Document:

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                                                                    EXHIBIT 10.2

                                                                       EXECUTION

                       SOUTHWESTERN LIFE HOLDINGS, INC.

                            REGISTRATION AGREEMENT
                            ----------------------

          THIS REGISTRATION AGREEMENT, dated as of June 13, 2000 (this
"Agreement"), is made by and among Southwestern Life Holdings, Inc. (f/k/a
 ---------
PennCorp Financial Group, Inc.), a Delaware corporation, (the "Company"),
                                                               -------
Inverness/Phoenix Partners, LP ("Inverness Fund"), Executive Capital Partners I,
                                 --------------
L.P. ("Executive Fund"), Bernard Rapoport ("Rapoport"), SLM Investment, L.P.
       --------------                       --------
("SLM"), Sharpe Taylor Investment, Ltd. ("Sharpe Taylor"), JTS Family Limited
  ---                                     -------------
Partnership #14 ("JTS"), John T. Sharpe ("Sharpe") and Steve R. Johnson
                  ---                     ------
("Johnson").  Inverness Fund and Executive Fund are referred to herein
  -------
collectively as the "Inverness Holders" and individually as a "Inverness
                     -----------------                         ---------
Holder".  SLM, Sharpe Talyor, JTS and Sharpe are referred to herein collectively
------
as the "Sharpe Holders" and individually as a "Sharpe Holder".   Except as
        --------------                         -------------
otherwise indicated, capitalized terms used herein are defined in Section 8
                                                                  ---------
hereof.

          The United States Bankruptcy Court, District of Delaware, has
confirmed the Joint Plan of Reorganization of PennCorp Financial Group, Inc. and
the Ad Hoc Committee of Preferred Stockholders under Chapter 11 of the
Bankruptcy Code (the "Plan") pursuant to which the Company will reconstitute its
                      ----
capital structure through the repayment of certain of its outstanding debt
obligations, exchange its existing preferred stock for Common Stock (as defined
herein), incur new debt obligations and sell newly-issued Common Stock on the
terms and subject to the conditions set forth in the Plan (the
"Recapitalization").
 ----------------

          In connection with the Recapitalization, (i) the Inverness Holders,
Vicuna Advisors LLC ("Vicuna") and the Company entered into a Standby Commitment
                      ------
Letter dated March 22, 2000 (the "Standby Commitment Letter") pursuant to which
                                  -------------------------
the Inverness Holders and Vicuna agreed to purchase shares of Common Stock not
otherwise purchased by holders of Rights pursuant to the Rights Offering (as
defined in the Plan), (ii) Rapoport and the Sharpe Holders entered into a
Subscription Agreement dated as of the date hereof (the "Subscription
                                                         ------------
Agreement") pursuant to which Rapoport and the Sharpe Holders agreed to purchase
---------
shares of Common Stock and (iii) Johnson entered into an Executive Stock and
Employment Agreement dated as of the date hereof (the "Johnson Agreement").
                                                       -----------------

          The parties hereto agree as follows:

          Section 1.  Demand Registrations.
                      --------------------

          (a) Requests for Registration.  At anytime after six months from the
              -------------------------
date hereof, and from time to time, after the date hereof, each of the holders
of a majority of the Inverness Registrable Securities, holders of a majority of
the Rapoport Registrable Securities and holders of a majority of the Sharpe
Registrable Securities may request one registration under the Securities Act
<PAGE>

of all or any portion of its Registrable Securities on Form S-1 or any similar
long-form registration ("Long-Form Registrations"). In addition to the Long-
                         -----------------------
Form Registrations provided pursuant to this Section 1(a), any holder of
                                             ------------
Registrable Securities then outstanding may request unlimited registrations
under the Securities Act of all or any portion of their Registrable Securities
on Form S-3 or any similar short-form registration ("Short-Form Registrations").
                                                     ------------------------
All registrations requested pursuant to this Section 1(a) are referred to herein
                                             ------------
as "Demand Registrations".
    --------------------

          All requests for Demand Registrations shall be made by giving written
notice to the Company (the "Demand Notice").  Each Demand Notice shall specify
                            -------------
the approximate number of Registrable Securities requested to be registered and
the anticipated per share price range for such offering.  Within ten days after
receipt of any Demand Notice, the Company shall give written notice of such
requested registration to all other holders of Registrable Securities and,
subject to the provisions of Section 1(d) below, shall include in such
                             ------------
registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 15 days after the receipt
of the Company's notice.

