1
EXHIBIT 10.1
NOTE PURCHASE, RELEASE AND SETTLEMENT AGREEMENT
This Note Purchase, Release and Settlement Agreement (this
"Agreement") is entered into as of the 31st day of July, 1997, by and among
Lone Star Liquidating Trust ("Seller") and PennCorp Financial Group, Inc., a
Delaware corporation ("Buyer"), and Southwestern Financial Corporation, a
Delaware corporation ("SFC").
WHEREAS, Buyer has advised Seller that it is seeking to become the
controlling stockholder of SFC;
WHEREAS, Seller is the holder of a $40,000,000 Convertible
Subordinated Reset Note due 2005 of SFC (the "Note");
WHEREAS, Buyer is desirous of purchasing the Note, and Seller is
desirous of selling the Note;
WHEREAS, pursuant to that certain Escrow Agreement, dated as of
December 13, 1995 (the "Escrow Agreement"), Seller is the owner of all of the
funds held in escrow (the "Escrowed Funds") with respect to certain asserted
and potential indemnity claims of the Buyer Indemnitees (as defined in Section
8.1(a) of the Purchase Agreement among I.C.H. Corporation, SWL Holding
Corporation, Care Financial Corporation, Facilities Management Installation,
Inc., SFC, Southwest Financial Services Corporation and Buyer, dated December
1, 1995 (the "Purchase Agreement")); and
WHEREAS, Buyer, Seller and SFC are desirous of resolving all claims
and liabilities, known or unknown, liquidated or contingent, that may exist
between (a) Seller and the Seller Indemnitees (as defined in Section 8.1(b) of
the Purchase Agreement) and (b) Buyer, SFC and the Buyer Indemnitees;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and intending to be legally bound
hereby, Seller, Buyer and SFC hereby agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF NOTE
1.01 Purchase of Note. Subject to the terms and conditions set
forth herein, Seller hereby agrees to sell, and Buyer hereby agrees to
purchase, the Note for a price of $40,000,000 plus accrued interest on the Note
through the date of the Closing (as defined below) payable at the Closing by
wire transfer to an account designated by Seller, upon delivery of the Note,
duly endorsed for transfer by the record holder thereof (or accompanied by
documentation in form and substance satisfactory to Buyer to permit Seller to
endorse the Note for transfer), by Seller to Buyer.
1.02 Closing. The closing ("Closing") of the sale of the Note
shall be held on August 4, 1997 at 9:00 a.m. at the offices of Xxxxxx, Xxxx &
Xxxxxxxx LLP, 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000.
EXECUTION VERSION
2
ARTICLE 2.
RELEASE OF ESCROWED FUNDS
2.01 Release of Escrowed Funds. Buyer hereby agrees to cause to be
released to Seller all Escrowed Funds (including any investment earnings with
respect thereto) as soon as practicable.
ARTICLE 3.
SETTLEMENT OF CERTAIN OTHER SELLER CLAIMS
3.01 Settlement. On the date of the Closing, Buyer shall cause
Southwestern Life Insurance Company to pay to Seller, in satisfaction of
certain income tax liabilities in connection with the consummation of the
transactions contemplated by the Purchase Agreement, $2,832,275 by wire
transfer to an account designated by Seller.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties. To induce the execution and
performance of this Agreement, Seller represents and warrants to Buyer and SFC,
and each of Buyer and SFC represents and warrants to Seller that:
(a) Authorization and Power. Each party has the
corporate or trust power, as the case may be, and requisite authority,
and has taken all action necessary, to execute, deliver, and perform
this Agreement.
(b) No Conflicts or Consents. The execution and delivery
of this Agreement, the consummation of any of the transactions herein
contemplated, and compliance with the terms and provisions hereof,
will not contravene or materially conflict with any provision of
applicable law to which such party is subject or any material
judgment, license, order or permit applicable to such party, or any
material contract, lease, indenture, loan agreement, mortgage, deed of
trust, or other agreement or instrument to which such party is a party
or by which it may be bound, or violate any provision of the
organizational documents of such party. No consent, approval,
authorization, or order of any governmental authority, tribunal or
other person is required in connection with the execution and delivery
of this Agreement, or the consummation of the transactions
contemplated hereby.
(c) Enforceable Obligations. This Agreement has been
duly executed and delivered and is the legal and binding obligation of
such party, enforceable in accordance with its respective terms,
except as limited by all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency,
reorganization, fraudulent conveyance, or similar laws from time to
time affecting the rights of creditors generally.
4.02 Seller Representation. Seller represents and warrants to
Buyer that (a) it has good title to the Note, free of all liens, claims, or
encumbrances, other than any lien, claim or encumbrance that could be asserted
by Buyer or SFC, and (b) it is the beneficial owner of the
- 2 -
NOTE PURCHASE, RELEASE AND SETTLEMENT AGREEMENT
3
Note. Except as set forth on Schedule 4.02 hereof and except for any
occurrence, event or other matter of which SFC has knowledge, Seller represents
and warrants that neither Xxxxx X. Xxxxx, Seller's managing trustee, nor Xxxxxx
Xxxxx, Sr. has knowledge of any occurrence, event, or other matter which could
give rise to a claim for indemnity under the Purchase Agreement, the Note or
the Escrow Agreement that has not previously been asserted by SFC, Buyer or any
Buyer Indemnitee.
