument to which the Company is a party, except as provided in this Agreement
or as will be obtained.
17. GENERAL PROVISIONS
17.1 Expenses. All expenses incurred by or on behalf of the parties
hereto in connection with the authorization, preparation, execution and
consummation of this Agreement, including, without limitation, all fees and
expenses of agents, representatives, printers, counsel
13
<PAGE>
and accountants employed by the parties hereto and all taxes, shall be borne
solely by the party which shall have incurred the same.
17.2 Cooperation. The parties hereto agree to cooperate in making
effective the transactions contemplated by this Agreement and each of them will,
at the request of any of the other parties, join in making any action which,
though not specified herein, may be reasonably required to be taken in order to
consummate the transactions contemplated in this Agreement.
17.3 Notices. All notices, statement or demands shall be in writing
and shall be served in person, by telegraph, by express mail, be certified mail
or by private overnight delivery. Service shall be deemed conclusively made (a)
at the time of service, if personally served, (b) at the time (as confirmed in
writing by the telegraphic agency) of deliver thereof to the addressee, if
served telegraphically, (c) twenty-four (24) hours after deposit in the United
Sate mail, properly addressed and postage prepaid, if served by express mail,
(d) five (5) days after deposit in the United Sates mail, properly addressed and
postage prepaid, return receipt requested, if served by certified mail and (e)
twenty-four (24) hours after delivery by the party giving the notice, statement
or demand to the private overnight deliverer, if served by private overnight
delivery.
Any notice or demand to the Company shall be given to:
Pacific Life and Accident Insurance Company
717 N. Harwood Street
Dallas, Texas 75201
Attention: President
Telephone: 214-954-7010
Facsimile: 214-954-7906
Any notice or demand to the Reinsurer shall be given to:
Pioneer Security Life Insurance Company
425 Austin Avenue
Waco, Texas 76701
Attn: President
Telephone: (254) 297-2711
Facsimile: (254) 297-7710
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And with a copy to: Joe Dunlap, Vice President
Any party may, by virtue of written notice in compliance with this paragraph,
alter or change the address or the identity of the person to whom any notice, or
copy thereof, is to be sent.
17.4 Captions. The captions to the various paragraphs and
subparagraphs of this Agreement have been inserted for convenient reference only
and shall not modify, define, limit or expand the express terms and conditions
of this Agreement.
17.5 Assignment; Binding Effect. This Agreement shall not be assigned
by either party without the prior written consent of the other and any attempt
to assign this Agreement without such consent shall be void. All terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
the permitted transferees, successors and assigns of either party.
17.6 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
the parties thereof.
17.7 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
the parties thereof.
17.8 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas.
17.9 Venue. Any action concerning a dispute arising out of or
concerning this Agreement, or regarding the relationships among the parties
created pursuant to this Agreement or the negotiations leading to its execution
shall be filed only in the United States District Court in Texas or in a Court
of the State of Texas.
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17.10 Severability. The invalidity of any term or terms of this
Agreement shall not affect any other term of this Agreement, which shall remain
in full force and effect.
17.11 Counterparts. This Agreement may be executed in counterparts
which, taken together, shall constitute the whole of the Agreement as between
parties.
17.12 Entire Agreement. This Agreement, the Coinsurance Agreement and
the Service and Administration Agreement of even date herewith entered into
between the Reinsurer and the Company constitute the entire reinsurance
agreement between the parties with respect to the business being reinsured
hereunder and that there are no other understandings between the parties other
than as expressed in this Agreement, the Coinsurance Agreement and the Service
and Administration Agreement.
16
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first hereinabove written.
"Resinsurer"
PIONEER SECURITY LIFE INSURANCE COMPANY,
a Texas Corporation
By:
----------------------------------------
Its:
---------------------------------------
"Company"
PACIFIC LIFE AND ACCIDENT INSURANCE COMPANY,
a Texas Corporation
By:
----------------------------------------
Its:
---------------------------------------
17
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PIONEER SECURITY LIFE INSURANCE COMPANY
425 Austin Avenue
Waco, Texas 76701
Telephone (800) 334-4324
CERTIFICATE OF ASSUMPTION
Policy [Contract or Certificate] No.:
Issued To:
This is to certify that, pursuant to the terms of an
Assumption and Reinsurance Agreement, the above policy [contract or
certificate] and all endorsements thereto (herein called the "Policy"
["Contract" or "Certificate") issued by PACIFIC LIFE AND ACCIDENT
INSURANCE COMPANY, a Texas domiciled insurance company, was assumed
by PIONEER SECURITY LIFE INSURANCE COMPANY, a Texas domiciled
insurance company (the "Assuming Reinsurer").
This change is effective as of
__________________________________________.
All of the terms and conditions of the Policy [Contract or
Certificate] remain unchanged, except that the Assuming Reinsurer
shall be the insurer. All premium payments, notices and claims on the
policy [Contract or Certificate] shall hereafter be made directly to
the Assuming Reinsurer at the address indicated above as though it
had issued the Policy [Contract or Certificate] originally.
This Certificate of Assumption will forma a part of your
Policy [Contract or Certificate] and should be attached to it.
Inquiries concerning the Policy [Contract or Certificate]
should be directed to the Assuming Reinsurer at the address indicated
above.
18
<PAGE>
IN WITNESS WHEREOF, the Assuming Reinsurer has caused this
Certificate of Assumption to be signed by its duly authorized officer
this ____ day of ___________________, 2000.
PIONEER SECURITY LIFE
INSURANCE COMPANY
By:
--------------------------------
Name:
Title:
ATTEST:
--------------------------------
Name:
Title:
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<PAGE>
Schedule 1.1a
-------------
Policies and Contracts Subject to Reinsurance
---------------------------------------------
All individual and [group] life, [annuity, credit and health]
insurance policies and contracts issued by the Company or reinsured by the
Company prior to the effective date of this Agreement which are (i) in full
force and effect on the effective date of this Agreement or (ii) reinstated in
accordance with their terms after the effective date of this Agreement.
20
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Schedule 1.2b
-------------
Company Reinsurance Agreements
------------------------------
Those reinsurance agreements described on Schedule S, Part 1,
Sections 1 and 2 of the Company's 1998 Statutory Annual Statement.
21
<PAGE>
Schedule 14.3
-------------
The Company and the Reinsurer agree to the following pursuant to
Section 1.8482(g)(8) of the Treasury Regulations issued under Section 848 of the
Internal Revenue Code of 1986, as amended (hereinafter "Section 1.848-2(g)(8)").
1. As used below, the term "party" will refer to the Company
or the Reinsurer as appropriate.
2. As used below, the phrases "net positive consideration",
"capitalize specified policy acquisition expenses",
"general deductions limitation", and "net consideration"
shall have the meaning used in Section 1.848-2(g)(8).
3. The party with net positive consideration for this
Agreement for any taxable year beginning with the taxable
year prescribed in paragraph 5 below will capitalize
specified policy acquisition expenses with respect to this
Agreement without regard to the general deductions
limitation.
4. The parties agree to exchange information pertaining to
the amount of net consideration under this Agreement to
ensure consistency.
5. This election shall be effective for 2000 and all
subsequent taxable years for which this Agreement remain
in effect.
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<PAGE>
EXHIBIT C
---------
COINSURANCE AGREEMENT
This COINSURANCE AGREEMENT (this "Agreement") is entered into this
_____ day of ________, 2000 by and between PACIFIC LIFE AND ACCIDENT INSURANCE
COMPANY, a Texas domiciled life insurance company (the "Company"), and PIONEER
SECURITY LIFE INSURANCE COMPANY, a Texas domiciled life insurance company (the
"Reinsurer").
RECITALS
--------
A. Concurrent with the execution of this Agreement, the Company and
the Reinsurer shall enter into an Assumption and Reinsurance Agreement pursuant
to which the Company shall transfer a substantial portion of its assets and
liabilities, including but not limited to policy liabilities, to the Reinsurer
(the "Assumption and Reinsurance Agreement"). Capitalized terms not defined in
the Agreement will have the meanings given them in the Assumption and
Reinsurance Agreement.
B. The Reinsurer has agreed to assume and coinsure, on a 100%
coinsurance basis, all Interim Policies and Rejected Policies, as defined in the
Assumption and Reinsurance Agreement.
NOW, THEREFORE, in consideration of the mutual promises, agreements
and understandings hereinafter set forth, the Company and the Reinsurer mutually
agree as follows:
1. BUSINESS COINSURED
1.1 The Company hereby cedes to the Reinsurer, and the Reinsurer
hereby coinsures, 100% of the Policy Liabilities (as defined in Paragraph 1.2
below) with respect to each Interim Policy and each Rejected Policy. The Interim
Policies and Rejected Policies shall be deemed to have been coinsured as of the
Initial Assumption Effective Date and the coinsurance provided by the Reinsurer
pursuant to this Agreement shall be effected automatically as of the Initial
<PAGE>
Assumption Effective Date upon execution of this Agreement by both the Reinsurer
and the Company.
1.2 For purposes of this Agreement, the term "Policy Liabilities"
means the gross liability of the Company, before deducting cessions under the
Company's reinsurance programs, on the Interim Policies and Rejected Policies,
including but not limited to all consequential, exemplary or punitive damages
(collectively, the "Extracontractual Damages").
1.3 All Policy Liabilities for which the Reinsurer is liable under
this Agreement shall include all claims which could be made against the Company
with respect to the Policies and the Reinsurance Assumed, whether on the basis
of contract, misrepresentation, estoppel, reliance, waiver or otherwise,
subject, however, in all respects to the same terms, conditions,
interpretations, waivers, modifications, alterations and cancellations as the
Interim Policies and Rejected Policies. The Reinsurer accepts and assumes the
Policy Liabilities subject to all defenses, setoffs and counterclaims to which
the Company would be entitled with respect to the Interim Policies and Rejected
Policies. It is expressly understood and agreed by the parties that no such
defenses, setoffs or counterclaims are waived by the execution of this Agreement
or the consummation of the transactions contemplated under this Agreement, and
that on the Initial Assumption Effective Date the Reinsurer shall be fully
subrogated to all such defenses, setoffs and counterclaims.
1.4 In the event that the Company is required to obtain security for
the liabilities ceded pursuant to this Agreement in order to take full statement
credit for the coinsurance provided hereunder, the Reinsurer hereby convenants
and agrees to provide and maintain at all relevant times for the benefit of the
Company a letter of credit, deposit or such other security as may be required
under the laws or regulations of any jurisdiction.
2. CONSIDERATION: PREMIUMS
2.1 As consideration for the cession by the Company and coinsurance
by the Reinsurer of all of the Interim Policies and Rejected Policies, the
Company shall transfer to the Reinsurer an amount equal to the outstanding
statutory reserves as of the Adjustment Date
2
<PAGE>
(defined below) on all Rejected Policies (the "Consideration") For purposes of
this Agreement, the term "Adjustment Date" shall mean that date which is within
thirty (30) days following the date on which all policies have been accepted or
rejected for transfer under the Assumption and Reinsurance Agreement, or are
deemed to have been accepted or rejected for transfer, to the Reinsurer, and
which date shall be mutually acceptable to the parties. The Consideration shall
be transferred by the Company to the Reinsurer by a mutually acceptable means.
2.2 The Reinsurer is entitled to 100% of all premiums and other
consideration received after the Initial Effective Assumption Date by the
Company or the Reinsurer with respect to the Interim Policies and the Rejected
Policies, which amounts shall be paid to the Reinsurer on a daily basis as
provided in the Service and Administration Agreement executed between the
Reinsurer and the Company ("Service Agreement") concurrent with the execution of
this Agreement. The Reinsurer shall reimburse the Company for 100% of all costs
with respect to the Interim Policies and the Rejected Policies, including,
without limitation, claims payments and benefits, surrenders, return premiums,
withdrawals, premium taxes, boards, bureaus, guarantee fund assessments, agents'
and general agents' commissions and all amounts payable as Expenses as defined
in the Service Agreement (in the aggregate, the "Expenses"). The Expenses shall
be reimbursed on a daily basis as provided in the Service Agreement. It is the
intention of the parties that neither gain nor loss be incurred by the Company
on the Interim Policies and the Rejected Policies coinsured hereunder.
3. TERM
This Agreement shall become effective on the Initial Assumption
Effective Date and shall continue in full force and effect until such time as
all liabilities, with respect to the Rejected Policies have been discharged or
have otherwise expired. This Agreement shall be permanent and noncancellable by
each of the Reinsurer and the Company, shall not be subject to commutation, and
neither the Reinsurer nor the Company shall have the right or power to cause the
reversion or recapture of the Interim Policies or the Rejected Policies.
3
<PAGE>
4. CONDITIONS AND REGULATORY APPROVALS
Prior to the Initial Assumption Effective Date, the Company and the
Reinsurer shall obtain al of the consents or approvals of the insurance
department of Texas and all other insurance regulatory authorities (whether
through positive notification of approval or non-objection) which are necessary
for the consummation on the Initial Assumption Effective Date of the
transactions contemplated by this Agreement to be consummated on the Initial
Assumption Effective Date.
5. RECORDS AND ACCOUNTING
5.1 The Company shall promptly transfer and deliver to the Reinsurer
copies of all of its original statistical and sales data, records, papers,
documents, books, memoranda and files pertaining to the Interim Policies and the
Rejected Policies (referred to collectively as the "Records"). The Company and
the Reinsurer each agree to provide the other party all data and information
with respect to the Interim Policies and the Rejected Policies sufficient to
enable each to prepare annual or other required financial statements.
5.2 All reserves for unearned premium and unpaid losses will be
accounted for by the Company as ceded reinsurance and by the Reinsurer as
assumed reinsurance as of the Initial Assumption Effective Date.
5.3 With respect to this Agreement, the Company and the Reinsurer
hereby make the election provided in Section 1.848-2(g) (8) of the Treasury
Regulations issued under Section 848 of the Internal Revenue Code of 986, as
amended. The specifics of such election are set forth on Schedule 5.3 attached
hereto and incorporated herein by this reference.
6. INSOLVENCY
6.1 In the event of the insolvency of the Company, all coinsurance
payable hereunder shall be payable directly to the liquidator, receiver or
statutory successor of the Company, without diminution because of the insolvency
of the Company.
4
<PAGE>
6.2 In the event of the insolvency of the Company, the liquidator,
receiver or statutory successor shall give the Reinsurer written notice of the
pendency of a claim on a policy coinsured hereunder within a reasonable time
after such claim is filed in the insolvency proceeding. During the pendency of
any such claim, the Reinsurer may investigate such claim and interpose in the
name of the Company (its liquidator, receiver or statutory successor), but at
its own expense, in the proceeding where such claim is to be adjudicated any
defense or defenses which the Reinsurer may deem available to the Company or its
liquidator, receiver or statutory successor.
6.3 The expense thus incurred by the Reinsurer shall be chargeable,
subject to court approval and subject to applicable law, against the Company as
part of the expense of liquidation to the extent of a proportionate share of the
benefit which may accrue to the Company solely as a result of the defense
undertaken by the Reinsurer. Where two or more reinsurers are participating in
the same claim and a majority in interest elect to interpose a defense or
defenses to any such claim, the expense shall be apportioned in accordance with
the terms of the reinsurance agreement as though such expenses have been
incurred by the Company.
7. ADMINISTRATION OF INTERIM POLICIES AND REJECTED POLICIES
Concurrent with the execution hereof, the Company and the Reinsurer
shall enter into a service agreement pursuant to which the Reinsurer shall
handle, manage, supervise and administer substantially all activities relating
to the examination, administration and processing of the Interim Policies and
the Rejected Policies, all of which services are more specifically detailed in
such agreement (the "Service Agreement").
8. REPRESENTATIONS AND WARRANTIES
8.1 The Reinsurer hereby makes the following representations and
warranties to the Company:
5
<PAGE>
a. The Reinsurer is a stock corporation duly organized, validly
existing and in good standing under the law of the State of Texas.
b. The Reinsurer has all licenses and authorizations necessary to
provide the coinsurance described herein;
c. All corporate action necessary for the execution and performance
of this Agreement has been taken by the Reinsurer. The Reinsurer has full
corporate authority to enter into and perform this Agreement, and this Agreement
has been executed by duly authorized officers of the Reinsurer;
d. Neither the execution nor the performance of the terms of this
Agreement will in any material way conflict with, result in a breach of or
constitute a default under any order, judgment or decree by which the Reinsurer
is bound, or under the corporate charter or articles of incorporation or By-Laws
of the Reinsurer, or require the consent of any other person to any contract of
instrument to which the Reinsurer is a party, except as provided in this
Agreement or as will be obtained.
8.2 The Company hereby makes the following representations and
warranties to the Reinsurer:
a. The Company is a stock corporation duly organized, validly
existing and in good standing under the law of the State of Texas;
b. All corporate action necessary for the execution and performance
of this Agreement has been taken by the Company. The Company has full corporate
authority to enter into and perform this Agreement, and this Agreement has been
executed by duly authorized officers of the Company;
c. Neither the execution nor the performance of the terms of this
Agreement will in any material way conflict with, result in a breach of or
constitute a default under any order,
6
<PAGE>
judgment or decree by which the Company is bound, or under the corporate charter
or articles of incorporation of By-Laws of the Company, or require the consent
of any other person to any contract or instrument to which the Company is a
party, except as provided in this Agreement or as will be obtained.
9. GENERAL PROVISIONS
9.1 Expenses. All expenses incurred by or on behalf of the parties
hereto in connection with the authorization, preparation, execution and
consummation of this Agreement, including, without limitation, all fees and
expenses of agents, representatives, printers, counsel and accountants employed
by the parties hereto and all taxes, shall be borne solely by the party which
shall have incurred the same.
9.2 Cooperation. The parties hereto agree to cooperate in making
effective the transactions contemplated by this Agreement and each of them will,
at the request of any of the other parties, join in making any action which,
though not specified herein, may be reasonably required to be taken in order to
consummate the transactions contemplated in the Agreement.
9.3 Notices. All notices, statements or demands shall be in writing
and shall be served in person, by telegraph, by express mail, by certified mail
or by private overnight delivery. Service shall be deemed conclusively made (a)
at the time of service, if personally served, (b) at the time (as confirmed in
writing by the telegraphic agency) of delivery thereof to the addressee, if
served telegraphically, (c) twenty-four (24) hours after deposit in the United
State mail, properly addressed and postage prepaid, if served by express mail,
(d) five (5) days after deposit in the United Sates mail, properly addressed and
postage prepaid, return receipt requested, if served by certified mail and (e)
twenty-four (24) hours after delivery by the party giving the notice, statement
or demand to the private overnight deliverer, if served by private overnight
delivery.
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Any notice or demand to the Company shall be given to:
Pacific Life and Accident
717 N. Harwood Street
Dallas, Texas 75201
Attn: President
Telephone: (214) 954-7010
Facsimile: (214) 954-7906
Any notice or demand to the Reinsurer shall be given to:
Pioneer Security Life Insurance Company
425 Austin Avenue
Waco, Texas 76701
Attn: President
Telephone: (254) 297-2711
Facsimile: (254) 297-7710
and with copy to: Joe Dunlap, Vice President
Any party may, by virtue of written notice in compliance with this paragraph,
alter or change the address or the identity of the person to whom any notice, or
copy thereof, is to be sent.
9.4 Captions. The captions to the various paragraphs and
subparagraphs of this Agreement have been inserted for convenient reference only
and shall not modify, define, limit or expand the express terms and conditions
of this Agreement.
9.5 Assignment: Binding Effect. This Agreement shall not be assigned
by either party without the prior written consent of the other and any attempt
to assign this Agreement without such consent shall be void. All terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
the permitted transferees, successors and assigns of either party.
9.6 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
the parties thereof.
9.7 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas.
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9.8 Venue. Any action concerning a dispute arising out of or
concerning this Agreement regarding the interpretation of this Agreement, or
regarding the relationships among the parties created pursuant to the Agreement
or the negotiations leading to its execution shall be filed only in the United
Sates District Court in Texas or in a Court of the State of Texas.
9.9 Severability. The invalidity of any term or terms of this
Agreement shall not affect any other term of this Agreement, which shall remain
in full force and effect.
9.10 Counterparts. This Agreement may be executed in counterparts
which, taken together, shall constitute the whole of the Agreement as between
parties.
9.11 This Agreement, the Assumption and Reinsurance Agreement and the
Service Agreement of even date herewith entered into between the Reinsurer and
the Company constitute the entire reinsurance agreement between the parties with
respect to the business being reinsured hereunder and that there are no other
understandings between the parties other than as expressed in this Agreement,
the Assumption and Reinsurance Agreement and the Service Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as
of the date first hereinabove written.
"Reinsurer"
PIONEER SECURITY LIFE INSURANCE COMPANY,
A Texas Corporation
By:
--------------------------------------------
Its:
-------------------------------------------
"Company"
PACIFIC LIFE AND ACCIDENT INSURANCE COMPANY,
A Texas Corporation
By:
--------------------------------------------
Its:
-------------------------------------------
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Schedule 5.3
------------
The Company and the Reinsurer agree to the following pursuant to
Section 1.848-2(g) (8) of the Treasury Regulations issued under Section 848 of
the Internal Revenue Code of 1986, as amended (hereinafter "Section 1.848-2(g)
(8)").
1. As used below, the term "party" will refer to the Company
or the Reinsurer as appropriate.
2. As used below, the phrases "net positive consideration",
"capitalize specified policy acquisition expenses",
"general deductions limitation", and "net consideration"
shall have the meaning used in Section 1.848-2(g) (8).
3. The party with net positive consideration for this
Agreement for any taxable year beginning with the taxable
year prescribed in paragraph 5 below will capitalize
specified policy acquisition expenses with respect to this
Agreement without regard to the general deductions
limitation.
4. The parties agree to exchange information pertaining to
the amount of net consideration under this Agreement to
ensure consistency.
5. This election shall be effective for 2000 and all
subsequent taxable years for which this Agreement remains
in effect.
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EXHIBIT D
---------
SERVICE AND ADMINISTRATION AGREEMENT
This SERVICE AND ADMINISTRATION AGREEMENT (the "service Agreement")
is entered into this _____ day of ___________________ 2000 by and between
PACIFIC LIFE AND ACCIDENT INSURANCE COMPANY, a Texas insurance company
("Pacific"), and PIONEER SECURITY LIFE INSURANCE COMPANY, a Texas insurance
company ("Pioneer"), with reference to the following facts:
RECITALS
--------
A. Pacific has entered into an Assumption and Reinsurance Agreement
with Pioneer pursuant to which Pacific is transferring a substantial portion of
its assets and liabilities, including but not limited to policy liabilities, to
Pioneer and Pioneer is assuming and reinsuring all of Pacific's policies and
liabilities except (i) each policy whose transfer to Pioneer by way of
assumption is not permitted because not all of the regulatory approvals or
policyholder approvals have been received by the effective date of the
Assumption and Reinsurance Agreement ("Interim Policies") and (ii) each policy
the transfer of which is rejected by the policyholder or which is deemed
rejected by operation of law, unless such policy can be legally reinsured under
the Assumption and Reinsurance Agreement (the "Rejected Policies").
B. With respect to the Interim Policies and the Rejected Policies,
Pacific has entered into a coinsurance agreement with Pioneer pursuant to which
Pioneer shall coinsure one hundred percent (100%) of the liabilities of Pacific
with respect to all Interim Policies and Rejected Policies ("Coinsurance
Agreement"). Capitalized terms not defined in this Service Agreement will have
the meanings given them under the Coinsurance Agreement.
C. Pacific desires to use the services of Pioneer for handling,
managing, supervising and administering substantially all activities relating to
the examination, administration and processing of the Interim Policies and the
Rejected Policies on the Effective Date (as herein after defined).
<PAGE>
D. In consideration of Pacific's execution of the Assumption and
Reinsurance Agreement and Coinsurance Agreement Pioneer has agreed to provide
services with respect to the Interim Policies and the Rejected Policies on the
terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual convenants and
agreements hereinafter set forth, the parties agree as follows:
1. ADMINISTRATIVE SERVICES TO BE PERFORMED BY PIONEER
1.1 Pioneer agrees to perform all services necessary for, and
incident to, the proper management and administration of the Interim Policies
and the Rejected Policies, including but not limited to collection of premium,
underwriting, policy service, processing and payment of claims and benefits
payments, payment of expenses and commission payments and maintenance of
accounting and recordkeeping. Pioneer's services shall be performed only with
respect to the Interim Policies and the Rejected Policies and shall not extend
to any other insurance business or activity or Pacific.
