EXHIBIT 10 (c)
CUT-THROUGH AGREEMENT
This Cut-Through Agreement (this "Agreement", dated as of June 26,
2001, is entered into by and among AMERICAN HALLMARK INSURANCE COMPANY OF
TEXAS (together with its successors and permitted assigns, the "Reinsurer"),
AMERICAN HALLMARK GENERAL AGENCY, INC. (together with its successors and
permitted assigns, the "General Agent"), HALLMARK FINANCE CORPORATION
(together with its successors and permitted assigns, "Hallmark") and FPF,
INC. (together with its successors and assigns, "FPF").
PRELIMINARY STATEMENTS:
(1) Hallmark from time to time enters into premium finance agreements
(each a "Premium Finance Agreement") pursuant to which Hallmark finances all
or a portion of the premium payable for insurance policies (each a "Financed
Insurance Policy") issued by State and County Mutual Fire Insurance Company
("State and County Mutual") and, in connection therewith, Hallmark obtains a
security interest in such Financed Insurance Policies (including all rights
to receive payment of unearned premiums and commissions upon the
cancellation thereof).
(2) Pursuant to the 100% Quota Share Reinsurance Agreement between
State and County Mutual and the Reinsurer with an effective date of July 1,
1998 (as amended or otherwise modified from time to time, the "Reinsurance
Agreement"), the Reinsurer reinsures 100% of the liabilities of State and
County Mutual under the "Policies" (as defined therein), and in exchange the
Reinsurer is entitled to receive 100% of the "Net Premiums" (as defined
therein) relating to such Policies (net of certain fees and other amounts
specified therein). All of the Financed Insurance Policies are, and shall
at all times be, included within the "Policies" which are the subject of the
Reinsurance Agreement.
(3) All of the Financed Insurance Policies are produced by or through
the General Agent and the General Agent may from time to time receive
certain commissions in connection therewith.
(4) FPF has agreed to purchase receivables (the "Premium Receivables")
arising under the Premium Finance Agreements from Hallmark pursuant to that
certain Sale and Assignment Agreement dated as of November 18, 1999 between
FPF and Hallmark (as amended or otherwise modified from time to time, the
"Sale Agreement").
(5) Hallmark services and collects the Premium Receivables on behalf
of FPF pursuant to a Premium Receivable Servicing Agreement dated as of
November 18, 1999 between FPF and Hallmark (as amended or otherwise modified
from time to time, the "Servicing Agreement").
(6) The Reinsurer and the General Agent are entering into this
Agreement in order to induce (a) Hallmark to enter into the Premium Finance
Agreements and (b) FPF to purchase Premium Receivables pursuant to the Sale
Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
SECTION 1. Unearned Premiums. Upon the termination or cancellation of
any Financed Insurance Policy, the Reinsurer and the General Agent hereby
jointly and severally agree to pay to FPF an amount equal to all unearned
premiums and commissions with respect to such Financed Insurance Policy
(whether or not such premiums or commissions were actually received or
retained by the Reinsurer or the General Agent) and all other amounts owed
by State and County Mutual in connection with such termination or
cancellation pursuant to the terms of such Financed Insurance Policy or
applicable law (collectively, "Unearned Premiums"). Without limiting the
generality of the foregoing, the liability of the Reinsurer and the General
Agent shall extend to all obligations which would be owed by State and
County Mutual in connection with a termination or cancellation of a Financed
Insurance Policy but for the fact that such obligations are unenforceable or
not allowable due to the bankruptcy or insolvency of State and County Mutual
or the placement of State and County Mutual in supervision, conservation,
receivership, rehabilitation or liquidation by any state insurance
department, court or other regulatory, administrative or judicial body or
the occurrence of any similar event. The Unearned Premiums will be
deposited on behalf of FPF in accordance with the Servicing Agreement within
thirty (30) days of the date on which State and County Mutual receives
written notice that the applicable Financed Insurance Policy has been
terminated or cancelled.
