Third Amendment to First Restated Credit Agreement
Third
Amendment to First Restated Credit Agreement
This
THIRD AMENDMENT TO FIRST RESTATED CREDIT AGREEMENT (this “Third
Amendment”),
dated
as of May 31, 2007, is among HALLMARK FINANCIAL SERVICES, INC., a Nevada
corporation (“Borrower”),
AMERICAN
HALLMARK INSURANCE COMPANY OF TEXAS,
a Texas
insurance corporation (“AHIC”),
PHOENIX
INDEMNITY INSURANCE COMPANY,
an
Arizona insurance corporation (“PIIC”),
each
other Obligor, and THE FROST NATIONAL BANK, a national banking association
(“Lender”).
RECITALS:
Borrower,
AHIC, PIIC, and Lender have previously entered into the First Restated Credit
Agreement dated as of January 27, 2006 (such agreement, together with all
amendments and restatements, the “Credit
Agreement”).
Borrower
has requested amendments to the Credit Agreement to increase the amount of
the
Revolving Commitment and add a subfacility to the Revolving Commitment, the
proceeds of which subfacility can be used to make loans to PAAC.
Lender
has agreed to amend the Credit Agreement, subject to the terms of this Third
Amendment.
AGREEMENT:
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE
I
Definitions
1.1 Definitions.
All
capitalized terms not otherwise defined herein have the same meanings as
in the
Credit Agreement.
ARTICLE
II
Amendments
to Credit Agreement
2.1 Amendments
to Credit Agreement Section 1.1.
(a) Credit
Agreement Section 1.1
is
amended by adding the following in alphabetical order:
“Eligible
Insurer”
means
(a) any RIC, and (b) any other insurance company which (i) is
licensed or approved and in good standing to do business in the state in
which
the policy to which a Premium Finance Agreement relates is issued by such
insurance company, and (ii) has an A.M. Best rating of B+ or higher. No
such insurer may be an Eligible Insurer if such insurer is the subject of
a
rehabilitation or liquidation proceeding commenced by any Insurance
Regulator.
1
“Eligible
Premium Finance Agreements”
means
those Premium Finance Agreements of PAAC prepared on a form approved by the
Texas Department of Insurance which comply with all requirements of the Texas
Insurance Code, the Texas Department of Insurance Regulations, the Texas
Finance
Code, the Truth in Lending Act, Regulation Z and all other applicable Laws
of each applicable Governmental Authority and which have been created in
the
ordinary course of PAAC’s business and upon which PAAC’s right to receive
payment is absolute, unconditional and not contingent upon the fulfillment
of
any condition whatsoever, and shall not include any of the following:
(a) any
Premium Finance Agreement with respect to which the Policyholder has paid
less
than 20% of the aggregate premium due under the related insurance policy
at the
time of execution of such Premium Finance Agreement;
(b) any
Premium Finance Agreement arising out of the funding of an insurance premium
for
an insurance product issued by any Person other than an Eligible Insurer;
(c) any
Premium Finance Agreement with respect to which (i) any payment obligation
of the Policyholder is more than thirty days past due, and (ii) a
cancellation notice for the related insurance policy has not been delivered
to
the respective insurer; and
(d) any
Premium Finance Agreement which provides for payments by the Policyholder
over a
period greater than twelve months.
“Eligible
Receivable Amount”
means,
as of any date of determination, the aggregate outstanding balance owed under
Eligible Premium Finance Agreements to PAAC by Policyholders residing in
an
Eligible State.
“Eligible
States”
means
those states in which PAAC possesses all licenses and otherwise qualifies
with
all requirements of Law to operate a premium finance business.
“PAAC
Note”
means
the promissory note in the principal amount of $5,000,000, made by PAAC and
payable to the order of Borrower, substantially in the form of Exhibit O.
“Policyholder”
means
an owner of an insurance policy the premiums on which are financed by PAAC
under
a Premium Finance Agreement.
“Premium
Finance Commitment”
means
$5,000,000. The Premium Finance Commitment is a subfacility of the Revolving
Commitment and not in addition to the Revolving Commitment.
2
“Premium
Finance Loan”
means
a
Revolving Loan made pursuant to Section 2.1.