1.2 The premium collection, underwriting and policy services will
include but are not limited to the following:
a. Preparation and mailing of premium notices to insureds under
the Interim Policies and the Rejected Policies in accordance with
Pacific's previous practices with the then effective rates.
b. Collection of any receipt for premiums. Premiums shall be
collected and administered as provided in Paragraph 2.1 below. In
addition, Pioneer shall administer and maintain all arrangements for
automatic pre-authorized deductions from bank accounts, salary deduction
plans and government allotments.
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c. Resolution by Pioneer of all billing errors and billing
complaints and inquiries.
d. Transmission of additional premium notices, termination
notices, lapse notices, reinstatement offers, increase notices and other
notices to insureds on a timely basis.
e. Underwriting and processing of any and all policy changes and
reinstatements.
f. Effectuation of surrenders, cancellations or terminations of
the Interim Policies and the Rejected Policies in accordance with local
statutory restrictions, if any, affecting surrenders, cancellations or
terminations.
g. Effectuation of loans, partial withdrawals and policy changes.
h. Receipt and processing of incoming general correspondence and
maintenance of a separate file of all such correspondence (which
correspondence will be made available to Pacific upon request).
i. Prompt notice to Pacific of regulatory inquiries, complaints
and all threatened or filed lawsuits and provision of the records
relating to such regulatory inquiries, complaints and lawsuits.
j. Prompt notice to Pacific of any pending or threatened claim
litigation or service of suit and management of such litigation,
including but not limited to the engagement of counsel, preparation of
strategy and settlement, trial or appeal of any such litigation:
provided, however, that Pioneer shall consult with Pacific with respect
to such management and shall act in accordance with the direction of
Pacific with respect to any matter which in the reasonable view of
Pacific impacts the reputation of Pacific.
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k. Provision to Pacific on a timely basis and as reasonably
requested by Pacific of all information and data necessary for Pacific
to prepare and submit all federal, state and local filings, including
but not limited to Form 1099 and all other required Internal Revenue
Service forms with respect to payments to agents, insured and vendors.
l. Provision of such services to policyholders of the Interim
Policies and the Rejected Policies and performance of such other
incidental duties as may be from time to time reasonably requested in
writing by Pacific.
1.3 The processing and payment of claims and benefits payments will
include but is not limited to the following services:
a. Examination, processing and payment or other disposition of
all claims for benefits promptly and in strict accordance with the
provisions of the relevant Interim Policy and the Rejected Policy,
including but not limited to: determination of the eligibility of
insureds and appropriate benefits for all claims submitted with respect
to the Interim Policies and the Rejected Policies; maintenance of files
substantiating the basis on which such claims are approved or denied in
accordance with reasonable and standard claim practices and procedures;
recording the disposition of all such claims paid to claimants; and
notification to eligible claimants of the disposition of their claims;
b. Preparation of and transmittal to insureds of drafts for the
payment of insured claims, which drafts will be signed only by such
persons(s) and in such amounts as may be authorized by Pacific; and
monthly transmittal to Pacific of copies of drafts indicating amounts
withheld for taxes, if applicable, and other information as Pacific may
reasonably require to control the payment of insured claims. This
information is to be furnished to Pacific in a manner mutually agreed
upon by the parties.
c. Preparation and handling of disputed claims to resolution;
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1.4 With respect to the administration of expense and commission
payments, Pioneer shall be responsible for the payment of all expenses related
to the Interim Policies and the Rejected Policies, which expenses shall include
but shall not be limited to personnel, materials, commissions, reinsurance
premiums and charges, claims and benefits payment, banking services and
materials (including bank drafts and all similar documentation) in connection
with payments to policyholders, postage, mailings and equipment which may be
needed for, or appurtenant to, the proper and effective performance of such
services.
1.5 Services relating to the maintenance of accounting and
recordkeeping will include but are not limited to the following:
a. Preparation by Pioneer and submission to Pacific of the
following reports on a timely basis or as otherwise requested by
Pacific:
Premium collection and deposits, with State and Municipal detail
as needed;
Terminated cases;
Commissions paid;
Claims paid and pending;
Unearned premium;
Due and uncollected premium;
Policy Experience Exhibit;
Valuation reserves computed in accordance with statutory methods,
generally accepted accounting principles and tax purposes;
Policy exhibit;
Accounting and trial balance;
Exhibits 5 and 6 expense reports attached to the statutory annual
statement of Pacific;
Financial information necessary for the preparation by Pacific of
all tax returns, reports and regulatory filings; and
All documentation necessary to evidence compliance with all
relevant provisions of the Internal Revenue Code of 1986, as
amended (the "IRC", and the Treasury Regulations promulgated
thereunder, including but not limited to Sections 72, 7702 and
7702A.
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<PAGE>
b. Maintenance and preservation of full and complete, true and
accurate records relating to the Interim Policies and the Rejected
Policies, including but not limited to accounting and statistical
records, premium and coverage records and claim files, in a manner as
mutually agreed upon between Pioneer and Pacific, in compliance with all
applicable statutes and in a form usable by Pacific and the Commissioner
of any state department of insurance (a "Commissioner"). The records
shall be maintained at the offices of Pioneer during the term of this
Service Agreement and for such time thereafter as specified by Pacific;
provided, however, that Pioneer shall make such records available to a
duly authorized representative of Pacific or a Commissioner for
inspection and copying in compliance with all applicable laws, rules and
regulations and upon reasonable advance written request during normal
business hours at the office of Pioneer.
1.6 Pioneer shall perform all of the duties and responsibilities of
Pacific specified in the Coinsurance Agreement.
1.7 All services of Pioneer will be performed with reasonable care,
skill, diligence, and prudence in good faith compliance with the terms of this
service Agreement and consistent with contemporaneous industry standards in a
timely and efficient manner sufficient to enable Pacific properly to administer
and control payment of its claims and to demonstrate compliance with all
applicable provisions of the Texas Insurance Law or any other state or federal
law, as applicable as well as all pertinent rules and regulations adopted
pursuant to said laws.
2. ESTABLISHMENT OF FIDUCIARY ACCOUNT AND REPORTS
2.1 All payments received with respect to the Interim Policies and
the Rejected Policies, including but not limited to all premium and other
related income, shall be collected by Pioneer on behalf of Pacific and promptly
deposited by Pioneer in a fiduciary account in the name of Pacific (the
"Account"). All such amounts collected by Pioneer on behalf of Pacific are the
property of Pacific and are held by Pioneer in a fiduciary capacity as trust
funds for the
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<PAGE>
benefit of Pacific. Duly authorized officers of Pioneer acceptable to Pacific
shall have signatory power with respect to the Account. All amounts payable with
respect to the Interim Policies and the Rejected Policies, including but not
limited to the following, shall be paid by Pioneer from the Account (or related
disbursement accounts):
a. Valid claims and benefit payments under the Interim Policies
and the Rejected Policies, including surrender value payments, if any,
from the Effective Date (as defined in Paragraph 4.1 below);
b. Commission expenses from the Effective Date;
c. All related Exhibit 5 and Exhibit 6 expenses from the
Effective Date; and
d. Payments to reinsurers of the Interim Policies and the
Rejected Policies.
2.2 All account balances shall be settled on a daily basis. Any
positive net balance resulting from such settlement shall be remitted daily to
Pioneer pursuant to the Coinsurance Agreement; however, in the event of any
daily negative net balance, Pioneer shall promptly deposit into the Account
within twenty-four (24) hours of such settlement an amount equal to such
underage. Pioneer shall make such arrangements with the bank in which the
Account is maintained as are necessary to ensure that no check written on the
Account will be deemed unplayable by reason of insufficient funds.
2.3 A statement of account and supporting documents as may be
reasonably requested by Pacific reflecting the amounts paid under Paragraph 2.1
above shall be prepared by Pioneer and submitted to Pacific on a quarterly basis
by United States Mail, First Class, postage prepaid. Such statement of account
shall include the following information in both detail and summary format:
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<PAGE>
a. Net Premiums Received: All amounts received during the
calendar quarter at the offices of Pioneer with respect to the Interim
Policies and the Rejected Policies less the amount of premiums returned
to the policyholder or to his account;
b. Expenses: All expenses related to the administration of the
Interim Policies and the Rejected Policies for the calendar quarter,
including but not limited to premium tax expense:
c. Agent's Commission: Commissions applied during the calendar
quarter to Net Premiums Received; and
d. Claims and Benefits Paid: All amounts paid during the calendar
quarter with respect to claims arising under the Interim Policies and
the Rejected Policies.
2.4 Pioneer has no interest in the premiums collected by it and shall
make no deductions therefrom. Pioneer shall not make personal use of any other
such funds either in paying expenses of its business or otherwise.
2.5 Pioneer shall provide Pacific the data required for statutory
statistical reporting within thirty (3) days following the calendar quarter for
which the data are collected.
3. RELATIONSHIP OF PARTIES
3.1 The relationship of Pioneer to Pacific shall be that of
independent contractor and nothing herein contained shall create or be deemed to
create a partnership for tax or other purposes or the relationship of employee
and employer between the parties.
3.2 At all times during the term of this Service Agreement, Pacific,
by its duly authorized representative, shall have the right, at any time and
from time to time on reasonable notice, to audit and inspect all records,
accounts and systems of and the performance of services
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<PAGE>
by Pioneer with respect to the Interim Policies and the Rejected Policies and
Pioneer will use its best efforts to assist any such audit or inspection during
normal business hours.
4. DURATION AND TERMINATION
4.1 Except as set forth in the following paragraph, this Service
Agreement will become effective as soon as all notice to and/or approval from
appropriate regulatory authorities has been given (herein called the "Effective
Date"). On the date the Coinsurance Agreement becomes effective, this Service
Agreement will be perpetual, permanent and noncancellable and will continue in
full force and remain in effect until such time as all liabilities with respect
to the Interim Policies and the Rejected Policies have been discharged or have
otherwise expired.
4.2 Notwithstanding the foregoing paragraph, this Service Agreement
may be terminated by Pacific in its sole and absolute discretion upon the
occurrence of any one or more of the following events:
a. Any material failure by Pioneer in keeping, observing or
performing any of the material terms, covenants, agreements, provisions
or conditions contained in this Service Agreement (each such failure, a
"Services Default"). Pacific shall provide Pioneer with a notice of
default, which specifically identifies the nature of the Services
Default. Thereafter, Pioneer shall have fifteen (15) business days
following its receipt of the notice of default in which to cure such
Services Default and, if such cure is reasonably acceptable to Pacific,
Pacific shall so advise Pioneer of such acceptance and Pioneer shall
continue to perform under this Service Agreement; provided, however,
that if in its sole discretion Pacific determines that the proposed
remedy does not cure the Services Default, then Pacific may terminate
this Service Agreement as provided herein.
b. A writ of execution or attachment or any similar process
issued or levied against all or any part of the assets or property of
Pioneer;
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<PAGE>
c. The commencement of any rehabilitation, conservation or
liquidation proceeding by any state insurance regulatory authority with
respect to Pioneer to satisfy an obligation when due; or
d. The seizure of the business or assets of Pioneer by the United
States or any political or governmental unit or subdivision thereof.
5. DATA OWNERSHIP AND CONTROL
Pioneer agrees that all records and other data as they relate, in
whole or part, to the Interim Policies and the Rejected Policies including,
without limitation, files, input materials, reports and forms that are received,
computed, developed, used and/or stored during the term or and pursuant to the
term of and pursuant to this Service Agreement are the exclusive property of
Pacific, and that all such records and other data, whether maintained in written
or electronic format, shall be furnished to Pacific by Pioneer upon termination
of this Service Agreement; provided, however, that delivery may be in a form the
same as currently maintained by Pioneer or in a mutually agreeable form.
6. CONFIDENTIALITY
Pioneer will safeguard and protect the confidentiality of all records
including, but not limited to, accounting and statistical records, premium and
coverage records, claims files, policyholder information, actuarial data,
correspondence and all other proprietary information with respect to Pacific and
Pacific's policyholders. In the event that either party is served with any order
or demand by any governmental agency or other regulatory body, the receiving
party will provide the other party with prompt notice of such order or demand so
that the other party may seek appropriate protective relief if it so desires.
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7. INDEMNIFICATION
7.1 Indemnification of Pacific. Pioneer shall indemnify and hold
Pacific harmless of and from any and all loss, liability, damage or expense,
including, without limitation, fines, penalties, and reasonable attorneys' fees,
court costs and Extracontractual Damages, (i) which Pacific may incur or to
which Pacific may be subjected by any governmental regulatory or administrative
body (including but not limited to the Texas Insurance Department, the Internal
Revenue Service or any other federal or state governmental body and whether by
way of decision on the merits, settlement, consent decree or otherwise) and
which arises out of any fault or failure on the part of Pioneer properly to
perform the services contemplated by this Service Agreement in a manner
consistent with the standard set forth in Paragraph 1.7 hereof except such acts
or omissions as shall be expressly authorized in writing by an officer of
Pacific or its duly appointed outside counsel; (ii) resulting from any fraud,
embezzlement or other similar defalcation committed or aided or abetted by
Pioneer or by its officers, agents or employees; or (iii) resulting from any
breach by Pioneer of any representation, covenant or agreement made by Pioneer
pursuant to the Service Agreement.
7.2 Indemnification of Pioneer. Except as limited by Paragraph 7.6
below, Pacific shall indemnify and hold Pioneer harmless of and from any and all
loss, liability, damage or expense, including, without limitation, fines,
penalties, court costs and reasonable attorneys' fees, which Pioneer may incur
or to which Pioneer may be subject by any governmental regulatory or
administrative body (including but not limited to the Texas Insurance
Department, the Internal revenue Service or any other federal or state
governmental body and whether by way of decision on the merits, settlement,
consent decree or otherwise) and which arises out Pioneer's compliance with an
express written instruction by an officer of Pacific or its duly appointed
outside counsel.
7.3 Defense of Claims and Demands Against Pacific. Except as
otherwise provided in Paragraph 7.7 below in the event of any claim or demand
against Pacific which is subject to the right of indemnification provided in
Paragraph 7.1 hereof, Pioneer shall have the right to assume the control of the
defense, compromise or settlement thereof at its own expense, with employment of
counsel satisfactory to Pioneer, provided that any compromise or settlement
shall be approved by Pacific, which approval shall not be unreasonable withheld.
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If Pioneer assumes control, Pacific shall have the right to participate in such
defense, compromise or settlement; provided, however that no costs incurred by
Pacific thereafter in connection with such participation shall be considered
costs, expenses or damages subject to indemnification hereunder. If Pioneer does
not elect to defend any such claim or demand, Pacific may do so, but shall have
no obligation to do so. Pioneer shall not be liable for any settlement of any
claim or demand effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with such written consent, or if there be
a final judgment for the plaintiff in any such claim or demand, Pioneer agrees
to indemnify and hold harmless Pacific to the extent provided in this Article 7
by reason of such settlement or judgment, which indemnification shall include
compensation for damages incurred as a result of non-monetary penalties.
7.4 Defense of Claims and Demands Against Pioneer. Except as
otherwise provided in Paragraph 7.7 below, in the event of any claim or demand
against Pioneer or any of its officers, directors, affiliates, successors and
assigns which is subject to the right of indemnification provided in Paragraph
7.2 hereof, Pacific shall have the right to assume the control of the defense,
compromise or settlement thereof at its own expense, with employment of counsel
satisfactory to Pioneer, provided that any compromise or settlement shall be
approved by Pioneer, which approval shall not be unreasonably withheld. If
Pacific assumes control, Pioneer shall have the right to participate in such
defense, compromise or settlement; provided, however, that no costs incurred by
Pioneer thereafter in connection with such participation shall be considered
costs, expenses or damages subject to indemnification hereunder. If Pacific does
not elect to defend any such claim or demand, Pioneer may do so, but shall be
considered costs, expenses or damages subject to indemnification hereunder. If
pacific does not elect to defend any such claim or demand, Pioneer may do so,
but shall have no obligation to do so. Pacific shall not be liable for any
settlement of any claim or demand effected with its written consent (which
consent shall not be unreasonably withheld), but if settled with such written
consent, or if there be a final judgment for the plaintiff in any such claim or
demand, Pacific agrees to indemnify and hold harmless Pioneer to the extent
provided in this Article 7 by reason of such settlement or judgment, which
indemnification shall include compensation for damages incurred as a result of
non-monetary penalties.
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7.5 Notice of Claims. Each party shall give prompt written notice to
the other party of any facts which are likely to result in a claim under any of
the indemnification provisions of this Article 7.
7.6 Defense of Tax Claims. Notwithstanding any of the other
provisions of this Service Agreement, the defense, litigation and settlement of
any claim or demand brought or asserted by any governmental taxing authority,
including but not limited to the Internal Revenue Service, against any party to
this Service Agreement shall be controlled by the party against whom such claim
or demand is asserted or brought.
8. REPRESENTATION AND WARRANTIES
8.1 Pioneer hereby makes the following representations and warranties
to Pacific:
a. Pioneer is a stock corporation duly organized, validly
existing and in good standing under the law of the State of Texas and is
licensed to do business in the State of North Carolina.
b. Pioneer has all licenses and authorizations necessary to
provide the services described herein;
c. All corporate action necessary for the execution and
performance of this Service Agreement has been taken by Pioneer. Pioneer
has full corporate authority to enter into and perform this Service
Agreement and this Service Agreement has been executed by duly
authorized officers of Pioneer;
d. Neither the execution nor the performance of the terms of this
Service Agreement will in any material way conflict with, result in a
breach of or constitute a default under any order, judgment or decree by
which Pioneer is bound, or under the corporate charter or articles of
incorporation or By-Laws of Pioneer, or require the
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consent of any other person to any contract or instrument to which
Pioneer is a party, except as provided in this Service Agreement or as
will be obtained.
8.2 Pacific hereby makes the following representations and warranties
to Pioneer:
a. Pacific is a stock corporation duly organized, validly
existing and in good standing under the law of the State of Texas;
b. All corporate action necessary for the execution and
performance of this Service Agreement has been taken by Pacific. Pacific
has full corporate authority to enter into and perform this Service
Agreement and this Service Agreement has been executed by duly
authorized officers of Pacific;
c. Neither the execution nor the performance of the terms of this
service Agreement will in any material way conflict with, result in a
breach of or constitute a default under any order, judgment, or decree
by which Pacific is bound, or under the corporate charter or articles of
incorporation or By-Laws of Pacific , or require the consent of any
other person to any contract or instrument to which Pacific is a party,
except as provided in this Service Agreement or as will be obtained.
9. MISCELLANEOUS
9.1 All expenses incurred by or on behalf of the parties hereto in
connection with the authorization, preparation, execution and consummation of
this Service Agreement, including, without limitation, all fees and expenses of
agents, representatives, printers, counsel and accountants employed by the
parties hereto and all taxes, shall be borne solely by the party which shall
have incurred the same.
9.2 The parties hereto agree to cooperate in making effective the
transactions contemplated by this Service Agreement and each party will, at the
request of the other party,
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join in making any action which, though not specified herein, may be reasonably
required to be taken in order to consummate the transactions contemplated in
this Service Agreement.
9.3 Except for the quarterly account statement identified in
Paragraph 2.3, all notices, statements or demands shall be in writing and shall
be served in person, by telegraph, by express mail, by certified mail or by
private overnight delivery. Service shall be deemed conclusively made (a) at the
time of service, if personally served, (b) at the time (as confirmed in writing
by the telegraphic agency) of delivery thereof to the address, if served
telegraphically, (c) twenty-four (24) hours after deposit in the United States
mail, properly addressed and postage prepaid, if served by express mail, (d)
five (5) days deposit in the United States mail, properly addressed and postage
prepaid, return receipt requested, if served by certified mail and (e)
twenty-four hours after delivery by the party giving the notice, statement or
demand to the private overnight deliverer, if served by private overnight
delivery.
Any notice or demand to Pacific shall be given to:
Pacific Life and Accident Insurance Company
717 N. Harwood Street
Dallas, TX 75201
Attn: President
Telephone: (214) 954-7010
Facsimile: (214) 954-7906
Any notice or demand to Pioneer shall be given to:
Pioneer Security Life Insurance Company
425 Austin Avenue
Waco, TX 76701
Attn: President
Telephone: (254) 297-2711
Facsimile: (254) 297-7710
and with a copy to: Joe Dunlap, Vice President
Any party may, by virtue of written notice in compliance with this paragraph,
alter or change the address or the identity of the person to whom any notice, or
copy thereof, is to be sent.
15
<PAGE>
9.4 Except as otherwise provided herein, this Service agreement shall
not be assigned by either party without the prior written consent of the other
and any attempt to assign this Service Agreement with such consent shall be
void. All terms and provisions of this Service Agreement shall be binding upon
and inure to the benefit of the permitted transferees, successors and assigns of
either party.
9.5 Any action concerning a dispute arising out of or concerning this
Service Agreement, regarding the interpretation of this Service Agreement, or
regarding the relationships among the parties created pursuant to this Service
Agreement or the negotiations leading to its execution shall be filed only in
the United States District Court in Texas or in a Court of the State of Texas.
9.6 The invalidity of any term or terms of the Service Agreement
shall not affect any other term of this Service Agreement, which shall remain in
full force and effect.
9.7 This Service Agreement shall not be modified or waived in whole
or in part except by the express terms of a writing signed by the party against
which such modification or waiver is sought to be enforced.
9.8 No failure on the part of either party hereto to exercise any
right, and no delay in exercising any right, shall operate as a waiver thereof,
nor shall single or partial exercise of any right preclude any other future
exercise thereof or the exercise of any other right.
9.9 The headings to the various paragraphs of this Service Agreement
have been inserted for convenient reference only and shall not modify, define,
limit or expand the express terms and conditions of this Service Agreement.
9.10 Errors or omissions on the part of either party shall not
invalidate this Service Agreement if such errors or omissions are corrected
promptly after discovery.
16
<PAGE>
9.11 In addition to the records otherwise required to be maintained
hereunder, the parties shall maintain records of all transactions undertaken
pursuant to this Service Agreement. Such records shall be maintained in
accordance with generally accepted standards of insurance bookkeeping for the
duration of this Service Agreement and for five (5) years after its termination.
Upon termination of this Service Agreement, Pioneer will transfer all records to
pacific in an orderly and reasonable manner.
9.12 This Service Agreement may be executed in counterparts which,
taken together, shall constitute the whole of the service Agreement as between
the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Service
Agreement as of the date first set forth above.
PACIFIC LIFE AND ACCIDENT INSURANCE
COMPANY, a Texas corporation
By:
---------------------------------------
Title:
------------------------------------
ATTEST:
- -----------------------------
PIONEER SECURITY LIFE INSURANCE
COMPANY, a Texas corporation
By:
---------------------------------------
Title:
------------------------------------
ATTEST:
- -----------------------------
17
<PAGE>
EXHIBIT E
---------
INVESTMENT ACCOUNTING SERVICES AGREEMENT
----------------------------------------
This INVESTMENT ACCOUNTING SERVICES AGREEMENT (this "Agreement") is
made as of February 4, 2000, by and among Pioneer Security Life Insurance
Company, a Texas insurance corporation ("Pioneer"), Occidental Life Insurance
Company of North Carolina, a Texas insurance corporation ("Occidental"), Pioneer
American Insurance Company of Texas, a Texas insurance corporation ("Pioneer
American"), American-Amicable Life Insurance Company of Texas, a Texas insurance
corporation ("AA Life") (Pioneer, Occidental, Pioneer American and AA Life,
collectively, the "Insurance Companies") and KB Management, L.L.C. ("Service
Provider").
w i t n e s s e t h:
--------------------
WHEREAS, each of the Insurance Companies underwrites and markets life
insurance products and holds as assets various investments in cash and
marketable securities;
WHEREAS, each of the Insurance Companies has severally, but not
jointly, established segregated accounts held under custody arrangements with
banking institutions (the "Custodians") into which are deposited the cash and
marketable securities owned severally, but not jointly, by the Insurance
Companies;
WHEREAS, Service Provider is an investment research, securities
brokerage and insurance advisory firm with special expertise in the areas of
asset and investment portfolio management;
WHEREAS, the Insurance Companies wish to engage Service Provider to
provide investment accounting services for the investment assets owned by the
respective Insurance Companies for a period not to exceed four months; and
WHEREAS, each of the Insurance Companies will engage a company to be
its investment advisor (the "Advisor") and expects that the Advisor will provide
such investment accounting services to each of the Insurance Companies after
termination of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Appointment. Each of the Insurance Companies hereby appoints
Service Provider to provide the investment accounting services described herein
(the "Services"), and Service Provider hereby accepts this appointment. Service
Provider shall perform the Services in accordance with the insurance laws and
regulations governing investments owned by life insurance companies promulgated
by the particular state in which each of the Insurance Companies is organized
(the "Regulations"), and Service Provider hereby represents that is
<PAGE>
generally familiar with the Regulations as such regulations exist as of the date
hereof; provided, however, that Service Provider shall not be obligated to
monitor periodic changes to the Regulations on an ongoing basis; provided
further, that Service Provider shall comply with the Regulations to the extent
that it has knowledge of them.