SECTION 2. Obligations Absolute. The Reinsurer and the General Agent
hereby agree that their obligation to pay Unearned Premiums to FPF shall be
absolute and unconditional, regardless of:
(i) any termination of the Reinsurance Agreement;
(ii) whether or not the Reinsurer or the General Agent actually
receives or retains all or any portion of the premiums or commissions
with respect to any Financed Insurance Policy;
(iii whether or not the Reinsurer or the General Agent has any
obligation to pay such Unearned Premiums to State and County Mutual,
any liquidator, receiver or similar official for State and County
Mutual or any other person or entity pursuant to the terms of the
Reinsurance Agreement, applicable law or otherwise;
(iv) any default by State and County Mutual with respect to its
obligations under or with respect to any Financed Insurance Policy or
the Reinsurance Agreement;
(v) any bankruptcy or insolvency of State and County Mutual or
the placement of State and County Mutual in supervision, conservation,
receivership, rehabilitation or liquidation by any state insurance
department, court or other regulatory, administrative or judicial body
or the occurrence of any similar event;
(vi) any law, regulation or order now or hereafter in effect in
any jurisdiction affecting any of the terms of the Premium Finance
Agreements or the Reinsurance Agreement or the obligations of the
Reinsurer, the General Agent or State and County Mutual with respect to
Unearned Premiums or the rights of Hallmark or FPF with respect to any
of the foregoing;
(vii) any lack of validity or enforceability of any Financed
Insurance Policy, any Premium Finance Agreement, the Reinsurance
Agreement, the Sale Agreement or any other agreement or instrument
relating thereto; or
(viii) any other event or circumstance whatsoever that might
otherwise constitute a defense available to, or a discharge of, the
Reinsurer or the General Agent.
The obligations of the Reinsurer and the General Agent under this Agreement
are independent of (x) the obligations of State and County Mutual with
respect to the Financed Insurance Policies and (y) the respective
obligations of the Reinsurer and the General Agent under or in connection
with the Reinsurance Agreement. In the event the Reinsurer or the General
Agent pays the amount of any Unearned Premium to State and County Mutual or
any other person or entity (including, without limitation, any liquidator,
receiver or similar official for State and County Mutual), such payment
shall not discharge the Reinsurer or the General Agent from its obligations
hereunder unless (and then only to the extent) such payment is actually
received by FPF. A separate action or actions may be brought and prosecuted
against each of the Reinsurer and the General Agent to enforce their
respective obligations under this Agreement. The obligations of the
Reinsurer and the General Agent shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Unearned Premiums is rescinded or must otherwise be returned by FPF upon the
bankruptcy, insolvency, liquidation or placement in receivership of State
and County Mutual, the Reinsurer, the General Agent or otherwise, all as
though such payment had not been made.
SECTION 3. Waivers; No Set-Off. Each of the Reinsurer and the General
Agent hereby waives promptness, diligence, notice of acceptance and any
other notice with respect to any of their respective obligations under this
Agreement and any requirement that Hallmark or FPF protect, secure, perfect
or insure any security interest or lien or any property subject to any
Premium Finance Agreement or exhaust any right or taken any action against
State and County Mutual or any other person or entity or any collateral.
Each of the Reinsurer and the General Agent hereby waives and agrees not to
assert any right of set-off with respect to payments otherwise owing by it
hereunder.
SECTION 4. Costs and Expenses. The Reinsurer and the General Agent
jointly and severally agree to pay any and all expenses (including counsel
fees and expenses) incurred by Hallmark or FPF in enforcing any rights under
this Agreement (whether through negotiations, legal proceedings or
otherwise).