“Premium
Finance Loan Maturity Date”
means
the first to occur of (a) May 31, 2009, (b) the date the Premium
Finance Commitment is terminated pursuant to either Section 2.6
or
9.2
and
(c) the date the Obligations are accelerated.
“Premium
Finance Outstanding Amount”
means,
as of any date of determination, the aggregate outstanding principal amount
of
all Premium Finance Loans, after giving effect to any Premium Finance Loan
and
any principal payment of Premium Finance Loans occurring on such
date.
“Premium
Finance Receivable Certificate”
means
a
certificate, substantially in the form of Exhibit N.
“Premium
Receivable Rights”
means
the entire interest in a Premium Finance Agreement, all security interests
relating thereto, all moneys due or to become due thereon (including
(a) the security interest granted or assigned by the Policyholder of such
Premium Finance Agreement in all unearned premiums, dividends, and loss payments
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 insurer becomes insolvent, (c) if
applicable, all broker or agent guarantee agreements with respect thereto,
and
(d) if applicable, any interest thereof in a cash collateral account
established with respect to such Premium Finance Agreement), and any related
documents and the proceeds of any and all of the foregoing.
(b) The
definition of “Commitment”
is
amended by deleting “TGA L/C Commitment” and substituting “Premium Finance
Commitment” in
lieu
thereof.
(c) The
definition of “Interest
Payment Date”
is
amended by adding “, the Premium Finance Loan Maturity Date” after “Payment
Date.”
(d) The
definition of “Permitted
Liens”
is
amended by deleting existing clause (g)
and
relettering existing clauses (h)
and
(i)
as
clause (g)
and
(h),
respectively.
(e) The
definition of “Premium
Finance Agreement”
is
deleted in its entirety and the following is substituted in
lieu
thereof:
“Premium
Finance Agreement”
means
an agreement by which an insured or prospective insured promises to pay PAAC
the
amount advanced under such agreement to an Eligible Insurer in payment of
premium on an insurance contract at a future date in one or more installments,
together with a finance charge.
(f) The
definition of “Revolving
Commitment”
is
amended by deleting “$20,000,000” and substituting “$25,000,000” in
lieu
thereof.
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2.2 Amendment
to Credit Agreement Section 2.1.
Credit
Agreement Section 2.1
is
deleted in its entirety and the following is substituted in
lieu
thereof:
2.1 Revolving
Loans.
Subject
to the terms and conditions of this Agreement, Lender agrees to make loans
(each
such loan, a “Revolving
Loan”),
to
Borrower from time to time on any Business Day during the period from the
Agreement Date to (a) the Termination Date (with respect to Revolving Loans
other than Premium Finance Loans), and (b) the Premium Finance Loan
Maturity Date (with respect to Premium Finance Loans), in an aggregate amount
not to exceed at any time outstanding the Revolving Commitment; provided,
however,
that
after giving effect to any (y) Revolving Borrowing, the Revolving Facility
Outstanding Amount shall not exceed the Revolving Commitment, and
(z) Premium Finance Loan, the Premium Finance Outstanding Amount shall not
exceed the Premium Finance Commitment. Prior to the Termination Date, Borrower
may borrow, repay and reborrow Revolving Loans, all in accordance with this
Agreement. On and after the Termination Date, Borrower may borrow, repay
and
reborrow Premium Finance Loans, only, all in accordance with this
Agreement.
2.3 Amendments
to Credit Agreement Section 2.2(a).
(a) The
fourth sentence of Credit Agreement Section 2.2(a)
is
amended by adding “or a Premium Finance Loan” before the period.
(b) The
last
sentence of Credit Agreement Section 2.2(a)
is
amended by adding “or, if a Premium Finance Loan, the unused portion of the
Premium Finance Commitment” before the period.
2.4 Amendment
to Credit Agreement Section 2.3.
Credit
Agreement Section 2.3
is
deleted in its entirety and the following is substituted in
lieu
thereof:
2.3 Repayment.
The
principal of all Revolving Loans (other than Premium Finance Loans) shall
be due
and payable on the following dates and in the following amounts:
|
Payment
Date
|
Payment
Amount
|
|
Each
Payment Date after the Termination Date
|
An
amount equal to 1/20th of the aggregate principal amount of all
Revolving
Loans (other than Premium Finance Loans) outstanding on the Termination
Date
|
|
The
Revolving Loan Maturity Date
|
The
remaining unpaid principal of all Revolving
Loans
|
The
unpaid principal of all Premium Finance Loans shall be due and payable on
the
Premium Finance Loan Maturity Date.