2. Duties.
(a) Service Provider shall faithfully perform for the Insurance
Companies the same investment accounting services as have been provided by
Service Provider to the Insurance Companies during the six months ending on the
date hereof, with such changes to such services as may be reasonably requested
by an Insurance Company, so long as such changes do not entail significant
additional costs for Service Provider. All such services shall be performed by
Service Provider to the best of its professional knowledge, skill and judgment,
and in accordance with recognized industry standards.
(b) In addition to the services set forth in Section 2(a) hereof,
Service Provider shall (i) provide to the Advisor within 5 business days of the
date of this Agreement a list of all investment assets owned by an Insurance
Company, that are held in the name of any other entity (including PennCorp
Financial Group, Inc., and to actively assist with both the transfer of such
assets into the name of each of the Insurance Companies, as applicable, and the
physical delivery to the appropriate Custodian of any documentation evidencing
ownership of such assets and (ii) otherwise cooperate as reasonably requested by
the Insurance Companies or the Advisor with the transitioning of the investment
accounting function to the Advisor, including without limitation addressing
questions that arise during the course of the Advisor's parallel processing of
data with respect to the Insurance Companies' investment assets, as applicable.
3. Term. This Agreement shall commence on the date hereof and shall
continue in full force and effect until the completion of month-end processing
for the month ended April 30, 2000, unless sooner terminated by any of the
Insurance Companies on 30 (thirty) days prior written notice to Service Provider
in which case this Agreement shall terminate with respect to such terminating
Insurance Company in accordance with the terms of the termination notice. Any
amounts due to Service Provider pursuant to Paragraph 6 hereof shall be due and
payable through the date of termination of this Agreement.
4. No Other Duties or Responsibilities of Service Provider. Each of
the Insurance Companies expressly acknowledges and agrees that Service Provider
shall perform no other services and have no other duties or responsibilities
under this Agreement, with respect to the investment assets or otherwise, other
than as specifically described in Paragraph 2 above. Without limiting the
generality of the foregoing, in no event shall Service Provider have any duty or
responsibility for the management, investment or monitoring of any of the
Insurance Companies' investment assets.
5. Custody of Assets. Service Provider shall not at any time act as
custodian of the investment assets of any of the Insurance Companies and each of
the Insurance Companies, severally, but not jointly, shall be fully responsible
for all fees and other costs of the Custodian associated with the maintenance of
the investment assets.
2
<PAGE>
6. Compensation. In consideration of Service Provider providing the
Services to the Insurance Companies during the term of this Agreement, the
Insurance Companies shall pay to Service Provider by wire transfer of
immediately available funds, for the benefit of the Insurance Companies and the
Advisor, $9,500 (the "Fee") for each full calendar month during which the
Services are provided. The Insurance Companies shall pay a pro-rated portion of
the Fee for any partial calendar month during which the Services are provided.
The Fee shall be due and payable on the first business day of each month.
7. Independent Contractor. Service Provider is retained by the
Insurance Companies under this Agreement only for the purposes and to the extent
set forth herein, and the relation of Service Provider to the Insurance
Companies is and shall remain, during the term of this Agreement, that of an
independent contractor.
8. Confidentiality. Service Provider shall keep confidential and
cause its representatives, agents, employees and advisors to keep confidential
the books and records of the Insurance Companies required to be maintained
pursuant to Paragraph 2 hereof. Service Provider agrees that all books and
records it maintains for the Insurance Companies hereunder are the property of
the Insurance Companies and it will surrender promptly to the Insurance
Companies any of such records upon the Insurance Companies' request.
9. Non-exclusivity. Service Provider and its officers may act and
continue to act as investment advisors and asset managers for others, and
nothing in this Agreement shall in any way be deemed to restrict Service
Provider's rights to perform portfolio and investment management or other
services for any other person or entity.
10. Indemnification of Service Provider. Each of the Insurance
Companies, severally, but not jointly, shall indemnify, defend and hold Service
Provider, its affiliates, parent, directors, officers, agents, and employees
harmless from and against any and all claims, suits, actions, liability, loss,
expense or damage, including attorneys' fees due to or arising out of the
performance by Service Provider of its obligations under this Agreement, unless
such claims are a direct result of the gross negligence or willful misconduct of
Service Provider or a breach of this Agreement by Service Provider.
11. Indemnification of the Insurance Companies. Service Provider
shall indemnify, defend and hold each of the Insurance Companies, and their
respective affiliates, parent, directors, officers, agents, and employees,
harmless from and against any and all claims, suits, actions, liabilities,
losses, expenses or damages, including attorneys' fees, to the extent resulting
from any breach of this Agreement by Service Provider.
12. Non-assignability; Amendments. This Agreement shall be binding
upon and shall insure to the benefit of the parties hereto, and their respective
successors and assigns. No party hereto shall assign its rights or obligations
under this Agreement without the prior written consent of the other parties.
This Agreement may be modified only by a written amendment signed by all parties
hereto.
3
<PAGE>
13. Prior Agreements. This Agreement supersedes any prior agreements
for understandings between the Insurance Companies and/or any of their
affiliates and Service Provider with respect to the subject matter hereof.
14. Reliance on Information. Service Provider shall be entitled to
rely, without independent verification, on the accuracy and completeness of all
information furnished to it by each of the Insurance Companies in furtherance of
this Agreement, and on information obtained by Service Provider from the
Custodians.
15. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
16. Notices. All notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be considered as properly given or made if delivered personally or mailed,
postage prepaid, or sent by overnight delivery or equivalent service or telecopy
addressed to the respective address of such party set forth below:
if to the Insurance Companies and/or the Advisor:
-------------------------------------------------
[Address]
if to Service Provider:
-----------------------
KB Management, L.L.C.
717 N. Harwood Street
Dallas, Texas 75201
Attention: Scott D. Silverman
Facsimile No.: (214) 954-7906
All notices will be deemed effective upon receipt if delivered personally or
sent by overnight delivery or equivalent service or telecopy and, if sent by
regular mail, ten (10) days after mailing. Either party hereto may change its
address for the giving of notices by like notice to the other parties stating
the new address.
17. Severability. If any provision of this Agreement is held for any
reason to be unenforceable by a court of competent jurisdiction, the remainder
of this Agreement shall, nevertheless, remain in full force and effect in such
jurisdiction.
18. Headings. The headings of this Agreement are intended solely for
convenience of reference and shall be given no effect on the construction or
interpretation of this Agreement.
19. Counterparts; Facsimile Execution. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.
Each party to this Agreement
4
<PAGE>
agrees that it will be bound by its own telecopy signature and that it accepts
the telecopy signature of each other party to this Agreement.
20. Third Party Beneficiary. The Advisor is intended to be a third
party beneficiary of this Agreement and shall be entitled to enforce the
provisions of this Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
PIONEER SECURITY LIFE INSURANCE COMPANY
By:
---------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
OCCIDENTAL LIFE INSURANCE COMPANY OF NORTH CAROLINA
By:
---------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
PIONEER AMERICAN INSURANCE COMPANY OF TEXAS
By:
---------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
AMERICAN-AMICABLE LIFE INSURANCE COMPANY OF TEXAS
By:
---------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
KB MANAGEMENT, L.L.C.
By:
---------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
6
<PAGE>
EXHIBIT F
---------
SECTION 3.1 (B) - STATE LICENSES BY COMPANY
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
AA LIFE
---------------------------------------------------------------------------------------------------------------------------------
STATE LINE OF BUSINESS PER CERTIFICATE OF AUTHORITY MISCELLANEOUS
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alabama Life, Health, Accident & Hospitalization
---------------------------------------------------------------------------------------------------------------------------------
Alaska Life, Disability & Annuities
---------------------------------------------------------------------------------------------------------------------------------
Arizona Life, Disability
---------------------------------------------------------------------------------------------------------------------------------
Arkansas Life, Disability
---------------------------------------------------------------------------------------------------------------------------------
California Life, Disability
---------------------------------------------------------------------------------------------------------------------------------
Colorado Ordinary & Group Life, Accident & Health, Annuity
---------------------------------------------------------------------------------------------------------------------------------
Connecticut Life - Non-Participating & Participating
---------------------------------------------------------------------------------------------------------------------------------
Delaware Life, Including Annuities & Health
---------------------------------------------------------------------------------------------------------------------------------
Dist of Col Individual Life, Individual Accident & Health,
Individual Annuities
---------------------------------------------------------------------------------------------------------------------------------
Florida Life, Group Life & Annuities
---------------------------------------------------------------------------------------------------------------------------------
Georgia Life, Accident & Sickness
---------------------------------------------------------------------------------------------------------------------------------
Hawaii Life
---------------------------------------------------------------------------------------------------------------------------------
Idaho Life, Disability
---------------------------------------------------------------------------------------------------------------------------------
Illinois Life, Accident & Health
---------------------------------------------------------------------------------------------------------------------------------
Indiana Life, Accident & Sickness
---------------------------------------------------------------------------------------------------------------------------------
Kansas Life, Accident & Health
---------------------------------------------------------------------------------------------------------------------------------
Kentucky Life & Health The Kentucky Department of Insurance has
alleged that the sales practices of a small
number of AA agents violated Kentucky insurance
regulations. The company has executed an Agreed
Order with the Kentucky Department and paid an
administrative penalty of $12,500 on
01/07/2000. The order includes a two-year
probationary period for the Company
---------------------------------------------------------------------------------------------------------------------------------
Louisiana Life, Health & Accident
---------------------------------------------------------------------------------------------------------------------------------
Maine Life
---------------------------------------------------------------------------------------------------------------------------------
Maryland Life & Health The Maryland Insurance Department issued a
draft for our review of the findings of their
exam conducted with respect to the period of
January 1993 to December 31, 1996. The report
requests that AA Life sign a consent order and
pay a fine of $100,000 immediately with an
additional $100,000 fine stayed on the
condition that there be no further violations
for three years. The Texas Insurance Department
has contacted the Maryland Insurance Department
on our behalf. To date no definitive
resolutions has been reached nor has the review
been publicly released.
--------------------------------------------------------------------------------------------------------------------------------
Minnesota Life & Accident
Mississippi Life, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
Missouri Life, Accident & Sickness
--------------------------------------------------------------------------------------------------------------------------------
Montana Life & Disability
--------------------------------------------------------------------------------------------------------------------------------
Nebraska Life, Sickness & Accident
--------------------------------------------------------------------------------------------------------------------------------
8
<PAGE>
---------------------------------------------------------------------------------------------------------------------------------
AA LIFE
---------------------------------------------------------------------------------------------------------------------------------
STATE LINE OF BUSINESS PER CERTIFICATE OF AUTHORITY MISCELLANEOUS
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nevada Life
--------------------------------------------------------------------------------------------------------------------------------
New Mexico Life and/or Health
--------------------------------------------------------------------------------------------------------------------------------
North Carolina Life, Annuities, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
North Dakota Accident & Health, Life & Annuity
--------------------------------------------------------------------------------------------------------------------------------
Ohio Life, Accident, Sickness, Disability, Annuities
--------------------------------------------------------------------------------------------------------------------------------
Oklahoma Life, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
Oregon Life & Health
--------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Life, Annuities, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
South Carolina Life, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
South Dakota Life & Health
--------------------------------------------------------------------------------------------------------------------------------
Tennessee Life, Disability
--------------------------------------------------------------------------------------------------------------------------------
Texas Life, Accident & Health By the terms of a letter agreement dated
September 22, 1998, Seller and certain of its
subsidiaries have committed to provide certain
financial information and notices of certain
transactions to the Texas Department of
Insurance with respect to business transacted
within the State of Texas.
--------------------------------------------------------------------------------------------------------------------------------
Utah Life
--------------------------------------------------------------------------------------------------------------------------------
Virginia Life, Accident & Sickness, Annuities
--------------------------------------------------------------------------------------------------------------------------------
Washington Life
--------------------------------------------------------------------------------------------------------------------------------
West Virginia Life, Accident & Sickness
--------------------------------------------------------------------------------------------------------------------------------
Wisconsin Life & Annuities, Disability
--------------------------------------------------------------------------------------------------------------------------------
Wyoming Life & Disability
--------------------------------------------------------------------------------------------------------------------------------
Guam Life, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
Department of All forms of insurance
Defense
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
PIONEER AMERICAN
--------------------------------------------------------------------------------------------------------------------------------
STATE LINE OF BUSINESS PER CERTIFICATE OF AUTHORITY MISCELLANEOUS
--------------------------------------------------------------------------------------------------------------------------------
Alabama Life, Health, Accident & Hospitalization
--------------------------------------------------------------------------------------------------------------------------------
Alaska Life, Disability & Annuities
--------------------------------------------------------------------------------------------------------------------------------
Arizona Life, Disability
--------------------------------------------------------------------------------------------------------------------------------
Arkansas Life, Disability
--------------------------------------------------------------------------------------------------------------------------------
California Life, Disability
--------------------------------------------------------------------------------------------------------------------------------
Colorado Life, Accident & Health, Annuity
--------------------------------------------------------------------------------------------------------------------------------
Dist of Col Individual Life, Individual Annuities
--------------------------------------------------------------------------------------------------------------------------------
Florida Life, Group Life & Annuities, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
Georgia Life, Accident & Sickness
--------------------------------------------------------------------------------------------------------------------------------
Hawaii Life
--------------------------------------------------------------------------------------------------------------------------------
Idaho Life, Disability
--------------------------------------------------------------------------------------------------------------------------------
Illinois Life, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
Indiana Life, Accident & Sickness
--------------------------------------------------------------------------------------------------------------------------------
Iowa Accident & Health, Hospital & Medical, Life & Annuities
--------------------------------------------------------------------------------------------------------------------------------
9
<PAGE>
--------------------------------------------------------------------------------------------------------------------------------
PIONEER AMERICAN
--------------------------------------------------------------------------------------------------------------------------------
STATE LINE OF BUSINESS PER CERTIFICATE OF AUTHORITY MISCELLANEOUS
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Kansas Life, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
Kentucky Life & Health
--------------------------------------------------------------------------------------------------------------------------------
Louisiana Life, Health & Accident, & Annuities
--------------------------------------------------------------------------------------------------------------------------------
Maryland Life
--------------------------------------------------------------------------------------------------------------------------------
Massachusetts Accident, Health, Life
--------------------------------------------------------------------------------------------------------------------------------
Mississippi Life, Accident, Health
--------------------------------------------------------------------------------------------------------------------------------
Missouri Life, Accident & Sickness
--------------------------------------------------------------------------------------------------------------------------------
Montana Life & Disability
--------------------------------------------------------------------------------------------------------------------------------
Nevada Life & Health
--------------------------------------------------------------------------------------------------------------------------------
New Jersey Life, Health & Accident, & Annuities
--------------------------------------------------------------------------------------------------------------------------------
New Mexico Life And/or Health
--------------------------------------------------------------------------------------------------------------------------------
North Carolina Life, Annuities, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
Ohio Life, Accident, Sickness, Disability, Annuities
--------------------------------------------------------------------------------------------------------------------------------
Oklahoma Life, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
Oregon Life & Health
--------------------------------------------------------------------------------------------------------------------------------
South Carolina Life, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
Tennessee Life, Disability
--------------------------------------------------------------------------------------------------------------------------------
Texas Life, Accident & Health By the terms of a letter agreement dated
September 22, 1998, Seller and certain of its
subsidiaries have committed to provide certain
financial information and notices of certain
transactions to the Texas Department of
Insurance with respect to business transacted
within the State of Texas.
--------------------------------------------------------------------------------------------------------------------------------
Utah Life
--------------------------------------------------------------------------------------------------------------------------------
Virginia Life, Accident & Sickness, Annuities
--------------------------------------------------------------------------------------------------------------------------------
Washington Life
--------------------------------------------------------------------------------------------------------------------------------
West Virginia Life, Accident & Sickness
--------------------------------------------------------------------------------------------------------------------------------
Wyoming Life & Disability
--------------------------------------------------------------------------------------------------------------------------------
Puerto Rico Life, Annuities, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
Japan Life
--------------------------------------------------------------------------------------------------------------------------------
Department of All forms of insurance
Defense
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
PIONEER SECURITY
--------------------------------------------------------------------------------------------------------------------------------
STATE LINE OF BUSINESS PER CERTIFICATE OF AUTHORITY MISCELLANEOUS
--------------------------------------------------------------------------------------------------------------------------------
Alabama Life, Disability & Annuities
--------------------------------------------------------------------------------------------------------------------------------
Alaska Life, Disability & Annuities (License Cancelled
03/1/95)
--------------------------------------------------------------------------------------------------------------------------------
Arkansas Life, Disability
--------------------------------------------------------------------------------------------------------------------------------
California Life, Disability
--------------------------------------------------------------------------------------------------------------------------------
Colorado Life, Group Life, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
Delaware Life, Including Annuities & Health
--------------------------------------------------------------------------------------------------------------------------------
Dist of Col Individual Life, Individual Annuities
--------------------------------------------------------------------------------------------------------------------------------
Florida Life, Group Life & Annuities
--------------------------------------------------------------------------------------------------------------------------------
10
<PAGE>
--------------------------------------------------------------------------------------------------------------------------------
PIONEER SECURITY
--------------------------------------------------------------------------------------------------------------------------------
STATE LINE OF BUSINESS PER CERTIFICATE OF AUTHORITY MISCELLANEOUS
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Georgia Life, Accident & Sickness
--------------------------------------------------------------------------------------------------------------------------------
Hawaii Life
--------------------------------------------------------------------------------------------------------------------------------
Idaho Life, Disability
--------------------------------------------------------------------------------------------------------------------------------
Illinois Life, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
Indiana Life, Accident & Sickness
--------------------------------------------------------------------------------------------------------------------------------
Kansas Life, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
Kentucky Life & Health
--------------------------------------------------------------------------------------------------------------------------------
Louisiana Life, Health & Accident
--------------------------------------------------------------------------------------------------------------------------------
Maryland Life & Health
--------------------------------------------------------------------------------------------------------------------------------
Michigan Life & Disability (License Surrendered 01/17/96) Section 500.405 of the Michigan Insurance Code
provides for the automatic revocation of the
Michigan certificate of authority of a foreign
insurer upon a change of control unless the
insurer requalifies for a certificate of
authority within 90 days following the change
of control.
--------------------------------------------------------------------------------------------------------------------------------
Minnesota Life & Accident A three-year business plan is
required for review and approval prior to
writing any new business or accepting any
deposits.
- ----------------------------------------------------------------------------------------------------------------------------------
Mississippi Life, Accident & Health
- ----------------------------------------------------------------------------------------------------------------------------------
Missouri Life, Accident & Sickness
- ----------------------------------------------------------------------------------------------------------------------------------
Montana Life & Disability
- ----------------------------------------------------------------------------------------------------------------------------------
Nebraska Life, Sickness & Accident
- ----------------------------------------------------------------------------------------------------------------------------------
Nevada Life, Health (License Cancelled 03/01/95)
- ----------------------------------------------------------------------------------------------------------------------------------
New Mexico Life And/or Health
- ----------------------------------------------------------------------------------------------------------------------------------
North Carolina Life, Annuities, Accident & Health
- ----------------------------------------------------------------------------------------------------------------------------------
North Dakota Accident & Health, Life & Annuity
- ----------------------------------------------------------------------------------------------------------------------------------
Oklahoma Life, Accident & Health
- ----------------------------------------------------------------------------------------------------------------------------------
Oregon Life & Health
- ----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Life, Annuities, Accident & Health
- ----------------------------------------------------------------------------------------------------------------------------------
South Carolina Life, Accident & Health
- ----------------------------------------------------------------------------------------------------------------------------------
South Dakota Life & Health
- ----------------------------------------------------------------------------------------------------------------------------------
Tennessee Life, Disability, Accident & Health
- ----------------------------------------------------------------------------------------------------------------------------------
Texas Life, Accident & Health By the terms of a letter agreement dated
September 22, 1998, Seller and certain of its
subsidiaries have committed to provide certain
financial information and notices of certain
transactions to the Texas Department of
Insurance with respect to business transacted
within the State of Texas.
- ----------------------------------------------------------------------------------------------------------------------------------
Utah Life, Annuity & Disability
- ----------------------------------------------------------------------------------------------------------------------------------
Virginia Life, Accident & Sickness, Annuities
- ----------------------------------------------------------------------------------------------------------------------------------
Washington Life
- ----------------------------------------------------------------------------------------------------------------------------------
West Virginia Life, Accident & Sickness
- ----------------------------------------------------------------------------------------------------------------------------------
Wisconsin Life & Annuities, Disability
- ----------------------------------------------------------------------------------------------------------------------------------
United Kingdom Life
- ----------------------------------------------------------------------------------------------------------------------------------
11
<PAGE>
--------------------------------------------------------------------------------------------------------------------------------
OCCIDENTAL
--------------------------------------------------------------------------------------------------------------------------------
STATE LINE OF BUSINESS PER CERTIFICATE OF AUTHORITY MISCELLANEOUS
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alabama Life, Disability & Annuities
--------------------------------------------------------------------------------------------------------------------------------
Alaska Life, Health, Annuities
--------------------------------------------------------------------------------------------------------------------------------
Arizona Disability, Life
--------------------------------------------------------------------------------------------------------------------------------
Arkansas Life & Disability
--------------------------------------------------------------------------------------------------------------------------------
California Life & Disability
--------------------------------------------------------------------------------------------------------------------------------
Colorado Life: Ordinary, Group Life, Accident & Health, Annuity
Contracts, Credit Life, Credit A&H
--------------------------------------------------------------------------------------------------------------------------------
Connecticut Accident & Health, Life Non-Participating
--------------------------------------------------------------------------------------------------------------------------------
Delaware Life, Including Annuities & Health
--------------------------------------------------------------------------------------------------------------------------------
Dist of Col Individual Life, Group Life, Individual Accident &
Health, Individual Annuities (Fixed & Variable), Group
Annuities (Fixed & Variable)
--------------------------------------------------------------------------------------------------------------------------------
Florida Life, Group Life & Annuities, Credit Life/Health, In a letter dated June 1999, the Florida
Credit Disability, And Accident & Health Insurance Department stated that Occidental did
not meet the statutory capital requirements. As
of the most recent Financial Statements
Occidental does now meet this requirement. No
further correspondence or request have been
received.
--------------------------------------------------------------------------------------------------------------------------------
Georgia Life, Accident & Sickness
--------------------------------------------------------------------------------------------------------------------------------
Hawaii Disability, Life
--------------------------------------------------------------------------------------------------------------------------------
Idaho Disability, Excluding Managed Care, Life
--------------------------------------------------------------------------------------------------------------------------------
Illinois Life, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
Indiana Life, Accident & Sickness
--------------------------------------------------------------------------------------------------------------------------------
Iowa Accident & Health, Hospital & Medical, Life & Annuities
--------------------------------------------------------------------------------------------------------------------------------
Kansas Life, Accident & Health In a letter dated May 1999, the Kansas
Insurance Department requested additional
information regarding the financial position of
Occidental and stating that Occidental may be
required to make an additional security
deposit. Occidental has furnished the
information requested. No further request have
been made by the Kansas Insurance Department.
--------------------------------------------------------------------------------------------------------------------------------
Kentucky Life & Health
--------------------------------------------------------------------------------------------------------------------------------
Louisiana Life, Health & Accident
--------------------------------------------------------------------------------------------------------------------------------
Maine Life, Health
--------------------------------------------------------------------------------------------------------------------------------
Maryland Health, Life
--------------------------------------------------------------------------------------------------------------------------------
Massachusetts Life, Accident, Health
--------------------------------------------------------------------------------------------------------------------------------
Michigan Life & Annuities, Disability Section 500.405 of the Michigan Insurance Code
provides for the automatic revocation of the
Michigan certificate of authority of a foreign
insurer upon a change of control unless the
insurer requalifies for a certificate of
authority within 90 days following the change
of control.