SECTION 5. Assignments. Neither the Reinsurer nor the General Agent
shall be entitled to assign any of their rights or obligations hereunder to
any person or entity. Hallmark has assigned all of its rights and interests
hereunder to FPF pursuant to the Sale Agreement and each of the Reinsurer
and the General Agent hereby consents to such assignment. FPF shall be
entitled to assign or otherwise transfer all or any portion of its rights
and obligations hereunder to any other person or entity, and such other
person or entity shall thereupon become vested with all the rights granted
to FPF herein. Without limiting the generality of the foregoing, each of
the parties hereto hereby acknowledges that (i) FPF has assigned all of its
rights hereunder to FPF Trust, a Delaware business trust (AFPF Trust)
pursuant to that certain Master Premium Receivables Sale and Assignment
Agreement dated as of February 27, 1998 (as amended or otherwise modified
from time to time, the "FPF Sale Agreement") and (ii) FPF Trust has granted
a security interest in all of its rights hereunder to Xxxxx Fargo Bank West,
N.A. (formerly known as Norwest Bank Colorado, N.A.), as trustee (in such
capacity, the "Trustee") pursuant to that certain Amended and Restated Loan
and Security Agreement dated as of June 30, 1999 (as amended or otherwise
modified from time to time, the "FPF Trust Loan and Security Agreement") by
and among FPF Trust, Flatiron Credit Company, Inc., Autobahn Funding Company
LLC, the Trustee and DG Bank Deutsche Genossenschaftsbank AG, as agent (in
such capacity, the "Agent"). The parties hereto agree that FPF Trust, the
Agent and the Trustee are express third party beneficiaries of this
Agreement and the Agent (on behalf of itself, FPF Trust and the Trustee)
shall be entitled to exercise all rights and shall be entitled to all
benefits accorded to FPF hereunder.
SECTION 6. Amendments, Etc. No amendment or waiver of any provision
of this Agreement, and no consent to any departure by the Reinsurer or the
General Agent herefrom, shall in any event be effective unless the same
shall be in writing and signed by Hallmark, FPF and the Agent, and then such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
SECTION 7. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including
telecopier communication) and mailed, telecopied or delivered to it, if to
the Reinsurer, at its address at 00000 Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxx,
Xxxxx 00000, Telecopy No. (000) 000-0000, Attention: Xxxxx X. Xxxxxxx,
President; if to the General Agent, at its address at 00000 Xxxxxx Xxxxxxx,
Xxxxx 000, Xxxxxx, Xxxxx 00000, Telecopy No. (000) 000-0000, Attention:
Xxxxx X. Xxxxxxx, President; if to Hallmark, at its address at 00000 Xxxxxx
Xxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000, Telecopy No. (000) 000-0000,
Attention: Xxxxx X. Xxxxxxx, President; if to FPF at its address at
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000X, Xxxxxx, Xxxxxxxx 00000, Telecopy
No. (000) 000-0000, Attention: Xxxxxx X. Xxxxxxxxx, Chief Executive Officer,
and if to the Agent, at its address at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Xxxxxx X. Xxxxxxxxx, Chief Executive Officer, Telecopy
No. (000) 000-0000 or, as to any such party, at such other address as shall
be designated by such party in a written notice to each other party. All
such notices and other communications shall, when mailed, telecopied or
delivered, be effective when deposited in the mails, telecopied or
delivered, respectively; provided that any notice given by the General Agent
or the Reinsurer pursuant to Section 9 shall be effective only upon actual
receipt of such notice by Hallmark, FPF and the Agent.
SECTION 8. No Waiver; Remedies. No failure on the part of Hallmark,
FPF or the Agent to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided
are cumulative and not exclusive of any remedies provided by law.
SECTION 9. Continuing Agreement. This Agreement shall remain in full
force and effect until the date specified by the Reinsurer or the General
Agent upon not less than sixty (60) days written notice to Hallmark, FPF and
the Agent; provided that no such termination shall diminish, modify or
otherwise affect the obligations of the Reinsurer or the General Agent
hereunder with respect to Financed Insurance Policies issued on or prior to
such sixtieth day, and each of the General Agent and the Reinsurer shall
continue to be liable hereunder with respect to all Unearned Premiums
arising in connection with such Financed Insurance Policies (whether arising
on, before or after such sixtieth day).
SECTION 10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS.
IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
AMERICAN HALLMARK INSURANCE COMPANY OF TEXAS
By:
Name: Xxxxx X. Xxxxxxx
Title: President & Chief Executive Officer
AMERICAN HALLMARK GENERAL AGENCY, INC.
By:
Name: Xxxxx X. Xxxxxxx
Title: President & Chief Executive Officer
HALLMARK FINANCE CORPORATION
By:
Name: Xxxxx X. Xxxxxxx
Title: President & Chief Operating Officer
FPF, INC.
By:
Name:
Title:
