Exhibit 10(bk)
-----------------------------
SALE AND ASSIGNMENT AGREEMENT
between
Hallmark Finance Corporation
and
FPF, INC.
Dated as of November 18, 1999
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TABLE OF CONTENTS
Page
----
Section 1. Definitions ....................................... 1
Section 2. Sale of Conveyed Property. ........................ 7
Section 3. Termination. ...................................... 9
Section 4. Purchase Price and Payment Terms for Conveyed
Property/Right of Set-Off. ........................ 10
Section 5. Notification of Sale .............................. 10
Section 6. Repurchase of Conveyed Property. .................. 10
Section 7. Delivery to FPF of Proceeds; Power of Attorney. ... 11
Section 8. Verification, Notification and Collection of
Premium Receivables................................ 11
Section 9. Financial Statements and Books and Records. ....... 11
Section 10.Seller's General Representations and Warranties. .. 11
Section 11.Seller's Representations and Warranties With
Respect to the Conveyed Property .................. 14
Section 12.Additional Covenants of Seller. ................... 17
Section 13.Taxes. ............................................ 19
Section 14.Further Assurances and Substituted Performance. ... 19
Section 15.Indemnification. .................................. 20
Section 16.Default. .......................................... 20
Section 17.Remedies. ......................................... 21
Section 18.Waiver. ........................................... 22
Section 19.Counterparts/Facsimiles. .......................... 22
Section 20.Essence of Time ................................... 22
Section 21.Assignment ........................................ 22
Section 22.Standard of Care .................................. 23
Section 23.Costs and Expenses/Attorneys Fees. ................ 23
Section 24.Notices. .......................................... 23
Section 25.Successors and Assigns. ........................... 23
Section 26.Severability. ..................................... 23
Section 27.Force Majeure. .................................... 24
Section 28.Governing Law. .................................... 24
Section 29.Jurisdiction and Waiver of Certain Damages. ....... 24
Section 30.Entire Agreement. ................................. 25
Section 31.Waiver of Jury Trial. ............................. 25
SALE AND ASSIGNMENT AGREEMENT
This Sale and Assignment Agreement is dated as of the 18th day of
November, 1999 by Hallmark Finance Corporation ("Seller"), whose
address is ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and FPF,
Inc. ("FPF"), whose address is ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
RECITALS:
A. Seller originated and/or owns Premium Receivables evidenced
by Premium Finance Agreements to finance payments by Obligors of
premiums for the purchase of insurance policies and, in connection
therewith, Seller has a security interest arising under statutory
authority or otherwise in unearned premiums, dividends and loss
payments with respect to such insurance policies and in state or
industry guaranty funds for the reimbursement of unearned premiums from
cancelled insurance policies and failed insurance companies; and
B. Seller wishes to sell from time to time during the Term of
this Agreement and FPF wishes to purchase all of Seller's Eligible
Premium Receivables and related interests under the terms and
conditions described in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. DefinitionsSection 1. Definitions. The following
terms shall be defined in this Agreement:
"Additional Provisions" means the Additional Provisions of this
Agreement as set forth in Schedule A attached hereto.
"Amount Financed" means, with respect to each Premium Receivable
Sold to FPF, an amount equal to 100% of the premium and other
financeable amounts relating to the insurance policy that gives rise to
the Premium Receivable less any down payment made at the inception of
the Premium Finance Agreement.
"Affiliate" of any specified Person means any other Person
controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" when
used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" means any Person licensed and qualified to sell or arrange
for the sale of insurance in the state in which any Premium Receivable
is originated.
"Agent Statement Unpaid Balance" means the amounts due from any
Agent as shown on the applicable Agent statement maintained by the
Servicer.
"Agreement" means this Agreement together with all schedules,
and all amendments, modifications, replacements or substitutions
thereto and together with all documents and instruments contemplated to
be executed pursuant to this Agreement.
"Business Day" means any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in Denver, Colorado
are authorized or obligated by law or executive order to be closed.
"Cancelled Premium Receivable" means each Premium Receivable for
which a request for cancellation has been sent to the Issuing Insurance
Company, and for which a reinstatement notice has not been received by
the Servicer from such insurance company.
"Capital Charge" means the charges, if any, described in
Schedule A attached hereto.
"Closing Fee" means the fee described in Schedule A attached
hereto.
"Collections" shall mean all amounts received daily by FPF, or the
Servicer on behalf of FPF, on all Premium Receivables Sold under this
Agreement including, but not limited to: (a) payments from Obligors,
(b) return of unearned commission from agents, (c) return of unearned
premium from Issuing Insurance Companies, and (d) amounts received from
a guaranty fund or other amounts paid by or on behalf of the Obligor,
agent or Issuing Insurance Company. The amounts referred to as
"Collections" shall exclude Obligor's down payment amounts, correction
amounts or amounts not lawfully eligible under applicable law to be
applied to the payment of amounts due under the Premium Receivables.
"Concentration Limits" means the Premium Receivable concentration
limits set forth in Schedule B attached hereto.
"Conveyed Property" means all of the Seller's right, title and
interest in, to and under the Premium Receivables Sold pursuant to this
Agreement, all related Premium Finance Agreements and all related
documents including, without limitation, all loan documents and
servicer documents, and all of the Seller's rights to any payment from
the Obligors and any and all rights against any Obligor with respect to
such Premium Receivables, all collateral and guaranties with respect to
such Premium Receivables, all other related rights and assets, and all
proceeds of the foregoing.
"Default" shall have the meaning specified in Section 16 of this
Agreement.
"Default Rate" shall mean the annual rate of interest as set forth
in Schedule A attached hereto.
"Defaulted Premium Receivable" means (without duplication) any
Premium Receivable which (a) has an amount due and unpaid for 180 days,
or (b) is a Cancelled Premium Receivable and has an unpaid principal
balance after application of all expected unearned premium received by
or on behalf of the Issuing Insurance Company, or (c) has been written
off by the Servicer.
"Down Payment Requirement" shall have the meaning set forth in
Schedule A attached hereto.
"Effective Date" shall have the meaning set forth in Schedule A
attached hereto.
"Eligible Insurance Company" means (a) an insurance company which
is licensed and in good standing to do business in the state in which
the policy to which a Premium Receivable relates is issued by such
insurance company, (b) a joint underwriting organization, intercompany
insurance pool or intercompany reinsurance pool which is licensed or
otherwise permitted to do business in the state in which the policy to
which a Premium Receivable relates is issued by such joint underwriting
organization or intercompany insurance pool, (c) a foreign or alien
insurance company which is authorized or approved to issue insurance on
a nonadmitted basis, through a licensed surplus or excess lines broker,
in the state in which the policy to which a Premium Receivable relates
is issued by such foreign or alien insurance company. No such insurer
may be an Eligible Insurance Company (i) if such insurer is the subject
of a rehabilitation or liquidation proceeding commenced by a state or
foreign insurance regulatory authority, or (ii) if such insurer is not,
in the judgment of FPF, a creditworthy Person which FPF has full
expectations will return, on a timely basis, unearned premiums on
Cancelled Premium Receivables.
"Eligible Premium Receivable" has the meaning defined in Section
11.
"Endorsement Refunds" means all funds returned by an insurance
company to the Seller or any other Person arising out of a reduction in
the premium payable under an insurance policy relating to a change in
the coverage thereof.
"FPF Principal Balance" means for any day of determination, the
sum of the Up-front Purchase Price paid by FPF for the Premium
Receivables under this Agreement, less the sum of (a) all Collections
received by FPF representing principal payments, and (b) the principal
amount of repurchases of Premium Receivables by the Seller under
Section 6 of this Agreement.
"GAAP" means generally accepted accounting principles applied in
the United States of America in effect from time to time which are
recognized by the American Institute of Certified Public Accountants.
"Guarantor" means each guarantor of Seller's repurchase
obligations as described in Section 6(b) of this Agreement listed in
Schedule A attached hereto, if any.
"Independent Public Accountants" means any firm of public
accountants acceptable to FPF; provided, that such firm is independent
with respect to the Seller and FPF within the meaning of the Securities
Act of 1933, as amended.
"Issuing Insurance Company" means, with respect to any Premium
Receivable, the insurance company which issued the insurance policy
related to such Premium Receivable.