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2.5 Amendment
to Credit Agreement Section 2.4.
(a) The
second sentence of Credit Agreement Section 2.4
is
amended by adding “and a notice stating the allocation of such prepayment
between the outstanding principal of and accrued interest on the Revolving
Loans
(other than Premium Finance Loans) and Premium Finance Loans” before the period.
(b) The
third
sentence of Credit Agreement Section 2.4
is
amended by adding “(other than Premium Finance Loans)” after “Revolving Loans.”
2.6 Amendment
to Credit Agreement Section 2.5.
Credit
Agreement Section 2.5
is
deleted in its entirety and the following is substituted in
lieu
thereof:
2.5 Mandatory
Payments.
On each
date that the Revolving Facility Outstanding Amount exceeds the Revolving
Commitment or that the Premium Finance Outstanding Amount exceeds the Premium
Finance Commitment, Borrower shall prepay the Revolving Loans or Premium
Finance
Loans, as appropriate, in an amount equal to such excess (each such prepayment
made after the Termination Date shall be applied to the unpaid scheduled
installment payments of the Revolving Loans in the inverse order of maturity)
or, if no Revolving Loans are outstanding, Cash Collateralize the Revolving
Facility L/C Obligations in an amount equal to such excess. On each date
that
the Revolving Facility L/C Obligations exceed the Revolving Facility L/C
Commitment, Borrower shall Cash Collateralize the Revolving Facility L/C
Obligations in an amount equal to such excess. If on the last Business Day
of
any month the Premium Finance Outstanding Amount is greater than 90% of the
Eligible Receivable Amount, Borrower shall prepay the Premium Finance Loans
in
an amount equal to the difference between the Premium Finance Outstanding
Amount
minus the amount equal to 90% of the Eligible Receivable Amount, such prepayment
to be due on the day the Premium Finance Receivable Certificate for such
month
is required to be delivered to Lender. Each mandatory prepayment shall be
accompanied by all accrued and unpaid interest thereon and a notice stating
the
allocation of such prepayment between the outstanding principal of and accrued
interest on the Revolving Loans (other than Premium Finance Loans) and Premium
Finance Loans.
2.7 Amendment
to Credit Agreement Section 2.6(a).
Credit
Agreement Section 2.6(a)
is
amended by adding “, Premium Finance Commitment” after “Revolving
Commitment”.
2.8 Amendment
to Credit Agreement Section 2.6(b).
The
first sentence of Credit Agreement Section 2.6(b)
is
deleted in its entirety and the following is substituted in
lieu
thereof:
On
the
Termination Date, (i) the Revolving L/C Commitment shall automatically
reduce to zero and terminate, and (ii) the Revolving Commitment shall
automatically reduce to the Premium Finance Commitment and, except for the
Premium Finance Commitment, shall terminate.
5
2.9 Amendment
to Credit Agreement Section 2.6(c).
Credit
Agreement Section 2.6(c)
is
amended by adding “, Premium Finance Commitment” after “Revolving
Commitment”.
2.10 Amendment
to Credit Agreement Section 2.9.
Credit
Agreement Section 2.9
is
amended by adding “or the Premium Finance Loan Maturity Date” after “Revolving
Loan Maturity Date.”
2.11 Amendment
to Credit Agreement Section 2.10.
Credit
Agreement Section 2.10
is
deleted in its entirety and the following is substituted in
lieu
thereof:
(d) If
some
but less than all amounts due from Borrower are received by Lender, Lender
shall
apply such amounts in the following order of priority: (i) to the payment
of
Lender’s expenses incurred under the Loan Documents then due and payable, if
any; (ii) to the payment of all other fees under the Loan Documents then
due and
payable; (iii) to the payment of the payment of interest then due and payable
on
the Premium Finance Loans; (iv) to the payment of interest then due and
payable on the Revolving Loans (other than Premium Finance Loans); (v) to
the
payment of all other amounts not otherwise referred to in this Section 2.10(d)
then due
and payable under the Loan Documents; (vi) to the payment of principal then
due and payable on the Premium Finance Loans and (vii) to the payment of
principal then due and payable on the Revolving Loans (other than Premium
Finance Loans) (each payment made after the Termination Date shall be applied
to
the unpaid scheduled installment payments of the Revolving Loans (other than
Premium Finance Loans) in the inverse order of maturity).
2.12 Amendment
to Credit Agreement Section 6.2.
Credit
Agreement Section 6.2
is
amended by adding a new Section 6.2(r)
which
provides as follows:
(r) Premium
Finance Receivable Certificate.
Not
later than 10 days after the last day of each month, a Premium Finance
Receivable Certificate executed by an Authorized Signatory of Borrower and
PAAC
and each of whom is a senior financial officer of Borrower and PAAC,
respectively.
2.13 Amendment
to Credit Agreement Section 6.9.
Credit
Agreement Section 6.9
is
deleted in its entirety and the following is substituted in
lieu
thereof:
6.9 Use
of Proceeds.
Borrower shall use (a) the proceeds of the Revolving Loans (other than
Premium Finance Loans) to (i) provide working capital to Borrower and
Guarantors, (ii) to acquire capital stock of or make capital contributions
to a Person that is either a Subsidiary on the Agreement Date or became a
Subsidiary after the Agreement Date as permitted by and in compliance with
this
Agreement, which capital contribution will result in an increase of paid-in
surplus of such Subsidiary in an amount equal to such capital contribution,
(iii) to acquire surplus debentures issued by a RIC that is a Domestic
Subsidiary of Borrower on the Agreement Date, (iv) to make loans to
Domestic Subsidiaries, (v) subject to Section 5.3,
to make
Permitted Acquisitions, and (vi) to provide all or a portion of the cash
purchase price payable by Borrower at closing pursuant to the TGA Purchase
Agreement and the PAAC Purchase Agreement; provided,
no
proceeds of any Revolving Loan (other than Premium Finance Loans) can be
used
for any purpose described in this clause
(a)
with
respect to PAAC, (b) the proceeds of the Premium Finance Loans to make
advances to PAAC pursuant to the PAAC Note and for no other purpose, and
(c) the Revolving Facility L/Cs and proceeds of the Revolving Facility L/Cs
to secure the performance of Borrower and/or an L/C RIC pursuant to Reinsurance
Agreements to which it is or they are a party or such other purpose as Lender
may permit in its discretion.
6
2.14 Amendment
to Credit Agreement Article VI.
Credit
Agreement Article VI
is
amended by adding a new Section 6.10
which
provides as follows:
6.10 Premium
Finance Operations.
(a) Portfolio
Audits.
In
addition to the rights of Lender pursuant to Section 6.3,
upon
the request of Lender from time to time, submit to, and bear the expense
of,
portfolio audits of PAAC’s portfolio of Premium Finance Agreements performed by
Lender or its representatives or agents.
(b) Right
to Receive Unearned Premiums.
Notify
the insurer whose premiums are being financed of the existence of each insurance
Premium Finance Agreement within the time required by applicable Law and
give
such notices and take all other actions as may be necessary or required in
order
that PAAC shall be entitled to receive all unearned premiums from such insurer
or any reinsurer in the event a Premium Finance Agreement is
canceled.
(c) Delivery
of Endorsed Premium Finance Agreements and Records.
Upon
the request of Lender from time to time (regardless of whether a Default
or
Event of Default exists), immediately deliver to Lender all Premium Finance
Agreements of PAAC, appropriately endorsed with full recourse and warranty,
and
execute, acknowledge, and deliver to Lender and file or cause to be filed
any
and all other records, documents, agreements and instruments and do all other
acts or things as Lender may reasonably request in order more fully to effect
the assignment of the Premium Finance Agreements to Lender.
(d) Delivery
of Electronic Records.
Upon
the request of Lender from time to time (regardless of whether a Default
or
Event of Default exists), promptly deliver to Lender an electronic copy (in
a
media and utilizing software used by Lender) of comprehensive data regarding
the
portfolio of Premium Finance Agreements and all information necessary to
substantiate the calculation of the Eligible Receivable Amount.
7
2.15 Amendment
to Credit Agreement Section 6.1(e).
Credit
Agreement Section 6.1(e)
is
amended by adding the following at the end thereof:
In
addition, PAAC shall, and Borrower shall cause PAAC to, comply in all material
respects with Chapter 651 of the Texas Insurance Code, Title 28,
Chapter 25 of the Texas Administrative Code, the Texas Finance Code, the
Truth in Lending Act and Regulation Z promulgated thereunder, and/or the
other Laws of each applicable Governmental Authority applicable to any aspect
of
the business of PAAC.
2.16 Amendment
to Credit Agreement Section 7.9.
Credit
Agreement Section 7.9
is
amended by adding the following at the end thereof:
Notwithstanding
the preceding sentence, PAAC shall not Dispose of any interest in any Premium
Finance Agreement and related Premium Receivable Rights, general intangibles
and
proceeds, except as provided in the Loan Documents.
2.17 Amendment
to Credit Agreement Article VII.
Credit
Agreement Article
VII
is
amended by adding the following:
7.20 Premium
Finance Loans.
PAAC
shall not use the proceeds of advances made pursuant to the PAAC Note for
any
purpose other than to make premium payments for the benefit of Policyholders
with respect to the related insurance policy.
7.21 Legend.
PAAC
shall not enter into any Premium Finance Agreement that does not contain
on its
face in conspicuous type a legend providing “THIS PREMIUM FINANCE AGREEMENT IS
SUBJECT TO A SECURITY INTEREST GRANTED BY LENDER TO THE FROST NATIONAL BANK”
which is affixed prior to execution by the Policyholder.
2.18 Amendment
to Credit Agreement Section 8.24.
Existing Credit Agreement Section 8.24
is
renumbered to be Section 8.25
and each
reference in each Loan Document to Section 8.24
is
amended to refer to Section 8.25.
2.19 Amendment
to Credit Agreement Article VIII.
Credit
Agreement Article VIII
is
amended by adding a new Section 8.24
which
provides as follows:
8.24 Premium
Finance Operations.
(a) Licenses
and Permits.
PAAC
has obtained all licenses, permits and approvals required to engage in the
business of insurance premium financing which are required by the Laws of
every
state in which PAAC engages in such business.
8
(b) Use
of
Approved Premium Finance Agreement.
The
form of Premium Finance Agreement used by PAAC in its insurance premium finance
business complies in all material respects with all applicable Laws, including,
without limitation, Chapter 651 of the Texas Insurance Code, Title 28,
Chapter 25 of the Texas Administrative Code, and the Texas Finance Code and
is approved by the Department of Insurance of Texas and by all other
Governmental Authorities required in order for PAAC to use such agreement
in its
insurance premium finance business.
(c) Compliance
with Applicable Laws.
PAAC is
in material compliance with all Laws (including without limitation
Chapter 651 of the Texas Insurance Code, Title 28, Chapter 25 of
the Texas Administrative Code, and the Texas Finance Code, the Truth in Lending
Act, and Regulation Z) applicable to PAAC’s premium finance
business.
(d) Premium
Finance Agreement Form.
Attached as Exhibit P
is a
true and correct copy of the only forms of Premium Finance Agreements used
by
PAAC.
2.20 Amendment
to Credit Agreement Section 9.1(c).
Credit
Agreement Section 9.1(c)
is
amended by (a) deleting the “or” after “6.3”
and
substituting a comma in
lieu
thereof
and (b) adding “or 6.10”
after
“6.6”.
2.21 Amendment
to Credit Agreement Section 9.2.
Credit
Agreement Section 9.2
is
deleted in its entirety and the following is substituted in
lieu
thereof:
9.2 Remedies.
If an
Event of Default exists:
(a) With
the
exception of an Event of Default specified in Section
9.1(e)
or
(f),
Lender
may terminate each or all of the Revolving Commitment, the Revolving Facility
L/C Commitment and Premium Finance Commitment and/or declare the principal
of
and interest on the Revolving Loans and Obligations and other amounts owed
under
the Loan Documents to be forthwith due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything in the Loan Documents to the contrary notwithstanding.
