<PAGE>

                                                                    EXHIBIT 10.4

                             EMPLOYMENT AGREEMENT
                             --------------------


     THIS EMPLOYMENT AGREEMENT is made and entered into effective as of the
13/th/ day of June, 2000, by and between SOUTHWESTERN LIFE HOLDINGS, INC., a
Delaware corporation (the "Company"), and STEVE R. JOHNSON, whose address is The
Park at Turtle Creek, 3355 Blackburn, #4405, Dallas, Texas 75204 ("Executive").

     In consideration of the premises and the mutual covenants herein contained
and other good and valuable consideration, the parties hereto agree as follows:

                                   ARTICLE I

     1.   Grant of Common Stock
          ---------------------

          (a)  On the date of this Agreement, the Company issues and grants to
     Executive, and Executive receives, 50,000 shares of the Company's common
     stock, par value $0.01 per share, (the "Common Stock").  The Company shall
                                             ------------
     effect the transfer of the shares of Common Stock granted to Executive
     pursuant to this section as soon as practicable after the date hereof by
     causing the Company's stock transfer agent to issue in Executive's name a
     certificate(s) for the number of shares granted to Executive pursuant to
     this section, such shares to be registered in Executive's name upon the
     stock records of the Company.

          (b)  The transfer and delivery of the shares will have income tax
     consequences to Executive. EXECUTIVE AGREES TO BE SOLELY RESPONSIBLE FOR
     THE PAYMENT OF ANY AND ALL FEDERAL, STATE AND LOCAL TAXES PAYABLE BY
     EXECUTIVE DUE TO THE GRANT AND RECEIPT OF THE SHARES PROVIDED FOR IN THIS
     SECTION. FURTHER, THE COMPANY SHALL NOT BE OBLIGATED TO DELIVER ANY
     CERTIFICATE OF SHARES UNLESS AND UNTIL EXECUTIVE HAS TENDERED TO THE
     COMPANY THE ENTIRE CASH SUM, IF ANY, TO PAY ANY TAX OWED BY EXECUTIVE AS A
     RESULT OF THE GRANT PURSUANT TO THIS SECTION IF THE COMPANY HAS OR MAY HAVE
     A LEGAL LIABILITY TO SATISFY SUCH TAX.

          (c)  Reference is hereby made to that certain Registration Agreement
     dated on or about the date of this Agreement between, among others, the
     Company and Executive with respect to certain registration rights
     respecting the shares of Common Stock issued and granted to Executive
     pursuant to this Section.

     2.   Grant of Option.
          ---------------
<PAGE>

          (a)  Effective as of the date of this Agreement (the "Date of Grant"),
                                                                -------------
     the Company hereby grants to Executive the right and option to purchase, at
     the time and on the terms and conditions set forth in this Agreement,
     150,000 shares of the Common Stock (the "Option Shares") at the purchase
                                              -------------
     price of  Twelve and 50/100 Dollars  ($12.50) per share (the "Exercise
                                                                   --------
     Price").  The Option provided for in this Agreement is to be treated as a
     -----
     Nonqualified Stock Option.

          (b)  The Option may be exercised only to the extent it has vested in
     the Option Shares in accordance with the schedule set forth below.  All
     Option Shares in which the Option has vested are referred to herein "Vested
                                                                          ------
     Options;" all other Option Shares are referred to here in "Unvested
     -------                                                    --------
     Options."  Subject to the terms and provisions of this Agreement, the
     Option will vest in the cumulative percentage of Option Shares set forth
     opposite each date in the following schedule so long as Executive is, and
     has been, continuously employed by the Company from the date of this
     Agreement through such date:

                                                     Cumulative Percentage
          Anniversary Date of Grant                    of Vested Options
          -------------------------                    -----------------

               First                                           0%
               Second                                         20%
               Third                                          50%
               Fourth                                        100%



          (c)  The Option shall be vested in 100% of the Option Shares,
     immediately upon the occurrence of any of the following events: (A)
     Executive's employment with the Company is terminated without good cause
     (as defined below) or (B) a Change in Control (as defined below) occurs.

          (d)  If Executive's employment with the Company is terminated for any
     reason other than (A) Executive's death, (B) Executive's permanent
     disability (as defined below) or (C) for good cause, the Option, to the
     extent exercisable in Vested Options as of the date of such termination,
     must be exercised if at all by Executive not later than the sixtieth
     (60/th/) day following the date of such termination.  Any Vested Options to
     which Executive has not exercised the Option as of the sixtieth (60/th/)
     day following the date of such termination shall expire and be void.  All
     rights to Unvested Options will terminate, expire and be void on the date
     of such termination.