"Interest Rate" means the rate of interest set forth in Schedule A
attached hereto.
"Lien" means any statutory, judicial, contractual or other lien,
security interest, encumbrance or claim of any kind.
"Loss" shall mean (i) with respect to Defaulted Premium
Receivables, an amount equal to the outstanding principal balance on
such Defaulted Premium Receivable, (ii) with respect to any Repurchase
Property not reacquired by Seller, an amount equal to the Repurchase
Price, and (iii) with respect to amounts due from Agents, any Agent
Statement Unpaid Balance amount over sixty (60) days past due.
"Loss Ratio" shall mean for any consecutive three month period the
percentage resulting from dividing (a) Loss incurred in such three
month period by (b) the average FPF Principal Balance for such three
month period.
"Loss Ratio Trigger" shall have the meaning set forth in
Schedule A attached hereto.
"Material Adverse Change" shall mean any material and adverse
change, either individually or in the aggregate, in the business,
prospects, management, financial position, results of operations or
general condition of Seller or any of its Affiliates as determined by
FPF in its reasonable discretion.
"Maximum Purchase Commitment" means the maximum outstanding
principal balance of the Eligible Premium Receivables Sold under this
Agreement, at the time of calculation, not to exceed the amount set
forth in Schedule A attached hereto.
"Minimum Yield Trigger" shall have the meaning set forth in
Schedule A attached hereto.
"Obligor" means, with respect to any Premium Finance Agreement,
the obligor or account debtor thereunder.
"Person" means an individual, partnership, limited liability
company, corporation (including a business trust), joint stock company,
trust, unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Premium Finance Agreement" means the premium finance agreement or
agreements which evidence a Premium Receivable in the form prescribed
under applicable law. The Premium Finance Agreements shall be in form
and substance acceptable to FPF in its sole discretion.
"Premium Receivable" means the entire interest in a Premium
Finance Agreement, all security interests relating thereto, all moneys
due or to become due thereon subsequent to the Sale of such Premium
Receivable to FPF, all related Realization Provisions, and any related
documents and the proceeds of any and all of the foregoing.
"Prohibited Agent" means any Agent that has been identified by
written notice from FPF to the Seller as being prohibited from
producing insurance policies financed by Premium Receivables that are
subject to purchase by FPF pursuant to this Agreement.
"Purchase Premium" means the portion of the Purchase Price as set
forth in Schedule A attached hereto.
"Purchase Price" means the price paid by FPF for each Eligible
Premium Receivable equal to the sum of the (a) Up-front Purchase Price
plus (b) the Purchase Premium.
"Realization Provisions" means, with respect to any Premium
Receivable, collectively: (a) the security interest granted or assigned
by an Obligor, pursuant to the terms of the documents creating and
evidencing the respective Premium Receivable at the time of execution
thereof to the originator of such Premium Receivable, in all unearned
premiums, dividends, and loss payments which reduce the unearned
premiums under the respective insurance policy or policies, (b) any
interest arising under a state guaranty fund for all unearned premiums
from the cancelled policy or policies in the event the Issuing
Insurance Company becomes insolvent, (c) Endorsement Refunds with
respect to such Premium Receivable, (d) if applicable to such Premium
Receivable, all broker or agent guarantee agreements with respect
thereto, and (e) if applicable to such Premium Receivable, any interest
thereof in a cash collateral account established with respect to such
Premium Receivable.
"Required Documents" means the original signed Premium Finance
Agreement (or a facsimile thereof in the event an original is not
received by Seller), the signed power of attorney of the insured (if a
power of attorney signed by the insured is not included in the Premium
Finance Agreement), and all other documents necessary for the legal
origination of the Premium Finance Agreement.
"Repurchase Price" shall have the meaning set forth in Schedule A
attached hereto.
"Repurchase Property" shall have the meaning defined in
Section 6(a).
"Sale" or "Sell" or "Sold" means to absolutely sell, transfer,
assign or otherwise convey property.
"Servicer" means the servicer of the Premium Receivables described
in Schedule C attached hereto.
"Servicing Agreement" means the Premium Receivable Servicing
Agreement in the form attached hereto in Schedule C
"Servicing Fee" means the fee to be paid to the Servicer pursuant
to the Servicing Agreement.
"Static Pool Cancellation Rate" means the applicable rate set
forth in Schedule A attached hereto.
"Static Pool Cancellation Rate Trigger" shall have the meaning set
forth in Schedule A attached hereto.
"Tangible Net Worth" shall mean the tangible net worth, determined
in accordance with GAAP, to be maintained by Seller in the amount set
forth in Schedule A attached hereto. For purposes of this definition
(i) Tangible Net Worth may be in the form of common or preferred equity
or unsecured debt, the terms and conditions of which shall be
satisfactory to FPF in its sole discretion ("Subordinated Debt"), and
(ii) tangible assets used to calculate net worth shall exclude all
intangible assets, goodwill and intercompany or Affiliate indebtedness
of any nature.
"Term" means the term of this Agreement as defined in Schedule A
attached hereto.
"Termination Fee" means the fee to be paid by Seller as provided
under Section 3 of this Agreement and as set forth in Schedule A
attached hereto.
"Up-front Purchase Price" means the portion of the Purchase Price
paid by FPF for a Premium Receivable as set forth in Schedule A
attached hereto.
Section 2. Sale of Conveyed Property.Section 2. Sale of Conveyed
Property.
(a) During the Term of this Agreement, Seller irrevocably
agrees to Sell to FPF all of the Eligible Premium Receivables
originated, acquired or otherwise owned by Seller and FPF agrees
to purchase up to the amount of the Maximum Purchase Commitment
all of Seller's Eligible Premium Receivables in accordance with
the terms and conditions of this Agreement. Seller shall Sell
Eligible Premium Receivables to FPF no less frequently than weekly
as originated, unless otherwise agreed by FPF in writing. The
parties agree that FPF shall have the exclusive right, during the
Term of this Agreement, to purchase all Eligible Premium
Receivables originated, acquired or otherwise owned by Seller.
(b) FPF's obligation to be bound by the terms of this
Agreement is subject to the satisfaction of each of the following
conditions by evidence in form and substance satisfactory to FPF
in its reasonable discretion:
(i) Seller shall provide evidence that it has the
necessary authority and has secured any required consents to
execute and deliver this Agreement and to enter into the
transactions contemplated by this Agreement, which evidence
shall include, at a minimum, good standing certificate of
Seller and any Guarantor (if not an individual), officers'
certificates regarding (together with copies of) the articles
and bylaws of Seller (or other organizational documents as
may be applicable) and any amendments thereto, UCC searches
regarding the Seller, proof of Seller's license to originate
the Premium Finance Agreements, the form of the Premium
Finance Agreements to be originated by Seller, and such other
evidence as FPF may require in its reasonable discretion
including, without limitation, any legal opinions that FPF
may require regarding Seller and Seller's ability to enter
into and perform under this Agreement;
(ii) FPF shall have completed its due diligence of the
Seller and determined that the findings of such due
diligence, including the hardware and software for the
Seller's data processing system, are acceptable to FPF in its
sole discretion;
(iii) The Closing Fee has been paid in full by Seller to
FPF;
(iv) Seller shall have provided evidence that there are
no prior Liens or existing Uniform Commercial Code financing
Statements granting to any party a security interest in any
of Seller's Premium Receivables or other Conveyed Property;
and
(v) Seller shall have provided to FPF Uniform
Commercial Code financing statements in form and substance
acceptable to FPF establishing a first priority ownership
interest in favor of FPF in the Premium Receivable and
related Conveyed Property.
(c) Each Sale of a Premium Receivable hereunder is subject
to the satisfaction to FPF of each of the following conditions at
Seller's sole cost and expense:
(i) All covenants and conditions of this Agreement have
been complied with by Seller and no default (or event which,
with the passage of time or notice or both would constitute a
default) exists hereunder or under the Servicing Agreement;
(ii) No Material Adverse Change has occurred;
(iii) Each of the Loss Ratio Trigger, Static Pool
Cancellation Rate Trigger, Minimum Yield Trigger and Maximum
Purchase Commitment shall not be exceeded;
(iv) The Concentration Limits established in Schedule B
with respect to concentrations with Issuing Insurance
Companies, originators or Agents shall not be exceeded;
(v) The Premium Receivables shall be Eligible Premium
Receivables; provided, however, that any Premium Receivable
Sold on the Effective Date may include Premium Receivables
with respect to which any payment has been due and unpaid for
more than 30 days and for which a cancellation notice has
been delivered to the Obligor and to the Issuing Insurance
Company; and
(vi) Seller shall provide such additional evidence,
documents and instruments as FPF may reasonably request to
consummate the Sale of the Conveyed Property in accordance
with the terms and provisions of this Agreement.