(b) Upon
the
occurrence of an Event of Default specified in Section
9.1(e)
or
(f),
the
principal of and interest on the Revolving Loans and Obligations and other
amounts and under the Loan Documents shall thereupon and concurrently therewith
become due and payable and the Revolving Commitment, Revolving Facility L/C
Commitment and Premium Finance Commitment shall forthwith terminate, all
without
any action by Lender or any holder of the Revolving Note and without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived, anything in the Loan Documents to the contrary
notwithstanding.
9
(c) Lender
may exercise all of the post-default rights granted to it under the Loan
Documents or under Law.
(d) Lender
may require that Borrower and the applicable L/C ▇▇▇ ▇▇▇▇ Collateralize all
Revolving Facility L/C Obligations.
(e) The
rights and remedies of Lender hereunder shall be cumulative and not exclusive.
2.22 Amendment
to Credit Agreement Section 9.3.
Credit
Agreement Section 9.3
is
deleted in its entirety and the following is substituted in
lieu
thereof:
9.3 Application
of Funds.
After
the exercise of remedies provided for in Section
9.2
(or
after any of the Revolving Loans and other Obligations have automatically
become
immediately due and payable), any amounts received on account of the Obligations
shall be applied by Lender in the following order:
(a) First,
to
payment of that portion of the Obligations constituting fees, indemnities,
expenses and other amounts (including Attorney Costs payable under Section
10.2
and
amounts payable under Article
IV)
payable
under the Loan Documents to Lender;
(b) Second,
to
payment of that portion of the Obligations constituting accrued and unpaid
interest on the Premium Finance Loans;
(c) Third,
to
payment of that portion of the Obligations constituting accrued and unpaid
interest on the Revolving Loans (other than Premium Finance Loans);
(d) Fourth,
to
payment of that portion of the Obligations constituting unpaid principal
of the
Premium Finance Loans in such order as Lender elects in its
discretion.
(e) Fifth,
to
payment of that portion of the Obligations constituting unpaid principal
of the
Revolving Loans (other than Premium Finance Loans) in such order as Lender
elects in its discretion;
(f) Sixth,
to Cash
Collateralize the Revolving Facility L/C Obligations;
(g) Seventh,
to all
other Obligations; and
(h) Last,
to the
balance, if any, after all of the Obligations have been indefeasibly paid
in
full, to Borrower or as otherwise required by Law;
10
Subject
to Article
III,
amounts
used to Cash Collateralize the Revolving Facility L/C Obligations pursuant
to
clause Sixth
above
shall be applied to satisfy drawings under such Revolving Facility L/Cs as
they
occur. If any amount remains on deposit as Cash Collateral after all Revolving
Facility L/Cs have either been fully drawn or expired, such remaining amount
(to
the extent such amount was paid by Borrower) shall be applied to the other
Obligations, if any, in the order set forth above.
2.23 Premium
Finance Receivable Certificate.
A new
Exhibit N
(Premium
Finance Receivable Certificate), in the form of attached Exhibit N,
is
added to the Credit Agreement.
2.24 PAAC
Note.
A new
Exhibit O
(PAAC
Note), in the form of attached Exhibit O,
is
added to the Credit Agreement.
2.25 Premium
Finance Agreement
A new
Exhibit P
(form of
Premium Finance Agreement), in the form of attached Exhibit P,
is
added to the Credit Agreement.
ARTICLE
III
Conditions
Precedent
3.1 Conditions.
The
effectiveness of this Third Amendment is subject to the satisfaction of the
following conditions precedent:
(a) Documents.
Lender
shall have received the following in number of counterparts and copies as
Lender
may request:
(i) Third
Amendment.
This
Third Amendment executed by Borrower, each other Obligor and
Lender.
(ii) Second
Restated Revolving Note.
The
duly executed Second Restated Revolving Note, in the form of attached
Exhibit A,
payable
to the order of Lender and in an amount equal to the Revolving
Commitment.
(iii) Form
of Premium Finance Agreement Approved by the Texas Department of
Insurance.
Evidence as Lender requires of the approval by the Texas Department of Insurance
of the form of Premium Finance Agreement utilized by PAAC in its premium
finance
business.
(iv) Termination
of PAAC Credit Facility.