4.03 Survival of Representations and Warranties. All
representations, warranties and convenants herein shall survive the Closing.
ARTICLE 5.
RELEASES
5.01 Buyer and SFC Release. Buyer and SFC, and Buyer and SFC on
behalf of the Buyer Indemnitees, hereby release, terminate, and forever
discharge Seller (including the managing trustee, supervisory trustees, agents,
representatives, employees, officers, successors, assigns, transferees,
subsidiaries, parents, or other affiliates of Seller) from any and all claims,
debts, liens, demands, liabilities, obligations, promises, acts, agreements,
costs and expenses (including, but not limited to, attorneys' fees), contracts,
controversies, guarantees, damages, judgments and causes of action of any
nature or kind whatsoever, whether known or unknown, suspected or unsuspected,
asserted or unasserted, now existing or arising in the future, concerning or
relating to the transactions contemplated by, or indemnities arising out of,
the Purchase Agreement, the Escrow Agreement and the Note; provided, however,
that the foregoing release shall not apply to (i) any breach by Seller of the
terms of this Agreement, or (ii) any indemnity claims that current or former
officers or directors of I.C.H. Corporation, SWL Holding Corporation, Care
Financial Corporation, or any of their respective subsidiaries may have against
I.C.H. Corporation, SWL Holding Corporation, Care Financial Corporation, or any
of their respective subsidiaries.
5.02 Seller Release. Seller, and Seller on behalf of the Seller
Indemnitees, hereby releases, terminates and forever discharges Buyer and SFC
(including their respective agents, representatives, employees, officers,
directors, partners, successors, assigns, transferees, subsidiaries, parents
and corporate or other affiliates) from any and all claims, debts, liens,
demands, liabilities, obligations, promises, acts, agreements, costs and
expenses (including, but not limited to, attorneys' fees), contracts,
controversies, guarantees, damages, judgments, and causes of action of any
nature or kind whatsoever, whether known or unknown, suspected or unsuspected,
asserted or unasserted, now existing or arising in the future, concerning or
relating to the transactions contemplated by, or indemnities arising out of,
the Purchase Agreement, the Escrow Agreement and the Note or arising out of the
performance by Buyer's affiliates of their obligations with respect to a policy
claim asserted by Xxxx Xxxxxx against Bankers Multiple Line, Inc. in Arizona;
provided, however, that the foregoing release shall not apply to any breach by
Buyer or SFC of the terms of this Agreement.
5.03 General. The terms of this Article 5 are contractual, not a
mere recital, and are the result of negotiations among the parties to this
Agreement. The parties acknowledge that this
- 3 -
NOTE PURCHASE, RELEASE AND SETTLEMENT AGREEMENT
4
Agreement is executed voluntarily and without duress or undue influence. The
releases set forth in this Article 5 and the timely release of the Escrowed
Funds constitute a material part of the consideration to be received by each
party hereto for its obligations hereunder.
ARTICLE 6.
COVENANTS
6.01 Continuing Compliance. Buyer and SFC agree (a) to execute and
deliver to the Escrow Agent under the Escrow Agreement all documents necessary
or desirable to cause the timely release of the Escrowed Funds as soon as
practicable including, without limitation, the certificate set forth in Exhibit
A hereto, and (b) not to take or fail to take any action which would impede or
delay the release of the Escrowed Funds.
6.02 General Compliance. Each party hereto agrees to use its best
efforts to cause the conditions which are subject to its control to be
satisfied on the date of the Closing.
ARTICLE 7.
INDEMNITY
7.01 Buyer Indemnity. Buyer shall defend, indemnify and hold
harmless Seller, its managing trustee, supervisory trustees, agents,
representatives, employees, officers, successors, assigns, transferees,
subsidiaries, parents and other affiliates of Seller against any claim or
expense that is asserted by a Buyer Indemnitee which has not delivered a
release pursuant to Section 5.01 and which claim would have been released
pursuant to Section 5.01 if it had been asserted by Buyer or SFC; provided,
however, that Section 7.01 shall not apply to any claim described in Section
5.01(ii) of this Agreement.
7.02 Seller Indemnity. Seller shall defend, indemnify and hold
harmless Buyer, its agents, representatives, employees, officers, successors,
assigns, transferees, subsidiaries, parents and other affiliates of Buyer
against any claim or expense that is asserted by a Seller Indemnitee which has
not delivered a release pursuant to Section 5.02 and which claim would have
been released pursuant to Section 5.02 if it had been asserted by Seller.
ARTICLE 8.