(d) In connection with the Sale of each Premium Receivable
hereunder, Seller shall timely deliver to FPF the Required
Documents relating to each Premium Finance Agreement, which
delivery shall be made within twenty (20) days of receipt and
system entry by Servicer; and
(e) The Sale of any Conveyed Property shall be effective (i)
with respect to the Conveyed Property Sold to FPF on the Effective
Date, upon delivery to FPF of an assignment in form and substance
acceptable to FPF or by other method of transfer as may be
directed by FPF, and (ii) with respect to all Conveyed Property
Sold after the Effective Date, upon the origination by the Seller
of each Premium Finance Agreement giving rise to the Premium
Receivable and other Conveyed Property without the need for
execution and delivery of any further assignments or instruments
of transfer unless specifically requested in writing by FPF. The
Seller shall cooperate with FPF and the Servicer in immediately
supplying to the Servicer the Premium Receivable data needed to
enter the Premium Receivables on the Servicer's data processing
system. All Sales shall be deemed to take place at the offices of
FPF described on the first page of this Agreement or such other
location as Seller and FPF may agree in writing.
(f) Seller and FPF intend and agree that each purchase and
Sale hereunder shall be treated as a true and absolute Sale of all
of Seller's right, title and interest in, to and under the
Conveyed Property and not a transfer intended as a security
interest. However, if, notwithstanding such intention, a
determination is made by a court or other body with appropriate
jurisdiction over the matter that such transfer shall not be
treated as a true and absolute Sale, this Agreement shall be
deemed to constitute a security agreement and the transaction
effected hereby shall be deemed to constitute a secured financing,
and Seller hereby pledges and grants to FPF a first priority Lien
on, and security interest in, to and under, all of Seller's right,
title and interest in, to and under the Premium Receivables and
all other related Conveyed Property as collateral for and as
security for all amounts paid and to be paid by FPF to Seller in
connection with the Conveyed Property and for all amounts due and
owing and all obligations arising under this Agreement.
Section 3. Termination.Section 3. Termination. Seller shall
have the right to terminate this Agreement upon sixty (60) days prior
written notice to FPF and payment to FPF of the Termination Fee. Upon
termination by Seller as provided herein, FPF shall continue to own all
Premium Receivables acquired by FPF to the date of termination and the
Servicer shall service the portfolio of Conveyed Property in the normal
course of its business and, in connection therewith, all provisions of
this Agreement or any Servicing Agreement with respect to such existing
portfolio shall remain in full force and effect and shall survive the
termination of this Agreement under this Section 3, including, without
limitation, the repurchase obligations of Seller or Guarantor relating
to such existing portfolio.
Section 4. Purchase Price and Payment Terms for Conveyed
Property/Right of Set-Off.Section 4. Purchase Price and Payment Terms
for Conveyed Property/Right of Set-Off. FPF shall pay Seller the
Purchase Price for the Conveyed Property pursuant to the terms and
conditions set forth in this Agreement. The Up-front Purchase Price
shall be paid to Seller or a third party acceptable to FPF upon
satisfaction of the conditions set forth in Section 2(c). The Purchase
Premium, if any, shall be paid to Seller monthly in arrears, not later
than the eighth Business Day of each month. FPF shall have a right to
off-set from such Purchase Price amounts due to Seller any amounts due
FPF from Seller or Guarantor under this Agreement including, without
limitation, any Repurchase Price amounts due under Section 6 and any
Agent Statement Unpaid Balance amounts.
Section 5. Notification of SaleSection 5. Notification of Sale.
FPF shall send or cause to be sent notice of the Sale of the Premium
Receivables to FPF, (i) to each Obligor to the effect that the Premium
Receivables have been Sold to FPF and that all payments with respect
thereto are required to be made payable as specified in such notice,
and (ii) to each Issuing Insurance Company to the effect that the
Premium Receivables have been Sold to FPF and that all payments with
respect thereto are required to be paid to the Servicer as specified in
such notice. The Seller shall promptly respond to reasonable inquiries
from FPF or third parties confirming the Sale of the Conveyed Property
hereunder.
Section 6. Repurchase of Conveyed Property.Section 6. Repurchase
of Conveyed Property.
(a) Not later than five (5) Business Days after notice from
FPF, Seller shall repurchase from FPF any Premium Receivables and
other related Conveyed Property (collectively, the "Repurchase
Property") (i) that does not comply in all respects with Seller's
representations and warranties described in Section 11 of this
Agreement or (ii) for which the Required Documents have not been
timely delivered to FPF. The amount payable by Seller to FPF for
the Repurchase Property shall be equal to the Repurchase Price.
Upon its receipt of the Repurchase Price, FPF shall convey to
Seller all of its right, title and interest in such Repurchase
Property on an "AS IS, WHERE IS" basis without recourse and
without any warranties, written or oral, express or implied, of
any kind including, but not limited to, warranties of TITLE;
MERCHANTABILITY OR ABSENCE FROM LIENS.
(b) Each Guarantor (jointly and severally, if more than one
Guarantor) hereby agrees to repurchase (i) the Repurchase Property
referred to in Section 6(a) upon the failure of Seller to do so,
and (ii) any Premium Receivable originated in a fraudulent manner.
Upon its receipt of all of the amounts due under this Section,
FPF shall convey to Guarantor all of its right, title and interest
in such Repurchase Property on an "AS IS, WHERE IS" basis without
recourse and without any warranties, written or oral, express or
implied, of any kind including, but not limited to, warranties of
TITLE; MERCHANTABILITY OR ABSENCE FROM LIENS.
Section 7. Delivery to FPF of Proceeds; Power of Attorney.Section
7. Delivery to FPF of Proceeds; Power of Attorney. FPF shall be the
owner of any Conveyed Property including any proceeds thereof.
Following the Sale of any Conveyed Property, if any proceeds of such
Conveyed Property are received by Seller, Seller shall hold such
proceeds in trust for FPF separate and apart from its own property and,
at its own cost, immediately endorse (if necessary) and deliver such
proceeds, as FPF directs. Seller hereby constitutes and appoints FPF
as its true and lawful attorney with the power to endorse the name of
Seller upon any instrument or other document pertaining to the Conveyed
Property and any related proceeds. This power is coupled with an
interest and is irrevocable.
Section 8. Verification, Notification and Collection of Premium
Receivables.Section 8. Verification, Notification and Collection of
Premium Receivables. FPF shall be entitled, in its own or any other
name and in form determined by FPF, to contact any Obligor or any other
Person and verify the payment of or inquire about any other issue
pertaining to any Conveyed Property that has been or is to be Sold to
FPF. Upon the Sale of any Conveyed Property, FPF shall be entitled to
notify and, upon the request of FPF, Seller shall notify the Obligors,
insurance companies and any other Persons that FPF is the owner of such
Conveyed Property and direct such Persons to pay FPF any amounts owing
with respect to such Conveyed Property.
FPF, as the owner of the Conveyed Property, shall be entitled to
amend, compromise, modify, release or settle the indebtedness and
obligations of the Obligors with respect to the Conveyed Property that
is Sold to FPF hereunder, and to take any legal action to collect any
amounts owing with respect to such Conveyed Property and to take or
refrain from taking any additional action with respect to such Conveyed
Property in good faith, without notice to or the consent of Seller and
without affecting any obligation of Seller to repurchase such Conveyed
Property as may be required by FPF under this Agreement. Seller, at
its own cost, shall execute and deliver to FPF any documents and take
any actions deemed necessary or desirable by FPF to assist FPF in
exercising any right or remedy pertaining to the Conveyed Property.
Section 9. Financial Statements and Books and Records.Section 9.
Financial Statements and Books and Records. Seller shall keep
accurate and complete books and financial records pertaining to the
Conveyed Property in accordance with GAAP and shall disclose the Sale
of any Conveyed Property to FPF and the respective date of such Sale in
Seller's books and records. FPF or its designated representative shall
have the right, upon written notice to Seller and during regular
business hours, to inspect, audit and copy Seller's books and records
relating to the Conveyed Property.
Section 10. Seller's General Representations and
Warranties.Section 10. Seller's General Representations and
Warranties. Seller hereby represents and warrants to and for the
benefit of FPF on the date of this Agreement and on any date of Sale of
Premium Receivables hereunder that:
(a) Seller is duly organized and is validly existing as a
corporation in good standing under the laws of the state of its
organization with full power and authority to execute and deliver
this Agreement and to Sell the Conveyed Property to FPF and
otherwise to perform the terms and provisions thereof;
(b) Seller is duly qualified to do business as a domestic or
foreign business entity in good standing, and has obtained all
required licenses and approvals, if any, in all jurisdictions in
which the conduct of its business requires such qualifications,
and has complied with all federal, state and local laws and
regulations in connection with the origination of the Premium
Receivables and the Sale of the Conveyed Property under this
Agreement;
(c) The execution and delivery by Seller of this Agreement
and Seller's performance of the terms and conditions thereof have
been duly authorized by all necessary action of Seller, do not
require any approval or consent of any governmental agency or
authority or any other Person, and do not and will not conflict
with or result in a breach or (with or without notice or lapse of
time) a default under any agreement, law or governmental
regulation binding upon or applicable to Seller or the Conveyed
Property;
(d) No litigation or administrative proceeding of or before
any court, tribunal or governmental body is presently pending or
threatened, against Seller or its properties which have not been
previously disclosed in writing to FPF;
(e) This Agreement and any related documents to which Seller
or any Guarantor is a party constitute valid, legal and binding
obligations of Seller and any such Guarantor, enforceable against
Seller and any such Guarantor in accordance with the terms
thereof, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the
enforcement of creditor's rights generally and to general
principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law;
(f) Seller does not have material liabilities or obligations
other than those previously disclosed in writing to FPF;
(g) No information, certificate, statement or report
furnished by or on behalf of Seller or any Guarantor to FPF
contains any untrue statement of a material fact or omits a
material fact necessary to make such information, certificate,
statement or report not misleading. There is no fact peculiar to
Seller or any Affiliate of Seller or, to its knowledge, any
Conveyed Property or Obligor, which it has not disclosed to FPF in
writing which could adversely affect Seller's ability to perform
the transactions contemplated by this Agreement and any related
documents to which Seller is a party;
(h) All tax returns required to be filed by Seller, any of
its Affiliates, subsidiaries or any Guarantor in any jurisdiction
have in fact been filed, and all taxes, assessments, fees, claims
and other governmental charges upon Seller, such Affiliate or
subsidiary, such Guarantor or any of their respective properties,
income or franchises, shown to be due and payable on such returns
have been paid; provided, that neither Seller nor such Affiliate
or subsidiary or Guarantor shall be required to pay or discharge
any such tax, assessment, fee, claim or other charge which is
being contested in good faith and by proper proceedings and as to
which appropriate reserves are being maintained in accordance with
GAAP. To the best of Seller's knowledge, all such tax returns
were true and correct and Seller does not know of any contemplated
or proposed additional tax assessment against Seller or any of its
subsidiaries in any material amount or of any basis therefor;
(i) The provisions for taxes on Seller's and its
subsidiaries' books are in accordance with GAAP;
(j) At the close of any Sale of Conveyed Property, Seller
had a positive Tangible Net Worth;
(k) The principal executive office of Seller is located at
the address described on the first page of this Agreement, and has
been located at such address for a period of not less than four
months preceding the date of this Agreement or since its
formation;
(l) "Hallmark Finance Corporation" is the only legal name
under which Seller is operating its business upon the execution of
this Agreement. Seller has not changed its name in the last three
years (or such shorter period of time during which Seller was in
existence) and does not have any other trade names, fictitious
names, assumed names or "doing business as" names other than those
that have been previously disclosed in writing to FPF;
(m) The transactions contemplated by this Agreement are in
the ordinary course of Seller's business and Seller has valid
business reasons for selling the related Conveyed Property rather
than obtaining a secured loan with the Conveyed Property as
collateral. At the time of each Sale: (i) Seller Sold the related
Conveyed Property to FPF without any intent to hinder, delay or
defraud any current or future creditor of Seller; (ii) Seller was
not insolvent or did not become insolvent as a result of any Sale;
(iii) Seller was not engaged and was not about to engage in any
business or transaction for which any property remaining with
Seller would constitute unreasonably small capital or for which
the remaining assets of Seller are unreasonably small in relation
to the business of Seller or the transaction; (iv) Seller did not
intend to incur, and did not believe or reasonably should not have
believed, that it would incur, debts beyond its ability to pay as
they become due; and (v) the consideration paid by FPF to Seller
for the Conveyed Property was equivalent to the fair market value
of such Conveyed Property;
(n) No Material Adverse Change has occurred since the
previous Sale of Conveyed Property;
(o) Each Sale of Conveyed Property contemplated by this
Agreement and any related documents constitutes a true sale and
not a pledge of collateral in connection with a financing and such
Conveyed Property shall not be part of Seller's property for any
purpose under state or federal law;
(p) Each Sale of Conveyed Property (including all payments
due or to become due thereunder) by Seller pursuant to this
Agreement to the best of Seller's knowledge is not subject to and
will not result in any tax, fee or governmental charge payable by
Seller or FPF to any federal, state or local government;
(q) The consideration to be received by Seller in exchange
for each Sale of Conveyed Property (including the right to receive
all payments due or to become due thereunder) (i) is fair
consideration having value equivalent to or in excess of the fair
market value of the Conveyed Property and, except with respect to
the Purchase Premium (ii) is or will be paid in full to Seller
upon the consummation of each Sale thereof, and (iii) no provision
exists whereby the consideration will be modified after the date
of such Sale; and
(r) Any drafts provided by FPF to Seller shall be used
exclusively for the purchase of Eligible Premium Receivables in
accordance with the terms and conditions for use of such drafts
that may be provided to Seller by FPF from time to time.
The foregoing representations and warranties shall be continuing
in nature and shall survive the termination of this Agreement.