          (e)  If Executive's employment with the Company is terminated for good
     cause, the Option as to all Vested Options and Unvested Options shall
     automatically expire and terminate as of the date of the termination of
     Executive's employment.

                                      -2-
<PAGE>

          (f)  If Executive's employment with the Company is terminated by death
     or permanent disability, the Option, to the extent not previously expired
     or exercised, shall, to the extent otherwise exercisable in Vested Options
     at the date of Executive's death or permanent disability, be exercisable by
     the estate of Executive or by any person who acquired the Option by bequest
     or inheritance, or, in the case of permanent disability, by Executive or
     Executive's duly appointed guardian or legal representative, at any time
     within one (1) year after the date of the death or permanent disability of
     Executive.

          (g)  Notwithstanding anything to the contrary in this Agreement, the
     Option, as to all Vested Options and Unvested Options, shall expire and be
     null and void as of the tenth (10/th/) annual anniversary of the Grant
     Date.

          (h)  Executive may exercise all or any portion of Vested Options at
     any time and from time to time prior the expiration of the Option by
     delivering written notice to the Company setting forth the number of Vested
     Options with respect to which the Option is being exercised. The payment of
     the Exercise Price of an Option shall be subject to the following:

          (1)  The full Exercise Price for shares of Common Stock purchased upon
               the exercise of any Option shall be paid at the time of such
               exercise (except that, in the case of an exercise arrangement
               approved by the Board of Directors and described in clause (3)
               below, payment may be made as soon as practicable after the
               exercise).

          (2)  The exercise price shall be payable in cash (including a check
               acceptable to the Company, bank draft or money order) or by
               tendering, by either actual delivery of shares or by attestation,
               shares of the Company's Common Stock having a total fair market
               value as of the day of exercise equal to the full Exercise Price,
               or any combination thereof, as determined by the Board of
               Directors.

          (3)  The Board of Directors may permit Executive to elect to pay the
               Exercise Price upon the exercise of the Option by irrevocably
               authorizing a third party to sell shares of the Company's Common
               Stock (or a sufficient portion of the shares) acquired upon
               exercise of the Option and remit to the Company  a sufficient
               portion of the sale proceeds to pay the entire exercise price and
               any tax withholding resulting from such exercise.

     The right of Executive to pay for any Option Share pursuant to clauses (2)
     or (3) above shall be subject to the Board of Directors determination that
     to do so does not violate in any respect any provision of the Securities
     Exchange Act of 1934 or any rules and regulations adopted pursuant thereto.
     In no event may the Option be exercised for a fraction of any

                                      -3-
<PAGE>

     Option Share. The Company shall effect the transfer of Option Shares
     purchased pursuant to the Option as soon as practicable, and, within a
     reasonable time thereafter, such transfer shall be evidenced on the books
     of the Company.

          (i)  The Company shall not be required to issue or deliver any
     certificates for Option Shares purchased upon the exercise of the Option
     prior to: (i) the obtaining of any approval from any governmental agency
     which the Company shall, in its sole discretion, determine to be necessary
     or advisable; (ii) the completion of any registration or other
     qualification of such Option Shares under any state or federal law or
     ruling or regulation of any governmental body which the Company shall, in
     its sole discretion, determine to be necessary or advisable; and (iii) the
     determination by the Company that Executive has tendered to the Company the
     full purchase price plus federal, state or local tax, if any, owed by
     Executive as a result of exercising the Option. In addition, if Option
     Shares reserved for issuance upon the exercise of the Option shall not then
     be registered under the Securities Act of 1933, as amended (the "Act"), the
     Company may, upon Executive's exercise of the Option, require Executive or
     his permitted transferee to represent in writing that the Option Shares
     being acquired are for investment and not with a view to distribution, and
     may mark the certificate for the Option Shares with a legend restricting
     transfer and may issue stop transfer orders relating to such certificate to
     the Company's transfer agent.

          (j)  In connection with the exercise of the Option by Executive and,
     as a condition to the Company's obligation to deliver Option Shares upon
     exercise of the Option, Executive shall make arrangements satisfactory to
     the Company to insure that the amount of federal, state or local
     withholding tax, if any, required to be withheld with respect to delivery
     of the Option Shares is made available by Executive for timely payment of
     the tax by the Company to the appropriate taxing authority.

          (k)  Without the prior written consent of the Board of Directors of
     the Company, the Option shall not be assignable or transferable by
     Executive, other than by will or the laws of descent and distribution, and
     may be exercised during the life of Executive only by Executive or his duly
     appointed guardian or legal representative. Any attempted assignment,
     transfer, pledge, hypothecation, or other disposition of the Option
     contrary to the provisions hereof, or the levy of any execution,
     attachment, or similar process upon the Option shall be null and void and
     without effect.

