EXHIBIT 4.3.1
PACIFIC LIFE AND ACCIDENT INSURANCE COMPANY
AMENDED AND REVISED
SURPLUS DEBENTURE NO. 7
$107,538,345.00 June 13, 2000
FOR VALUE RECEIVED, Pacific Life and Accident Insurance Company, a Texas life
insurance corporation ("Pacific"), subject to the terms, conditions,
restrictions, and limitations contained herein, promises to pay to the order of
Southwestern Financial Corporation, a Delaware Corporation ("Southwestern"), or
to any subsequent holder hereof (the "Holder"), the principal sum of One Hundred
Seven Million Five Hundred Thirty-Eight Thousand Three Hundred and Forty-Five
Dollars ($107,538,345.00) together with interest on the unpaid balance thereof
at a rate (the "Rate") equal to the greater of (i) ten percent (10%) per annum,
or (ii) two hundred (200) basis points above the rate of the outstanding senior
debt (if any) of PennCorp Financial Group, Inc. ("PFG"), Southwestern's ultimate
parent. Each change in the rate of the outstanding senior debt of PFG that would
cause a corresponding change in the calculation of the Rate, shall be effective
as of the time and date of such change, without any notice to Pacific or further
action by the Holder.
Interest on this Surplus Debenture will be payable each quarter on the day in
which Pacific's financial statements are finalized for the prior quarter (each a
"Payment Date") and continuing until the principal amount of this Surplus
Debenture is paid in full. Both principal and interest on this Surplus Debenture
will be due and payable in the following manner at the offices of Holder:
1. On or before each Payment Date, Pacific will calculate the Surplus of
Pacific (as hereinafter defined) as of the most recent date
practicable, but in no event prior to the end of the immediately
preceding calendar quarter (each such date being hereinafter referred
to as a "Calculation Date").
2. On each Payment Date, Pacific will pay the Holder the amount of
accrued but unpaid interest on the unpaid principal balance of this
Surplus Debenture to the extent the Surplus of Pacific exceeds $1.2
million as of the Calculation Date immediately prior to such Interest
Payment Date.
3. If, as of any Calculation Date, the Surplus of Pacific does not exceed
$1.2 million by an amount sufficient to pay all accrued but unpaid
interest on this Surplus Debenture, the remaining accrued but unpaid
interest shall be payable on the next Payment Date to the extent the
Surplus of Pacific exceeds $1.2 million as of the Calculation Date
immediately prior to such next Payment Date.
4. Pacific will pay principal payments to the Holder on a quarterly basis
on the Payment Date in accordance with the principal amortization
schedule attached hereto as Exhibit A, to the extent the Surplus of
Pacific exceeds $1.2 million as of the most recent Calculation Date.
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5. If on a Payment Date, the Surplus of Pacific does not exceed $1.2
million by an amount sufficient to pay the Holder the principal amount
due, together with all accrued but unpaid interest on this Surplus
Debenture, the remaining unpaid portion of such principal amount and
such interest shall be payable thereafter at such time or from time to
time as the Surplus of Pacific exceeds $1.2 million.
6. For purposes of this Surplus Debenture, the term "Surplu of Pacific"
shall mean the remainder obtained after subtracting the carrying value
of the insurance subsidiaries of Pacific from the sum of:
(a) "common capital stock" of Pacific;
(b) "gross paid-in and contributed surplus" of Pacific;
(c) "unassigned surplus" of Pacific;
(d) "special surplus" of Pacific;
(e) any amounts required to be carried as liabilities with respect to
outstanding surplus debentures issued by Pacific; and
(f) surplus evidenced by surplus debentures of Pacific which is not
included in clauses (a)- (e) of this paragraph 6.
The items listed in clauses (a)-(f) of this paragraph 6 will be
calculated in accordance with the accounting practices required or
permitted by the Texas Department of Insurance ("Texas Department")
for inclusion in the Annual Statement of Pacific filed with the Texas
Department as of December 31 of each year.
7. The obligations of Pacific to pay this Surplus Debenture will not
otherwise be or constitute a liability of Pacific or a claim against
any of its assets except in the event of the liquidation of Pacific,
and in no event will this Surplus Debenture be considered or treated
as a current or fixed liability or obligation of Pacific under the
Texas insurance laws and the regulations thereunder except to the
extent that a payment of principal or interest becomes due and payable
hereunder or to the extent otherwise required by Texas law.
8. In the event of the liquidation of Pacific, this Surplus Debenture
will become immediately due and payable and will be superior to and in
preference of the rights and claims of the shareholders of Pacific;
provided, however, that to the extent required by applicable law, all
obligations, rights and claims hereunder are expressly subordinated to
the claims of (a) policyholders, insureds, and the beneficiaries under
insurance contracts or policies issued by Pacific, and (b) any
supervisor, conservator or receiver of Pacific appointed by the
Commissioner of Insurance of the State of Texas.
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9. All payments made hereunder will be credited first to accrued but
unpaid interest, if any, and the balance of such payment will be
credited to the principal amount hereof.
10. As a condition to the consolidation or merger of Pacific into another
corporation or the sale of all or substantially all of Pacific's
assets to any other corporation, the corporation into which Pacific is
consolidated or merged or to which the assets of Pacific are
transferred shall unconditionally assume the liability of Pacific
hereunder.