(A) Evidence reasonably satisfactory to Lender that (1) the Credit
Agreement dated April 19, 2006 (such agreement, together with all
amendments and attachments, the “PAAC
Credit Agreement”),
between PAAC and JPMorgan Chase Bank, N.A. is terminated, (2) all amounts
due under the PAAC Credit Agreement are paid in full, (3) all Liens
securing performance of the PAAC Credit Agreement and all notice filings
related
to such Liens are terminated and (4) all Premium Finance Agreements of PAAC
are in the possession of and exclusive control of PAAC, and (B) such
documents as Lender may reasonably require to evidence the termination of
or
assignment to Lender of any endorsement related to the PAAC Credit Agreement
attached to or on any Premium Finance Agreement.
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(v) PAAC
Note.
The
PAAC Note, duly executed by an Authorized Signatory of PAAC, together with
an
allonge endorsement executed in blank by Borrower.
(vi) PAAC
Lease.
A copy
of the lease or other agreement related to the use of the real property at
which
PAAC conducts its business and at which the Premium Finance Agreements are
maintained.
(vii) Eligible
Insurers and Eligible States.
A list
of all Eligible States and Eligible Insurers.
(viii) Borrower
Certificate.
A
certificate of officers acceptable to Lender of Borrower certifying as to
(A) the incumbency of the officers signing such certificate, this Third
Amendment and the Loan Documents to which it is a party, (B) no amendment
to or restatement of its Articles of Incorporation since the Agreement Date
and
which have not otherwise been previously provided to Lender, (C) no
amendment to or restatement of its By-Laws since the Agreement Date and which
have not otherwise been previously provided to Lender, (D) a copy of the
resolutions of its Board of Directors authorizing it to execute, deliver
and
perform this Third Amendment and the Loan Documents to which it is a party,
(E) an original certificate or certificates of good standing, existence and
qualification issued by the appropriate authority or authorities of the States
of Nevada and Texas (certified as of a date acceptable to Lender), (F) the
accuracy of the representations and warranties in the Loan Documents as of
the
date hereof, (G) no Default or Event of Default exists, and (H) no
Material Adverse Change having occurred.
(ix) Obligor
and L/C RIC Certificate.
A
certificate of officers acceptable to Lender of each Obligor (other than
Borrower) and each L/C RIC certifying as to (A) the incumbency of the
officers signing such certificate, this Third Amendment and the Loan Documents
to which it is a party, (B) if a corporation, no amendment to or
restatement of its Articles of Incorporation or Certificate of Incorporation,
as
applicable, since the Agreement Date and which have not otherwise been
previously provided to Lender, (C) if a limited liability company, no
amendment to or restatement of its Articles of Organization (or similar
organization and governance document) since the Agreement Date, (D) if a
limited partnership, no amendment to or restatement of its Certificate of
Limited Partnership (or similar organization or governance document) since
the
Agreement Date, (E) if a corporation, no amendment to or restatement of its
By-Laws since the Agreement Date and which have not otherwise been previously
provided to Lender, (F) if a limited liability company, no amendment to or
restatement of its operating agreement (or similar organization and governance
document) since the Agreement Date, (G) if a limited partnership, no
amendment to or restatement of its partnership agreement (or similar
organization or governance document) since the Agreement Date, (H) with
respect to PAAC, a copy of the resolutions of the appropriate governance
board
authorizing it to execute, deliver and perform this Third Amendment, the
PAAC
Note and the Loan Documents to which it is a party, and (I) an original
certificate or certificates of good standing and existence issued by the
appropriate authority or authorities of its state of organization and the
state
in which its chief executive office is located (certified as of a date
acceptable to Lender).
12
(x) Subsidiary
Certificate.
A
certificate of officers acceptable to Lender of each Subsidiary (other than
an
Obligor) of each Obligor certifying as to (A) if a corporation, no
amendment to or restatement of its Articles of Incorporation since the Agreement
Date and which have not otherwise been previously provided to Lender,
(B) if a limited liability company, no amendment to or restatement of its
Articles of Organizations (or similar organization and governance document)
since the Agreement Date, (C) if a corporation, no amendment to or
restatement of its By-Laws since the Agreement Date and which have not otherwise
been previously provided to Lender, (D) if a limited liability company, no
amendment to or restatement of its operating agreement (or similar organization
and governance document) since the Agreement Date, and (E) if a Foreign
Subsidiary (other than Mannequin), no amendment to or restatement of its
organizational and governance documents since the Agreement Date.