          (b)  Expenses; Withdrawal.  The Company shall pay all Registration
               --------------------
Expenses of all holders of Registrable Securities in all Demand Registrations.
A registration shall not count as the permitted Long-Form Registration until
both (i) it has become effective and (ii) the holders requesting such
registration are able to register and sell at least 75% of the Registrable
Securities requested to be included in such registration; provided that the
                                                          --------
Company shall in any event pay all Registration Expenses in connection with any
registration initiated as a Demand Registration whether or not it has become
effective and whether or not such registration has counted as the permitted
Long-Form Registrations.  All Long-Form Registrations shall be underwritten
registrations unless otherwise requested by the holders of a majority of the
Registrable Securities included in the applicable Long-Form Registration.

          (c)  Short-Form Registrations.  Demand Registrations shall be Short-
               ------------------------
Form Registrations whenever the Company is permitted to use any applicable short
form, and the Company will use its best efforts to make Short-Form Registrations
on Form S-3 (or any successor form) available for the sale of Registrable
Securities.

          (d)  Priority on Demand Registrations.  The Company shall not include
               --------------------------------
in any Demand Registration any securities which are not Registrable Securities
without the prior written consent of the holders of a majority of the
Registrable Securities.  If a Demand Registration is an underwritten offering
and the managing underwriters advise the Company in writing that in their
opinion the number of Registrable Securities and, if permitted hereunder, other
securities requested to be included in such offering exceeds the number of
Registrable Securities and other securities, if any, which can be sold in an
orderly manner in such offering within a price range acceptable to the holders
initiating such registration, the Company will include in such registration only
the number of securities which can be sold in the following order of priorities:
(1) first, the Registrable Securities that the holders of Registrable Securities
and their respective affiliates have requested to be included in such
registration (pro rata according to the Registrable Securities proposed to be
included in the

                                      -2-
<PAGE>

registration by such holders) and (2) second, securities held by all other
parties (pro rata according to the securities proposed to be included in the
registration by such other parties).

          (e)  Selection of Underwriters.  The Company will have the right to
               -------------------------
select the investment banker(s) and manager(s) to administer the offering.

          (f)  Other Registration Rights.  As of the date hereof, there are no
               -------------------------
agreements with any holder or prospective holder of any securities of the
Company giving such holder or prospective holder any registration rights the
terms of which are senior or pari passu with any rights granted to the
                             ---- -----
Purchasers under this Agreement. From and after the date of this Agreement, the
Company shall not, without the prior written consent of holders of a majority of
the Registrable Securities, enter into any agreement with any holder or
prospective holder of any securities of the Company giving such holder or
prospective holder any registration rights the terms of which are senior or pari
                                                                            ----
passu with the registration rights granted hereunder or to require the Company
-----
to effect a registration earlier than the date on which the holders of
Registrable Securities can first require a registration hereunder.

          Section 2.  Piggyback Registrations.
                      -----------------------

          (a)  Right to Piggyback. Whenever the Company proposes to register any
               ------------------
of its securities (including any proposed registration of the Company's
securities by any third party) under the Securities Act (other than (i) pursuant
to a Demand Registration or (iii) pursuant to a registration on Form S-4 or S-8
or any successor or similar forms) and the registration form to be used may be
used for the registration of Registrable Securities (a "Piggyback
                                                        ---------
Registration"), whether or not for sale for its own account, the Company will
------------
give prompt written notice to all holders of Registrable Securities of its
intention to effect such a registration and will include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 15 days after the receipt of the
Company's notice.

          (b)  Piggyback Expense.  The Registration Expenses of the holders of
               -----------------
Registrable Securities will be paid by the Company in all Piggyback
Registrations.

          (c)  Priority on Primary Registration.  If a Piggyback Registration is
               --------------------------------
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing (with a copy to each party hereto
requesting registration of Registrable Securities) that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
marketability of such offering, the Company will include in such registration
(i) first, the securities the Company proposes to sell, (ii) second, the
    -----                                                    ------
Registrable Securities requested to be included in such registration, pro rata
among the holders of such Registrable Securities on the basis of the number of
shares owned by each such holder, and (iii) third, other securities requested to
be included in such registration pro rata among the holders of such securities.

          (d)  Priority on Secondary Registrations.  If a Piggyback Registration
               -----------------------------------
is an underwritten secondary registration on behalf of holders of the Company's
securities (other than the

                                      -3-
<PAGE>

parties hereto) who have been granted contractual demand registration rights,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering without adversely
affecting the marketability of the offering, the Company will include in such
registration (i) first, the securities requested to be included
                 -----
therein by the holders requesting such registration and the Registrable
Securities requested to be included in such registration, pro rata among the
holders of such securities on the basis of the number of shares owned by each
such holder, and (ii) second, other securities requested to be included in such
                      ------
registration pro rata among the holders of such securities.