11. By acceptance and as part of the consideration for the issuance
hereof, the Holder expressly acknowledges that it has been informed
and has knowledge that this Surplus Debenture has not been registered
under the Securities Act of 1933, as amended, or the securities laws
of any state and that Pacific has issued this Surplus Debenture for
investment purposes and not with a view toward a public distribution
thereof and that this Surplus Debenture may not be sold or otherwise
transferred in the absence of an effective registration statement with
respect hereto or an exemption from registration under the Securities
Act of 1933, as amended, or any other applicable securities laws.
12. If this Surplus Debenture is collected through judicial proceedings,
Pacific agrees, subject to conditions and restrictions contained
herein, to pay all reasonable legal fees and disbursements incurred by
the Holder in connection with such collection.
13. This Surplus Debenture may be prepaid in whole or in par at any time
or from time to time without premium or penalty to the extent that the
Surplus of Pacific exceeds $1.2 million on the most recent Calculation
Date before the date of any proposed prepayment.
14. This Surplus Debenture will be governed by and construed in accordance
with the laws of the State of Texas.
15. It being the intention of the parties hereto to conform strictly to
the applicable usury laws of the State of Texas, all agreements
between Pacific and Southwestern and any other Holder whether now or
hereafter arising and whether written or oral, are here expressly
limited so that in no event, whether by reason of acceleration of the
maturity of any amount owed hereunder or otherwise, shall the amount
paid or agreed to be paid to Southwestern or any other Holder for the
use, forbearance or retention of money hereunder or otherwise exceed
the maximum amount permissible under applicable law (the "Maximum
Lawful Amount"). If fulfillment of any provision hereof, at the time
performance of such provision shall be due, shall cause the amount of
interest applicable to this Surplus Debenture to exceed the Maximum
Lawful Amount, then, ipso facto, the obligation to be fulfilled shall
be reduced to the extent necessary to cause the amount of interest
applicable to this Surplus Debenture not to exceed the Maximum Lawful
Amount; and if the Holder of this Surplus Debenture shall ever receive
anything of value deemed interest under applicable law that would
cause the interest applicable to this Surplus Debenture to exceed the
Maximum Lawful Rate, an amount equal to the portion of such interest
in excess of the Maximum Lawful Rate shall be
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applied to the reduction of the principal amount owing hereunder and
not to the payment of interest, or if such excessive interest exceeds
the unpaid principal amount hereof, such excess shall be promptly
refunded to Pacific by the Holder hereof. All sums paid or agreed to
be paid to the Holder of this Surplus Debenture for the use,
forbearance or retention of the indebtedness of Pacific shall, to the
extent permitted by applicable law, be amortized, prorated, allocated
and spread throughout the full term of such indebtedness until payment
in full so that interest on account of such indebtedness is uniform
throughout the full term thereof. The provisions of this paragraph
shall control agreements between Pacific and the holder of this
Surplus Debenture.
16. Southwestern may assign its rights hereunder to any person or entity
without the consent of Pacific. This Surplus Debenture will inure to
the benefit of Pacific and its successors and assignees.
Notwithstanding the above, this Surplus Debenture is registered as to
both principal and any stated interest with Pacific and transfer of
the Surplus Debenture may be effected either by surrender of the old
instrument and the reissuance by Pacific of a new instrument to the
new Holder or the written acknowledgment by Pacific of the transfer of
the Surplus Debenture to the new Holder. No transfer of any ownership
interest in this Surplus Debenture shall be made unless such transfer
is permitted under Texas insurance law and Pacific and Southwestern
shall comply with all regulatory and legal limitations and
requirements in connection with any transfer of this Surplus
Debenture.
17. The occurrence of any one or more of the following event shall
constitute an Event in Default (herein so called) hereunder:
(1) Pacific shall fail to make any payment of interest on this
Surplus Debenture when due and payable or declared due and
payable, and such failure shall have remained unremedied for a
period of five (5) days.
(2) Pacific shall fail to make any payment of principal of this
Surplus Debenture when due and payable or declared due and
payable.
(3) Pacific shall (i) be the subject of a petition seeking relief
under any state liquidation, rehabilitation, conservation, or
supervision law or other similar state or federal laws, or any
delinquency proceeding or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee,
trustee or similar official of any substantial part of its
properties, (ii) fail generally to pay its debts as such debts
become due, or (iii) take any corporate action in furtherance of
any such action.
If, at any time, any Event of Default has occurred and is continuing,
the Holder hereof may, without further action, declare the entire
principal amount under this Surplus Debenture to be due and payable,
and such principal amount, together with all accrued but unpaid
interest hereon, shall be paid to the holder hereof by Pacific to the
extent the Surplus of Pacific exceeds $1.2 million on the date of such
declaration by the Holder hereof or at any time thereafter.
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18. To the extent required by Texas law, Pacific will notify the Texas
Department of the payment of principal and interest under this Surplus
Debenture. Pacific will take all actions reasonably necessary to
maintain the enforceability of this Surplus Debenture.
IN WITNESS WHEREOF, Pacific has caused this Surplus Debenture to be duly
executed as of June 13, 2000.
PACIFIC LIFE AND ACCIDENT
INSURANCE COMPANY
By: /s/David A. Commons
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Name: David A. Commons
Title: Vice President - Financial Reporting