--------------------------------------------------------------------------------------------------------------------------------
Minnesota Life And Disability Company will notify MN, 60
days prior to time it expects to exceed $60,000
writing level, with a 3- year business plan
--------------------------------------------------------------------------------------------------------------------------------
12
<PAGE>
--------------------------------------------------------------------------------------------------------------------------------
OCCIDENTAL
--------------------------------------------------------------------------------------------------------------------------------
STATE LINE OF BUSINESS PER CERTIFICATE OF AUTHORITY MISCELLANEOUS
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mississippi Life, Accident & Health, Credit Life; Credit Health &
Accident
---------------------------------------------------------------------------------------------------------------------------------
Missouri Life & Health; Life Annuities & Endowments, Accident &
Health
---------------------------------------------------------------------------------------------------------------------------------
Montana Life & Disability
---------------------------------------------------------------------------------------------------------------------------------
Nebraska Life, Sickness & Accident
---------------------------------------------------------------------------------------------------------------------------------
Nevada Life And Health
---------------------------------------------------------------------------------------------------------------------------------
New Hampshire Life, Accident & Health Effective September 30, 1997, company is
restricted to servicing existing business.
---------------------------------------------------------------------------------------------------------------------------------
New Jersey Life, Annuities, Non-Participating Insurance Only
---------------------------------------------------------------------------------------------------------------------------------
New Mexico Life, Health
---------------------------------------------------------------------------------------------------------------------------------
North Carolina Life, Annuities (Excluding Variable Annuities),
Accident & Health, Including Hospitalization
(Cancelable & Non-Cancelable, Credit-Small Loans,
Credit-Other Than Small Loans)
---------------------------------------------------------------------------------------------------------------------------------
North Dakota Life & Annuity, Accident & Health, Credit Life & Health
---------------------------------------------------------------------------------------------------------------------------------
Ohio Life, Accident & Health, Disability, Annuities
---------------------------------------------------------------------------------------------------------------------------------
Oklahoma Life, Accident & Health
---------------------------------------------------------------------------------------------------------------------------------
Oregon Life & Health
---------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Life & Annuities, Accident & Health
---------------------------------------------------------------------------------------------------------------------------------
Rhode Island Life, Accident & Health & Annuity (Except Variable
Annuity)
---------------------------------------------------------------------------------------------------------------------------------
South Carolina Life, Accident & Health
---------------------------------------------------------------------------------------------------------------------------------
South Dakota Life, Health
---------------------------------------------------------------------------------------------------------------------------------
Tennessee Life, Disability, Credit
---------------------------------------------------------------------------------------------------------------------------------
Texas Life, Accident & Health By the terms of a letter agreement dated
September 22, 1998, Seller and certain of its
subsidiaries have committed to provide certain
financial information and notices of certain
transactions to the Texas Department of
Insurance with respect to business transacted
within the State of Texas.
--------------------------------------------------------------------------------------------------------------------------------
Utah Life, Annuity, Disability
--------------------------------------------------------------------------------------------------------------------------------
Vermont Authorized To Transact Business As Authorized In Voluntarily agreed to notify VT DOI 90 days in
Charter, i.e. transaction of any and all kinds, writing advance of
new business. classes, types and forms of life, accident
and health insurance, annuity contracts of every type and
combinations of any two or more of such insurance
business as is now or hereafter permitted and authorized
under the laws of the State of Texas, the Dist of
Columbia, or any state, nation, country, territory,
possession or principality in which the corporation is
authorized to do business; to reinsure any such risk or
any part thereof ceded to it by other insurance
companies; to hold and own one or more insurance
subsidiaries; and the transaction of any and all lawful
business not inconsistent with the purposes enumerated
herein.
---------------------------------------------------------------------------------------------------------------------------------
13
<PAGE>
--------------------------------------------------------------------------------------------------------------------------------
OCCIDENTAL
--------------------------------------------------------------------------------------------------------------------------------
STATE LINE OF BUSINESS PER CERTIFICATE OF AUTHORITY MISCELLANEOUS
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Virginia Life, Industrial Life, Credit Life, Annuities,
Accident & Sickness, Credit Accident & Sickness
--------------------------------------------------------------------------------------------------------------------------------
Washington Life, Disability
--------------------------------------------------------------------------------------------------------------------------------
West Virginia Life, Accident & Sickness
--------------------------------------------------------------------------------------------------------------------------------
Wisconsin Life (Non-Participating), Disability
-------------------------------------------------------------------------------------------------------------------------------
Wyoming Life, Disability, Variable Products
-------------------------------------------------------------------------------------------------------------------------------
Guam Life, Accident & Health
-------------------------------------------------------------------------------------------------------------------------------
Puerto Rico Life, Disability
-------------------------------------------------------------------------------------------------------------------------------
US Virgin Islands Life, Accident & Health
-------------------------------------------------------------------------------------------------------------------------------
British Virgin Life, Accident & Health
Islands
-------------------------------------------------------------------------------------------------------------------------------
Cayman Islands, Various Life, Annuities, Accident & Health
British West Indies
-------------------------------------------------------------------------------------------------------------------------------
Puerto Rico Life & Disability
-------------------------------------------------------------------------------------------------------------------------------
Panama License Was Cancelled By DOI 09/30/97
-------------------------------------------------------------------------------------------------------------------------------
Northern Mariana Disability & Life
Islands
-------------------------------------------------------------------------------------------------------------------------------
Anguilla Life, Accident & Health
--------------------------------------------------------------------------------------------------------------------------------
Department of All forms of insurance
Defense
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
EXHIBIT G
---------
SECTION 3.3 - NO VIOLATION
Various software licenses possessed by each of AA Life and Occidental require
notification to and consent from the vendor upon any change of control, which
may include a transfer fee.
With respect to each of Occidental and Pioneer Security, Section 500.405 of the
Michigan Insurance Code provides for the automatic revocation of the Michigan
Certificate of Authority of a foreign insurer upon a change of control unless
the insurer requalifies for a Certificate of Authority within 90 days following
the change of control.
15
<PAGE>
EXHIBIT H
---------
SECTION 3.7(D) - STATE OBJECTIONS
In a letter dated June 1999, the Florida Insurance Department stated that
Occidental did not meet the statutory capital requirements. As of the most
recent Financial Statements Occidental does now meet this requirement. No
further correspondence or requests have been received.
In a letter dated May 1999, the Kansas Insurance Department requested additional
information regarding the financial position of Occidental and stated that
Occidental may be required to make an additional security deposit. Occidental
has furnished the information requested. No further requests have been made by
the Kansas Insurance Department.
16
<PAGE>
EXHIBIT I
---------
SECTION 3.12 - CERTAIN AGREEMENTS
Debt Obligations:
- ----------------
$73,000,000 Note, dated August 31, 1994, made by Pioneer in favor of Seller, as
amended January 1, 1997; current outstanding balance: $48,184,538. As part of
this transaction this Note will be paid in full.
$63,700,809 Note, dated July 1, 1997, made by Pioneer in favor of Seller;
current outstanding balance of $60,150,961.
Contracts Involving Annual Payments in Excess of $200,000:
- ---------------------------------------------------------
Each of AA Life, Occidental and Pioneer utilize Tillinghast - Towers Perrin for
various consulting projects including appraisals, reinsurance reviews and due
diligence questions. There is no ongoing obligation to utilize the services of
Tillinghast - Towers Perrin, however, past fees paid have been in excess of
$200,000 annually for each of above.
The Insurance Companies utilize KPMG Peat Marwick LLP as its independent
auditors, the aggregate cost of which services exceed $200,000. There is no
ongoing obligation to utilize the services of KPMG Peat Marwick LLP, however,
past fees paid have been in excess of $200,000 annually for each of above.
The Insurance Companies contract with IBM Credit Corp. concerning certain
Mainframe Hardware/Software under a 36 month lease which expires September 30,
2002. Fees under the lease exceed $200,000 annually.
Employment Agreement, dated September 1, 1999, between AA Life and Lanny Peavy
Occidental pays PennCorp Financial Inc. (a non-affiliated company) a monthly fee
of $83,000.00 for data center/operating maintenance and support services. There
are substantial monetary penalties for early termination of the agreement.
Agreements with Non-Competition Provisions:
- -------------------------------------------
Pursuant to that certain Stock Purchase Agreement, dated December 31, 1998,
among GE Financial Assurance Holdings, Inc., Pacific Life and Accident Insurance
Company, for a period of five years from the Closing Date (as defined therein)
neither Occidental nor any of certain other affiliates may market and sale of
insurance products through agents utilized by Professional Insurance Corporation
as of the Closing Date (as defined therein).
17
<PAGE>
Other Material Contracts
- ------------------------
Renewal of Group Policies Agreement dated December 1, 1988, among Officers
Benefit Association, AA Life, Pioneer and Pioneer American, as extended until
December 1, 2000.
Pursuant to the Service and Administration Agreement between Occidental and
Peninsular Life Insurance Company, the administration of the Peninsular business
is being processed in consideration of the execution of the Assumption and
Coinsurance Agreements.
18
<PAGE>
EXHIBIT J
---------
SECTION 3.13(A) - EMPLOYEES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME TITLE EMPLOYEE NAME TITLE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
English, Delvernia Sr File Clerk
- -----------------------------------------------------------------------------------------------------------------------------------
Abney, Jennifer Systems Control Clerk Evans, Ryshekia W Underwriting Tech Asst
- -----------------------------------------------------------------------------------------------------------------------------------
Aiello, Gary E. AVP-Marketing Farris, Mary L. Mgr - Field Financing
- -----------------------------------------------------------------------------------------------------------------------------------
Fewell, Rex Correspondent
- -----------------------------------------------------------------------------------------------------------------------------------
Allen, Nick E Microcomputer Programmer Fleischhauer, Carolyn L. Compliance Analyst
- -----------------------------------------------------------------------------------------------------------------------------------
Alonzo, Beatrice Application Processor I Fore, Cynthia L Customer Service Spec I
- -----------------------------------------------------------------------------------------------------------------------------------
Armand, Mildred G Claims Assistant Forrest, Claire M Project Leader (Temporary Employee)
- -----------------------------------------------------------------------------------------------------------------------------------
Armstrong, Rhonda G. Receptionist Foster, Rachel D Mail Clerk I
- -----------------------------------------------------------------------------------------------------------------------------------
Auldridge, Charles W. Mgr - General Services Fulp, Karen S. Mgr - Premium Accounting
- -----------------------------------------------------------------------------------------------------------------------------------
Baker, Carol L. Sr Accounting Clerk Gamez, Nora C. Customer Service Spec I
- -----------------------------------------------------------------------------------------------------------------------------------
Bayer, John R. Maintenance Worker II Garcia, Michele Financial Accountant
- -----------------------------------------------------------------------------------------------------------------------------------
Benker, Debra J. Sr Accounting Clerk Gariepy, Patty A. Policy Service Specialist
- -----------------------------------------------------------------------------------------------------------------------------------
Bilnoski, Jannie Collection Clerk III
- -----------------------------------------------------------------------------------------------------------------------------------
Blanton, Michael J. Vice President-1 Gerik, Joann Administrative Assistant I
- -----------------------------------------------------------------------------------------------------------------------------------
Bone, Betsy B. Claims Analyst Goggin, Cary D. AVP & Dir. Actuary
- -----------------------------------------------------------------------------------------------------------------------------------
Gonzales, Carmen Application Processor I
- -----------------------------------------------------------------------------------------------------------------------------------
Brown, Ronald E Shipping/Receiving Clerk Gonzales, Pete Mgr - Computer Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Brown, Sherry L. Sr License & Contracting Clk Groholski, Susan M Policy Assembly Clerk I
- -----------------------------------------------------------------------------------------------------------------------------------
Buehrle, Sharon P. Claims Analyst Hall, Sherri G. Customer Serv Spec II
- -----------------------------------------------------------------------------------------------------------------------------------
Butler, Alicia D. Policy Assembly Clerk Hancock, Darren K. Assistant Manager-Prem Acctg
- -----------------------------------------------------------------------------------------------------------------------------------
Butler, Christina R Claims Analyst Hardy, Linda F Policy Assembly Clerk I
- -----------------------------------------------------------------------------------------------------------------------------------
Buzbee, Cynthia M Prog/Analyst II-Main Frame Herrera, Mary J Field Financing Analyst
- -----------------------------------------------------------------------------------------------------------------------------------
Callaway, William Mgr - Policy Issues Higgins, Mary J. Mgr - System Control
- -----------------------------------------------------------------------------------------------------------------------------------
Honey, Donna Mail Clerk I
- -----------------------------------------------------------------------------------------------------------------------------------
Carbajal, Eloisa Executive Assistant
- -----------------------------------------------------------------------------------------------------------------------------------
Carbajal, Henry Mgmt Trainee Horton, Cathy J. Systems Analyst
- -----------------------------------------------------------------------------------------------------------------------------------
Carter, Rita Admin Asst
- -----------------------------------------------------------------------------------------------------------------------------------
Casiano, Robert G Director-Mktg Sales-Occ James, Everett D. Prog/Analyst II-Main Frame
- -----------------------------------------------------------------------------------------------------------------------------------
Chapman, James H. Mgr - Microcomputer Janes, Don L. Programmer Trainee
- -----------------------------------------------------------------------------------------------------------------------------------
Clark, Lilly R. Policy Assembly Clerk I Jansing, Lana J Customer Service Spec I
- -----------------------------------------------------------------------------------------------------------------------------------
Clynch, Bob D. Mgr - Nb/Chief Underwriter Johnson, Lisa A Mgmt Trainee
- -----------------------------------------------------------------------------------------------------------------------------------
Cole, Seleena M. Actuarial Student Jones, Allen E. Sr Application Processor
- -----------------------------------------------------------------------------------------------------------------------------------
Coleman, Ted D. Programmer/Analyst I- Main Frame Kallus, Mary M. Systems Analyst
- -----------------------------------------------------------------------------------------------------------------------------------
Cross, Raymond Micro Computer Programmer I Kapavik, Gayland R. Computer Operator VI
- -----------------------------------------------------------------------------------------------------------------------------------
Csikos, Jimmie L. Sr Application Processor Keel, Clara J. Mgr - Actuary
- -----------------------------------------------------------------------------------------------------------------------------------
Curtis, Latonja D. Programmer Trainee Keenan, Shawna Application Processor I
- -----------------------------------------------------------------------------------------------------------------------------------
Daniel, Larissa L. Collection Clerk III King, Laverne R Customer Service Spec I
- -----------------------------------------------------------------------------------------------------------------------------------
Davy, Christine R Application Processor I Kolar, Tina L. Sr Collection Clk
- -----------------------------------------------------------------------------------------------------------------------------------
Degrate, Sheila P Application Processor I Kubacak, Sarah L. Tax Accountant
- -----------------------------------------------------------------------------------------------------------------------------------
Dewald, Joanna Typesetter Lamaak, Barbara J. Application Processor II
- -----------------------------------------------------------------------------------------------------------------------------------
Diaz, Jose Luis Computer Operator VI Laufenberg, Kathy L Artist
- -----------------------------------------------------------------------------------------------------------------------------------
19
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME TITLE EMPLOYEE NAME TITLE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dudley, Linda M. Mgr - Mktg Sales Admin Lawson, Jonathan P. Computer Operator VI
- -----------------------------------------------------------------------------------------------------------------------------------
Duffey, Tranquilla A Actuarial Receptionist Lea, Alfred S. Medical Director
- -----------------------------------------------------------------------------------------------------------------------------------
Duncan, Deianna L. AVP-Human Resources Lenart, Joyce C Collection Clerk V
- -----------------------------------------------------------------------------------------------------------------------------------
Dunlap, Joe W. Vice President-1 Linley, Chandra L Post Underwriting Clk I
- -----------------------------------------------------------------------------------------------------------------------------------
Duron, Misty R Post Underwriting Clerk Long, Julie J. Supv - Customer Service
- -----------------------------------------------------------------------------------------------------------------------------------
Eck, Joseph E. Systems Programmer Lowrey, Rebecca Cust. Serv. Spec. I
- -----------------------------------------------------------------------------------------------------------------------------------
Elias, Shelia K. General Services Technician Lowrimore, Jerry O. Mgr - Data Processing
- -----------------------------------------------------------------------------------------------------------------------------------
Emmons, Winfred S VP-Chief Actuary Lucky, Lucy L Correspondent
- -----------------------------------------------------------------------------------------------------------------------------------
Mann, Sonja D. Application Processor II
- -----------------------------------------------------------------------------------------------------------------------------------
20
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME TITLE EMPLOYEE NAME TITLE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Markwardt, Wendy Accounting Clerk III Roberts, Marjorie A. Mgr - Admin Mkt Services
- --------------------------------------------------------------------------------------------------------------------------------
Sancillo, Wanda L. Purchasing/Supply Coordinator
- --------------------------------------------------------------------------------------------------------------------------------
Marshall, Dana L. Field Financing Analyst Sanford, Danny S Mgmt Trainee
- --------------------------------------------------------------------------------------------------------------------------------
Matus, Carol A. Senior Underwriter Schaffer, Darla A. VP & Treasurer
- --------------------------------------------------------------------------------------------------------------------------------
McFadden, Leilani S Claims Analyst Schroeder, Margaret J. Field Financial Anlyst II
- --------------------------------------------------------------------------------------------------------------------------------
Meaders, Linda A. Collection Clerk IV Scott, Dorothy J Sr Policy Change Analyst
- --------------------------------------------------------------------------------------------------------------------------------
Metting, Darren Mgr - Data Processing Seale, Deanna L. Collection Clerk V
- --------------------------------------------------------------------------------------------------------------------------------
Meyer, Marianne Compliance Assistant
- --------------------------------------------------------------------------------------------------------------------------------
Mitchell, Bryan T. Press Operator III Sinkule, Eugenia M. Sr Accountant
- --------------------------------------------------------------------------------------------------------------------------------
Moore, Adam C. Correspondent I Sliva, Darren G. Director - Marketing Sales
- --------------------------------------------------------------------------------------------------------------------------------
Moore, Mendee Customer Service Spec I Smith, Lori A Policy Service Clerk
- --------------------------------------------------------------------------------------------------------------------------------
Morris, Vicky D. Staff Assistant Smith, Malisa A Collection Clerk III
- --------------------------------------------------------------------------------------------------------------------------------
Moses, Sabra A Collection Clerk III Smith, Marland B Programmer Analyst III
(Temporary)
- --------------------------------------------------------------------------------------------------------------------------------
Smith, Sherry D Systems Analyst
- --------------------------------------------------------------------------------------------------------------------------------
Navejas, Esmeralda V Employment Recruiter Soukup, Francine L Mail Clerk I
- --------------------------------------------------------------------------------------------------------------------------------
Neal, Sarah A Commission Accounting Clerk Soward, Michael B Systems Programmer I
- --------------------------------------------------------------------------------------------------------------------------------
Necessary, Stephanie Application Processor I Sparks, Kay M. Manager - Claims
- --------------------------------------------------------------------------------------------------------------------------------
Nelson, Donna K. Supv - Correspondence Standerfer, Patsy Mgmt Trainee
- --------------------------------------------------------------------------------------------------------------------------------
Steensen, Stacey Admin Asst
- --------------------------------------------------------------------------------------------------------------------------------
Nemec, Anniesa L Correspondent Stone, Linda J Exec Asst/Asst Co Sec
- --------------------------------------------------------------------------------------------------------------------------------
Nemec, Shana K. Application Processor I
- --------------------------------------------------------------------------------------------------------------------------------
Newsom, Lea Ann Claims Analyst Swanton, Shirley L. Sr Administrative Asst
- --------------------------------------------------------------------------------------------------------------------------------
Norris, Donna M Policy Assembly Clerk I Tamez Jr., Pete Microcomputer Programmer
- --------------------------------------------------------------------------------------------------------------------------------
Tamez, Cristen Supervisor-General Accounting
- --------------------------------------------------------------------------------------------------------------------------------
Noyola, Irma L. License And Contracting Clerk Tennie, Johnnie U Accounting Clerk I
- --------------------------------------------------------------------------------------------------------------------------------
Olvera, Deanna Collection Clerk III Terry, Melissa N Collection Clerk III
- --------------------------------------------------------------------------------------------------------------------------------
Tharp, Francis Collection Clerk III
- --------------------------------------------------------------------------------------------------------------------------------
Thompson, Gail L Collection Clerk III
- --------------------------------------------------------------------------------------------------------------------------------
Osburn, Patsy R Collection Clerk III Tristan, Kristine Policy Assembly Clerk I
- --------------------------------------------------------------------------------------------------------------------------------
Paul, Robert M Mgmt Trainee Turner, Robert L Security Guard
- --------------------------------------------------------------------------------------------------------------------------------
Peavy, Shelby L. President/CEO Turner, Curtis D. Night Security Guard III
- --------------------------------------------------------------------------------------------------------------------------------
Pelt, Thomas E. Bindery Specialist Underwood, Donald J. Vice President-2 Mktg.
- --------------------------------------------------------------------------------------------------------------------------------
Persilver, Teresa K. Underwriter II Underwood, Sonya R Mail Clerk I
- --------------------------------------------------------------------------------------------------------------------------------
Phillips, Hillary S. Underwriting Tech Asst Vigil, Jesse Sr Maintenance
- --------------------------------------------------------------------------------------------------------------------------------
Phillips, Louise H. Mgr - Policy Service Vrana, Paula D Reinsurance Clerk
- --------------------------------------------------------------------------------------------------------------------------------
Plemons, Virginia A. Customer Service Spec I Vrana, Ralph D. Sr Computer Operator
- --------------------------------------------------------------------------------------------------------------------------------
Politza, Suzanne L Sr License & Contracting Clk Waldrop, Barbara J. Claims Processor
- --------------------------------------------------------------------------------------------------------------------------------
Poulin, Betty A. Computer Operator III
- --------------------------------------------------------------------------------------------------------------------------------
Proctor, Charles L. Unit Leader - Supply Watson, Brenda K File Clerk I
- --------------------------------------------------------------------------------------------------------------------------------
Pursley, Esther I Mail Clerk I Watson, Juanita Administrative Assistant
- --------------------------------------------------------------------------------------------------------------------------------
Quiram, Helen R. Real Estate Coordinator Watson, Shilandra D. Field Financing Analyst I
- --------------------------------------------------------------------------------------------------------------------------------
Rajkowski, Ashley N Collection Clerk III Weaver, Richard D AVP-Systems Adm
- --------------------------------------------------------------------------------------------------------------------------------
Ramsey, Jimmie R. Night Security Guard I Webb, Joseph A. Mgr - Building
- --------------------------------------------------------------------------------------------------------------------------------
Ramsey, Richard J Mgmt Trainee Welch, Davie L Sr Policy Change Analyst
- --------------------------------------------------------------------------------------------------------------------------------
21
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
EMPLOYEE NAME TITLE EMPLOYEE NAME TITLE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rawls, Laurie D Customer Service Spec I Williams, Arlene L. Sr.Commission Accounting Clerk
- --------------------------------------------------------------------------------------------------------------------------------
Wilson, Dwight Programmer Analyst II
- --------------------------------------------------------------------------------------------------------------------------------
Reams, Charlena K Administrative Assistant Wilson, Jonathan S. Maintenance Worker II
- --------------------------------------------------------------------------------------------------------------------------------
Reed, Patsy R. Customer Service Spec I Wood, Graling R. Press Operator I
- --------------------------------------------------------------------------------------------------------------------------------
Renfroe, Elizabeth K. Sr Collection Clk Wyatt, Joy E. Sr Policy Assembler
- --------------------------------------------------------------------------------------------------------------------------------
Reyes, Elda L Collection Clerk III
- --------------------------------------------------------------------------------------------------------------------------------
Richardson, Nelson D. Press Operator I
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
EXHIBIT K
---------
SECTION 3.13 (B) - BENEFIT PLANS
Neither Seller nor any Target Company maintains a plan under Title IV of ERISA.