MISCELLANEOUS
8.01 Amendment. No amendment or waiver of any provision of this
Agreement shall in any circumstance be effective unless the same shall be in
writing and signed by the parties to this Agreement and then such amendment,
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
8.02 No Waiver; Remedies. No failure on the part of a party to
exercise, and no delay on the part of a party in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
- 4 -
NOTE PURCHASE, RELEASE AND SETTLEMENT AGREEMENT
5
8.03 Costs and Expenses. Each party shall be responsible for its
own fees and expenses in connection with the negotiation, closing and
performance of the transactions contemplated hereby.
8.04 Binding Effect; Governing Law. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns. This Agreement shall be governed by, and construed in
accordance with, the substantive, internal laws of the State of Texas without
giving reference to principles of conflicts of law.
8.05 Execution. This Agreement may be executed in one or more
counterparts, which together shall constitute but one and the same instrument.
It shall not be necessary for each party to sign each counterpart so long as
each party has signed at least one counterpart. If any party delivers a
facsimile signature of this Agreement, such facsimile signature shall be fully
binding on such party but such party shall promptly deliver a manually executed
original of its execution of this Agreement.
8.06 Arbitration. In the event of any claim, controversy or
dispute arising out of or relating to this Agreement that cannot be resolved by
the parties, such claim, controversy or dispute shall be determined solely and
exclusively by arbitration in accordance with the rules of the American
Arbitration Association. Any such arbitration proceedings shall be held in
Dallas, Texas. Judgment upon any award may be entered in any court having
jurisdiction thereof.
[SIGNATURES ON NEXT PAGE]
- 5 -
NOTE PURCHASE, RELEASE AND SETTLEMENT AGREEMENT
6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers or trustee thereunto duly authorized,
as of the date first above written.
LONE STAR LIQUIDATING TRUST
By: /s/ XXXXX X. XXXXX
-----------------------------------------
Xxxxx X. Xxxxx
Managing Trustee
PENNCORP FINANCIAL GROUP, INC.
By: /s/ XXXXX X. XXXXXXXXX
-----------------------------------------
Its: Senior Vice President
----------------------------------------
SOUTHWESTERN FINANCIAL CORPORATION
By: /s/ XXXXX X. XXXXXXXXX
-----------------------------------------
Its: Senior Vice President
----------------------------------------
7
SCHEDULE 4.02
POTENTIAL INDEMNIFICATION CLAIMS
1. Claims relating to "Vanishing Premium" allegations in
connection with insurance policies sold by the Acquired Companies.
2. Claims of I.C.H. Corporation which may be acquired by Xxxxxx
Xxxx or his affiliates.
NOTE PURCHASE, RELEASE AND SETTLEMENT AGREEMENT
8
EXHIBIT A
LONE STAR LIQUIDATING TRUST
AND
SOUTHWESTERN FINANCIAL CORPORATION
CERTIFICATE FOR RELEASE OF
FUNDS IN ESCROW ACCOUNT
The undersigned, a duly authorized officer and trustee, respectively, of
Southwestern Financial Corporation, a Delaware corporation (the "Buyer"), and
Lone Star Liquidating Trust as successor to the rights of I.C.H. Corporation
(the "Seller") hereby certify, with reference to the Escrow Agreement (the
"Escrow Agreement"), dated as of December 13, 1995, among the Seller,
Facilities Management Installation, Inc., SWL Holding Corporation, Care
Financial Corporation, the Buyer and the Escrow Agent, as follows (capitalized
terms used herein without definition having the respective meanings specified
in the Escrow Agreement):
(1) The conditions set forth in Section 8.2(c) of the Purchase
Agreement for release of all funds in the Escrow Account to the Seller
have been satisfied.
(2) The sum of all amounts now remaining in the Escrow Account
is as follows: approximately $39,174,924.61.
(3) The amount of all pending claims by Buyer and Buyer Indemnities
against the Seller or any Selling Subsidiary for indemnification under the
Purchase Agreement is as follows: $0.00.
(4) The amount to be released to the Seller from the Escrow Account
under Section 3(a) of the Escrow Agreement pursuant to this certificate is
approximately $39,174,924.61 (less any unpaid fees and expenses of the
Escrow Agent) which represents the sum of the amount specified in
paragraph 2, minus the amount specified in paragraph 3.
(5) The amount requested to be paid pursuant to this Certificate is
to be transferred by wire transfer of immediately available funds to Lone
Star Liquidating Trust's account at Bank One Texas, Dallas, Texas (ABA
Routing Number 000000000), Account Number 1822928030.
[SIGNATURES ON NEXT PAGE]
9
IN WITNESS WHEREOF, the Buyer and the Seller have executed and delivered
this Certificate as of the ___ day of _____________, 1997.
LONE STAR LIQUIDATING TRUST
By:
-----------------------
Xxxxx X. Xxxxx
Managing Trustee
SOUTHWESTERN FINANCIAL
CORPORATION
By:
-----------------------------
Name:
----------------------
Title:
---------------------
2