Section 11. Seller's Representations and Warranties With Respect
to the Conveyed Property.Section 11. Seller's Representations and
Warranties With Respect to the Conveyed Property. Upon each Sale of
Conveyed Property, each Premium Receivable Sold to FPF shall have all
of the following characteristics as of the date of Sale (such Premium
Receivables having all of such characteristics shall be referred to
herein as "Eligible Premium Receivables"):
(a) Each Premium Receivable represents the genuine, legal,
valid and binding payment obligation in writing of the Obligor
thereon, enforceable by the holder thereof in accordance with its
terms;
(b) Each Premium Receivable arises under a Premium Finance
Agreement which contains customary and enforceable provisions such
that the rights and remedies of the holder thereof are adequate to
enforce the Realization Provisions;
(c) Each Premium Receivable is not subject to any
proceedings or investigations pending or threatened, before any
court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over Seller or
its properties: (i) asserting the invalidity of such Premium
Receivable; (ii) seeking to prevent the enforcement of such
Premium Receivable; or (iii) seeking any determination or ruling
that may adversely affect the payment on or enforceability of such
Premium Receivable;
(d) Each Premium Receivable was originated in a state where
Seller is licensed (if required to be licensed) to do business as
an insurance premium finance company;
(e) Each Premium Receivable does not (and did not at the
time of origination) contravene any federal, state or local laws,
rules or regulations applicable thereto or contract between Seller
and FPF applicable thereto, and no party to any such contract is
in contravention of any such law, rule or regulation;
(f) Each Premium Receivable was originated in the United
States of America by Seller or purchased by Seller from another
premium finance company in the ordinary course of Seller's
business of financing insurance premiums written through
independent insurance agents and brokers or insurance companies
directly, in either case, through the application of and
consistent with Seller's standard procedures in a fashion not less
stringent taken as a whole than those other Premium Receivables
owned by Seller;
(g) Each Premium Receivable is payable in U.S. Dollars by an
Obligor who at time of policy origination is located within the
United States of America;
(h) Each Premium Receivable is evidenced by only one
original contract, in the form of a Premium Finance Agreement,
properly completed and executed without variations, with notation
of the Sale to FPF, on or before the Sale of such Premium
Receivable;
(i) Each Premium Receivable provides, according to its
original or modified terms, that the amount payable thereunder
will be paid in consecutive equal monthly payments that fully
amortize such Premium Receivable by its stated terms and which
amount will be paid in a maximum of eleven (11) payments (if
financing an annual policy), and a maximum of five (5) payments
(if financing a six-month policy) with the first payment due not
later than 31 days following the inception date of the related
insurance policy;
(j) Each Premium Receivable relates to an insurance policy
issued by an Eligible Insurance Company;
(k) Each Premium Receivable relates to an insurance policy
for which the insured has paid a down payment amount of not less
than the Down Payment Requirement;
(l) Each Premium Receivable is evidenced by proof of payment
to the Issuing Insurance Company or its designated general Agent
equal to an amount not less than the original principal amount of
such Premium Receivable and the related down payment due under the
Premium Finance Agreement has been paid in full by, or on behalf
of, the related Obligor;
(m) The information and related documents regarding the
Premium Receivables being Sold to FPF is true and correct in all
material respects as of the opening of business on the date of
Sale and no selection procedures believed to be adverse to FPF
have been utilized in selecting the Premium Receivables for
inclusion therein;
(n) Except for Premium Receivables Sold on the Effective
Date, no Premium Receivable or related Premium Finance Agreement
has been satisfied, cancelled or is more than 30 days past due or
is subject to a right of rescission, setoff, counterclaim,
subordination, recoupment or defense which has been asserted or
threatened with respect to such Premium Receivable nor have the
Realization Provisions securing such Premium Receivable been
released from the Lien granted by the Obligor;
(o) Except for assignments or pledges to lenders who have
provided financing to Seller and which assignments and pledges
have been released prior to the Sale of the Premium Receivables to
FPF, no Premium Receivable has been Sold or pledged by Seller to
any Person other than FPF; immediately prior to any Sale
contemplated by this Agreement Seller had good title to the
Premium Receivable sold to FPF free and clear of all Liens and,
immediately upon any Sale of the Premium Receivables contemplated
by this Agreement, FPF will have good title to the Premium
Receivables Sold to FPF free and clear of all Liens;
(p) No Premium Receivable has terms which have been extended
or modified other than through the customary process and
procedures of Seller, the originals of which have been included in
the Premium Finance Agreement loan documents delivered to FPF;
(q) No Premium Receivable has any Liens or claims which have
been filed or claims that would be Liens prior to or equal to the
Realization Provisions granted by the Obligor pursuant to such
Premium Receivable;
(r) At the time of Sale of any Premium Receivable which
finances a commercial line insurance policy, to the best of
Seller's knowledge, the Obligor with respect to such Premium
Receivable is not subject to any bankruptcy or insolvency
proceeding;
(s) No Premium Receivable relates to an insurance policy
which is deemed fully earned in the case of a claim;
(t) No Premium Receivable has been originated by a
Prohibited Agent; and
(u) No Premium Receivable has been originated in, nor is
subject to the laws of, any jurisdiction under which the Sale of
such Premium Receivable would be unlawful, void or voidable.
The foregoing and any additional representations, warranties and
covenants contained in this Agreement shall be continuing in nature and
shall survive the termination of this Agreement.
Section 12. Additional Covenants of Seller.Section 12.
Additional Covenants of Seller. During the Term of this Agreement,
(a) Seller shall at its expense cause all Uniform Commercial
Code termination statements, satisfactions, releases or partial
releases, as the case may be, with respect to Liens on the
Conveyed Property to be filed on the date of Sale of the Conveyed
Property.
(b) Seller shall cause all Uniform Commercial Code financing
statements, continuation statements and any other documents,
reasonably requested by FPF, establishing the right, title and
interest of FPF, to and under the Conveyed Property, to be
promptly executed and filed by Seller, and shall deliver to FPF or
its designee file-stamped, complete copies of, or filing receipts
for, any document recorded, registered or filed as provided above,
as soon as available but in any event not later than thirty (30)
days following such recordation, registration or filing.
(c) At least thirty (30) days prior to Seller making any
change in its name, identity or organizational structure which
would make any termination statement, financing statement or
continuation statement filed by FPF or Seller seriously misleading
within the applicable provisions of the Uniform Commercial Code or
any title statute, Seller shall give FPF notice of any such change
and shall execute and file such financing statements or amendments
as may be necessary or reasonably required by FPF to continue the
perfection of the respective interests of FPF in the Conveyed
Property.
(d) Except for the Sale to FPF of the Conveyed Property and
Liens granted or caused by FPF in such Conveyed Property, Seller
shall not Sell to any other Person, or grant, incur, assume or
suffer to exist any Lien on such Conveyed Property or on any
interest therein, and Seller shall defend the right, title and
interest of FPF in, to and under such Conveyed Property against
all claims of third parties claiming through or under Seller.
(e) Seller shall not impair FPF's right, title and interest
in, to and under any of the Conveyed Property.
(f) Seller shall maintain Tangible Net Worth of not less
than the amount set forth in Schedule A attached hereto.
(g) Seller shall furnish to FPF:
(i) within forty-five (45) days after the end of each
of the first three fiscal quarters of Seller (commencing with
the first fiscal quarter ending after the date hereof) an
unaudited balance sheet and income statement (prepared in
accordance with GAAP without accompanying notes) for Seller
and its subsidiaries covering the preceding quarter, in each
case certified by the president or principal financial
officer of Seller to be true, accurate and complete copies of
such financial statements;
(ii) within ninety (90) days after the end of each
fiscal year of Seller beginning at the end of the first
fiscal year after the date hereof an audited balance sheet
and income statement (prepared in accordance with GAAP) for
Seller and its subsidiaries covering the preceding fiscal
year;
(iii) such other information respecting the condition or
operations, financial or otherwise, of Seller, any of its
subsidiaries and any Guarantor as FPF may from time to time
reasonably request; and
(iv) prompt notice to FPF (but in no event more than
three (3) Business Days following) of any Material Adverse
Change.
(h) Seller shall provide prompt written notice to FPF if:
(i) Seller ceases to be managed and controlled by the
Person or Persons who manage and control Seller as of the
date of this Agreement;
(ii) any such Person which is a corporation,
partnership, trust or other entity is dissolved or liquidated
or merged with or into any other Person or for any period of
more than ten (10) days ceases to exist in its present form
and (where applicable) in good standing and duly qualified
under the laws of the jurisdiction of its incorporation or
formation and any jurisdiction in which such standing or
qualification is necessary or advisable in connection with
the conduct of business; or
(iii) Seller consummates a sale of all or substantially
all of its assets, except for the Sale of Conveyed Property
by Seller to FPF under this Agreement and any related
documents.
(i) Seller shall not dissolve or liquidate in whole or in
part.
(j) Seller shall not voluntarily institute any proceedings
to adjudicate Seller or any of its Affiliates bankrupt or
insolvent, consent to the institution of bankruptcy or insolvency
proceedings against Seller or any of its Affiliates, file a
petition seeking or consenting to reorganization or relief under
any applicable federal or state law relating to bankruptcy,
consent to the appointment of a receiver, liquidator, assignee,
trustee (or other similar official) of Seller or any of its
Affiliates or a substantial part of its or their property or admit
its or their inability to pay its or their debts generally as they
become due or authorize any of the foregoing to be done or taken
on behalf of Seller or any of its Affiliates.
(k) Seller shall maintain at its own expense, a blanket
fidelity bond or an errors and omissions insurance policy, in form
and content and in amounts acceptable to FPF and naming FPF as an
additional loss payee or beneficiary thereunder.
(l) Seller shall comply with all Additional Provisions set
forth in Schedule A, if any.
Section 13. Taxes.Section 13. Taxes. Seller shall pay when due
all present and future income taxes, withholding taxes, worker's
compensation premiums, sales taxes, use taxes, excise taxes, personal
property taxes and all assessments and other amounts levied by or
required to be paid to any governmental or quasi-governmental authority
and pertaining to Seller, its business operations, its assets or the
Conveyed Property (except for FPF's income taxes) and provide FPF with
written proof of such payment upon the request of the latter party.