          (e)  Other Registrations.  If the Company has previously filed a
               -------------------
registration statement with respect to Registrable Securities pursuant to
Section 1 or pursuant to this Section 2, and if such previous registration has
---------                     ---------
not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-4 or S-8 or any successor form), whether on
its own behalf or at the request of any holder or holders of such securities,
without the prior written consent of the holders of a majority of the
Registrable Securities, until a period of at least six months has elapsed from
the effective date of such previous registration.

          Section 3. Registration Expenses.
                     ---------------------

          (a)  All expenses incident to the Company's performance of or
compliance with Section 1 or Section 2, including, without limitation, all
                ---------    ---------
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all independent certified public
accountants, underwriters (excluding discounts and commissions) and other
Persons retained by the Company (all such expenses being herein called
"Registration Expenses"), will be borne as provided in this Agreement, except
 ---------------------
that the Company will, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance and the expenses and
fees for listing the securities to be registered on each securities exchange on
which similar securities issued by the Company are then listed or on the NASD
automated quotation system.

          (b)  In connection with each Demand Registration and each Piggyback
Registration, the Company will reimburse the holders of Registrable Securities
covered by such registration for the reasonable fees and disbursements of one
counsel chosen by the holders of a majority of the Registrable Securities
included in such registration.

          (c)  To the extent Registration Expenses are not required to be paid
by the Company, each holder of securities included in any registration hereunder
will pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration

                                      -4-
<PAGE>

Expenses not so allocable will be borne by all sellers of securities included in
such registration in proportion to the aggregate selling price of the securities
to be so registered for each seller.

          Section 4.  Definitions.
                      -----------

          "Inverness Registrable Securities" means (i) any shares of Common
           --------------------------------
Stock issued to the Inverness Holders and its affiliates pursuant to the Standby
Commitment Letter and (ii) any shares of Common Stock issued or issuable
directly or indirectly with respect to the securities referred to in clause (i)
by way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization,
including a recapitalization or exchange.

          "Johnson Registrable Securities" means (i) any shares of Common Stock
           ------------------------------
issued to Johnson pursuant to the Johnson Agreement and (ii) any shares of
Common Stock issued or issuable directly or indirectly with respect to the
securities referred to in clause (i) by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, including a recapitalization or exchange.

          "Person" means an individual, a partnership, a joint venture, a
           ------
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.

          "Rapoport Registrable Securities" means (i) any shares of Common Stock
           -------------------------------
issued to Rapoport pursuant to the Subscription Agreement or any shares of
Common Stock hereafter held by Rapoport and (ii) any shares of Common Stock
issued or issuable directly or indirectly with respect to the securities
referred to in clause (i) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization, including a recapitalization or exchange.

          "Registrable Securities" means the Inverness Registrable Securities,
           ----------------------
the Rapoport Registrable Securities, the Sharpe Registrable Securities and the
Johnson Registrable Securities.  As to any particular shares constituting
Registrable Securities, such shares will cease to be Registrable Securities when
they have been (x) effectively registered under the Securities Act and disposed
of in accordance with the registration statement covering them, or (y) sold to
the public through a broker, dealer or market maker pursuant to Rule 144 (or by
similar provision then in force) under the Securities Act.

          "Sharpe Registrable Securities" means (i) any shares of Common Stock
           -----------------------------
issued to the Sharpe Holders pursuant to the Subscription Agreement or any
shares of Common Stock hereafter held by any Sharpe Holder and (ii) any shares
of Common Stock issued or issuable directly or indirectly with respect to the
securities referred to in clause (i) by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization, including a recapitalization or exchange.

                                      -5-
<PAGE>

          "Securities Act" means the Securities Act of 1933, as amended, or any
           --------------
similar federal law then in force.

          "Securities and Exchange Commission" includes any governmental body or
           ----------------------------------
agency succeeding to the functions thereof.

          Section 5.  Indemnification.
                      ---------------

          (a)  The Company shall indemnify, to the extent permitted by law, each
holder of Registrable Securities, its officers and directors and each Person who
controls such holder (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses (including without limitation,
attorney's fees) caused by any untrue or alleged untrue statement of material
fact contained in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as the same are
contained in any information furnished in writing to the Company by such holder
expressly for use therein or by such holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such holder with a sufficient number of copies
of the same.  In connection with an underwritten offering, the Company shall
indemnify such underwriters, their officers and directors and each Person who
controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the holders
of Registrable Securities.

          (b)  In connection with any registration statement in which a holder
of Registrable Securities is participating, each such holder will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the full extent permitted by law, shall indemnify the
Company, its directors and officers and each Person who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of material fact contained in the registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is contained in any information or
affidavit so furnished in writing by such holder expressly for use in such
registration statement; provided that the obligation to indemnify will be
individual, not joint and several, for each holder and shall be limited to the
net amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.

          (c)  Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to

                                      -6-
<PAGE>

the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.

          (d)  The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and shall survive the transfer of securities. The
Company shall make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for that reason.

          Section 6.  Miscellaneous.
                      -------------

          (a)  No Inconsistent Agreements. The Company shall not hereafter enter
               --------------------------
into any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement.

          (b)  Adjustments Affecting Registrable Securities.  The Company shall
               --------------------------------------------
not take any action, or permit any change to occur, with respect to its
securities which would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or which would adversely affect the
marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).

          (c)  Remedies.  Any Person having rights under any provision of this
               --------
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.  The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.

          (d)  Amendments and Waivers.  Except as otherwise provided herein, the
               ----------------------
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and holders of at least a majority of the
Registrable Securities.

                                      -7-
<PAGE>

          (e)  Successors and Assigns. All covenants and agreements in this
               ----------------------
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not.  In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.

          (f)  Severability. Whenever possible, each provision of this Agreement
               ------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable under any applicable law or rule in any jurisdiction, such
provision will be ineffective only to the extent of such invalidity, illegality
or unenforceability in such jurisdiction, without invalidating the remainder of
this Agreement in such jurisdiction or any provision hereof in any other
jurisdiction.

          (g)  Counterparts.  This Agreement may be executed simultaneously in
               ------------
two or more counterparts (including by means of telecopied signature pages), any
one of which need not contain the signatures of more than one party, but all
such counterparts taken together will constitute one and the same Agreement.

          (h)  Descriptive Headings.  The descriptive headings of this Agreement
               --------------------
are inserted for convenience only and do not constitute a part of this
Agreement.

          (i)  Governing Law. All issues concerning the enforceability, validity
               -------------
and binding effect of this Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to any
choice of laws or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the law
of any jurisdiction other than the State of Delaware.

          (j)  Notices. All notices, demands or other communications to be given
               -------
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when personally delivered or
received by certified mail, return receipt requested, or sent by guaranteed
overnight courier service.  Notices, demands and communications will be sent to
each Purchaser at such Purchaser's address as indicated in the Schedule of
Purchasers attached hereto and to the Company at the address indicated below:

          Notices to the Company:
          ----------------------

          Southwestern Life Holdings, Inc.
          717 North Harwood Street
          Dallas, Texas  75201
          Attention: Board of Directors

                                      -8-
<PAGE>

          With a copy to:
          --------------

          Kirkland & Ellis
          200 E. Randolph Drive
          Chicago, Illinois  60601
          Attention: James L. Learner, P.C.

or to such other address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending party.

                             *    *    *    *    *

                                      -9-
<PAGE>

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

                                   SOUTHWESTERN LIFE HOLDINGS, INC.

                                   By:  /s/ Steve R. Johnson
                                        -------------------------------------
                                   Its: President and Chief Operating Officer
                                        -------------------------------------

                                   INVERNESS/PHOENIX PARTNERS LP

                                   By:  /s/ James C. Comis, III
                                        -------------------------------------
                                   Its: Managing Partner
                                        -------------------------------------

                                   EXECUTIVE CAPITAL PARTNERS I, LP

                                   By:  /s/ James C. Cormis,  III
                                        -------------------------------------
                                   Its: Managing Partner
                                        -------------------------------------

                                   /s/ Bernard Rapoport
                                   ------------------------------------------
                                   Bernard Rapoport

                                   SLM INVESTMENTS, L.P.

                                   By:  /s/ John T. Sharpe
                                        -------------------------------------
                                   Its: _____________________________________

                                   SHARPE TAYLOR INVESTMENTS, LTD.

                                   By:  /s/ John T. Sharpe
                                        -------------------------------------
                                   Its: _____________________________________

                                   JTS FAMILY LIMITED PARTNERSHIP #14

                                   By:  /s/ John T. Sharpe
                                        -------------------------------------
                                   Its: _____________________________________
<PAGE>

                                   /s/ John T. Sharpe
                                   ----------------------------
                                   John T. Sharpe

                                   /s/ Steve R. Johnson
                                   ----------------------------
                                   Steve R. Johnson<PAGE>

                                                                    EXHIBIT 10.3

                                                                       EXECUTION

                       SOUTHWESTERN LIFE HOLDINGS, INC.

                   EXECUTIVE STOCK AND EMPLOYMENT AGREEMENT
                   ----------------------------------------

          THIS AGREEMENT is made as of June 13, 2000, between Southwestern Life
Holdings, Inc., a Delaware corporation (the "Company"), and Bernard Rapoport
                                             -------
("Executive").
  ---------
          In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

     1.   Grant of Options.
          ----------------
     (a)  The Company hereby grants to Executive an option (the "Option") to
                                                                 ------
purchase 225,000 shares of Common Stock at a purchaser price of $12.50 per share
(the "Exerciser Price") (as such number of shares and Exercise Price are
      ---------------
equitably adjusted for any stock splits, stock dividends, combinations,
recapitalizations, reorganizations, or other like change affecting the Common
Stock). Any shares of COmmon Stock or other securities issued or issuable upon
exercise of the Option (and any securities issued with respect to any such
Common Stock or other securities by way of a stock split, stock dividend,
recapitalization of any other reclassification or reorganization) are referred
to herein as "Option Stock."
              ------------

     (b)  Executive may exercise all or any portion of the Options at any time
and from time to time prior to their expiration as provided herein, by
delivering to the Company written notice of such exercise (an "Exerciser
                                                               ---------
Notice") accompanied by the aggregate Exercise Price for the Options being
------
exercised payable in cash or by check. The Exercise Notice shall set forth the
number of Options to be exercised and will contain a written acknowledgement
that Executive has read and has been afforded an opportunity to ask questions of
the Company's management regarding the Company. As a condition to the exercise
of the Options, Executive shall permit the Company to deliver to Executive all
financial and other information regarding all financial and other information
provided to Executive regarding Company it believes necessary to enable
Executive to make an informed investment decision, and Executive shall make all
customary investment representations (including, without limitation, regarding
securities compliance) which the Company shall require. All Options shall expire
upon the tenth anniversary of the date of this Agreement. The Options shall be
assignable and transferable by Executive to any person.

     (c)  In connection with the grant of Options hereunder, Executive
represents and warrants to the Company that:

          (i)  The Options to be acquired by Executive pursuant to this
Agreement shall be acquired for his account and not a view to, or intention of,
distribution thereof in violation
<PAGE>

of the 1933 Act, or any applicable state securities laws, and the Options shall
not be disposed of in contravention of the 1933 Act or any applicable state
securities laws.

          (ii)    Executive is an executive employee of the Company.  Executive
is sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in the Options.

          (iii)   Executive is able to bear the economic risk of its investment
in the Options for an indefinite period of time because the Options have not
been registered under the 1933 Act and, therefore, cannot be sold unless
subsequently registered under the 1933 Act or an exemption from such
registration is available.

          (iv)    Executive has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the offering of the Options and
has had full access to such other information concerning the Company as he or it
has requested.  Executive has reviewed, or has had an opportunity to review, the
following documents: (A) the Company's Certificate of Incorporation, as amended,
and Bylaws; (B) the loan agreements, notes and related documents with the
Company's senior lenders; and (C) such other documents, reports, and other
information (financial or otherwise) concerning the Company as Executive has
requested.

          (v)     This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Executive do not and
shall not conflict with, violate or cause a breach of any agreement, contract or
instrument to which Executive is a party or any judgement, order or decree to
which Executive is subject.

     2.   Employment.  The Company shall employ Executive, and Executive hereby
          ----------
accepts employment with the Company, upon the terms and conditions set forth in
this Agreement for the period beginning on the date hereof and ending as
provided in Section 6 hereof (the "Employment Period").
            ---------              -----------------

     3.   Position and Duties.
          -------------------

          (a)     During the Employment Period, Executive shall serve as the
Chairman and Chief Executive Officer of the Company and shall have the normal
duties, responsibilities and authority of the Chairman and Chief Executive
Officer, subject to the power of the Board to expand or limit such duties,
responsibilities and authority and to override actions of the Chairman and Chief
Executive Officer.

          (b)     Executive shall report to the Board, and Executive shall
devote his best efforts and his full business time and attention (except for
permitted vacation periods and reasonable periods or illness or other
incapacity) to the business and affairs of the Company and its Subsidiaries.
Executive shall perform his duties and responsibilities to the best of his
abilities in a diligent, trustworthy, businesslike and efficient manner.