          (l)  The Option Shares with respect to which the Option is granted are
     shares of the Common Stock as presently constituted, but if, and whenever,
     prior to the delivery by the Company of all the Option Shares with respect
     to which the Option is granted, the Company shall effect a subdivision or
     consolidation of shares or other capital readjustment, the payment of a
     stock dividend, or other increase or reduction of the number of shares of
     the Common Stock outstanding, without receiving compensation therefor in
     money, services or property, then (i) in the event of an increase in the
     number of such shares outstanding, the

                                      -4-
<PAGE>

     number of Option Shares then remaining subject to the Option hereunder
     shall be proportionately increased, and the Exercise Price shall be
     proportionately reduced; and (ii) in the event of a reduction in the number
     of such shares outstanding, the number of Option Shares then remaining
     subject to the Option hereunder shall be proportionately reduced, and the
     Exercise Price per share shall be proportionately increased.

          (m)  After a merger of one or more corporations into the Company, or
     after a consolidation of the Company and one or more corporations in which
     the Company shall be the surviving corporation, Executive shall, at no
     additional cost, be entitled upon any exercise of the Option, to receive
     (subject to any required action by shareholders) in lieu of the number of
     Option Shares as to which the Option shall then be exercisable, the number
     and class of shares of stock or other securities or cash or other property
     to which Executive would have been entitled pursuant to the terms of the
     agreement of merger or consolidation, as if immediately prior to such
     merger or consolidation Executive had been the holder of record of a number
     of shares of Common Stock equal to the number of Option Shares as to which
     such Option was exercisable; provided that, anything herein contained to
     the contrary notwithstanding, upon the dissolution or liquidation of the
     Company, or upon any merger or consolidation if the Company is not the
     surviving corporation, the Board of Directors of the Company shall
     determine the disposition of the Option.  The determination of whether the
     Company is the surviving corporation shall be made by the Board of
     Directors.

          (n)  Executive shall not be deemed for any purpose to be a shareholder
     of the Company in respect of any Option Shares as to which the Option shall
     not have been exercised, as herein provided, and until such shares shall
     have been issued to Executive by the Company hereunder.

          (o)  The existence of the Option shall not affect in any way the right
     or power of the Company or its shareholders to make or authorize any or all
     adjustments, recapitalizations, reorganizations or other changes in the
     Company's capital structure or its business, or any merger or consolidation
     of the Company, or any issue of bonds, debentures, preferred or prior
     preference stock ahead of or affecting the Option Shares or the rights
     thereof, or the dissolution or liquidation of the Company, or any sale or
     transfer of all or any part of its assets or business, or any other
     corporate act or proceeding, whether of a similar character or otherwise.

          (p)  Except as hereinbefore expressly provided, the issue by the
     Company of shares of stock of any class, or securities convertible into
     shares of stock of any class, for cash, property, labor or services, either
     upon direct sale, upon the exercise of rights or warrants to subscribe
     therefor, or upon conversion of shares or obligations of the Company
     convertible into such shares or other securities, shall not affect, and no
     adjustment by reason thereof shall be made with respect to, the number or
     price of shares of Common Stock subject to the Option.

                                      -5-
<PAGE>

          (q)  Any payment or any issuance or transfer of Shares to Executive or
     to his legal representative, heir, legatee or distributee, in accordance
     with the provisions hereof, shall, to the extent thereof, be in full
     satisfaction of all claims of such persons under this Article I.  The Board
     of Directors of the Company may require Executive and any such legal
     representative, heir, legatee or distributee, as a condition precedent to
     such payment, issuance or transfer, to execute a release and receipt
     therefor in such form as it shall determine.

          (r)  Neither the granting of the Option or the exercise of any part
     thereof, shall constitute or be evidence of any understanding, express or
     implied, on the part of the Company to continue the service of Executive
     for any specified period.  EXECUTIVE ACKNOWLEDGES AND AGREES THAT THE
     VESTING OF THE OPTION PURSUANT TO ARTICLE I HEREOF IS EARNED ONLY BY
     CONTINUING EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF
     BEING HIRED, BEING GRANTED THE OPTION OR ACQUIRING SHARES HEREUNDER).
     EXECUTIVE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS ARTICLE I
     CONFERS UPON EXECUTIVE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT
     BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH EXECUTIVE'S RIGHT OR
     THE COMPANY'S RIGHT TO TERMINATE EXECUTIVE'S EMPLOYMENT AT ANY TIME, WITH
     OR WITHOUT CAUSE, SUBJECT TO THE TERMS OF ARTICLE II OF THIS AGREEMENT.

          (s)  EXECUTIVE ACKNOWLEDGES THAT HE IS AWARE THAT THE EXERCISE OF THE
     OPTION WILL HAVE INCOME TAX CONSEQUENCES TO EXECUTIVE. EXECUTIVE FURTHER
     ACKNOWLEDGES THAT HE HAS HAD AN OPPORTUNITY TO CONSULT WITH TAX, ACCOUNTING
     AND LEGAL ADVISORS OF HIS OWN CHOOSING PRIOR TO EXECUTIVE'S EXECUTION OF
     THIS AGREEMENT. EXECUTIVE ASSUMES ALL RISKS AND FINANCIAL AND TAX
     CONSEQUENCES TO EXECUTIVE OF THE EXERCISE OF THE OPTION.

                                      -6-
<PAGE>

                                  ARTICLE II

     1.   Employment. The Company hereby employs Executive, and Executive
          ----------
hereby accepts such employment, upon the terms and subject to the conditions set
forth in this Agreement.

     2.   Term.
          ----

     The term of employment under this Agreement shall commence on date hereof
and shall continue until Executive's employment is terminated, subject to the
terms of this Article II, pursuant to Sections 7 or 8 of this Article II.

     3.   Compensation; Reimbursement; etc.
          ---------------------------------

     (a)  The Company shall pay to Executive as compensation for all services
rendered by Executive during the term of this Agreement a basic annualized
salary of $260,000.00 per year (the "Basic Salary"), or such other sums as the
Board of Directors of the Company and Executive may agree on from time to time,
payable monthly or in other more frequent installments, as determined by the
Company, subject to all standard withholding practices and procedures of the
Company.  The Board of Directors of the Company shall have the right to increase
Executive's compensation from time to time by action of the Board of Directors.
The Board of Directors of the Company, in its discretion, may, with respect to
any year during the term hereof, award a bonus or bonuses to Executive. For
purposes hereof, Executive's target bonus for the year 2000 is $200,000.00.  The
compensation provided for in this Section 3(a) shall be in addition to any
401(k), pension or profit sharing payments set aside or allocated for the
benefit of Executive.

     (b)  The Company shall reimburse Executive for all reasonable expenses
incurred by Executive in the performance of his duties under this Agreement;
provided, however, that Executive must furnish to the Company an itemized
account, satisfactory to the Company, in substantiation of such expenditures.

     (c)  Executive shall be entitled to such fringe benefits including, but not
limited to, medical and insurance benefits as may be provided from time to time
by the Company to other senior officers of the Company.

     (d)  In addition to all other compensation provided for in this Agreement,
the Company shall pay to Executive in cash on the date hereof, subject to all
standard withholding practices and procedures of the Company, a one-time special
bonus in the amount of $500,000.00.

     4.   Duties.  Executive is engaged as the President and Chief Operating
          ------
Officer of the Company.  In addition, Executive shall have such other duties,
responsibilities and authority and hold such other offices as may from time to
time be reasonably assigned to him by the Board of Directors of the Company and
be subject to the power of the Board of Directors to limit such duties,

                                      -7-
<PAGE>

responsibilities and authority and to override actions of Executive.

     5.   Extent of Services; Vacations and Days Off.
          ------------------------------------------

     (a)  During the term of his employment under this Agreement, Executive
shall devote full time, energy and attention during regular business hours to
the benefit and business of the Company and its subsidiaries as may be
reasonably necessary in performing his duties pursuant to this Agreement.

     (b)  Executive shall be entitled to vacations with pay and to such personal
and sick leave with pay in accordance with the policy of the Company as may be
established from time to time by the Company and applied to other senior
officers of the Company.

     6.   Facilities.  The Company shall provide Executive with a fully
          ----------
furnished office, and the facilities of the Company shall be generally available
to Executive in the performance of his duties pursuant to this Agreement; it
being understood and contemplated by the parties that all equipment, supplies
and office personnel required for performance of Executive's duties under this
Agreement shall be supplied by Company.

     7.   Illness or Incapacity, Termination on Death, Etc.
          -------------------------------------------------

     (a)  If Executive dies during the term of his employment, the Company shall
pay to the estate of Executive such compensation, including any bonus
compensation earned but not yet paid, as would otherwise have been payable to
Executive prorated to the end of the month in which his death occurs. The
Company shall have no additional financial obligation under this Article II to
Executive or his estate. After receiving the payments provided in this
subparagraph (a), Executive and his estate shall have no further rights under
this Article II.

     (b)  (i)   During any period of disability, illness or incapacity during
the term of this Agreement which renders Executive at least temporarily unable
to perform the services required under this Agreement for a period which shall
not equal or exceed ninety (90) continuous days, or ninety (90) continuous days
in any one (1) year period, Executive shall receive the compensation payable
under Section 3(a) of this Agreement plus any bonus compensation earned but not
yet paid, less any benefits received by him under any disability insurance
carried by or provided by the Company. All rights of Executive under this
Article II (other than rights already accrued) shall terminate as provided below
upon Executive's permanent disability (as defined below), although Executive
shall continue to receive any disability benefits to which he may be entitled
under any disability income insurance which may be carried by or provided by the
Company from time to time.

          (ii) The term "permanent disability" as used in this Agreement shall
mean the inability of Executive, as determined by the Board of Directors of the
Company, by reason of physical or mental disability to perform the duties
required of him under this Agreement for a period

                                      -8-
<PAGE>

of more than ninety (90) days in any one-year period. Successive periods of
disability, illness or incapacity will be considered separate periods unless the
later period of disability, illness or incapacity is due to the same or related
cause and commences less than six months from the ending of the previous period
of disability. Upon such determination, the Board of Directors may terminate
Executive's employment under this Agreement upon ten (10) days' prior written
notice. If any determination of the Board of Directors with respect to permanent
disability is disputed by Executive, the parties hereto agree to abide by the
decision of a panel of three physicians. Executive and Company shall each
appoint one member, and the third member of the panel shall be appointed by the
other two members. Executive agrees to make himself available for and submit to
examinations by such physicians as may be directed by the Company. Failure to
submit to any such examination shall constitute a breach of a material part of
this Agreement.

     8.   Other Terminations.
          ------------------

     (a)  Executive may terminate his employment hereunder upon written notice
to the Board of Directors, and upon such termination the Company shall pay to
Executive the Basic Salary earned but not paid to Executive prior to the
effective date of such termination. Under such circumstances, such payment shall
be in full and complete discharge of any and all liabilities or obligations of
the Company to Executive under this Article II, and Executive shall be entitled
to no further benefits under this Article II; provided that, notwithstanding
such termination of employment, Executive's covenants set forth in Section 10
and Section 11 of this Article II are intended to and shall remain in full force
and effect. In addition, Executive shall have the right to terminate his
employment hereunder on the conditions and at the times provided for in Section
8(d) of the Agreement.

     (b)  (i)  Except as otherwise provided in this Agreement, the Company may
terminate the employment of Executive hereunder only for good cause.

          (ii) As used herein, "good cause" shall include any one or more of the
following:

               (1)  Executive's commission of either a felony involving moral
turpitude or any crime in connection with his employment by the Company which
causes the Company or its subsidiaries a substantial detriment, but specifically
shall not include traffic offenses.

               (2)  Actions by Executive as an executive officer of the Company
which clearly are contrary to the best interests of the Company or its
subsidiaries.

               (3)  Executive's willful failure to take actions permitted by law
and necessary to implement policies of the Company's Board of Directors which
the Board of Directors has communicated to him in writing, provided that minutes
of a Board of Directors meeting attended in its entirety by Executive shall be
deemed communicated to Executive.

               (4)  Executive's continued failure to attend to his duties as an
executive

                                      -9-
<PAGE>

officer of the Company.

                (5)  Any condition which either resulted from Executive's
substantial dependence, as determined by the Board of Directors of the Company,
on alcohol, or any narcotic drug or other controlled or illegal substance. If
any determination of substantial dependence is disputed by Executive, the
parties hereto agree to abide by the decision of a panel of three physicians
appointed in the manner and subject to the same penalties for noncompliance as
specified in Section 7(b)(ii) of this of this Article II.

          (iii) Termination of the employment of Executive for reasons other
than those expressly specified in this Agreement as good cause shall be deemed
to be a termination of employment "without good cause."

     (c)  (i)   If the Company shall terminate the employment of Executive
without good cause (with the effective date of termination as so identified by
the Company being referred to herein as the "Accelerated Termination Date"),
Executive, until the date which is six (6) months after the Accelerated
Termination Date, shall continue to receive the Basic Salary and employee
benefits that the Company has heretofore in Section 3 of this Article II agreed
to pay and to provide for Executive, in each case in the amount and kind and at
the time provided for in Section 3 of this Article II; provided that,
notwithstanding such termination of employment, Executive's covenants set forth
in Section 10 and Section 11 of this Article II are intended to and shall remain
in full force and effect.

          (ii)  The parties agree that, because there can be no exact measure of
the damage that would occur to Executive as a result of a termination by the
Company of Executive's employment without good cause, the payments and benefits
paid and provided pursuant to this Section 8(c) shall be deemed to constitute
liquidated damages and not a penalty for the Company's termination of
Executive's employment without good cause.