Section 14. Further Assurances and Substituted
Performance.Section 14. Further Assurances and Substituted
Performance. Seller shall take or cause any third party to take any
actions and execute or cause any third party to execute any additional
documents (including, but not limited to, Uniform Commercial Code
filings) deemed necessary or desirable by FPF to carry out the intent
or purposes of this Agreement and any related documents. FPF shall be
entitled, but not required, to take any action and execute any document
that was required to be, but not, taken or executed by Seller under
this Agreement and any related documents. This power is coupled with
an interest and is irrevocable. Upon demand, Seller shall reimburse
FPF for any amounts, attorneys' fees, expenses and costs paid by FPF in
connection with such actions together with interest thereon at the
Interest Rate from the date of payment until the date of reimbursement.
No action taken by FPF shall be deemed to relieve Seller's obligation
to take such action or cure Seller's default under this Agreement.
Section 15. Indemnification.Section 15. Indemnification. Seller
shall indemnify and hold FPF and its Affiliates harmless from all
claims, defenses, offsets, counterclaims, loss, costs, damages,
liabilities, causes of action, actions and suits (including, but not
limited to, attorneys' fees, expenses and costs) arising from
(i) Seller's breach of any representation, warranty or covenant
contained in this Agreement or any related documents, (ii) the
unauthorized use of drafts provided by FPF to Seller for the funding of
Premium Finance Agreements, or (iii) the failure of the Premium
Receivables Sold hereunder to be originated in compliance with all
requirements of law. These indemnity provisions are in addition to any
other obligations that the Seller may otherwise have hereunder and
shall survive the termination of this Agreement.
Section 16. Default.Section 16. Default. Seller shall be deemed
in default (a "Default") under this Agreement upon the occurrence of
any one or more of the following:
(a) Seller fails to pay any indebtedness, fails to perform
any obligation, or breaches any covenant, representation or
warranty (other than a breach of any representation or warranty
under Section 11 of this Agreement) to FPF under this Agreement
and/or any related documents and any other present or future
agreement with FPF;
(b) Seller breaches any representation or warranty by Seller
under Section 11 of this Agreement pertaining to Conveyed Property
and Seller fails to repurchase such Conveyed Property within five
(5) Business Days from the date of written notification by FPF of
such breach in accordance with the terms and conditions of Section
6 of this Agreement;
(c) Seller permits the entry or service of any garnishment,
judgment, tax levy, attachment or lien against it or any of its
property;
(d) Seller or any Guarantor becomes insolvent or unable to
pay its debts in a timely manner;
(e) Seller or any Guarantor makes a general assignment for
the benefit of its creditors, a receiver or trustee is appointed
for all or a substantial portion of Seller's or Guarantor's
respective assets, or a bankruptcy, insolvency, liquidation or
reorganization proceeding is commenced by or against Seller or
Guarantor in any state or federal court;
(f) Seller challenges the validity of the true Sale of the
Premium Receivables hereunder or the priority, validity or
enforceability of any ownership interest granted by Seller in the
Conveyed Property to FPF;
(g) Seller ceases to operate its business, or is dissolved
or terminated for any reason;
(h) Any Guarantor dies or any Guarantor fails to perform any
obligation to FPF under this Agreement or challenges the validity
of its guaranty provision of this Agreement or provides FPF with
notice of its intent to terminate any guaranty provision of this
Agreement to FPF or its future obligations under such guaranty
provisions for any reason; or
(i) Following 30 days written notice to Seller that FPF, in
good faith, believes that Seller's or any Guarantor's ability to
pay and perform any of the obligations described in this Agreement
or any related documents is or shall be impaired or otherwise
deems itself insecure for any reason and such written notice
specifies the basis of its determination.
(j) An event of default by the Servicer under the provisions
of the Servicing Agreement.
Section 17. Remedies.Section 17. Remedies. In the event of
Seller's default under this Agreement, FPF may exercise one or more of
the following cumulative remedies without notice or demand of any kind:
(a) terminate immediately any of its remaining obligations
under this Agreement;
(b) collect all amounts due from Seller to FPF under this
Agreement or any other agreement, together with interest thereon
at the Default Rate until paid, with or without resorting to legal
process;
(c) in the event FPF terminates this Agreement, collect, in
addition to the amounts set forth in (b) above, liquidated damages
in the amount of the maximum Termination Fee that would be
collectible in the event of termination hereunder, it being agreed
by the parties that damages would be difficult to assess under
this Agreement and that liquidated damages in addition to
collection of the amounts set forth in (b) above shall be due to
FPF to compensate FPF for the default by Seller or any Guarantor
and the termination of this Agreement by FPF as a result thereof;
(d) change Seller's mailing address, and as it relates to
the Conveyed Properly only, open Seller's mail, endorse Seller's
name on checks, bills of exchange, notes, acceptances, money
orders, drafts or other documents or forms of payment and retain
any proceeds of the Conveyed Property;
(e) terminate any Servicing Agreement or lock box agreement
pertaining to the Conveyed Property and change such servicers and
lock box arrangements;
(f) notify Obligors to make payment on Premium Receivables
Sold under this Agreement to FPF or its designee;
(g) enter Seller or any Affiliate's premises during normal
business hours and take possession of any Conveyed Property;
(h) require Seller, at its expense, to deliver and make
available to FPF any Conveyed Property Sold to FPF at a place
reasonably convenient to FPF;
(i) commence a suit for the turnover or replevin of the
Conveyed Property;
(j) collect, compromise, settle, sell or otherwise dispose
of any Conveyed Property that Seller was required to, but did not,
repurchase from FPF;
(k) set-off Seller's and any Guarantor's obligations owing
to FPF under this Agreement, any other written agreement or by
operation of law against any amounts owed by FPF to such Persons
under this Agreement or any related documents, respectively,
including, but not limited to, moneys, instruments and other
property deposited or maintained with FPF or any third party for
the benefit of FPF; and
(l) exercise all other rights available to FPF under any
other present or future agreement or applicable law.
FPF's rights and remedies are cumulative and may be exercised
together, separately and in any order.
Section 18. Waiver.Section 18. Waiver. FPF shall not be deemed
to have waived any right or remedy described in this Agreement unless
FPF has executed and delivered to Seller a written waiver thereof. A
waiver of a right or remedy on one occasion shall not act as a waiver
of that or any other right or remedy on a future occasion. Without
limiting the foregoing, FPF's delay in exercising any right or remedy
shall not constitute a waiver of that or any other right or remedy
described in this Agreement.
Section 19. Counterparts/Facsimiles.Section 19.
Counterparts/Facsimiles. This Agreement may be executed by facsimile
signature and in one or more counterparts, each of which when taken
together shall constitute one complete Agreement.
Section 20. Essence of TimeSection 20. Essence of Time. Seller
and FPF agree that time is of the essence.
Section 21. AssignmentSection 21. Assignment. FPF shall be
entitled to assign or ▇▇▇▇▇ ▇ ▇▇▇▇ on its interests hereunder, and the
obligations, rights and remedies under this Agreement to any Person in
its sole discretion. Such Persons shall be deemed to be third party
beneficiaries hereunder and shall be entitled to rely on the provisions
hereof for the benefit of FPF including, without limitation, the
indemnification provisions of Section 15. Any assignee or designee of
FPF shall be entitled to enforce the provisions of this Agreement
against Seller. Notwithstanding any such assignment, no assignment by
FPF hereunder shall relieve FPF of its obligations to Seller hereunder.
Seller shall not be entitled to assign or grant a security interest in
any of its obligations, rights or remedies under this Agreement to any
Person without the prior written consent of FPF, or its assignees or
designees, which consent may be withheld in the sole discretion of FPF.
No person shall be deemed a third party beneficiary of Seller.
Section 22. Standard of CareSection 22. Standard of Care. FPF
shall not be liable to Seller for any action taken or not taken by FPF
in good faith in connection with this Agreement. FPF shall not be
deemed a fiduciary of Seller or be required to perform any of Seller's
obligations to FPF or any third party under any circumstances.
Section 23. Costs and Expenses/Attorneys Fees.Section 23. Costs
and Expenses/Attorneys Fees.
(a) Seller shall pay all costs and expenses incident to the
performance of its obligations under this Agreement;
(b) Seller shall pay on demand FPF's reasonable attorneys'
fees and other costs and expenses incurred before trial, at trial
and on appeal in the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Agreement, including
without limitation, all costs, expenses and attorneys fees
incurred by FPF in connection with any bankruptcy or insolvency
proceeding involving the Seller.