                                       2
<PAGE>

          (c)   For purposes of this Agreement, "Subsidiaries" shall mean any
                                                 ------------
corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one of more Subsidiaries.

          4.    Base Salary and Benefits.
                ------------------------

          (a)   During the Employment Period, Executive's base salary shall be
$200,000 per annum or such higher rate as the Board may designate from time to
time (the "Base Salary"), which salary shall be payable in regular installments
           -----------
in accordance with the Company's general payroll practices and shall be subject
to customary withholding. In addition, during the Employment Period, Executive
shall be entitled to participate in all of the Company's employee benefit
programs for which senior executive employees of the Company and its
Subsidiaries are generally eligible.

          (b)   The Company shall reimburse Executive for all reasonable
expenses incurred by him in the course of performing his duties under this
Agreement which are consistent with the Company's policies in effect from time
to time with respect to travel, entertainment and other business expenses,
subject to the Company's requirements with respect to reporting and
documentation of such expenses.

          (c)   In addition to the Base Salary, the Board may, in its sole
discretion, award a bonus to Executive following the end of each fiscal year
during the Employment Period based upon Executive's performance and the
Company's operating results during such year.

          (d)   The Company shall reimburse Executive for the costs and expenses
of maintaining an office in Waco, Texas, including, without limitation, costs
and expenses related to rent, secretarial support, a personal driver and
utilities, which reimbursement shall in no event exceed $150,000 per annum. The
Company acknowledges that a portion of the work hours of Executive's driver and
secretarial support may be devoted to matters that are not related to
Executive's performance of this Agreement.

          5.    Termination.
                -----------

          (a)   The Employment Period shall continue (i) until Executive's
resignation, death or disability or other incapacity (as determined by the Board
in its good faith judgement) or (ii) until the Board determines to terminate
Executive for any reason or no reason.

          (b)   If the Employment Period is terminated by the Company without
Cause then during the sixth-month period commencing on the date of termination
the Company shall pay to Executive an aggregate amount equal to one-half of
Executive's Base Salary, payable in equal installments on the Company's regular
salary payment dates.

          (c)   If the Employment Period is terminated by the Company for Cause
or is terminated pursuant to clause (a)(i) above, Executive shall be entitled to
                             -------------
receive his Base Salary through the date of termination.

                                       3
<PAGE>

          (d)  All of Executive's rights to fringe benefits and bonuses
hereunder (if any) which accrue after the termination of the Employment Period
shall cease upon such termination, including, without limitation, the benefits
set forth in Section 4(d).
             ------------

          (e)  For purposes of this Agreement, "Cause" shall mean (i) the
                                                -----
commission of a felony or a crime involving moral turpitude or the commission of
any other act or omission involving dishonesty, disloyalty or fraud with respect
to the Company or any of its Subsidiaries, (ii) intentional conduct tending to
bring the Company or any of its Subsidiaries into substantial public disgrace or
disrepute, (iii) substantial and repeated failure to perform duties as
reasonably directed by the Board, (iv) gross negligence or willful misconduct
with respect to the Company or any of its Subsidiaries or (v) any other material
breach of this Agreement.

          6.   Confidential Information.  Executive acknowledges that the
               ------------------------
information, observations and data obtained by him while employed by the Company
and its Subsidiaries concerning the business or affairs of the Company, or any
of its Subsidiaries ("Confidential Information") are the property of the Company
                      ------------------------
or such Subsidiary.  Therefore, Executive agrees that he shall not disclose to
any unauthorized person or use for his own purposes any Confidential Information
without the prior written consent of the Board, unless and to the extent that
the aforementioned matters become generally known to and available for use by
the public other than as a result of Executive's acts or omissions. Executive
shall deliver to the Company at the termination of the Employment Period, or at
any other time the Company may request, all memoranda, notes, plans, records,
reports, computer tapes, printouts and software and other documents and data
(and copies thereof) relating to the Confidential Information, Work Product (as
defined below) or the business of the Company or any Subsidiary which he may
then possess or have under his control.

          7.   Inventions and Patents. Executive acknowledges that all
               ----------------------
inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports and all similar or related information (whether or not
patentable) which relate to the Company's or any of its Subsidiaries' actual or
anticipated business, research and development or existing or future products or
services and which are conceived, developed or made by Executive while employed
by the Company and its Subsidiaries ("Work Product") belong to the Company or
                                      ------------
such Subsidiary.  Executive shall promptly disclose such Work Product to the
Board and perform all actions reasonably requested by the Board (whether during
or after the Employment Period) to establish and confirm such ownership
(including, without limitation, assignments, consents, powers of attorney and
other instruments).