Benefit Plans:
- -------------
Southwestern Financial Services Corporation Group Welfare Plans:
Group Term Life Insurance Plan
Dependent Life Insurance
Accidental Death and Dismemberment Insurance
Long Term Disability Plan
Business Travel Accident Plan (different for Dallas and
Non-Dallas employees)
Group Medical - AA Agents (Mutual of Omaha)
Temporary Disability Policy (salary continuation)
Voluntary Group Term Life Insurance
Vision Care Plan - An AA Stand Alone as of 01-01-2000
Vacation
Severance Policy/Guidelines
Mutual of Omaha Administrative Services Agreement with Southwestern Financial
Services for life insurance, accidental death and dismemberment insurance and
long term disability insurance
1992 PennCorp Financial Group, Inc. Stock Option Plan; 1992 Senior Management
Warrant Award Program and Amendment 1; and 1996 Stock Award and Stock Option
Plan and Amendments 1 and 2
Management Incentive Bonus Plan
Group Pre-Tax Benefit Plan
Pre-tax premiums
Medical Reimbursement Account
Dependent Care Reimbursement Account
PennCorp / American Amicable Blue Cross Blue Shield of Texas Medical and Dental
Plans
23
<PAGE>
Employee Assistance Plan between Southwestern Financial Services and Plan 21
Penncorp Financial Group, Inc. Retirement and Savings Plan
Other policies and programs as defined in the Employee Manuals for Waco
employees
24
<PAGE>
EXHIBIT L
---------
SECTION 3.13 (G) - BENEFIT PLANS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
BENEFIT CONTINUATION PROVISIONS
--------------------------------------------------------------------------------------------------------------
NO. OF MONTHS AFTER
EMPLOYMENT THAT
BENEFITS CONTINUE
NAME TITLE PAID BY
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lanny Peavy President 24* AA Life
--------------------------------------------------------------------------------------------------------------
Michael J. Blanton Vice President 12 AA Life
--------------------------------------------------------------------------------------------------------------
Joe W. Dunlap Vice President 12 AA Life
--------------------------------------------------------------------------------------------------------------
Win Emmons VP & Chief Actuary 12 AA Life
--------------------------------------------------------------------------------------------------------------
Donald J. Underwood Vice President 12 AA Life
--------------------------------------------------------------------------------------------------------------
Gary Aiello Asst. VP - Marketing 12 AA Life
--------------------------------------------------------------------------------------------------------------
Cary D. Goggin Asst. VP & Actuary 12 AA Life
--------------------------------------------------------------------------------------------------------------
Darla A. Schaffer VP & Treasurer 12 AA Life
--------------------------------------------------------------------------------------------------------------
Richard Weaver Asst VP Systems Administration 12 AA Life
--------------------------------------------------------------------------------------------------------------
DeiAnna L. Duncan Asst. VP & Building Administrator 12 AA Life
--------------------------------------------------------------------------------------------------------------
</TABLE>
* Benefit continuation could extend beyond 24 months. Please refer to
the provisions contained in Mr. Peavy's employment agreement.
Listing of Retiree Benefit Plans
- --------------------------------
PennCorp Financial Group Retiree Benefit provides post retirement life and
medical insurance to Occidental Retired Employees and American Amicable Retired
Employees.
Disability Benefits
- -------------------
Three former employees who are disabled, Cheryl Mossburg, Earlene Campbell and
Phyllis DeRosier, are provided group term life, medical and dental benefits for
as long as they remain disabled.
25
<PAGE>
EXHIBIT M
---------
SECTION 6.1(F) INTERCOMPANY INDEBTEDNESS AND TRANSACTIONS; BROKERS AND FINDERS
FEE.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
COMPANY VENDOR DESCRIPTION PAYMENTS TERMINATION CANCELLATION FEE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Knightbridge Oaktree Investment Management 1/2 of 1% on an 30 day prior written N/A
Consultants Capital Agreement annualized basis of the notice or such shorter
Management market value of all period as may be
invested assets mutually agreed.
- -----------------------------------------------------------------------------------------------------------------------------------
Knightbridge Hyperion Investment Consulting First $400 million of 60 day prior written N/A
Consultants Capital Agreement assets: 25 basis notice
Management points; over $400
million of assets: 22
basis points
- -----------------------------------------------------------------------------------------------------------------------------------
Knightbridge Blackrock Investment Management First $1 Billion: 30 day prior written N/A
Consultants Inc. Agreement 10:25 bps; Next $200 notice
Million: 7.00 bps; Over
$1200 Million: 4.50 bps
- -----------------------------------------------------------------------------------------------------------------------------------
PFG Emerald Investment Consulting quarterly fee of .037% 60 day prior written N/A
Capital Agreement of the total statutory notice
Group, Ltd. book value of the assets
- -----------------------------------------------------------------------------------------------------------------------------------
SWFC AT&T T-1 and Long Distance T-l's $800.00 mo. Transfer to own N/A
Services LD-$7,000+ Mo. plan
Depending on
Usage
- -----------------------------------------------------------------------------------------------------------------------------------
PFG 401(k) Plan Employee 40lk and $.50 to $1.00 matching Agreed transfer by N/A
Fidelity Profit Sharing up to 6% PFG to stand alone AA
Investments of Employee Plan with Fidelity
Contribution. Investments
Profit
Sharing-determined by
Board (0-3%)
Adm. Fees
- -----------------------------------------------------------------------------------------------------------------------------------
PFG Sunguard/ABC
General
Ledger
- -----------------------------------------------------------------------------------------------------------------------------------
SWFC Plan 21 EAP $1.75 per employee Trnsf. Own plan N/A
Employee/Retiree Group Life, Dep Life Varies monthly
- -----------------------------------------------------------------------------------------------------------------------------------
SWFC Group Ins. Vol. Life, AD&D, LTD, 12/99 = $17,741 mo. Carve out emps/rets N/A
Coverages Retiree Medicare Sup., To own plan
Mutual of Emp. Medical (3 emps.)
Omaha
- -----------------------------------------------------------------------------------------------------------------------------------
PFG Insurance WorkersComp, Prop & Gen 1999-2000 premiums paid Transfer to own N/A
Coverages Liab, Comm.Umbrella/Excess, to date: $112,547 Plan coverages
Crime simplified, Emp.
Practices, Mort E&O
Bank,D&O, Bus.Auto,.
- -----------------------------------------------------------------------------------------------------------------------------------
1
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
COMPANY VENDOR DESCRIPTION PAYMENTS TERMINATION CANCELLATION FEE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SWFC Mutual of Medical plan Varies monthly- Transfer to own plan N/A
Omaha - 12/99 = 891 mo.
Agent
Insurance
Agreement
- -----------------------------------------------------------------------------------------------------------------------------------
SFSC Ceridian- Payroll processing Varies monthly
Payroll 1999 averaged
Servicing $1,840 mo.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
EXHIBIT N
---------
ANNEX G
RESTRUCTURING TRANSACTIONS
Prior to the Closing Date, Seller and its Affiliates will effect the following
transactions:
1. Pioneer will transfer Security Life as a dividend to Seller as a
surplus note repayment (including interest) of approximately $50
million and a dividend of approximately $55 million.
2. Seller will transfer Security Life as a dividend to PennCorp.
3. Pioneer will transfer Occidental as satisfaction in full for that
certain surplus debenture made by Pioneer on July 1, 1997, in the
original principal amount of $63,700,809 with the excess value of
Occidental of approximately $25 million being transferred to Seller
in the form of a dividend.
EXHIBIT 10.2
------------
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is entered into
as of the 28th day of January, 2000 (the "Effective Date"), by and between
PENNCORP FINANCIAL GROUP, INC., a Delaware corporation (the "Company"), and
Keith A. Maib (the "Executive").
WHEREAS, the Company has entered into a Stock Purchase Agreement dated
January 7, 2000 with Reassure America Life Insurance Company and a separate
Stock Purchase Agreement dated January 8, 2000 with Pioneer-Occidental Holding
Company;
WHEREAS, the Company intends to file a petition under Chapter 11 of the
Bankruptcy Code and to liquidate; and
WHEREAS, the Company desires to ensure the availability of the
Executive's services to complete the sales in accordance with the Stock Purchase
Agreements and to manage the Company's affairs during its bankruptcy proceeding
and its liquidation, and the Executive is willing to provide such services;
IN CONSIDERATION of the mutual covenants and agreements hereinafter set
forth, Company and Executive agree as follows:
1. Agreement Term.
--------------
The term of this Agreement shall be the period commencing on the
Effective Date and ending on the earliest of (i) December 31, 2000, (ii)
completion of the Chapter 11 bankruptcy proceeding of the Company, and (iii) the
termination date determined by the Board of Directors of the Company (the
"Agreement Term").
2. Employment.
----------
(a) Employment by the Company. Executive agrees to be
employed by Company for the Agreement Term upon the
terms and subject to the conditions set forth in this
Agreement. Throughout the Agreement Term, Executive
shall serve as President and the Chief Executive
Officer of Company and be responsible for the general
management of the operations of Company, and serve as
Chairman of Company's Operating Committee. Executive
shall be elected or appointed as a member of the
Board of Directors of Company ("Board") and shall
continue to serve as such for the balance of the
Agreement Term.
(b) Performance of Duties. Throughout the Agreement Term,
Executive shall faithfully and diligently perform
such duties (i) as are consistent with his position
as the President and the Chief Executive Officer of
Company and as Chairman of Company's Operating
Committee, and (ii) as the Executive
<PAGE>
Committee of the Board (or, if the Executive
Committee does not exist, the liquidating Trustee)
may reasonably and in good faith request.
(c) Place of Performance. During the Agreement Term,
Executive shall be based at Company's executive
offices in Dallas, Texas or at such other location
within an 18-mile radius of Dallas, Texas. Company
shall not request or require Executive to relocate
his principal place of employment outside of an
18-mile radius of Dallas, Texas.
3. Compensation and Benefits.
-------------------------
(a) Base Salary. Company agrees to pay to Executive a
base salary at the annual rate of $250,000 ("Base
Salary"), payable in installments consistent with the
Company's payroll practices.
(b) Performance Bonus. Executive shall have a performance
bonus opportunity of up to, but not exceeding,
$300,000. The amount of bonus to which Executive is
entitled shall be determined solely at the discretion
of the Board of Directors of the Company, and such
bonus, if any, shall be payable upon termination of
Executive's employment under this Agreement (except
as set forth in Section 8(d) of this Agreement).
(c) Receipt and Escrow of 1999 Bonus-Related Amount.
Executive acknowledges receipt on the Effective Date
of $232,464.96 (the "Bonus- Related Amount"), which
is the sum of the maximum amount of the bonus payable
to Executive for achievement of budgeted financial
results of operations for 1999 (the "1999 Operations
Bonus") plus certain related amounts, and agrees that
such Bonus-Related Amount is being deposited in
escrow on his behalf with Gardere & Wynne, L.L.P., as
escrow agent (the "Escrow") to secure his obligation
to repay to Company such portion, if any, of the
Bonus-Related Amount to which he is not entitled
after his 1999 Operations Bonus is finally determined
by Company. The Bonus-Related Amount to which
Executive is entitled (which will equal the amount
deposited into the Escrow if 110% of statutory
budgeted performance was achieved in 1999 and
$103,697.37 if 100% of statutory budgeted performance
was achieved in 1999) shall be released from the
Escrow and paid to Executive no later than the filing
of Company's statutory annual statement with the
State of Texas.
4. Employee Benefit Programs.
-------------------------
During the Agreement Term, Executive shall be entitled to participate
in all employee pension and welfare benefit plans and programs made available to
the senior-level executives of Company or to its employees generally, as such
plans or programs may be in effect from time to
EXECUTIVE EMPLOYMENT AGREEMENT - Page 2
- ------------------------------
<PAGE>
time, including, without limitation, pension, profit sharing, savings and other
retirement plans or programs, medical, dental, hospitalization, short-term and
long-term disability and life insurance plans, accidental death and
dismemberment protection, travel accident insurance, and any plans that
supplement the above-listed types of plans or programs, whether funded or
unfunded, but excluding any severance benefit plan or program. Company shall, to
the extent possible without penalty for a failure to provide similar treatment
to other employees of Company, waive the waiting or grace period applicable
under any such plan or program before Executive's participation therein can
begin.
5. Reimbursement of Business and Other Expenses.
--------------------------------------------
Executive is authorized to incur reasonable travel and business
expenses that are consistent with his position and incurred in carrying out his
duties and responsibilities under this Agreement, and Company shall promptly
reimburse him for all such travel and business expenses incurred in connection
with carrying out the business of the Company, subject to reasonable
documentation in accordance with the reasonable policies of Company.
6. Perquisites.
-----------
During the Agreement Term, Executive shall be entitled to participate
in all of Company's executive fringe benefits (other than financial consulting
benefits) in accordance with the terms and conditions of such arrangements as
are in effect from time to time for the senior-level executives of Company.
Executive is also entitled to reimbursement from Company for, or Company's
payment of, all reasonable attorneys' and other professional fees and expenses
incurred by or on behalf of Executive relating in any manner to the negotiation
and preparation of this Agreement, including (without limitation) the conditions
to Executive's employment relationship with Company under this Agreement.
7. Vacation.
--------
Executive shall be entitled to six weeks' paid vacation each calendar
year, which vacation shall be earned on a pro-rata basis for each day during the
calendar year that Executive is employed by Company. Company shall pay Executive
any earned and unused vacation at the end of the Agreement Term or, if earlier,
upon the termination of Executive's employment.
8. Termination of Employment.
-------------------------
(a) Company may terminate Executive's employment with
Company, at any time for any (or no) reason, prior to
termination of employment by the expiration of the
Agreement Term under Section 1(i) or Section 1(ii) of
this Agreement, upon at least 30 days' written notice
to Executive. Such termination shall be effective
upon the expiration of the notice period (of at least
30 days) specified in the notice of termination.
EXECUTIVE EMPLOYMENT AGREEMENT - Page 3
- ------------------------------
<PAGE>
(b) In light of his importance to Company during the
Agreement Term, Executive is not entitled to
voluntarily terminate his employment with Company at
any time before termination by the expiration of the
Agreement Term under Section 1 of this Agreement. In
addition, Executive and Company acknowledge that the
calculation of the damages to Company as a result of
Executive's voluntary termination of his employment
under this Agreement would be difficult, expensive
and time-consuming, and accordingly, the parties have
agreed to a liquidated damage amount due Company in
the event of an Improper Executive Termination (as
defined below). Therefore, if Executive terminates
his employment hereunder before termination by the
expiration of the Agreement Term, other than by death
or because of Disability (an "Improper Executive
Termination"), then Executive shall pay Company, as
liquidated damages (and not as a penalty), $500,000
in cash within ten days after the effective date of
such Improper Executive Termination. In this Section
8(b), "Disability" means Executive's inability,
because of any mental or physical illness, to perform
his duties under this Agreement that extends, or is
reasonably expected to extend, for at least 30
consecutive days.
(c) Upon any termination of Executive's employment
hereunder, Executive shall perform, for up to six
months following such date of termination and without
additional compensation or benefits, such consulting
or transition services consistent with his
experience, expertise and prior services to the
Company as the Board of Directors of the Company (or,
if the Board of Directors does not exist, the
liquidating Trustee) may reasonably request. Such
services by Executive shall be rendered at such times
and in such manner as are mutually satisfactory to
the Company and Executive, without material
interference with Executive's employment or other
business activities during such period.
(d) Upon any termination of Executive's employment
hereunder, Company shall pay to Executive, within ten
days of the effective date of such termination, (i)
any Base Salary and any earned and unused vacation,
in each case accrued through the date of such
termination, and (ii) any expenses that have not been
reimbursed in accordance with Section 5 herein. Also,
upon any termination other than an Improper Executive
Termination, (A) Company shall pay to Executive,
within ten days of the effective date of such
termination, any bonus awarded to Executive in
accordance with Section 3(b) herein, and (B) Company
shall cause the release from the Escrow of all or
that portion of the Bonus-Related Amount to which
Executive is entitled under Section 3(c) herein, if
not already released and paid to Executive (but if
already released and paid to Executive, shall not be
recoverable by the Company).
EXECUTIVE EMPLOYMENT AGREEMENT - Page 4
- ------------------------------
<PAGE>
(e) In the event of any termination of Executive's
employment hereunder, Executive shall be under no
obligation to seek other employment, and there shall
be no offset against amounts due to Executive under
this Agreement on account of any remuneration
attributable to any subsequent employment (including,
without limitation, any self-employment) that he may
obtain.
(f) Executive and his eligible dependents shall be
entitled, for a period of three (3) years following
the date of any termination of Executive's employment
hereunder, to continued coverage, at the cost of the
Company, under the Company's group health, dental and
life insurance plans as in effect from time to time
(but not any other welfare benefit plans or any
retirement plans); provided, that coverage under any
particular benefit plan shall expire with respect to
the period after Executive becomes covered under
another employer's plan providing for a similar type
of benefit. In the event the Company is unable to
provide such coverage on account of any limitations
under the terms of any applicable contract with an
insurance carrier or third- party administrator, the
Company shall pay Executive an amount equal to the
cost of such coverage.
9. Confidentiality; Assignment of Rights.
-------------------------------------
(a) During the Agreement Term and thereafter, Executive
shall not disclose to anyone or make use of any trade
secret or proprietary or confidential information of
Company, including such trade secret or proprietary
or confidential information of any customer or other
entity to which Company owes an obligation not to
disclose such information, which he acquires during
the Agreement Term, including but not limited to
records kept in the ordinary course of business,
except (i) as such disclosure or use may be required
or appropriate in connection with his work as an
employee of Company or (ii) when required to do so by
a court of law, by any governmental agency or
authority having supervisory authority over the
business of Company or by any governmental agency or
authority or administrative or legislative body
(including a committee thereof) with apparent
jurisdiction to order him to divulge, disclose or
make accessible such information.
(b) Executive hereby sells, assigns and transfers to
Company all of his right, title and interest in and
to all inventions, discoveries, improvements and
copyrightable subject matter (the "Rights") which
during his employment by Company are made or
conceived by him, alone or with others and which are
within or arise out of any general field of Company's
business or arise out of any work he performs or
information he receives regarding the business of
Company while employed by Company. During his
employment by Company, Executive shall fully disclose
to Company as promptly as available all information
known or possessed by him concerning the rights
referred to
EXECUTIVE EMPLOYMENT AGREEMENT - Page 5
- ------------------------------
<PAGE>
in the preceding sentence, and upon request by
Company and without any further remuneration in any
form to him by Company, but at the expense of
Company, execute all applications for patents and for
copyright registration, assignments thereof and other
instruments and do all things which Company may deem
necessary to vest and maintain in it the entire
right, title and interest in and to all such Rights.
10. Nonsolicitation.
---------------
(a) Executive covenants and agrees that he shall not
directly or indirectly solicit Company's or any of
its subsidiaries' (i) employees during the 18-month
period following the date of the termination of his
employment by Company hereunder and (ii) agents,
brokers and/or policyholders during the Agreement
Term.
(b) The parties acknowledge that in the event of a breach
of Section 10(a) above, Company shall not have an
adequate remedy at law. Accordingly, in the event of
any breach of Section 10(a) above, Company shall be
entitled to such equitable and injunctive relief as
may be available to restrain Executive and any
business, firm, partnership, individual, corporation
or entity participating in the breach from the
violation of the provisions of Section 10(a) above.
Nothing in this Agreement shall be construed as
prohibiting Company from pursuing any other remedies
available at law or in equity for breach of Section
10(a) above, including the recovery of damages.
11. Indemnification.
---------------
(a) Company agrees that if Executive is or becomes a
party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative
or investigative and whether brought by or in the
right of the Company or otherwise ("Proceeding"), by
reason of the fact that (whether before or after the
Effective Date) he is or was a director, officer or
employee of Company or is or was serving at the
request of Company as a director, officer, member,
employee or agent of another corporation,
partnership, joint venture, trust or other
enterprise, including (without limitation) service
with respect to employee benefit plans, whether or
not the basis of such Proceeding is Executive's
alleged action in an official capacity while serving
as a director, officer, member, employee or agent,
Executive shall be indemnified and held harmless by
Company to the fullest extent legally permitted or
authorized by Company's certificate or articles of
incorporation or bylaws (or other applicable
governing documents) or resolutions of the Board (or
other applicable governing body) or the stockholders
of Company or, if greater, by the laws of the State
of Delaware or any other applicable state of
organization
EXECUTIVE EMPLOYMENT AGREEMENT - Page 6
- ------------------------------
<PAGE>
or formation, against all cost, expense, liability
and loss (including, without limitation, attorneys,
fees, judgments, costs of appeal, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by
Executive in connection therewith, and such
indemnification shall continue as to Executive even
if he has ceased to be a director, member, employee
or agent of Company or other entity and shall inure
to the benefit of Executive's heirs, executors and
administrators. In this Section 11, (i) each
reference to "Company" (other than for the purpose of
any notice) shall include, without limitation, all
entities that are subsidiaries and affiliates of
Company, and (ii) all obligations of Company shall be
joint and several as to all entities included in such
definition of "Company." Company shall pay or provide
such indemnification to Executive in connection with
a Proceeding within 60 days after written request by
Executive for that indemnification. During that
60-day period, Executive shall have an opportunity to
be heard and to present evidence in connection with
the consideration by the board of directors,
independent legal counsel, or stockholders, as the
case may be, of any findings required by applicable
law in connection with that indemnification request.
Company shall also advance to Executive all
reasonable costs and expenses incurred by him
(including, without limitation, all reasonable fees
and costs of counsel selected by Executive, and all
other indemnifiable liabilities covered by this
paragraph (a)) in connection with a Proceeding within
30 days after written request by Executive for such
advance. Such request shall include an undertaking by
Executive to repay the amount of such advance if it
shall ultimately be determined that he is not
entitled to be indemnified against such costs and
expenses. In the event Company does not properly
indemnify or advance expenses to Executive in
accordance with the terms of this paragraph (a)
(including, without limitation, the time period set
forth above), Executive shall be entitled to bring an
action or proceeding against Company in any state or
federal court in Dallas County, Texas, in accordance
with Section 19 hereof, or before a panel of
arbitrators in accordance with Section 20 hereof, to
enforce Company's indemnification or
expense-advancement obligations, and (in either case)
Executive shall be reimbursed by Company for the
reasonable costs and expenses (including, without
limitation, reasonable attorneys fees and costs) of
any successful enforcement of Company's
indemnification or expense-advancement obligations.
(b) Neither the failure of Company (including, without
limitation, its board of directors, independent legal
counsel or stockholders) to have made any
determination that indemnification of Executive is
proper because he has met the applicable standard of
conduct, nor a determination by Company (including,
without limitation, its board of directors,
independent legal counsel or stockholders) that
Executive has not met such applicable standard of
conduct, shall create a presumption that Executive
has not met the
EXECUTIVE EMPLOYMENT AGREEMENT - Page 7
- ------------------------------
<PAGE>
applicable standard of conduct or shall be a defense
to any action or proceeding to enforce Company's
indemnification or expense-advancement obligations.
Company shall have the burden of proof in
establishing that Executive has not met the
applicable standard of conduct. The termination of
any Proceeding by judgment, court order, settlement,
or conviction, or upon a plea of nolo contenders or
its equivalent, shall not, of itself, create a
presumption that Executive did not meet the
applicable standard of conduct. Where Executive is
entitled to indemnification under this Section 11 for
a portion of the indemnifiable liabilities described
in paragraph (a) of this Section 11, but not for the
total amount of liabilities of that kind, Company
shall nevertheless indemnify Executive for such
portion of the indemnifiable liabilities to which
Executive is entitled.
(c) Executive's rights provided in this Section 11 shall
not be exclusive of any other rights of
indemnification or advancement of expenses (or any
similar rights) that Executive may have against
Company or under any liability insurance covering
Executive.
(d) Company agrees to continue and maintain one or more
directors, and officers, liability insurance policies
that cover Executive (with reputable and financially
sound insurers) at a level that is commercially
reasonable (in light of Company's business and the
risks of litigation or claims) and not less than the
level of coverage provided as of the Effective Date,
and otherwise to the fullest extent Company provides
such coverage for any of its other executive
officers.
(e) Without limiting the generality of Section 17 hereof,
the rights of indemnity and advancement of expenses
in favor of Executive in this Section 11 shall
continue and survive any expiration or termination of
this Agreement or Executive's ceasing to be a
director, officer, or employee of Company.
12. Assignability; Binding Nature.
-----------------------------
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors, heirs (in the case of Executive) and
permitted assigns. No rights or obligations of Company under this Agreement may
be assigned or transferred by Company (including, without limitation, by merger,
consolidation, or other operation of law). No rights or obligations of Executive
under this Agreement may be assigned or transferred by Executive other than his
rights to compensation and benefits, which may be transferred only by will or
operation of law, except as provided in Section 18 below.
13. Representation.
--------------
EXECUTIVE EMPLOYMENT AGREEMENT - Page 8
- ------------------------------
<PAGE>
Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement between it and
any other person, firm or organization. Executive represents that he knows of no
agreement between him and any other person, firm or organization that would be
violated by the performance of his obligations under this Agreement.
14. Entire Agreement.
----------------
This Agreement contains the entire understanding and agreement between
the parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and undertakings, whether
written or oral, between the parties with respect thereto; except that nothing
in this Agreement impairs or otherwise adversely affects any of Executive's
rights or Company's obligations under any other agreement or document executed
by Company and Executive contemporeously or concurrently herewith.
15. Amendment or Waiver.
-------------------
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by Executive and an authorized officer of
Company (other than Executive). No waiver by either party of any breach by the
other party of any condition or provision contained in this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same or any prior or subsequent time.
Any waiver must be in writing and signed by Executive or an authorized officer
of Company (other than Executive), as the case may be.
16. Severability.
------------
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
17. Survivorship.
------------
The respective rights and obligations of the parties hereunder shall
survive any termination of the Executive's employment, including (without
limitation) upon expiration of the Agreement Term, to the extent necessary to
the intended preservation of such rights and obligations.
18. Beneficiaries/References.
------------------------
Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following Executive's death or
incompetence by giving Company written notice thereof. In the event of
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to
EXECUTIVE EMPLOYMENT AGREEMENT - Page 9
- ------------------------------
<PAGE>
Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.
19. Governing Law/Jurisdiction.
--------------------------
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Texas without reference to principles of conflict of
laws. Jurisdiction and venue of any action or proceeding relating to this
Agreement shall be exclusively in state or federal courts in Dallas County,
Texas.
20. Resolution of Disputes.
----------------------
Any disputes arising under or in connection with this Agreement (other
than injunctive or equitable relief sought to enforce Sections 9 or 10 hereof,
or any enforcement of Executive's rights under Section 11, which may (if
Executive so elects) be brought in any court having jurisdiction in accordance
with this Agreement) shall, at the election of Executive or Company, be resolved
by binding arbitration in accordance with the following terms and procedures:
(a) Arbitration of Claims. Company and Executive agree to
settle by arbitration any dispute or controversy
arising in connection with this Agreement, whether or
not such dispute involves a plan subject to the
Employee Retirement Income Security of 1974, as
amended ("ERISA"). Such arbitration shall be
conducted on an expedited basis in accordance with
the National Rules for the Resolution of Employment
Disputes of the American Arbitration Association,
sitting in Dallas, Texas. The award of the
arbitrators shall be final and nonappealable, the
judgment may be entered on the award of the
arbitrators in any court having proper jurisdiction.
All expenses of such arbitration shall be borne by
the Company in accordance with subsection (b).
(b) Payment of Legal Fees and Costs. The Company agrees
to pay as incurred, to the full extent permitted by
law, all legal fees and expenses which Executive may
reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company,
Executive or others of any action taken pursuant to
the terms of this Agreement, or of the validity or
enforceablity of, or liability under, any provision
of this Agreement, or any guarantee of performance
thereof (including, without limitation, as a result
of any contest by Executive about the amount of
payment pursuant to this Agreement), plus in each
case interest on any delayed payment at the
applicable federal rate provided for in Section 7872
(f) (2) (A) of the Code.
21. Notices.
-------
EXECUTIVE EMPLOYMENT AGREEMENT - Page 10
- ------------------------------
<PAGE>
Any notice given to a party shall be in writing and shall be deemed to
have been given when delivered personally or by courier, or upon receipt if sent
by certified or registered mail, postage prepaid, return receipt requested, duly
addressed to the party concerned at the address indicated below or to such
changed address as such party may subsequently give such notice of:
If to Company: PennCorp Financial Group, Inc.
717 North Harwood, Suite 2401
Dallas, Texas 75201
Attention: Chief Executive Officer
If to Executive: Keith A. Maib
2513 Beacon Crest Drive
Plano, Texas 75093
22. Headings.
--------
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
23. Counterparts.
------------
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement to be
effective as of the Effective Date.
PENNCORP FINANCIAL GROUP, INC.
By: /s/ David C. Smith
Its: Chairman of the Board
/s/ Keith A. Maib
------------------
KEITH A . MAIB
EXECUTIVE EMPLOYMENT AGREEMENT - Page 11
- ------------------------------
EXHIBIT 10.3
------------
AGREEMENT
---------
This Agreement is entered into between PennCorp Financial Group, Inc.,
a Delaware corporation (the "Company"), and Keith A. Maib (the "Executive"),
effective as of January 28, 2000 (the "Effective Date").
W I T N E S S E T H
-------------------
WHEREAS, the Company is a publicly held holding company with its
principal place of business in Dallas, Texas;
WHEREAS, the Executive is the senior operating officer of the Company
and is employed pursuant to (i) an Executive Employment Agreement dated July 1,
1998 (the "Employment Agreement"), and (ii) an Executive Retention Agreement
dated July 1, 1998 (the "Retention Agreement") (collectively, the "Employment
Contracts").
WHEREAS, Section 8(b) of the Employment Agreement provides, in relevant
part, as follows:
(b) If Executive terminates his employment with Company for
Good Reason, or if Company terminates Executive's employment with
Company without Cause, Executive shall be entitled to any payments and
benefits provided pursuant to the terms of the Retention Agreement in
addition to (but without duplication) any amount to be paid or provided
to Executive under the terms of this Agreement.
WHEREAS, the Company has entered into (i) a Stock Purchase Agreement
dated January 7, 2000, in which the Company has agreed to sell Southwestern Life
Insurance Company and Security Life and Trust Insurance Company to Reassure
America Life Insurance Company, and (ii) a Stock Purchase Agreement dated
January 8, 2000, with Pioneer-Occidental Holding Company, in which the Company
has agreed to sell American-Amicable Life Insurance Company of Texas, Pioneer
Security Life Insurance Company, Occidental Life Insurance Company of North
Carolina, and Pioneer American Insurance Company (collectively, the "Sales
Agreements");
WHEREAS, the Executive is entitled to submit his resignation upon the
occurrence of a "Change of Control" which results in "Good Reason," both as
defined in the Employment Contracts, thereby entitling the Executive to certain
payments and benefits provided under the terms and provisions of the Employment
Contracts;
WHEREAS, the Company and the existing Board of Directors believe the
continued employment and services of the Executive is crucial to the
implementation and consummation of the Sales Agreements, the Chapter 11
bankruptcy filing and proceeding of the Company, the contemplated liquidation of
the Company and related events;
<PAGE>
WHEREAS, the Company and the Executive desire to enter into this
Agreement to clarify their respective rights and obligations and to ensure the
availability of the Executive's services to the Company for a limited, but
critical, period of time;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, including (without limitation) the recitals set
forth above (which are an integral part of this Agreement), the parties agree as
of the Effective Date as follows:
(1) WAIVER OF NOTICE AND OPPORTUNITY TO CURE
The Company hereby waives its right to written notice by the Executive
of an event or events constituting "Good Reason," as well as the Company's right
or opportunity to cure the event or events constituting "Good Reason," under the
terms and provisions of the Employment Contracts.
(2) EXECUTIVE TERMINATES EMPLOYMENT FOR GOOD REASON
The Company and the Executive hereby agree that (i) the Executive's
employment with the Company is terminated as of the Effective Date by the
Executive for "Good Reason" under the Employment Contracts and (ii) the amounts
outlined on Exhibit "A" are the true and correct payments and benefits due to
the Executive under the Employment Contracts by reason of such termination. The
Company agrees to pay the amounts reflected on Exhibit "A" to the Executive on
the Effective Date, unless otherwise provided in such Exhibit "A."
(3) NEW EMPLOYMENT AGREEMENT
The Executive agrees to execute and deliver, concurrently with his
receipt of the payment provided under Section (2) above, a new employment
agreement substantially in the form attached hereto as Exhibit "B," in which the
Executive agrees to continue his employment by the Company commencing on the
effective date of this Agreement through the earliest of (i) December 31, 2000,
(ii) completion of the Chapter 11 bankruptcy proceeding of the Company, and
(iii) the termination date determined by the Board of Directors of the Company,
in order to assist the Company in the implementation and consummation of the
Sales Agreements, the Chapter 11 bankruptcy filing and proceeding of the
Company, the contemplated liquidation of the Company and related events.
(4) SURVIVAL
The rights and obligations of the Company and the Executive which are
necessary to give full effect to the terms of this Agreement, including, but not
limited to, those set forth in the provisions outlined below of the Employment
Contracts, shall survive the execution of this Agreement:
AGREEMENT - Page 2
<PAGE>
SECTION HEADING (IF ANY) CONTRACT
------- ---------------- --------
3.1f Retention Agreement
3.4 No Mitigation Retention Agreement
4 Excise Taxes Retention Agreement
5 Claims Retention Agreement
6 Tax Withholding Retention Agreement
14 Governing Law/Jurisdiction Retention Agreement
3(d) Expiration Payments and Employment Agreement
Benefits (2nd paragraph only)
9 Confidentiality; Employment Agreement
Assignment of Rights
10 Non-Competition; Employment Agreement
Non-Solicitation
11 Indemnification Employment Agreement
19 Governing Law/Jurisdiction Employment Agreement
(5) GENERAL
5.1. This Agreement may be executed in counterparts, all of which taken
together shall constitute one instrument.
5.2. This Agreement is made and entered into in the State of Texas, and
the laws of said state shall govern the validity and interpretation hereof and
the performance of the parties hereto of his respective duties and obligations
hereunder.
5.3. The parties hereto hereby covenant and agree that any judicial
action or proceeding to enforce or prevent the breach of any provision hereof,
including, without limitation, any action or proceeding to enforce any provision
hereof, for damages by reason of any alleged breach hereof, for a declaration of
such party's rights or obligations hereunder or for any other judicial remedy in
connection therewith, shall be commenced and maintained exclusively in a federal
or state court of competent jurisdiction in Dallas County, Texas.
5.4. This Agreement may be amended and any provision may be waived only
by a written agreement executed by the Company and the Executive to which the
amendment or waiver shall apply.
5.5. This Agreement, including (without limitation) Exhibits "A" and
"B" and the employment agreement described in Section (3) above, embodies the
entire understanding of the parties, and there is no further or other agreements
or understandings, written or oral, in effect between the parties hereto,
relating to the subject matter hereof, unless expressly referred to by reference
herein or executed concurrently herewith.
AGREEMENT - Page 3
<PAGE>
5.6. Each party has been advised by counsel of his or its choice in
reviewing, understanding and executing this Agreement.
5.7. This Agreement shall be effective as of the Effective Date.
COMPANY:
PENNCORP FINANCIAL GROUP, INC.
By: /s/ David C. Smith
--------------------------------
Its: Chairman of the Board
--------------------------------
EXECUTIVE:
/s/ Keith A. Maib
--------------------------------
Keith A. Maib
AGREEMENT - Page 4
- ---------
EXHIBIT 10.4
------------
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is entered into
as of the 28th day of January, 2000 (the "Effective Date"), by and between
PENNCORP FINANCIAL GROUP, INC., a Delaware corporation (the "Company"), and
James P. McDermott (the "Executive").
WHEREAS, the Company has entered into a Stock Purchase Agreement dated
January 7, 2000 with Reassure America Life Insurance Company and a separate
Stock Purchase Agreement dated January 8, 2000 with Pioneer-Occidental Holding
Company; and
WHEREAS, the Company desires to ensure the availability of the
Executive's services to complete the sales in accordance with the Stock Purchase
Agreements, and the Executive is willing to provide such services;
IN CONSIDERATION of the mutual covenants and agreements hereinafter set
forth, Company and Executive agree as follows:
1. Agreement Term.
The term of this Agreement shall be the period commencing on the
Effective Date and ending on the earliest of (i) September 30, 2000, (ii) the
60th day following the closing or consummation of the transactions described in
the Stock Purchase Agreements that the Company has entered into with Reassure
America Life Insurance Company and with Pioneer-Occidental Holding Company (as
now existing or as may be hereafter amended), and (iii) the termination date
determined by the Board of Directors of the Company (the "Agreement Term").
2. Employment.
----------
(a) Employment by the Company. Executive agrees to be
employed by Company for the Agreement Term upon the
terms and subject to the conditions set forth in this
Agreement. Throughout the Agreement Term, Executive
shall serve as Executive Vice President and Chief
Financial Officer of Company and be responsible for
the general management of the financial affairs of
Company, and serve as a member of the Company's
Operating Committee.
(b) Performance of Duties. Throughout the Agreement Term,
Executive shall faithfully and diligently perform
such duties (i) as are consistent with his position
as the Executive Vice President and Chief Financial
Officer of Company and as a member of the Company's
Operating Committee, and (ii) as the Executive
Committee of the Board (or, if the Executive
Committee
EXECUTIVE EMPLOYMENT AGREEMENT - Page 1
- ------------------------------
<PAGE>
does not exist, the liquidating Trustee) may
reasonably and in good faith request.
(c) Place of Performance. During the Agreement Term,
Executive shall be based in McLean, Virginia, or at
such other location within an 18 mile radius of
McLean, Virginia. Company shall not request or
require Executive to relocate his principal place of
employment outside of an 18 mile radius of McLean,
Virginia.
3. Compensation and Benefits.
-------------------------
(a) Base Salary. Company agrees to pay to Executive a
base salary at the annual rate of $200,000 ("Base
Salary"), payable in installments consistent with the
Company's payroll practices.
(b) Performance Bonus. Executive shall have a performance
bonus opportunity of up to, but not exceeding,
$200,000. The amount of bonus to which Executive is
entitled shall be determined solely at the discretion
of the Board of Directors of the Company, and such
bonus, if any, shall be payable upon termination of
Executive's employment under this Agreement (except
as set forth in Section 8(d) of this Agreement).
(c) Receipt and Escrow of 1999 Bonus-Related Amount.
Executive acknowledges receipt on the Effective Date
of $155.237.24 (the "Bonus- Related Amount"), which
is the sum of the maximum amount of the bonus payable
to Executive for achievement of budgeted financial
results of operations for 1999 (the "1999 Operations
Bonus") plus certain related amounts, and agrees that
such Bonus-Related Amount is being deposited in
escrow on his behalf with Gardere & Wynne, L.L.P., as
escrow agent (the "Escrow") to secure his obligation
to repay to Company such portion, if any, of the
Bonus-Related Amount to which he is not entitled
after his 1999 Operations Bonus is finally determined
by Company. The Bonus-Related Amount to which
Executive is entitled (which will equal the amount
deposited into the Escrow if 110% of statutory
budgeted performance was achieved in 1999 and
$77,618.92 if 100% of statutory budgeted performance
was achieved in 1999) shall be released from the
Escrow and paid to Executive no later than the filing
of Company's statutory annual statement with the
State of Texas.
4. Employee Benefit Programs.
-------------------------
During the Agreement Term, Executive shall be entitled to participate
in all employee pension and welfare benefit plans and programs made available to
the senior-level executives of Company or to its employees generally, as such
plans or programs may be in effect from time to time, including, without
limitation, pension, profit sharing, savings and other retirement plans or
EXECUTIVE EMPLOYMENT AGREEMENT - Page 2
- ------------------------------
<PAGE>
programs, medical, dental, hospitalization, short-term and long-term disability
and life insurance plans, accidental death and dismemberment protection, travel
accident insurance, and any plans that supplement the above-listed types of
plans or programs, whether funded or unfunded, but excluding any severance
benefit plan or program. Company shall, to the extent possible without penalty
for a failure to provide similar treatment to other employees of Company, waive
the waiting or grace period applicable under any such plan or program before
Executive's participation therein can begin.
5. Reimbursement of Business and Other Expenses.
--------------------------------------------
Executive is authorized to incur reasonable travel and business
expenses that are consistent with his position and incurred in carrying out his
duties and responsibilities under this Agreement, and Company shall promptly
reimburse him for all such travel and business expenses incurred in connection
with carrying out the business of the Company, subject to reasonable
documentation in accordance with the reasonable policies of Company.
6. Perquisites.
-----------
During the Agreement Term, Executive shall be entitled to participate
in all of Company's executive fringe benefits (other than financial consulting
benefits) in accordance with the terms and conditions of such arrangements as
are in effect from time to time for the senior-level executives of Company.
Executive is also entitled to reimbursement from Company for, or Company's
payment of, all reasonable attorneys' and other professional fees and expenses
incurred by or on behalf of Executive relating in any manner to the negotiation
and preparation of this Agreement, including (without limitation) the conditions
to Executive's employment relationship with Company under this Agreement.
7. Vacation.
--------
Executive shall be entitled to six weeks' paid vacation each calendar
year, which vacation shall be earned on a pro-rata basis for each day during the
calendar year that Executive is employed by Company. Company shall pay Executive
any earned and unused vacation at the end of the Agreement Term or, if earlier,
upon the termination of Executive's employment.
8. Termination of Employment.
-------------------------
(a) Company may terminate Executive's employment with
Company, at any time for any (or no) reason, prior to
termination of employment by the expiration of the
Agreement Term under Section 1(i) or Section 1(ii) of
this Agreement, upon at least 30 days' written notice
to Executive. Such termination shall be effective
upon the expiration of the notice period (of at least
30 days) specified in the notice of termination.
(b) In light of his importance to Company during the
Agreement Term, Executive is not entitled to
voluntarily terminate his employment with Company at
any
EXECUTIVE EMPLOYMENT AGREEMENT - Page 3
- ------------------------------
<PAGE>
time before termination by the expiration of the
Agreement Term under Section 1 of this Agreement. In
addition, Executive and Company acknowledge that the
calculation of the damages to Company as a result of
Executive's voluntary termination of his employment
under this Agreement would be difficult, expensive
and time-consuming, and accordingly, the parties have
agreed to a liquidated damage amount due Company in
the event of an Improper Executive Termination (as
defined below). Therefore, if Executive terminates
his employment hereunder before termination by the
expiration of the Agreement Term, other than by death
or because of Disability (an "Improper Executive
Termination"), then Executive shall pay Company, as
liquidated damages (and not as a penalty), $500,000
in cash within ten days after the effective date of
such Improper Executive Termination. In this Section
8(b), "Disability" means Executive's inability,
because of any mental or physical illness, to perform
his duties under this Agreement that extends, or is
reasonably expected to extend, for at least 30
consecutive days.
(c) Upon any termination of Executive's employment
hereunder, Executive shall perform, for up to six
months following such date of termination and without
additional compensation or benefits, such consulting
or transition services consistent with his
experience, expertise and prior services to the
Company as the Board of Directors of the Company (or,
if the Board of Directors does not exist, the
liquidating Trustee) may reasonably request. Such
services by Executive shall be rendered at such times
and in such manner as are mutually satisfactory to
the Company and Executive, without material
interference with Executive's employment or other
business activities during such period.
(d) Upon any termination of Executive's employment
hereunder, Company shall pay to Executive, within ten
days of the effective date of such termination, (i)
any Base Salary and any earned and unused vacation,
in each case accrued through the date of such
termination, and (ii) any expenses that have not been
reimbursed in accordance with Section 5 herein. Also,
upon any termination other than an Improper Executive
Termination, (A) Company shall pay to Executive,
within ten days of the effective date of such
termination, any bonus awarded to Executive in
accordance with Section 3(b) herein, and (B) Company
shall cause the release from the Escrow of all or
that portion of the Bonus-Related Amount to which
Executive is entitled under Section 3(c) herein, if
not already released and paid to Executive (but if
already released and paid to Executive, shall not be
recoverable by the Company.
(e) In the event of any termination of Executive's
employment hereunder, Executive shall be under no
obligation to seek other employment, and there shall
be no offset against amounts due to Executive under
this Agreement on
EXECUTIVE EMPLOYMENT AGREEMENT - Page 4
- ------------------------------
<PAGE>
account of any remuneration attributable to any
subsequent employment (including, without limitation,
any self-employment) that he may obtain.
(f) Executive and his eligible dependents shall be
entitled, for a period of three (3) years following
the date of any termination of Executive's employment
hereunder, to continued coverage, at the cost of the
Company, under the Company's group health, dental and
life insurance plans as in effect from time to time
(but not any other welfare benefit plans or any
retirement plans); provided, that coverage under any
particular benefit plan shall expire with respect to
the period after Executive becomes covered under
another employer's plan providing for a similar type
of benefit. In the event the Company is unable to
provide such coverage on account of any limitations
under the terms of any applicable contract with an
insurance carrier or third- party administrator, the
Company shall pay Executive an amount equal to the
cost of such coverage.
9. Confidentiality; Assignment of Rights.
-------------------------------------
(a) During the Agreement Term and thereafter, Executive
shall not disclose to anyone or make use of any trade
secret or proprietary or confidential information of
Company, including such trade secret or proprietary
or confidential information of any customer or other
entity to which Company owes an obligation not to
disclose such information, which he acquires during
the Agreement Term, including but not limited to
records kept in the ordinary course of business,
except (i) as such disclosure or use may be required
or appropriate in connection with his work as an
employee of Company or (ii) when required to do so by
a court of law, by any governmental agency or
authority having supervisory authority over the
business of Company or by any governmental agency or
authority or administrative or legislative body
(including a committee thereof) with apparent
jurisdiction to order him to divulge, disclose or
make accessible such information.
(b) Executive hereby sells, assigns and transfers to
Company all of his right, title and interest in and
to all inventions, discoveries, improvements and
copyrightable subject matter (the "Rights") which
during his employment by Company are made or
conceived by him, alone or with others and which are
within or arise out of any general field of Company's
business or arise out of any work he performs or
information he receives regarding the business of
Company while employed by Company. During his
employment by Company, Executive shall fully disclose
to Company as promptly as available all information
known or possessed by him concerning the rights
referred to in the preceding sentence, and upon
request by Company and without any further
remuneration in any form to him by Company, but at
the expense of Company, execute all applications for
patents and for copyright registration,
EXECUTIVE EMPLOYMENT AGREEMENT - Page 5
- ------------------------------
<PAGE>
assignments thereof and other instruments and do all
things which Company may deem necessary to vest and
maintain in it the entire right, title and interest
in and to all such Rights.
10. Nonsolicitation.
---------------
(a) Executive covenants and agrees that he shall not
directly or indirectly solicit Company's or any of
its subsidiaries' (i) employees during the 18-month
period following the date of the termination of his
employment by Company hereunder and (ii) agents,
brokers and/or policyholders during the Agreement
Term.
(b) The parties acknowledge that in the event of a breach
of Section 10(a) above, Company shall not have an
adequate remedy at law. Accordingly, in the event of
any breach of Section 10(a) above, Company shall be
entitled to such equitable and injunctive relief as
may be available to restrain Executive and any
business, firm, partnership, individual, corporation
or entity participating in the breach from the
violation of the provisions of Section 10(a) above.
Nothing in this Agreement shall be construed as
prohibiting Company from pursuing any other remedies
available at law or in equity for breach of Section
10(a) above, including the recovery of damages.
11. Indemnification.
---------------
(a) Company agrees that if Executive is or becomes a
party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative
or investigative and whether brought by or in the
right of the Company or otherwise ("Proceeding"), by
reason of the fact that (whether before or after the
Effective Date) he is or was a director, officer or
employee of Company or is or was serving at the
request of Company as a director, officer, member,
employee or agent of another corporation,
partnership, joint venture, trust or other
enterprise, including (without limitation) service
with respect to employee benefit plans, whether or
not the basis of such Proceeding is Executive's
alleged action in an official capacity while serving
as a director, officer, member, employee or agent,
Executive shall be indemnified and held harmless by
Company to the fullest extent legally permitted or
authorized by Company's certificate or articles of
incorporation or bylaws (or other applicable
governing documents) or resolutions of the Board (or
other applicable governing body) or the stockholders
of Company or, if greater, by the laws of the State
of Delaware or any other applicable state of
organization or formation, against all cost, expense,
liability and loss (including, without limitation,
attorneys, fees, judgments, costs of appeal, fines,
ERISA excise taxes or penalties and amounts paid or
to be paid in settlement) reasonably
EXECUTIVE EMPLOYMENT AGREEMENT - Page 6
- ------------------------------
<PAGE>
incurred or suffered by Executive in connection
therewith, and such indemnification shall continue as
to Executive even if he has ceased to be a director,
member, employee or agent of Company or other entity
and shall inure to the benefit of Executive's heirs,
executors and administrators. In this Section 11, (i)
each reference to "Company" (other than for the
purpose of any notice) shall include, without
limitation, all entities that are subsidiaries and
affiliates of Company, and (ii) all obligations of
Company shall be joint and several as to all entities
included in such definition of "Company." Company
shall pay or provide such indemnification to
Executive in connection with a Proceeding within 60
days after written request by Executive for that
indemnification. During that 60-day period, Executive
shall have an opportunity to be heard and to present
evidence in connection with the consideration by the
board of directors, independent legal counsel, or
stockholders, as the case may be, of any findings
required by applicable law in connection with that
indemnification request. Company shall also advance
to Executive all reasonable costs and expenses
incurred by him (including, without limitation, all
reasonable fees and costs of counsel selected by
Executive, and all other indemnifiable liabilities
covered by this paragraph (a)) in connection with a
Proceeding within 30 days after written request by
Executive for such advance. Such request shall
include an undertaking by Executive to repay the
amount of such advance if it shall ultimately be
determined that he is not entitled to be indemnified
against such costs and expenses. In the event Company
does not properly indemnify or advance expenses to
Executive in accordance with the terms of this
paragraph (a) (including, without limitation, the
time period set forth above), Executive shall be
entitled to bring an action or proceeding against
Company in any state or federal court in Montgomery
County, Maryland, in accordance with Section 19
hereof, or before a panel of arbitrators in
accordance with Section 20 hereof, to enforce
Company's indemnification or expense-advancement
obligations, and (in either case) Executive shall be
reimbursed by Company for the reasonable costs and
expenses (including, without limitation, reasonable
attorneys fees and costs) of any successful
enforcement of Company's indemnification or
expense-advancement obligations.
(b) Neither the failure of Company (including, without
limitation, its board of directors, independent legal
counsel or stockholders) to have made any
determination that indemnification of Executive is
proper because he has met the applicable standard of
conduct, nor a determination by Company (including,
without limitation, its board of directors,
independent legal counsel or stockholders) that
Executive has not met such applicable standard of
conduct, shall create a presumption that Executive
has not met the applicable standard of conduct or
shall be a defense to any action or proceeding to
enforce Company's indemnification or
expense-advancement
EXECUTIVE EMPLOYMENT AGREEMENT - Page 7
- ------------------------------
<PAGE>
obligations. Company shall have the burden of proof
in establishing that Executive has not met the
applicable standard of conduct. The termination of
any Proceeding by judgment, court order, settlement,
or conviction, or upon a plea of nolo contenders or
its equivalent, shall not, of itself, create a
presumption that Executive did not meet the
applicable standard of conduct. Where Executive is
entitled to indemnification under this Section 11 for
a portion of the indemnifiable liabilities described
in paragraph (a) of this Section 11, but not for the
total amount of liabilities of that kind, Company
shall nevertheless indemnify Executive for such
portion of the indemnifiable liabilities to which
Executive is entitled.
(c) Executive's rights provided in this Section 11 shall
not be exclusive of any other rights of
indemnification or advancement of expenses (or any
similar rights) that Executive may have against
Company or under any liability insurance covering
Executive.
(d) Company agrees to continue and maintain one or more
directors, and officers, liability insurance policies
that cover Executive (with reputable and financially
sound insurers) at a level that is commercially
reasonable (in light of Company's business and the
risks of litigation or claims) and not less than the
level of coverage provided as of the Effective Date,
and otherwise to the fullest extent Company provides
such coverage for any of its other executive
officers.
(e) Without limiting the generality of Section 17 hereof,
the rights of indemnity and advancement of expenses
in favor of Executive in this Section 11 shall
continue and survive any expiration or termination of
this Agreement or Executive's ceasing to be a
director, officer, or employee of Company.
12. Assignability; Binding Nature.
-----------------------------
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors, heirs (in the case of Executive) and
permitted assigns. No rights or obligations of Company under this Agreement may
be assigned or transferred by Company (including, without limitation, by merger,
consolidation, or other operation of law). No rights or obligations of Executive
under this Agreement may be assigned or transferred by Executive other than his
rights to compensation and benefits, which may be transferred only by will or
operation of law, except as provided in Section 18 below.
13. Representation.
--------------
Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement between it and
any other person, firm or organization. Executive represents that he knows
EXECUTIVE EMPLOYMENT AGREEMENT - Page 8
- ------------------------------
<PAGE>
of no agreement between him and any other person, firm or organization that
would be violated by the performance of his obligations under this Agreement.
14. Entire Agreement.
----------------
This Agreement (with Schedule A, which is an integral part hereof)
contains the entire understanding and agreement between the parties concerning
the subject matter hereof and supersedes all prior agreements, understandings,
discussions, negotiations and undertakings, whether written or oral, between the
parties with respect thereto; except that nothing in this Agreement impairs or
otherwise adversely affects any of Executive's rights or Company's obligations
under any other agreement or document executed by Company and Executive
contemporeously or concurrently herewith.
15. Amendment or Waiver.
-------------------
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by Executive and an authorized officer of
Company (other than Executive). No waiver by either party of any breach by the
other party of any condition or provision contained in this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same or any prior or subsequent time.
Any waiver must be in writing and signed by Executive or an authorized officer
of Company (other than Executive), as the case may be.
16. Severability.
------------
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
17. Survivorship.
------------
The respective rights and obligations of the parties hereunder shall
survive any termination of the Executive's employment, including (without
limitation) upon expiration of the Agreement Term, to the extent necessary to
the intended preservation of such rights and obligations.
18. Beneficiaries/References.
------------------------
Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following Executive's death or
incompetence by giving Company written notice thereof. In the event of
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative.
EXECUTIVE EMPLOYMENT AGREEMENT - Page 9
- ------------------------------
<PAGE>
19. Governing Law/Jurisdiction.
--------------------------
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Maryland without reference to principles of conflict
of laws. Jurisdiction and venue of any action or proceeding relating to this
Agreement shall be exclusively in state or federal courts in Montgomery County,
Maryland.
20. Resolution of Disputes.
----------------------
Any disputes arising under or in connection with this Agreement (other
than injunctive or equitable relief sought to enforce Sections 9 or 10 hereof,
or any enforcement of Executive's rights under Section 11, which may (if
Executive so elects) be brought in any court having jurisdiction in accordance
with this Agreement) shall, at the election of Executive or Company, be resolved
by binding arbitration in accordance with the following terms and procedures:
(a) Arbitration of Claims. Company and Executive agree to
settle by arbitration any dispute or controversy
arising in connection with this Agreement, whether or
not such dispute involves a plan subject to the
Employee Retirement Income Security of 1974, as
amended ("ERISA"). Such arbitration shall be
conducted on an expedited basis in accordance with
the National Rules for the Resolution of Employment
Disputes of the American Arbitration Association,
sitting in Bethesda, Maryland. The award of the
arbitrators shall be final and nonappealable, the
judgment may be entered on the award of the
arbitrators in any court having proper jurisdiction.
All expenses of such arbitration shall be borne by
the Company in accordance with subsection (b).
(b) Payment of Legal Fees and Costs. The Company agrees
to pay as incurred, to the full extent permitted by
law, all legal fees and expenses which Executive may
reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company,
Executive or others of any action taken pursuant to
the terms of this Agreement, or of the validity or
enforceablity of, or liability under, any provision
of this Agreement, or any guarantee of performance
thereof (including, without limitation, as a result
of any contest by Executive about the amount of
payment pursuant to this Agreement), plus in each
case interest on any delayed payment at the
applicable federal rate provided for in Section 7872
(f) (2) (A) of the Code.
21. Notices.
-------
Any notice given to a party shall be in writing and shall be deemed to
have been given when delivered personally or by courier, or upon receipt if sent
by certified or registered mail, postage prepaid, return receipt requested, duly
addressed to the party concerned at the address indicated below or to such
changed address as such party may subsequently give such notice of:
EXECUTIVE EMPLOYMENT AGREEMENT - Page 10
- ------------------------------
<PAGE>
If to Company: PennCorp Financial Group, Inc.
717 North Harwood, Suite 2401
Dallas, Texas 75201
Attention: Chief Executive Officer
If to Executive: James P. McDermott
628 Live Oak Drive
McLean, VA 22101
22. Headings.
--------
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
23. Counterparts.
------------
This Agreement may be executed in two or more counterparts.
EXECUTIVE EMPLOYMENT AGREEMENT - Page 11
- ------------------------------
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement to be
effective on the Effective Date.
PENNCORP FINANCIAL GROUP, INC.
By: /s/ David C. Smith
------------------------------------
Its: Chairman of the Board
------------------------------------
/s/ James P. McDermott
-----------------------
JAMES P. MCDERMOTT
EXECUTIVE EMPLOYMENT AGREEMENT - Page 12
- ------------------------------
EXHIBIT 10.5
------------
AGREEMENT
---------
This Agreement is entered into between PennCorp Financial Group, Inc.,
a Delaware corporation (the "Company"), and James P. McDermott (the
"Executive"), effective as of January 28, 2000 (the "Effective Date").
W I T N E S S E T H
-------------------
WHEREAS, the Company is a publicly held holding company with its
principal place of business in Dallas, Texas;
WHEREAS, the Executive is the senior financial officer of the Company
and is employed pursuant to (i) an Executive Employment Agreement dated May 22,
1998 (the "Employment Agreement"), and (ii) an Executive Retention Agreement
dated May 22, 1998 (the "Retention Agreement") (collectively, the "Employment
Contracts").
WHEREAS, Section 8(b) of the Employment Agreement provides, in
relevant part, as follows:
(b) If Executive terminates his employment with Company for
Good Reason, or if Company terminates Executive's employment with
Company without Cause, Executive shall be entitled to any payments and
benefits provided pursuant to the terms of the Retention Agreement in
addition to (but without duplication) any amount to be paid or provided
to Executive under the terms of this Agreement.
WHEREAS, the Company has entered into (i) a Stock Purchase Agreement
dated January 7, 2000, in which the Company has agreed to sell Southwestern Life
Insurance Company and Security Life and Trust Insurance Company, to Reassure
America Life Insurance Company, and (ii) a Stock Purchase Agreement dated
January 8, 2000, with Pioneer-Occidental Holding Company, in which the Company
has agreed to sell American-Amicable Life Insurance Company of Texas, Pioneer
Security Life Insurance Company, Occidental Life Insurance Company of North
Carolina, and Pioneer American Insurance Company (collectively, the "Sales
Agreements");
WHEREAS, the Executive is entitled to submit his resignation upon the
occurrence of a "Change of Control" which results in "Good Reason," both as
defined in the Employment Contracts, thereby entitling the Executive to certain
payments and benefits provided under the terms and provisions of the Employment
Contracts;
WHEREAS, the Company and the existing Board of Directors believe the
continued employment and services of the Executive is crucial to the
implementation and consummation of the Sales Agreements, the Chapter 11
bankruptcy filing and proceeding of the Company, the contemplated liquidation of
the Company and related events;
AGREEMENT - Page 1
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<PAGE>
WHEREAS, the Company and the Executive desire to enter into this
Agreement to clarify their respective rights and obligations and to ensure the
availability of the Executive's services to the Company for a limited, but
critical, period of time;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, including (without limitation) the recitals set
forth above (which are an integral part of this Agreement), the parties agree as
of the Effective Date as follows:
(1) WAIVER OF NOTICE AND OPPORTUNITY TO CURE
The Company hereby waives its right to written notice by the Executive
of an event or events constituting "Good Reason," as well as the Company's right
or opportunity to cure the event or events constituting "Good Reason," under the
terms and provisions of the Employment Contracts.
(2) EXECUTIVE TERMINATES EMPLOYMENT FOR GOOD REASON
The Company and the Executive hereby agree that (i) the Executive's
employment with the Company is terminated as of the Effective Date by the
Executive for "Good Reason" under the Employment Contracts and (ii) the amounts
outlined on Exhibit "A" are the true and correct payments and benefits due to
the Executive under the Employment Contracts by reason of such termination. The
Company agrees to pay the amounts reflected on Exhibit "A" to the Executive on
the Effective Date, unless otherwise provided in such Exhibit "A."
(3) NEW EMPLOYMENT AGREEMENT
The Executive agrees to execute and deliver, concurrently with his
receipt of the payment provided under Section (2) above, a new employment
agreement substantially in the form attached hereto as Exhibit "B," in which the
Executive agrees to continue his employment by the Company commencing on the
effective date of this Agreement through the earliest of (i) September 30, 2000,
(ii) the 60th day after the consummation of the Sales Agreements, and (iii) the
termination date determined by the Board of Directors of the Company, in order
to assist the Company in the implementation and consummation of the Sales
Agreements, the Chapter 11 bankruptcy filing and proceeding of the Company, the
contemplated liquidation of the Company and related events.
(4) SURVIVAL
The rights and obligations of the Company and the Executive which are
necessary to give full effect to the terms of this Agreement, including, but not
limited to, those set forth in the provisions outlined below of the Employment
Contracts, shall survive the execution of this Agreement:
AGREEMENT - Page 2
- ---------
<PAGE>
SECTION HEADING (IF ANY) CONTRACT
------- ---------------- --------
3.1f Retention Agreement
3.4 No Mitigation Retention Agreement
4 Excise Taxes Retention Agreement
5 Claims Retention Agreement
6 Tax Withholding Retention Agreement
14 Governing Law/Jurisdiction Retention Agreement
3(d) Expiration Payments and Employment Agreement
Benefits (2nd paragraph only)
9 Confidentiality; Employment Agreement
Assignment of Rights
10 Non-Competition; Employment Agreement
Non-Solicitation
11 Indemnification Employment Agreement
19 Governing Law/Jurisdiction Employment Agreement
(5) GENERAL
5.1. This Agreement may be executed in counterparts, all of which taken
together shall constitute one instrument.
5.2. This Agreement is made and entered into in the State of Maryland,
and the laws of said state shall govern the validity and interpretation hereof
and the performance of the parties hereto of his respective duties and
obligations hereunder.
5.3. The parties hereto hereby covenant and agree that any judicial
action or proceeding to enforce or prevent the breach of any provision hereof,
including, without limitation, any action or proceeding to enforce any provision
hereof, for damages by reason of any alleged breach hereof, for a declaration of
such party's rights or obligations hereunder or for any other judicial remedy in
connection therewith, shall be commenced and maintained exclusively in a federal
or state court of competent jurisdiction in Montgomery County, Maryland.
5.4. This Agreement may be amended and any provision may be waived only
by a written agreement executed by the Company and the Executive to which the
amendment or waiver shall apply.
5.5. This Agreement, including (without limitation) Exhibits "A" and
"B" and the employment agreement described in Section (3) above, embodies the
entire understanding of the parties, and there is no further or other agreements
or understandings, written or oral, in effect between the parties hereto,
relating to the subject matter hereof, unless expressly referred to by reference
herein or executed concurrently herewith.
AGREEMENT - Page 3
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<PAGE>
5.6. Each party has been advised by counsel of his or its choice in
reviewing, understanding and executing this Agreement.
5.7. This Agreement shall be effective as of the Effective Date.
COMPANY:
PENNCORP FINANCIAL GROUP, INC.
By:/s/ David C. Smith
-----------------------------------
Its: Chairman of the Board
-----------------------------------
EXECUTIVE:
/s/ James P. McDermott
-----------------------------------
James P. McDermott
AGREEMENT - Page 4
- ---------
EXHIBIT 10.6
------------
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is entered into
as of the 28th day of January, 2000 (the "Effective Date"), by and between
PENNCORP FINANCIAL GROUP, INC., a Delaware corporation (the "Company"), and
Scott D. Silverman (the "Executive").
WHEREAS, the Company has entered into a Stock Purchase Agreement dated
January 7, 2000 with Reassure America Life Insurance Company and a separate
Stock Purchase Agreement dated January 8, 2000 with Pioneer-Occidental Holding
Company; and
WHEREAS, the Company desires to ensure the availability of the
Executive's services to complete the sales in accordance with the Stock Purchase
Agreements, and the Executive is willing to provide such services;
IN CONSIDERATION of the mutual covenants and agreements hereinafter set
forth, Company and Executive agree as follows:
1. Agreement Term.
--------------
The term of this Agreement shall be the period commencing on the
Effective Date and ending on the earliest of (i) September 30, 2000, (ii) the
60th day following the closing or consummation of the transactions described in
the Stock Purchase Agreements that the Company has entered into with Reassure
America Life Insurance Company and with Pioneer-Occidental Holding Company (as
now existing or as may be hereafter amended), and (iii) the termination date
determined by the Board of Directors of the Company (the "Agreement Term").
2. Employment.
----------
(a) Employment by the Company. Executive agrees to be
employed by Company for the Agreement Term upon the
terms and subject to the conditions set forth in this
Agreement. Throughout the Agreement Term, Executive
shall serve as Executive Vice President, Chief
Administrative Officer and General Counsel of Company
and be responsible for the general management of the
administrative affairs of Company, and serve as a
member of the Company's Operating Committee.
(b) Performance of Duties. Throughout the Agreement Term,
Executive shall faithfully and diligently perform
such duties (i) as are consistent with his position
as the Executive Vice President, Chief Administrative
Officer and General Counsel of Company and as a
member of the Company's Operating Committee, and (ii)
as the Executive Committee of the Board (or, if the
Executive Committee does not exist, the liquidating
Trustee) may reasonably and in good faith request.
EXECUTIVE EMPLOYMENT AGREEMENT - Page 1
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<PAGE>
(c) Place of Performance. During the Agreement Term,
Executive shall be based in Potomac, Maryland, or at
such other location within an 18 mile radius of
Potomac, Maryland. Company shall not request or
require Executive to relocate his principal place of
employment outside of an 18 mile radius of Potomac,
Maryland.
3. Compensation and Benefits.
-------------------------
(a) Base Salary. Company agrees to pay to Executive a
base salary at the annual rate of $200,000 ("Base
Salary"), payable in installments consistent with the
Company's payroll practices.
(b) Performance Bonus. Executive shall have a performance
bonus opportunity of up to, but not exceeding,
$200,000. The amount of bonus to which Executive is
entitled shall be determined solely at the discretion
of the Board of Directors of the Company, and such
bonus, if any, shall be payable upon termination of
Executive's employment under this Agreement (except
as set forth in Section 8(d) of this Agreement).
(c) Receipt and Escrow of 1999 Bonus-Related Amount.
Executive acknowledges receipt on the Effective Date
of $154,990.67 (the "Bonus- Related Amount"), which
is the sum of the maximum amount of the bonus payable
to Executive for achievement of budgeted financial
results of operations for 1999 (the "1999 Operations
Bonus") plus certain related amounts, and agrees that
such Bonus-Related Amount is being deposited in
escrow on his behalf with Gardere & Wynne, L.L.P., as
escrow agent (the "Escrow") to secure his obligation
to repay to Company such portion, if any, of the
Bonus-Related Amount to which he is not entitled
after his 1999 Operations Bonus is finally determined
by Company. The Bonus-Related Amount to which
Executive is entitled (which will equal the amount
deposited into the Escrow if 110% of statutory
budgeted performance was achieved in 1999 and
$77,495.34 if 100% of statutory budgeted performance
was achieved in 1999) shall be released from the
Escrow and paid to Executive no later than the filing
of Company's statutory annual statement with the
State of Texas.
4. Employee Benefit Programs.
-------------------------
During the Agreement Term, Executive shall be entitled to participate
in all employee pension and welfare benefit plans and programs made available to
the senior-level executives of Company or to its employees generally, as such
plans or programs may be in effect from time to time, including, without
limitation, pension, profit sharing, savings and other retirement plans or
programs, medical, dental, hospitalization, short-term and long-term disability
and life insurance plans, accidental death and dismemberment protection, travel
accident insurance, and any plans that
EXECUTIVE EMPLOYMENT AGREEMENT - Page 2
- ------------------------------
<PAGE>
supplement the above-listed types of plans or programs, whether funded or
unfunded, but excluding any severance benefit plan or program. Company shall, to
the extent possible without penalty for a failure to provide similar treatment
to other employees of Company, waive the waiting or grace period applicable
under any such plan or program before Executive's participation therein can
begin.
5. Reimbursement of Business and Other Expenses.
--------------------------------------------
Executive is authorized to incur reasonable travel and business
expenses that are consistent with his position and incurred in carrying out his
duties and responsibilities under this Agreement, and Company shall promptly
reimburse him for all such travel and business expenses incurred in connection
with carrying out the business of the Company, subject to reasonable
documentation in accordance with the reasonable policies of Company.
6. Perquisites.
-----------
During the Agreement Term, Executive shall be entitled to participate
in all of Company's executive fringe benefits (other than financial consulting
benefits) in accordance with the terms and conditions of such arrangements as
are in effect from time to time for the senior-level executives of Company.
Executive is also entitled to reimbursement from Company for, or Company's
payment of, all reasonable attorneys' and other professional fees and expenses
incurred by or on behalf of Executive relating in any manner to the negotiation
and preparation of this Agreement, including (without limitation) the conditions
to Executive's employment relationship with Company under this Agreement.
7. Vacation.
--------
Executive shall be entitled to six weeks' paid vacation each calendar
year, which vacation shall be earned on a pro-rata basis for each day during the
calendar year that Executive is employed by Company. Company shall pay Executive
any earned and unused vacation at the end of the Agreement Term or, if earlier,
upon the termination of Executive's employment.
8. Termination of Employment.
-------------------------
(a) Company may terminate Executive's employment with
Company, at any time for any (or no) reason, prior to
termination of employment by the expiration of the
Agreement Term under Section 1(i) or Section 1(ii) of
this Agreement, upon at least 30 days' written notice
to Executive. Such termination shall be effective
upon the expiration of the notice period (of at least
30 days) specified in the notice of termination.
(b) In light of his importance to Company during the
Agreement Term, Executive is not entitled to
voluntarily terminate his employment with Company at
any time before termination by the expiration of the
Agreement Term under Section 1 of this Agreement. In
addition, Executive and Company
EXECUTIVE EMPLOYMENT AGREEMENT - Page 3
- ------------------------------
<PAGE>
acknowledge that the calculation of the damages to
Company as a result of Executive's voluntary
termination of his employment under this Agreement
would be difficult, expensive and time-consuming, and
accordingly, the parties have agreed to a liquidated
damage amount due Company in the event of an Improper
Executive Termination (as defined below). Therefore,
if Executive terminates his employment hereunder
before termination by the expiration of the Agreement
Term, other than by death or because of Disability
(an "Improper Executive Termination"), then Executive
shall pay Company, as liquidated damages (and not as
a penalty), $500,000 in cash within ten days after
the effective date of such Improper Executive
Termination. In this Section 8(b), "Disability" means
Executive's inability, because of any mental or
physical illness, to perform his duties under this
Agreement that extends, or is reasonably expected to
extend, for at least 30 consecutive days.
(c) Upon any termination of Executive's employment
hereunder, Executive shall perform, for up to six
months following such date of termination and without
additional compensation or benefits, such consulting
or transition services consistent with his
experience, expertise and prior services to the
Company as the Board of Directors of the Company (or,
if the Board of Directors does not exist, the
liquidating Trustee) may reasonably request. Such
services by Executive shall be rendered at such times
and in such manner as are mutually satisfactory to
the Company and Executive, without material
interference with Executive's employment or other
business activities during such period.
(d) Upon any termination of Executive's employment
hereunder, Company shall pay to Executive, within ten
days of the effective date of such termination, (i)
any Base Salary and any earned and unused vacation,
in each case accrued through the date of such
termination, and (ii) any expenses that have not been
reimbursed in accordance with Section 5 herein. Also,
upon any termination other than an Improper Executive
Termination, (A) Company shall pay to Executive
within ten days of the effective date of such
termination, any bonus awarded to Executive in
accordance with Section 3(b) herein, and (B) Company
shall cause the release from the Escrow of all or
that portion of the Bonus-Related Amount to which
Executive is entitled under Section 3(c) herein, if
not already released and paid to Executive (but if
already released and paid to Executive, shall not be
recoverable by the Company.).
(e) In the event of any termination of Executive's
employment hereunder, Executive shall be under no
obligation to seek other employment, and there shall
be no offset against amounts due to Executive under
this Agreement on account of any remuneration
attributable to any subsequent employment (including,
without limitation, any self-employment) that he may
obtain.
EXECUTIVE EMPLOYMENT AGREEMENT - Page 4
- ------------------------------
<PAGE>
(f) Executive and his eligible dependents shall be
entitled, for a period of three (3) years following
the date of any termination of Executive's employment
hereunder, to continued coverage, at the cost of the
Company, under the Company's group health, dental and
life insurance plans as in effect from time to time
(but not any other welfare benefit plans or any
retirement plans); provided, that coverage under any
particular benefit plan shall expire with respect to
the period after Executive becomes covered under
another employer's plan providing for a similar type
of benefit. In the event the Company is unable to
provide such coverage on account of any limitations
under the terms of any applicable contract with an
insurance carrier or third- party administrator, the
Company shall pay Executive an amount equal to the
cost of such coverage.
9. Confidentiality; Assignment of Rights.
-------------------------------------
(a) During the Agreement Term and thereafter, Executive
shall not disclose to anyone or make use of any trade
secret or proprietary or confidential information of
Company, including such trade secret or proprietary
or confidential information of any customer or other
entity to which Company owes an obligation not to
disclose such information, which he acquires during
the Agreement Term, including but not limited to
records kept in the ordinary course of business,
except (i) as such disclosure or use may be required
or appropriate in connection with his work as an
employee of Company or (ii) when required to do so by
a court of law, by any governmental agency or
authority having supervisory authority over the
business of Company or by any governmental agency or
authority or administrative or legislative body
(including a committee thereof) with apparent
jurisdiction to order him to divulge, disclose or
make accessible such information.
(b) Executive hereby sells, assigns and transfers to
Company all of his right, title and interest in and
to all inventions, discoveries, improvements and
copyrightable subject matter (the "Rights") which
during his employment by Company are made or
conceived by him, alone or with others and which are
within or arise out of any general field of Company's
business or arise out of any work he performs or
information he receives regarding the business of
Company while employed by Company. During his
employment by Company, Executive shall fully disclose
to Company as promptly as available all information
known or possessed by him concerning the rights
referred to in the preceding sentence, and upon
request by Company and without any further
remuneration in any form to him by Company, but at
the expense of Company, execute all applications for
patents and for copyright registration, assignments
thereof and other instruments and do all things which
Company may deem necessary to vest and maintain in it
the entire right, title and interest in and to all
such Rights.
EXECUTIVE EMPLOYMENT AGREEMENT - Page 5
- ------------------------------
<PAGE>
10. Nonsolicitation.
---------------
(a) Executive covenants and agrees that he shall not
directly or indirectly solicit Company's or any of
its subsidiaries' (i) employees during the 18-month
period following the date of the termination of his
employment by Company hereunder and (ii) agents,
brokers and/or policyholders during the Agreement
Term.
(b) The parties acknowledge that in the event of a breach
of Section 10(a) above, Company shall not have an
adequate remedy at law. Accordingly, in the event of
any breach of Section 10(a) above, Company shall be
entitled to such equitable and injunctive relief as
may be available to restrain Executive and any
business, firm, partnership, individual, corporation
or entity participating in the breach from the
violation of the provisions of Section 10(a) above.
Nothing in this Agreement shall be construed as
prohibiting Company from pursuing any other remedies
available at law or in equity for breach of Sections
10(a) above, including the recovery of damages.
11. Indemnification.
---------------
(a) Company agrees that if Executive is or becomes a
party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative
or investigative and whether brought by or in the
right of the Company or otherwise ("Proceeding"), by
reason of the fact that (whether before or after the
Effective Date) he is or was a director, officer or
employee of Company or is or was serving at the
request of Company as a director, officer, member,
employee or agent of another corporation,
partnership, joint venture, trust or other
enterprise, including (without limitation) service
with respect to employee benefit plans, whether or
not the basis of such Proceeding is Executive's
alleged action in an official capacity while serving
as a director, officer, member, employee or agent,
Executive shall be indemnified and held harmless by
Company to the fullest extent legally permitted or
authorized by Company's certificate or articles of
incorporation or bylaws (or other applicable
governing documents) or resolutions of the Board (or
other applicable governing body) or the stockholders
of Company or, if greater, by the laws of the State
of Delaware or any other applicable state of
organization or formation, against all cost, expense,
liability and loss (including, without limitation,
attorneys, fees, judgments, costs of appeal, fines,
ERISA excise taxes or penalties and amounts paid or
to be paid in settlement) reasonably incurred or
suffered by Executive in connection therewith, and
such indemnification shall continue as to Executive
even if he has ceased to be a
EXECUTIVE EMPLOYMENT AGREEMENT - Page 6
- ------------------------------
<PAGE>
director, member, employee or agent of Company or
other entity and shall inure to the benefit of
Executive's heirs, executors and administrators. In
this Section 11, (i) each reference to "Company"
(other than for the purpose of any notice) shall
include, without limitation, all entities that are
subsidiaries and affiliates of Company, and (ii) all
obligations of Company shall be joint and several as
to all entities included in such definition of
"Company." Company shall pay or provide such
indemnification to Executive in connection with a
Proceeding within 60 days after written request by
Executive for that indemnification. During that
60-day period, Executive shall have an opportunity to
be heard and to present evidence in connection with
the consideration by the board of directors,
independent legal counsel, or stockholders, as the
case may be, of any findings required by applicable
law in connection with that indemnification request.
Company shall also advance to Executive all
reasonable costs and expenses incurred by him
(including, without limitation, all reasonable fees
and costs of counsel selected by Executive, and all
other indemnifiable liabilities covered by this
paragraph (a)) in connection with a Proceeding within
30 days after written request by Executive for such
advance. Such request shall include an undertaking by
Executive to repay the amount of such advance if it
shall ultimately be determined that he is not
entitled to be indemnified against such costs and
expenses. In the event Company does not properly
indemnify or advance expenses to Executive in
accordance with the terms of this paragraph (a)
(including, without limitation, the time period set
forth above), Executive shall be entitled to bring an
action or proceeding against Company in any state or
federal court in Montgomery County, Maryland, in
accordance with Section 19 hereof, or before a panel
of arbitrators in accordance with Section 20 hereof,
to enforce Company's indemnification or
expense-advancement obligations, and (in either case)
Executive shall be reimbursed by Company for the
reasonable costs and expenses (including, without
limitation, reasonable attorneys fees and costs) of
any successful enforcement of Company's
indemnification or expense-advancement obligations.
(b) Neither the failure of Company (including, without
limitation, its board of directors, independent legal
counsel or stockholders) to have made any
determination that indemnification of Executive is
proper because he has met the applicable standard of
conduct, nor a determination by Company (including,
without limitation, its board of directors,
independent legal counsel or stockholders) that
Executive has not met such applicable standard of
conduct, shall create a presumption that Executive
has not met the applicable standard of conduct or
shall be a defense to any action or proceeding to
enforce Company's indemnification or
expense-advancement obligations. Company shall have
the burden of proof in establishing that Executive
has not met the applicable standard of conduct. The
termination of any Proceeding by judgment, court
order, settlement, or conviction, or
EXECUTIVE EMPLOYMENT AGREEMENT - Page 7
- ------------------------------
<PAGE>
upon a plea of nolo contenders or its equivalent,
shall not, of itself, create a presumption that
Executive did not meet the applicable standard of
conduct. Where Executive is entitled to
indemnification under this Section 11 for a portion
of the indemnifiable liabilities described in
paragraph (a) of this Section 11, but not for the
total amount of liabilities of that kind, Company
shall nevertheless indemnify Executive for such
portion of the indemnifiable liabilities to which
Executive is entitled.
(c) Executive's rights provided in this Section 11 shall
not be exclusive of any other rights of
indemnification or advancement of expenses (or any
similar rights) that Executive may have against
Company or under any liability insurance covering
Executive.
(d) Company agrees to continue and maintain one or more
directors, and officers, liability insurance policies
that cover Executive (with reputable and financially
sound insurers) at a level that is commercially
reasonable (in light of Company's business and the
risks of litigation or claims) and not less than the
level of coverage provided as of the Effective Date,
and otherwise to the fullest extent Company provides
such coverage for any of its other executive
officers.
(e) Without limiting the generality of Section 17 hereof,
the rights of indemnity and advancement of expenses
in favor of Executive in this Section 11 shall
continue and survive any expiration or termination of
this Agreement or Executive's ceasing to be a
director, officer, or employee of Company.
12. Assignability; Binding Nature.
-----------------------------
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors, heirs (in the case of Executive) and
permitted assigns. No rights or obligations of Company under this Agreement may
be assigned or transferred by Company (including, without limitation, by merger,
consolidation, or other operation of law). No rights or obligations of Executive
under this Agreement may be assigned or transferred by Executive other than his
rights to compensation and benefits, which may be transferred only by will or
operation of law, except as provided in Section 18 below.
13. Representation.
--------------
Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement between it and
any other person, firm or organization. Executive represents that he knows of no
agreement between him and any other person, firm or organization that would be
violated by the performance of his obligations under this Agreement.
EXECUTIVE EMPLOYMENT AGREEMENT - Page 8
- ------------------------------
<PAGE>
14. Entire Agreement.
----------------
This Agreement (with Schedule A, which is an integral part hereof)
contains the entire understanding and agreement between the parties concerning
the subject matter hereof and supersedes all prior agreements, understandings,
discussions, negotiations and undertakings, whether written or oral, between the
parties with respect thereto; except that nothing in this Agreement impairs or
otherwise adversely affects any of Executive's rights or Company's obligations
under any other agreement or document executed by Company and Executive
contemporeously or concurrently herewith.
15. Amendment or Waiver.
-------------------
No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by Executive and an authorized officer of
Company (other than Executive). No waiver by either party of any breach by the
other party of any condition or provision contained in this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same or any prior or subsequent time.
Any waiver must be in writing and signed by Executive or an authorized officer
of Company (other than Executive), as the case may be.
16. Severability.
------------
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
17. Survivorship.
------------
The respective rights and obligations of the parties hereunder shall
survive any termination of the Executive's employment, including (without
limitation) upon expiration of the Agreement Term, to the extent necessary to
the intended preservation of such rights and obligations.
18. Beneficiaries/References.
------------------------
Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following Executive's death or
incompetence by giving Company written notice thereof. In the event of
Executive's death or a judicial determination of his incompetence, reference in
this Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative.
19. Governing Law/Jurisdiction.
--------------------------
EXECUTIVE EMPLOYMENT AGREEMENT - Page 9
- ------------------------------
<PAGE>
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of Maryland without reference to principles of conflict
of laws. Jurisdiction and venue of any action or proceeding relating to this
Agreement shall be exclusively in state or federal courts in Montgomery County,
Maryland.
20. Resolution of Disputes.
----------------------
Any disputes arising under or in connection with this Agreement (other
than injunctive or equitable relief sought to enforce Sections 9 or 10 hereof,
or any enforcement of Executive's rights under Section 11, which may (if
Executive so elects) be brought in any court having jurisdiction in accordance
with this Agreement) shall, at the election of Executive or Company, be resolved
by binding arbitration in accordance with the following terms and procedures:
(a) Arbitration of Claims. Company and Executive agree to
settle by arbitration any dispute or controversy
arising in connection with this Agreement, whether or
not such dispute involves a plan subject to the
Employee Retirement Income Security of 1974, as
amended ("ERISA"). Such arbitration shall be
conducted on an expedited basis in accordance with
the National Rules for the Resolution of Employment
Disputes of the American Arbitration Association,
sitting in Bethesda, Maryland. The award of the
arbitrators shall be final and nonappealable, the
judgment may be entered on the award of the
arbitrators in any court having proper jurisdiction.
All expenses of such arbitration shall be borne by
the Company in accordance with subsection (b).
(b) Payment of Legal Fees and Costs. The Company agrees
to pay as incurred, to the full extent permitted by
law, all legal fees and expenses which Executive may
reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company,
Executive or others of any action taken pursuant to
the terms of this Agreement, or of the validity or
enforceablity of, or liability under, any provision
of this Agreement, or any guarantee of performance
thereof (including, without limitation, as a result
of any contest by Executive about the amount of
payment pursuant to this Agreement), plus in each
case interest on any delayed payment at the
applicable federal rate provided for in Section 7872
(f) (2) (A) of the Code.
21. Notices.
-------
Any notice given to a party shall be in writing and shall be deemed to
have been given when delivered personally or by courier, or upon receipt if sent
by certified or registered mail, postage prepaid, return receipt requested, duly
addressed to the party concerned at the address indicated below or to such
changed address as such party may subsequently give such notice of:
EXECUTIVE EMPLOYMENT AGREEMENT - Page 10
- ------------------------------
<PAGE
If to Company: PennCorp Financial Group, Inc.
717 North Harwood, Suite 2401
Dallas, Texas 75201
Attention: Chief Executive Officer
If to Executive: Scott D. Silverman
8504 Pierce Point Court
Potomac, MD 20854
22. Headings.
--------
The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
23. Counterparts.
------------
This Agreement may be executed in two or more counterparts.
EXECUTIVE EMPLOYMENT AGREEMENT - Page 11
- ------------------------------
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement to be
effective as of the Effective Date.
PENNCORP FINANCIAL GROUP, INC.
By: /s/ David C. Smith
-------------------------------
Its: Chairman of the Board
-------------------------------
/s/ Scott D. Silverman
---------------------------
SCOTT D. SILVERMAN
EXECUTIVE EMPLOYMENT AGREEMENT - Page 12
- ------------------------------
EXHIBIT 10.7
------------
AGREEMENT
---------
This Agreement is entered into between PennCorp Financial Group, Inc.,
a Delaware corporation (the "Company"), and Scott D. Silverman (the
"Executive"), effective as of January 28, 2000 (the "Effective Date").
W I T N E S S E T H
-------------------
WHEREAS, the Company is a publicly held holding company with its
principal place of business in Dallas, Texas;
WHEREAS, the Executive is the senior counsel of the Company and is
employed pursuant to (i) an Executive Employment Agreement dated May 22, 1998
(the "Employment Agreement"), and (ii) an Executive Retention Agreement dated
May 22, 1998 (the "Retention Agreement") (collectively, the "Employment
Contracts").
WHEREAS, Section 8(b) of the Employment Agreement provides, in
relevant part, as follows:
(b) If Executive terminates his employment with Company for
Good Reason, or if Company terminates Executive's employment with
Company without Cause, Executive shall be entitled to any payments and
benefits provided pursuant to the terms of the Retention Agreement in
addition to (but without duplication) any amount to be paid or provided
to Executive under the terms of this Agreement.
WHEREAS, the Company has entered into (i) a Stock Purchase Agreement
dated January 7, 2000, in which the Company has agreed to sell Southwestern Life
Insurance Company and Security Life and Trust Insurance Company to Reassure
America Life Insurance Company and (ii) a Stock Purchase Agreement dated January
8, 2000, with Pioneer-Occidental Holding Company, in which the Company has
agreed to sell American-Amicable Life Insurance Company of Texas, Pioneer
Security Life Insurance Company, Occidental Life Insurance Company of North
Carolina, and Pioneer American Insurance Company (collectively, the "Sales
Agreements");
WHEREAS, the Executive is entitled to submit his resignation upon the
occurrence of a "Change of Control" which results in "Good Reason," both as
defined in the Employment Contracts, thereby entitling the Executive to certain
payments and benefits provided under the terms and provisions of the Employment
Contracts;
WHEREAS, the Company and the existing Board of Directors believe the
continued employment and services of the Executive is crucial to the
implementation and consummation of the Sales Agreements, the Chapter 11
bankruptcy filing and proceeding of the Company, the contemplated liquidation of
the Company and related events;
AGREEMENT - Page 1
- ---------
<PAGE>
WHEREAS, the Company and the Executive desire to enter into this
Agreement to clarify their respective rights and obligations and to ensure the
availability of the Executive's services to the Company for a limited, but
critical, period of time;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, including (without limitation) the recitals set
forth above (which are an integral part of this Agreement), the parties agree as
of the Effective Date as follows:
(1) WAIVER OF NOTICE AND OPPORTUNITY TO CURE
The Company hereby waives its right to written notice by the Executive
of an event or events constituting "Good Reason," as well as the Company's right
or opportunity to cure the event or events constituting "Good Reason," under the
terms and provisions of the Employment Contracts.
(2) EXECUTIVE TERMINATES EMPLOYMENT FOR GOOD REASON
The Company and the Executive hereby agree that (i) the Executive's
employment with the Company is terminated as of the Effective Date by the
Executive for "Good Reason" under the Employment Contracts and (ii) the amounts
outlined on Exhibit "A" are the true and correct payments and benefits due to
the Executive under the Employment Contracts by reason of such termination. The
Company agrees to pay the amounts reflected on Exhibit "A" to the Executive on
the Effective Date, unless otherwise provided in such Exhibit "A."
(3) NEW EMPLOYMENT AGREEMENT
The Executive agrees to execute and deliver, concurrently with his
receipt of the payment provided under Section (2) above, a new employment
agreement substantially in the form attached hereto as Exhibit "B," in which the
Executive agrees to continue his employment by the Company commencing on the
effective date of this Agreement through the earliest of (i) September 30, 2000,
(ii) the 60th day after the consummation of the Sales Agreements, and (iii) the
termination date determined by the Board of Directors of the Company, in order
to assist the Company in the implementation and consummation of the Sales
Agreements, the Chapter 11 bankruptcy filing and proceeding of the Company, the
contemplated liquidation of the Company and related events.
(4) SURVIVAL
The rights and obligations of the Company and the Executive which are
necessary to give full effect to the terms of this Agreement, including, but not
limited to, those set forth in the provisions outlined below of the Employment
Contracts, shall survive the execution of this Agreement:
AGREEMENT - Page 2
- ---------
<PAGE>
SECTION HEADING (IF ANY) CONTRACT
------- ---------------- --------
3.1f Retention Agreement
3.4 No Mitigation Retention Agreement
4 Excise Taxes Retention Agreement
5 Claims Retention Agreement
6 Tax Withholding Retention Agreement
14 Governing Law/Jurisdiction Retention Agreement
3(d) Expiration Payments and Employment Agreement
Benefits (2nd paragraph only)
9 Confidentiality; Employment Agreement
Assignment of Rights
10 Non-Competition; Employment Agreement
Non-Solicitation
11 Indemnification Employment Agreement
19 Governing Law/Jurisdiction Employment Agreement
(5) GENERAL
5.1. This Agreement may be executed in counterparts, all of which taken
together shall constitute one instrument.
5.2. This Agreement is made and entered into in the State of Maryland,
and the laws of said state shall govern the validity and interpretation hereof
and the performance of the parties hereto of his respective duties and
obligations hereunder.
5.3. The parties hereto hereby covenant and agree that any judicial
action or proceeding to enforce or prevent the breach of any provision hereof,
including, without limitation, any action or proceeding to enforce any provision
hereof, for damages by reason of any alleged breach hereof, for a declaration of
such party's rights or obligations hereunder or for any other judicial remedy in
connection therewith, shall be commenced and maintained exclusively in a federal
or state court of competent jurisdiction in Montgomery County, Maryland.
5.4. This Agreement may be amended and any provision may be waived only
by a written agreement executed by the Company and the Executive to which the
amendment or waiver shall apply.
5.5. This Agreement, including (without limitation) Exhibits "A" and
"B" and the employment agreement described in Section (3) above, embodies the
entire understanding of the parties, and there is no further or other agreements
or understandings, written or oral, in effect
AGREEMENT - Page 3
- ---------
<PAGE>
between the parties hereto, relating to the subject matter hereof, unless
expressly referred to by reference herein or executed concurrently herewith.
5.6. Each party has been advised by counsel of his or its choice in
reviewing, understanding and executing this Agreement.
5.7. This Agreement shall be effective as of the Effective Date.
COMPANY:
PENNCORP FINANCIAL GROUP, INC.
By: /s/ David C. Smith
-------------------------------
Its: Chairman of the Board
-------------------------------
EXECUTIVE:
/s/ Scott D. Silverman
-------------------------------
Scott D. Silverman
AGREEMENT - Page 4
- ---------
EXHIBIT 99.1
------------
Media Contact: Ann Julsen
Maya Pogoda
(310) 788-2850
Investor Contact: Linda Press
Sitrick And Company
(310) 788-2850
FOR IMMEDIATE RELEASE
- ---------------------
PENNCORP FINANCIAL COMPLETES SALE OF WACO, TEXAS-BASED
INSURANCE OPERATIONS
NEW YORK - FEBRUARY 4, 2000 -- PennCorp Financial Group, Inc.
(NYSE:PFG) announced today that it has completed the sale, through its
subsidiary American-Amicable Holdings Corp., of its Waco, Texas-based insurance
operations to a new acquisition company formed by Thoma Cressey Equity Partners
for net proceeds of $97 million in cash. In addition, the Company received $13
million in cash representing capital in excess of the minimum required capital
and surplus under the agreement. Concurrent with the completion of the sale
PennCorp repaid $100 million of bank debt.
On January 10, 2000, PennCorp announced that it had entered into a
definitive agreement with Thoma Cressey for the sale of the insurance
operations, which include Pioneer Security Life Insurance Company, Occidental
Life Insurance Company of North Carolina, American-Amicable Life Insurance
Company of Texas and Pioneer American Insurance Company.
PennCorp Financial Group, Inc. is an insurance holding company.
Through its subsidiaries, the Company underwrites and markets life insurance and
accident and sickness insurance to the middle market throughout the United
States.
<PAGE>
Cautionary Statement for purposes of the Safe Harbor Provisions of
the Private Securities Litigation Reform Act of 1995:
All Statements in this 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 sales of its
remaining operating subsidiaries; (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.
# # #
2
EXHIBIT 99.2
------------
Contact: Ann Julsen
Maya Pogoda
Sitrick And Company
(310) 788-2850
FOR IMMEDIATE RELEASE
- ---------------------
PENNCORP FINANCIAL BEGINS VOLUNTARY CHAPTER 11 CASE TO FACILITATE SALE OF
DALLAS-BASED INSURANCE OPERATIONS
CHAPTER 11 CASE AFFECTS PARENT COMPANY ONLY
NEW YORK - FEBRUARY 7, 2000 -- PennCorp Financial Group, Inc.
(NYSE:PFG) announced today that in order to facilitate the previously announced
sale of its Dallas, Texas-based life insurance operations, it has filed a
voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code.
None of PennCorp's insurance company subsidiaries are included in the case,
which affects only the parent company, PennCorp Financial Group, Inc.
On January 10, 2000, PennCorp announced it had entered into a
definitive agreement for the sale of Southwestern Life Insurance Company and
Security Life & Trust Insurance Company to Reassure America Life Insurance
Company, an indirect U.S. subsidiary of Swiss Reinsurance Company of Zurich,
Switzerland, for $260 million in cash, subject to certain adjustments. The sale
agreement requires that the Company effectuate the sale through a voluntary
Chapter 11 case and is subject to bankruptcy court approval.
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The proceeds from the sale should provide full payment of PennCorp's
approximately $65 million of bank debt, approximately $115 million of
subordinated debt, and other unsecured claims. It is anticipated that any
balance would be distributed to the Company's preferred stockholders, and no
distribution would be made to the Company's common stockholders.
The Company expects that the Bankruptcy Court will establish
procedures to consider alternative sale or recapitalization proposals in the
near future. These procedures, when established, will be made generally known to
the public.
Keith A. Maib, PennCorp President and Chief Executive Officer, said
that the Chapter 11 proceeding will have no material impact on the day-to-day
operations of the insurance subsidiaries, and no material impact on their
policyholders. "While we complete the sale through the utilization of the
Chapter 11 process, we will continue to provide our insurance products, process
claims and serve our policyholders as before. We have been involved in ongoing
communications with insurance regulators, who have indicated they are satisfied
that each of the insurance companies being sold has adequate capitalization and
sufficient liquidity to meet their obligations to policyholders," he said.
The sale is expected to close prior to the end of the first quarter.
The Company filed its petition in the U.S. Bankruptcy Court for the District of
Delaware in Wilmington.
PennCorp Financial Group, Inc. is an insurance holding company.
Through its subsidiaries, the Company underwrites and markets life insurance and
accident and sickness insurance to the middle market throughout the United
States.
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Cautionary Statement for purposes of the Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995:
All Statements in this 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 sales of its
remaining operating subsidiaries; (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.
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