Section 24. Notices.Section 24. Notices. All notices, requests,
consents and other communications hereunder shall be in writing and
shall be delivered personally or mailed by first-class registered and
certified mail, postage prepaid, or by telephonic facsimile
transmission, electronic mail or overnight delivery service, postage
prepaid, to the parties at the following addresses or such other
addresses that they may provide each other with written notice of in
the future:
If to Seller: Hallmark Finance Corporation
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to FPF, Inc.: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Such notices shall be effective upon the earlier of (i) receipt or
(ii) two (2) Business Days after the confirmed delivery by overnight
delivery service.
Section 25. Successors and Assigns.Section 25. Successors and
Assigns. Except as provided in Section 21 hereof limiting assignments
by Seller, this Agreement shall inure to the benefit of and be binding
upon the successors, assigns, trustees, receivers, heirs and personal
representatives of the parties hereto.
Section 26. Severability.Section 26. Severability. Any part,
provision, agreement, representation, warranty or covenant of this
Agreement which is prohibited or unenforceable or is held to be void or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties
waive any provision of law which prohibits or renders void or
unenforceable any provision hereof. If the invalidity of any part,
provision, agreement, representation, warranty or covenant of this
Agreement shall deprive any party of the economic benefit intended to
be conferred by this Agreement, the parties shall negotiate in good
faith to develop a structure the economic effect of which is as nearly
as possible the same as the economic effect of the transactions
contemplated hereunder without regard to such invalidity.
Section 27. Force Majeure.Section 27. Force Majeure. Neither
party shall be liable for damages due to delay or failure to perform
any obligation under this Agreement if such delay or failure results
directly or indirectly from circumstances beyond the control of such
party. Such circumstances shall include, but shall not be limited to,
acts of God, acts of war, civil commotions, riots, strikes, lockouts,
acts of the government, disruption of telecommunications transmissions
accident, fire, water damages, flood, earthquake or other natural
catastrophes.
Section 28. Governing Law.Section 28. Governing Law. THIS
AGREEMENT AND ANY RELATED DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF COLORADO
WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS.
Section 29. Jurisdiction and Waiver of Certain Damages.Section
29. Jurisdiction and Waiver of Certain Damages. THE PARTIES HERETO
HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS
OF THE STATE OF COLORADO AND THE UNITED STATES DISTRICT COURT OF
COLORADO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND THE PARTIES HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
SUCH COURTS. THE PARTIES HEREBY IRREVOCABLY WAIVE, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM
TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING AND IRREVOCABLY CONSENT
TO THE SERVICE OF ANY SUMMONS AND COMPLAINT AND ANY OTHER PROCESS BY
THE MAILING OF COPIES OF SUCH PROCESS TO THEM AT THEIR RESPECTIVE
ADDRESSES AS SPECIFIED IN THIS AGREEMENT. THE PARTIES HEREBY AGREE
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS
SECTION SHALL AFFECT THE RIGHT OF FPF TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR PRECLUDE THE ENFORCEMENT OF ANY
JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION
UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR
JURISDICTION. NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO
THE CONTRARY, NO CLAIM MAY BE MADE BY THE SELLER AGAINST FPF OR ANY OF
ITS AFFILIATES FOR ANY LOST PROFITS, OR ANY SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES IN RESPECT TO ANY BREACH OR WRONGFUL CONDUCT
(OTHER THAN WILLFUL MISCONDUCT CONSTITUTING FRAUD) ARISING OUT OF OR IN
ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED HEREUNDER.
Section 30. Entire Agreement.Section 30. Entire Agreement. This
Agreement (including any Servicing Agreement between Seller and FPF )
contains the complete and integrated understanding and agreement
between the parties and their respective Affiliates pertaining to the
subject matter hereof, and all other prior and contemporaneous
discussions, negotiations, agreements and proposal letters, written or
oral, express or implied shall be of no force and effect.
Section 31. Waiver of Jury Trial. EACH OF THE PARTIES HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the undersigned duly authorized officers of
the parties have executed this Agreement as of the day first stated
above.
SELLER:
By
Name:
Title:
FPF, INC.
By
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
AGREED TO WITH RESPECT TO SECTION 6(b):
__________________________________
Hallmark Financial Services, Inc
By: ______________________________
Name:____________________________
Title:_____________________________
SCHEDULE A
This Schedule A forms a part of the Sale and Assignment Agreement
("Agreement") to which it is attached and is incorporated therein.
Section A-1. Definitions. The following definitions shall have
the following meanings:
"Additional Charges" shall mean upon Default, the sum (a) the
additional interest due equal to the FPF Principal Balance multiplied
by a rate per annum equal to the difference between the Default Rate
and the Interest Rate, (b) all other expenses due from the Seller to
FPF under this Agreement, (c) the Termination Fee, as applicable, (d)
the amount of repurchase obligations, if any, under Section 6 of this
Agreement and (e) the costs and expenses set forth in Section 23 of
this Agreement.
"Advance Rate" shall mean a percentage from time to time specified
by Seller in writing to FPF but in no event to exceed ninety percent
(90.00%) reduced by the Reserve Percentage.
"Capital Charge" shall mean the sum of:
(a) The FPF Principal Balance multiplied by 1/360th of the
Interest Rate, plus;
(b) Any unpaid Capital Charge due for any prior day or
accounting period, plus;
(c) The Commitment Fee, plus
(d) Additional Charges.
"Closing Fee" shall be $12,500 of which $5,000 has been paid prior
to the Effective Date.
"Commitment Fee" shall mean for any month in which the Unused
Portion exceeds twenty percent (20%) of the Maximum Purchase
Commitment, a commitment fee payable to FPF, in an amount equal to the
product of (a) the Unused Portion and (b) one half percent (0.50%) per
annum.
"Default Rate" shall be the lesser of (a) the Prime Rate plus 8%
or (b) the highest interest rate permitted by applicable law.
"Down Payment Requirement" shall mean a down payment under each
Premium Finance Agreement in an amount not less than the amount
required by law or statute.
"Effective Date" means the Effective Date of this Agreement which shall
be the 18th day of November, 1999.
"Guarantor" means, Hallmark Financial Services, Inc., whose
address is ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
"Interest Rate" shall be the Prime Rate plus a spread ("Spread")
shown below, based on an actual/360 day year.
a) From the Closing and for each day in which the prior month's
average daily FPF principal balance is $5,000,000 or below,
the Spread shall be one percent (1.00%); and
b) For any day in which the prior month's average daily FPF
principal balance is greater than $5,000,000 but less than
$7,500,000, then the Spread shall be three-quarters percent
(0.75%); and
c) For any day in which the prior month's average daily FPF
principal balance is greater than $7,500,000, then the Spread
shall be one-half percent (0.50%).
"Loss Ratio Trigger" shall mean any time at which the Loss Ratio
exceeds one and a half percent (1.50%).
"Maximum Purchase Commitment" shall be $6,000,000 as of the
effective date. So long as Seller is in compliance with this
Agreement, the Maximum Purchase Commitment may be increased up to
$8,000,000, in increments of $1,000,000, by Seller upon ten (10)
business days written notice to FPF. Any increase in the Maximum
Purchase Commitment above the $8,000,000 will be at the sole discretion
of FPF, upon the request and consent of Seller.
"Minimum Yield Trigger" shall mean, for any month, the failure of
FPF to receive payment in full of the Capital Charge.
"Parity Shortfall" means for each Premium Receivable (including
each Premium Receivable in any current Sale), the amount by which the
outstanding principal balance of the applicable Premium Finance
Agreement exceeds the expected return premium due from the Issuing
Insurance Company in the actual or prospective event of a cancellation
of such Premium Receivable. If the expected return premium due from
the Issuing Insurance Company exceeds such outstanding principal
balance, then no parity shortfall exists.
"Parity Shortfall Amount" means for all outstanding Premium
Receivables, the sum of (a) for Cancelled Premium Receivables, the
total Parity Shortfall on such Cancelled Premium Receivables, plus
(b) for all other Premium Receivables not in a cancelled status, the
total Parity Shortfall for such Premium Receivables calculated as if
the next payment due date is missed, times 150% of the projected
lifetime Static Pool Cancellation Rate for the portfolio of Premium
Receivables as determined by FPF, plus (c) the outstanding principal
balance of all Defaulted Premium Receivables.