          8.   Non-Compete, Non-Solicitation.  In further consideration of the
               -----------------------------
compensation to be paid to Executive hereunder, Executive acknowledges that in
the course of his employment with the Company he shall become familiar with the
Company's trade secrets and with other Confidential Information concerning the
Company and its Subsidiaries and that his services shall be of special, unique
and extraordinary value to the Company and its Subsidiaries.  Therefore,
Executive agrees that:

                                       4
<PAGE>

     (a)  Non Compete. During the Employment Period and for a period of six
          -----------
months thereafter (the "Noncompete Period"), he shall not directly or indirectly
                        -----------------
own any interest in, manage, control, participate in, consult with, render
services for, or in any manner engage in any business competing with the
businesses of the Company or its Subsidiaries, as such businesses exist or are
in process on the date of the termination of Executive's employment, within any
geographical area in which the Company or its Subsidiaries engage or plan to
engage in such businesses. Nothing herein shall prohibit Executive from being a
passive owner of not more than 2% of the outstanding stock of any class of a
corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.

     (b)  Non-Solicitation. During the Noncompete Period, Executive shall not
          ----------------
directly or indirectly through another entity (i) induce or attempt to induce
any employee of the Company or any Subsidiary to leave the employ of the Company
or such Subsidiary, or in any way interfere with the relationship between the
Company or any Subsidiary and any employee thereof, (ii) hire any person who was
an employee of the Company or any Subsidiary at any time during the Employment
Period or (iii) induce or attempt to induce any customer, supplier, licensee,
licensor, franchisee or other business relation of the Company or any Subsidiary
to cease doing business with the Company or such Subsidiary, or in any way
interfere with the relationship between any such customer, supplier, licensee or
business relation and the Company or any Subsidiary (including, without
limitation, making any negative statements or communications about the Company
or its Subsidiaries).

     (c)  Enforcement. If, at the time of enforcement of this Section 8, a court
          -----------                                         ---------
holds that the restrictions stated herein are unreasonable under circumstances
then existing, the parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area. Because Executive's services are unique and
because Executive has access to Confidential Information and Work Product, the
parties hereto agree that money damages would not be an adequate remedy for any
breach of this Agreement. Therefore, in the event a breach or threatened breach
of this Agreement, the Company or its successors or assigns may, in addition to
other rights and remedies existing in their favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce, or prevent any violations of, the provisions hereof
(without posting a bond or other security).

     9.   Executive's Representations. Executive hereby represents and warrants
          ---------------------------
to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and shall not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgement or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity which would prohibit
his performance under this Agreement and (iii) upon the execution and delivery
of this Agreement by the Company, this Agreement shall be the valid and binding
obligation of Executive, enforceable in accordance with its terms. Executive
hereby acknowledges and represents that he has consulted with independent legal
counsel regarding his rights and obligations under this Agreement and that he
fully understands the terms and conditions contained herein.

                                       5

<PAGE>

          10.       Indemnification.
                    ---------------

          (a)       Right to Indemnification.  If Executive is made a party or
                    ------------------------
is threatened to be made a party to or is otherwise involved (including
involvement as a witness) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding"), by reason of the
                                              ----------
fact that he is or was a director or officer of the Company or, while a director
or officer of the Company, is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan, whether the basis of such proceeding is alleged action in
an official capacity as a director or officer or in any other capacity while
serving as a director or officer, the Company shall indemnify and hold harmless
Executive to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment that requires the Company to provide narrower indemnification
rights than permitted prior thereto, such amendment shall not eliminate or
reduce the effect of this Section 10(a) in respect of any matter occurring, or
                          -------------
any cause of action, suit or claim that would accrue or arise prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, excise exercise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by Executive in connection therewith
and such indemnification shall continue after Executive has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
Executive's heirs, executors and administrators; provided, however, that, except
                                                 --------
as provided in Section 10(b) hereof with respect to proceedings to enforce
               -------------
rights to indemnification, the Company shall indemnify Executive in connection
with a proceeding (or part thereof) initiated by Executive only if such
proceeding (or part thereof) was authorized by the Board of Directors of the
Company.  In addition, to the fullest extent permitted by the Delaware General
Corporation Law as it now exists or may hereafter be amended (but, in the case
of any such amendment that requires the Company to provide narrower
indemnification rights than permitted prior thereto, such amendment shall not
eliminate or reduce the effect of this Section 10(a) in respect of any matter
                                       -------------
occurring, or any cause of action, suit or claim that would accrue or arise
prior to such amendment), the Company shall pay the expenses incurred in
defending any such proceeding in advance of its final disposition (an "advance
                                                                       -------
of expenses"); provided, however, that, if and to the extent that the Delaware
-----------    --------  -------
General Corporation Law requires, an advance of expenses incurred by Executive
in his capacity as a director or officer (and not in any other capacity in which
service was or is rendered by Executive, including, without limitation, service
to an employee benefit plan) shall be made only upon delivery to the Company of
an undertaking (an "undertaking"), by or on behalf of Executive, to repay all
                    -----------
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (a "final adjudication")
                                                            ------------------
that Executive is not entitled to be indemnified for such expenses under this
Section 10(a) or otherwise.
-------------