     (d)  (i)   If a Change in Control of the Company, as defined in Section
8(d)(ii) of this Article II shall occur and Executive shall:

                (1) voluntarily terminate his employment within six (6) months
following such Change in Control and such termination shall be as a result of
Executive's good faith determination that as a result of the Change in Control
and a change in circumstances thereafter significantly affecting his position,
he can no longer adequately exercise the authorities, powers, functions or
duties attached to his position as an executive officer of the Company; or

                (2) voluntarily terminate his employment within six (6) months
following such Change in Control, and such termination shall be as a result of
Executive's good faith determination that he can no longer perform his duties as
an executive officer of the Company by reason of a substantial diminution in his
responsibilities, status or position; or

                                     -10-
<PAGE>

                (3) have his employment terminated by the Company for reasons
other than those specified in Section 8(b)(ii) of this Article II within six (6)
months following such Change in Control;

then in any of the above three cases, Executive shall have the right to
immediately terminate his employment with the Company and have a nonforfeitable
right to receive, payable in a lump sum, the sum of the monthly amounts of his
Basic Salary for a period equal to six (6) months; provided, however, no
payments or benefits pursuant to this Section, together with any other payments
to Executive under this Agreement or otherwise, shall cause the total of such
payments to exceed the maximum amount allowable as a deduction to the Company
for federal income tax purposes, as may be determined in the reasonable
discretion of the Company, under any applicable provision of law or regulations.

          (ii)  For purposes of this Agreement, a "Change in Control" shall
mean:

                (1) the obtaining by any party other than (A) Inverness/Phoenix
Capital, LLC, a Delaware limited liability company, or any of its affiliates,
(B) Bernard Rapoport or any of his heirs or beneficiaries or affiliates, or (C)
John T. Sharpe or any of his heirs or beneficiaries or affiliates of fifty
percent (50%) or more of the voting shares of the Company pursuant to a "tender
offer" for such shares as provided under Rule 14d-2 promulgated under the
Securities Exchange Act of 1934, as amended, or any subsequent comparable
federal rule or regulation governing tender offers; or

                (2) individuals who were members of the Company's Board of
Directors immediately prior to any particular meeting of the Company's
shareholders which involves a contest for the election of directors fail to
constitute a majority of the members of the Company's Board of Directors
following such election; or

                (3) the Company's executing an agreement concerning the sale of
substantially all of its assets to a purchaser which is not a subsidiary; or

                (4) the Company's adoption of a plan of dissolution or
liquidation; or

                (5) the Company's executing an agreement concerning a merger or
consolidation involving the Company in which the Company is not the surviving
corporation or if, immediately following such merger or consolidation, less than
fifty percent (50%) of the surviving corporation's outstanding voting stock is
held by persons who are stockholders of the Company immediately prior to such
merger or consolidation.

          (iii) The provisions of Section 8(c) of this Article II and this
Section 8(d) are mutually exclusive, provided, however, that if within one year
following commencement of a payout under Section 8(c) of this Article II there
shall be a Change in Control as defined in Section 8(d)(ii)

                                     -11-
<PAGE>

of this Article II, then Executive shall be entitled to the amount payable to
Executive under Section 8(d)(i) of this Article II reduced by the amount that
Executive has received under Section 8(c) of this Article II up to the date of
the Change in Control. The triggering of the lump sum payment requirement of
this Section 8(d) shall cause the provisions of Section 8(c) of this Article II
to become inoperative. The triggering of the continuation of payment provisions
of Section 8(c) of this Article II shall cause the provisions of Section 8(d) of
this Article II to become inoperative except to the extent provided in this
Section 8(d)(iii).

     (e)  If the employment of Executive is terminated for good cause under
Section 8(b)(ii) of this Article II, or if Executive voluntarily terminates his
employment by written notice to the Company under Section 8(a)of this Article II
without reliance on Section 8(d), the Company shall pay to Executive the Basic
Salary earned but not paid to Executive prior to the effective date of such
termination.  Under such circumstances, such payment shall be in full and
complete discharge of any and all liabilities or obligations of the Company to
Executive under this Article II, and Executive shall be entitled to no further
benefits under this Article II.

     9.   Disclosure.  Executive agrees that during the term of his employment
          ----------
by the Company, he will disclose and disclose only to the Company and its
subsidiaries all ideas, methods, plans, developments or improvements known by
him which relate directly or indirectly to the business of the Company and its
subsidiaries, whether acquired by Executive before or during his employment by
the Company.  Nothing in this Section 9 shall be construed as requiring any such
communication where the idea, plan, method or development is lawfully protected
from disclosure as a trade secret of a third party or by any other lawful
prohibition against such communication.