"Prime Rate" shall be as published in the Money Section of The
Wall Street Journal. If more than one rate is published, then the
highest rate published shall apply.
"Purchase Premium" shall be equal to the Collections (but not
including any unearned commissions from Agents) due the Seller as
provided herein. Collections shall be allocated in the following
order:
(a) Principal payments received shall be allocated to FPF
until the FPF Principal Balance is reduced to zero.
(b) FPF shall retain all Collections until the unpaid
Capital Charge is paid in full.
(c) If Seller is in Default, then FPF shall retain all
Collections until all amounts payable to FPF pursuant to
Section 17 of this Agreement are paid in full.
(d) The Servicing Fee shall be paid to the Servicer of the
Premium Receivables sold under this Agreement.
(e) Remaining Collections, if any, will be paid to the
Seller as a Purchase Premium.
"Repurchase Price" means (a) the lesser of (i) the Up-front
Purchase Price paid to Seller by FPF for the Premium Receivables and
other related Conveyed Property or (ii) the current outstanding balance
due on the Premium Receivable at the time of repurchase under the
applicable Premium Finance Agreement(s) with respect to the Repurchase
Property, plus (b) interest on the amount payable by Seller to FPF
under (a) above at the Interest Rate from the date that FPF advanced
funds to purchase the Premium Receivables and other related Conveyed
Property to the date of payment by Seller of the Repurchase Price
reduced by any payments previously received by FPF and allocated to
interest, plus (c) the Purchase Premium paid to Seller, if any.
"Reserve Percentage" means for all outstanding Premium Receivables
(including each Premium Receivable in any current Sale) the percentage
resulting from dividing (a) the total Parity Shortfall Amount plus the
total amount of Premium Receivables in excess of the FPF Concentration
Limits by (b) the outstanding principal balance of all Eligible Premium
Receivables at the time of calculation.
"Rule of 78's" means the method by which interest income will be
allocated on Premium Receivable payments and calculated for any payment
as a fraction, the numerator being the number of payments or days
remaining under the original payment schedule for such Premium
Receivable and the denominator being the sum of the digits for the
number of all scheduled payments or days remaining. Example: A 10
monthly payment receivable will recognize 10/55ths of the total
expected lifetime interest in month one and 9/55ths of the total
interest in month two and so forth.
"Static Pool Cancellation Rate" means for each monthly period, the
percentage resulting from dividing (a) the total number of Premium
Receivables Sold in such month that are or become Cancelled Premium
Receivables, by (b) the total number of Premium Receivables Sold in
such month. EXAMPLE: 100 Premium Receivables are originated in January
1999 and in a calculation on July 30, 1999, 32 of these January
Originated Premium Receivables had been cancelled since their
origination. The Static Pool Cancellation Rate for such January 1999
Premium Receivables would be 32% as of July 30, 1999.
"Static Pool Cancellation Rate Trigger" shall mean any time at
which the average Static Pool Cancellation Rate exceeds sixty percent
(60%).
"Term" means the Term of this Agreement commencing on the
Effective Date and, if not earlier terminated as provided in this
Agreement, terminating on November 1, 2002.
"Termination Fee" shall be $30,000 if Seller terminates this
Agreement pursuant to Section 3 during the first eighteen (18) months
following the Effective Date. If such termination occurs in months
nineteen (19) through twenty four (24) following the Effective Date,
the Termination Fee shall be $15,000. No Termination Fee shall be due
after 24 months following the Effective Date.
"Unused Portion" means, as of each day of calculation, an amount
equal to (a) the Maximum Purchase Commitment, less (b) the average FPF
Principal Balance during the period of calculation.
"Up-front Purchase Price" shall mean the Amount Financed for all
outstanding Eligible Premium Receivables Sold by Seller to FPF
multiplied by the Advance Rate.
Section A-2. Additional Provision. The following Additional
Provisions shall be a part of this Agreement.
A-2(i). Identification of Collections. Collections shall
be identified for application against each Premium Receivable
balance and applied against the unpaid Premium Receivable balance
as follows:
(1) First, to any earned-at-writing Premium Finance
Agreement fees; then
(2) Principal calculated in accordance with the applicable
amortization schedule; then
(3) Interest or finance charge at the applicable annual
percentage rate determined in accordance with the Rule
of 78's (or determined as may otherwise be required
under applicable state law for the state in which the
Premium Receivables were originated); then
(4) Any late fees, cancellation fees and other allowable
charges; then
(5) From any remaining amounts, any amount required to be
paid to the Obligor as the insured party in accordance
with applicable state law governing the Premium
Receivables.
A-2(ii).Tangible Net Worth. Seller shall maintain Tangible
Net Worth equal to the sum of (a) $25,000, plus, (b) the
difference between the Amount Financed and the Up-Front Purchase
Price for all Premium Receivables sold to FPF.
SCHEDULE B
CONCENTRATION LIMITS
This Schedule is part of the Sale and Assignment Agreement between
Hallmark Finance Corporation and FPF, Inc., dated as of the 15th day
of November, 1999. Capitalized terms used herein that are not defined
shall have the meanings ascribed to them in this Agreement.
Eligible Premium Receivables may not exceed the following limits:
A. Insurance Company Diversification Limits.
1. For Eligible Insurance Companies covered by the
Texas insurance guaranty fund, the following
allocations shall apply:
Maximum % of
Insurance Company's Eligible Premium
A.M. Best Rating Receivables per
Carrier
---------------- -------
"A-" or better no limit
"B++" or "B+" 25.0%
"B" or "B-" 15.0%
all others* 5.00%
*Note: under "all others" above, "C,"
"D," "E," "F," "N/F," "S" are not
eligible.
Exception:
The financed policies are issued by State and County Mutual Fire
Insurance Company ("S&C"). S&C acts as a "fronting" company and cedes
100% of the risk to American Hallmark Insurance Company ("AHIC") via a
100% Quota Share Reinsurance Agreement between S&C and AHIC.
To administer this sales program, S&C has also entered into a General
Agency Agreement with an affiliate of AHIC, Brokers General, Inc. now
known as American Hallmark General Agency, Inc. ("▇▇▇▇"). ▇▇▇▇ acts as
the administrator of the program, appoints agents, processes policies,
returns unearned premium upon cancellation of policies, including
financed policies, and settles and pays claims.
AHIC in turn has reinsured 75% of its risk related to these policies
through Dorinco Reinsurance Company ("Dorinco") and GE Reinsurance
Company ("GE"). The reinsurance is accomplished through a Quota Share
Retrocession Agreement.
Each of GE and Dorinco have also entered into Guaranty Agreement with
S&C, providing for direct performance and payment by GE and Dorinco in
the event AHIC fails to perform any of its duties and obligations or
fails to make timely payment to S&C.
Finance contracts originated under the above described structure shall
be eligible. Further, if AHIC maintains reinsurance treaties that
accept a quota share of the insurance risk and guarantee the full
performance similar to those currently existing with companies that
are rated "A" or better by A.M. Best and have a Financial Size
Category Class of V there shall be no concentration limitations.
2. For Eligible Insurance Companies not admitted to
the Texas insurance guaranty fund acceptable to
FPF, no more than fifteen percent (15%) of the
portfolio may be written by those non-admitted
insurance companies and the following per company
allocations shall apply:
Maximum % of
Insurance Company's Eligible Premium
A.M. Best Rating Receivables per
Carrier
---------------- -------
"A-" or better 7.5%
"B++" or "B+" 2.5%
B. Insurance Agent Diversification Limits.
Except for insurance agencies which are affiliates of
Seller, the outstanding balance of Eligible Premium
Receivables from an agency may not exceed 15.0% of the
pool and the next largest agent concentration may not
exceed 12.5%, unless an exception is approved in writing
by FPF.
C. Failure of Seller to request cancellation of the policy
from the Issuing Insurance Company pertaining to a
Premium Receivable for which payment is more than thirty
(30) days past due (or for such longer period as maybe
required under applicable state law or regulation) shall
deem said Premium Receivable as ineligible.
All exceptions, if any, are subject to adjustment by FPF in its sole
discretion.
Schedule C
Servicing Agreement