          (b)       Procedure for Indemnification.  Any indemnification of
                    -----------------------------
Executive or advance of expenses under Section 10(a)(1) shall be made promptly,
                                       ----------------
and in any event within forty-five days (or, in the case of an advance of
expenses, twenty days), upon the written request of Executive.  If a
determination by the Company that Executive is entitled to indemnification
pursuant to this Section 10 is required, and the Company fails to respond within
                 ----------
sixty days to a written request for indemnity, the Company shall be deemed to
have approved the request.  If the Company denies a written request for
indemnification or advance of expenses, in whole or in part, or if payment in
full pursuant to such

                                       6
<PAGE>

request is not made within forty-five days (or, in the case of an advance of
expenses, twenty days), the right to indemnification or advances as granted by
this Section 10 shall be enforceable by Executive in any court of competent
     ----------
jurisdiction. Executive's costs and expenses incurred in connection with
successfully establishing his or her right to indemnification, in whole or in
part, in any such action shall also be indemnified by the Company. It shall be a
defense to any such action (other than an action brought to enforce a claim for
the advance of expenses where the undertaking required pursuant to Section
                                                                   -------
10(a), if any, has been tendered to the Company) that Executive has not met the
-----
standards of conduct which make it permissible under the Delaware General
Corporation Law for the Company to indemnify Executive for the amount claimed,
but the burden of such defense shall be on the Company. Neither the failure of
the Company (including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of Executive is proper in the circumstances because
he has met the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Company (including its Board
of Directors, independent legal counsel or its stockholders) that Executive has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that Executive has not met the applicable standard of
conduct.

     (c)  The Company shall purchase and keep in force for the benefit of all
officers and directors of the Company (including Executive) directors and
officers insurance coverage of not less than $___________ in face amount.

     11.  Survival. Sections 6, 7 and 8 and Sections 11 through 19 shall survive
          --------  -------- -  -     -     -----------         --
and continue in full force in accordance with their terms notwithstanding any
termination of the Employment Period.

     12.  Notices. Any notice provided for in this Agreement shall be in writing
          -------
and shall be either personally delivered, or mailed by first class mail, return
receipt requested, to the recipient at the address below indicated:

     Notices to Executive:
     --------------------

     Bernard Rapoport
     1200 Wooded Acres
     Waco, Texas 76710

     Notices to the Company:
     ----------------------

     Southwestern Life Holdings, Inc.
     717 North Harwood Street
     Dallas, Texas 75201
     Attention: Board of Directors

                                       7
<PAGE>

or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.

     13.  Severability. Whenever possible, each provision of this Agreement
          ------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

     14.  Complete Agreement. This Agreement, those documents expressly referred
          ------------------
to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.

     15.  No Strict Construction. The language used in this Agreement shall be
          ----------------------
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.

     16.  Counterparts. This Agreement may be executed in separate counterparts,
          ------------
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.

     17.  Successors and Assigns. This Agreement is intended to bind and inure
          ----------------------
to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company.

     18.  Choice of Law. The corporate law 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 and the exhibits and schedules hereto shall be
governed by, and construed in accordance with, the laws of the State of Texas,
without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of Texas or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Texas.

     19.  Amendment and Waiver. The provisions of this Agreement may be amended
          --------------------
or waived only with the prior written consent of the Company and Executive, and
no course of conduct or failure or delay in enforcing the provisions of this
Agreement shall affect the validity, binding effect or enforceability of this
Agreement.

                                 *  *  *  *  *

                                       8
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.

                                SOUTHWESTERN LIFE HOLDINGS, INC.

                                BY: /s/ Steve R. Johnson
                                   -----------------------------------------
                                Its: President and Chief Operating Officer
                                    ----------------------------------------

                                /s/ Bernard Rapoport
                                --------------------------------------------
                                Bernard Rapoport

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