     10.  Confidentiality.  Executive agrees to keep in strict secrecy and
          ---------------
confidence any and all information Executive assimilates or to which he has
access during his employment by the Company and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Company and its subsidiaries.  Executive agrees that both during and after the
term of his employment by the Company, he will not, without the prior written
consent of the Company, disclose any such confidential information to any third
person, partnership, joint venture, company, corporation or other organization.

     11.  Noncompetition and Nonsolicitation.
          ----------------------------------

     Executive hereby acknowledges that, during and solely as a result of his
employment by the Company, he has received and shall continue to receive access
to confidential information and business and professional contacts.  In
consideration of the special and unique opportunities afforded to Executive by
the Company as a result of Executive's employment, as outlined in the previous
sentence, Executive hereby agrees as follows:

     (a)  During the term of Executive's employment, whether pursuant to this
Agreement, any automatic or other renewal hereof or otherwise, and, except as
may be otherwise herein provided,

                                     -12-
<PAGE>

for a period of six (6) months after the termination of his employment with the
Company, regardless of the reason for such termination, Executive shall not,
directly or indirectly, enter into, engage in, be employed by or consult any
business which competes with the business of the Company or its subsidiaries by
selling, offering to sell, soliciting offers to buy, or producing, or by
consulting with others concerning the selling or producing of, any product
substantially similar to those now sold or produced by the Company or its
subsidiaries or included in the product lines then developed by the Company or
its subsidiaries for sale production, or by engaging in transactions with any
person who was a vendor of merchandise to the Company or its subsidiaries;
provided that the restriction on the ability to deal with a vendor shall not
apply to dealing with any vendor from whom the Company and its subsidiaries has
not purchased or is not expected to purchase in excess of $25,000.00 of
merchandise in any one fiscal year. Executive shall not engage in such
prohibited activities, either as an individual, partner, officer, director,
stockholder, employee, advisor, independent contractor, joint venturer,
consultant, agent, or representative or salesman for any person, firm,
partnership, corporation or other entity so competing with the Company or its
subsidiaries. The restrictions of this Section 11 shall not be violated by (i)
the ownership of no more than 2% of the outstanding securities of any company
whose stock is traded on a national securities exchange or is quoted in the
Automated Quotation System of the National Association of Securities Dealers
(NASDAQ), or (ii) other outside business investments that do not in any manner
conflict with the services to be rendered by Executive for the Company and its
subsidiaries and that do not diminish or detract from Executive's ability to
render his required attention to the business of the Company and its
subsidiaries.

     (b)  During his employment with the Company and, except as may be otherwise
herein provided, for a period of six (6) months following the termination of his
employment with the Company, regardless of the reason for such termination,
Executive agrees he will refrain from and will not, directly or indirectly, (1)
induce, solicit or attempt to induce or solicit any employee, advisor,
independent contractor, consultant, agent, representative salesman of the
Company or its subsidiaries to leave employ of the Company or its subsidiaries
or otherwise severe or terminate such person's business relationship with the
Company or its subsidiaries (including, but not limited to, making any negative
statements or communications about the Company or its subsidiaries), (2)
interfere with the business relationship between the Company or its subsidiaries
and any employee, advisor, independent contractor, consultant, agent,
representative or salesman of the Company or its subsidiaries or (3) hire,
contract with or otherwise engage the services of any employee, advisor,
independent contractor, consultant, agent, representative or salesman of the
Company or its subsidiaries for the benefit of any other person, or (5) accept
employment with or seek remuneration by any of the clients or customers of the
Company or its subsidiaries with whom the Company or its subsidiaries did
business during the term of Executive's employment.

     (c)  The period of time during which Executive is prohibited from engaging
in certain business practices pursuant to Sections 11(a) or (b) of this Article
II shall be extended by any length of time during which Executive is in breach
of such covenants.

                                     -13-
<PAGE>

     (d)  It is understood by and between the parties hereto that the foregoing
restrictive covenants set forth in Sections 11(a) through (c) of this Article II
are essential elements of this Agreement, and that, but for the agreement of
Executive to comply with such covenants, the Company would not have agreed to
enter into this Agreement.  Such covenants by Executive shall be construed as
agreements independent of any other provision in this Agreement.  The existence
of any claim or cause of action of Executive against the Company, whether
predicated on this Agreement, or otherwise, shall not constitute a defense to
the enforcement by the Company of such covenants.

     (e)  It is agreed by the Company and Employee that if any portion of the
covenants set forth in this Section 11 are held to be invalid, unreasonable,
arbitrary or against public policy, then such portion of such covenants shall be
considered divisible both as to time and geographical area. The Company and
Employee agree that, if any court of competent jurisdiction determines the
specified time period or the specified geographical area applicable to this
Section 11 to be invalid, unreasonable, arbitrary or against public policy, a
lesser time period or geographical area which is determined to be reasonable,
non-arbitrary and not against public policy may be enforced against Executive.
The Company and Executive agree that the foregoing covenants are appropriate and
reasonable when considered in light of the nature and extent of the business
conducted by the Company.

     12.  Specific Performance.  Executive agrees that damages at law will be an
          --------------------
insufficient remedy to the Company if Executive violates the terms of Sections
9, 10 or 11 of this Article II and that the Company would suffer irreparable
damage as a result of such violation.  Accordingly, it is agreed that the
Company shall be entitled, upon application to a court of competent
jurisdiction, to obtain injunctive relief to enforce the provisions of such
Sections, which injunctive relief shall be in addition to any other rights or
remedies available to the Company.  Executive agrees to pay to the Company all
costs and expenses incurred by the Company relating to the enforcement of the
terms of Sections 9, 10 or 11 of this Article II, including reasonable fees and
disbursements of counsel (both at trial and in appellate proceedings).

     13.  Compliance with Other Agreements.  Executive represents and warrants
          --------------------------------
that the execution of this Agreement by him and his performance of his
obligations hereunder will not conflict with, result in the breach of any
provision of or the termination of or constitute a default under any Agreement
to which Executive is a party or by which Executive is or may be bound.

     14.  Waiver of Breach.  The waiver by the Company of a breach of any of the
          ----------------
provisions of this Agreement by Executive shall not be construed as a waiver of
any subsequent breach by Executive.

     15.  Binding Effect; Assignment.  The rights and obligations of the Company
          --------------------------
under this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Company.  This Agreement is a personal employment
contract and the rights, obligations and

                                     -14-
<PAGE>

interests of Executive hereunder may not be sold, assigned, transferred, pledged
or hypothecated.

     16.  Entire Agreement.  This Agreement contains the entire agreement and
          ----------------
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof.  This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification or discharge is sought.

     17.  Construction and Interpretation.
          -------------------------------

     (a)  The corporate law of the State of Delaware shall govern all issues
concerning the relative rights of the Company and its stockholders.  All other
issues and questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be construed pursuant to and governed by
the laws of the State of Texas (but any provision of Texas law shall not apply
if the application of such provision would result in the application of the law
of a state or jurisdiction other than Texas).

     (b)  The headings of the various sections in this Agreement are inserted
for convenience of the parties and shall not affect the meaning, construction or
interpretation of this Agreement.

     (c)  Any provision of this Agreement which is determined by a court of
competent jurisdiction to be prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or non-authorization without invalidating the
remaining provisions hereof or affecting the validity, enforceability or
legality of such provision in any other jurisdiction.  In any such case, such
determination shall not affect any other provision of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect.
If any provision or term of this Agreement is susceptible to two or more
constructions or interpretations, one or more of which would render the
provision or term void or unenforceable, the parties agree that a construction
or interpretation which renders the term or provision valid shall be favored.

     18.  Notice.  All notices which are required or may be given under this
          ------
Agreement shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by telecopy or
similar electronic transmission method; one working day after it is sent, if
sent by recognized expedited delivery service; and five days after it is sent,
if mailed, first class mail, certified mail, return receipt requested, with
postage prepaid.  In each case notice shall be sent to:

     To the Company:  Southwestern Life Holdings, Inc.
                      717 North Hardwood Street
                      Dallas, Texas 75201
                      Attention: Chairman of the Board

                                     -15-
<PAGE>

     To Executive at his address herein first above written.

     19.  Venue; Process.  COURTS WITHIN THE STATE OF TEXAS SHALL HAVE
          --------------
JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN THE COMPANY AND EXECUTIVE ARISING
OUT OF OR RELATING TO THIS AGREEMENT, WHETHER IN LAW OR EQUITY, AND VENUE IN ANY
SUCH DISPUTE WHETHER IN FEDERAL OR STATE COURT SHALL BE LAID IN DALLAS COUNTY,
TEXAS.  The parties further agree that the mailing by certified or registered
mail, return receipt requested, of any process required by any such court shall
constitute valid and lawful service of process against them, without the
necessity for service by any other means provided by statute or rule of court.

       The remainder of this page is blank.  The signature page follows.

                                     -16-
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.

                                     COMPANY:

                                     SOUTHWESTERN LIFE HOLDINGS, INC., a
                                     Delaware corporation

                                     By: /s/ Bernard Rapoport
                                         _______________________________________

                                     Name: Bernard Rapoport
                                           _____________________________________

                                     Title: Chairman and Chief Executive Officer
                                            ____________________________________

                                     EXECUTIVE:


                                      /s/ Steve R. Johnson
                                     ___________________________________________
                                     STEVE R. JOHNSON


                                     -17-