(xi) Security
Documents.
An
allonge, undated and executed in blank by an Authorized Signatory of PAAC,
with
respect to Premium Finance Agreements.
(xii) UCC
and Lien Searches.
Searches of the Uniform Commercial Code, Tax lien and other records as Lender
may require.
(xiii) Obligor
Proceedings.
Evidence that all corporate, limited liability company and partnership
proceedings of each Obligor and each other Person (other than Lender) taken
in
connection with the transactions contemplated by this Agreement and the other
Loan Documents shall be reasonably satisfactory in form and substance to
Lender
and Special Counsel; and Lender shall have received copies of all documents
or
other evidence which Lender or Special Counsel may reasonably request in
connection with such transactions.
(xiv) Compliance
Certificate.
A
Compliance Certificate, dated the date of this Third Amendment and signed
by an
Authorized Signatory of Borrower, confirming compliance with the financial
covenants set forth therein as of the most recent determination
date.
(xv) Premium
Finance Receivable Certificate.
A
Premium Finance Receivable Certificate, dated the date of this Third Amendment
and signed by an Authorized Signatory of Borrower and PAAC, together with
information to support the calculation of the Eligible Receivable
Amount.
(xvi) Notice
of Final Agreement.
The
Notice of Final Agreement executed by all parties thereto.
13
(xvii) Expenses.
Reimbursement for reasonable Attorney Costs incurred through the date
hereof.
(xviii) Other
Documents.
In form
and substance satisfactory to Lender and Special Counsel, such other documents,
instruments and certificates as Lender may reasonably require in connection
with
the transactions contemplated hereby.
(b) No
Default.
No
Default or Event of Default shall exist.
(c) Representations
and Warranties.
(i) All
of
the representations and warranties contained in Article VIII
of the
Credit Agreement, as amended hereby, and in the other Loan Documents shall
be
true and correct on and as of the date of this Third Amendment with the same
force and effect as if such representations and warranties had been made
on and
as of such date, except to the extent such representations and warranties
speak
to a specific date.
(ii) All
of
the representations and warranties contained in Article V
shall be
true and correct on and as of the date hereof and subject to any waiver
previously delivered by Lender to Borrower.
ARTICLE
IV
Ratification
4.1 Ratification.
The
terms and provisions set forth in this Third Amendment shall modify and
supersede all inconsistent terms and provisions set forth in the Credit
Agreement and except as expressly modified and superseded by this Third
Amendment, the terms and provisions of the Credit Agreement and the other
Loan
Documents are ratified and confirmed and shall continue in full force and
effect. Each Obligor agrees that the Credit Agreement, as amended hereby,
and
the other Loan Documents to which it is a party or subject shall continue
to be
legal, valid, binding and enforceable in accordance with their respective
terms.
ARTICLE
V
Representations
and Warranties
5.1 Representations
and Warranties of all Obligors.
Each
Obligor hereby represents and warrants to Lender that (a) the execution,
delivery and performance of this Third Amendment and any and all other Loan
Documents executed and/or delivered in connection herewith have been authorized
by all requisite action on the part of such Obligor and will not violate
any
organizational document of such Obligor, (b) the representations and
warranties contained in the Credit Agreement, as amended hereby, and each
other
Loan Document are true and correct on and as of the date hereof as though
made
on and as of the date hereof, except to the extent such representations and
warranties speak to a specific date, (c) no Default or Event of Default
exists, and (d) such Obligor is in full compliance with all covenants and
agreements contained in the Credit Agreement, as amended hereby, and the
other
Loan Documents to which it is a party or it or its property is
subject.
14
ARTICLE
VI
Miscellaneous
6.1 Reference
to Credit Agreement.
Each of
the Loan Documents, including the Credit Agreement and any and all other
agreements, documents, or instruments now or hereafter executed and delivered
pursuant to the terms hereof or pursuant to the terms of the Credit Agreement
as
amended hereby, are hereby amended so that any reference in such Loan Documents
to the Credit Agreement shall mean a reference to the Credit Agreement as
amended hereby.
6.2 Severability.
The
provisions of this Third Amendment are intended to be severable. If for any
reason any provision of this Third Amendment shall be held invalid
or unenforceable
in whole or in part in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the
validity or enforceability thereof in any other jurisdiction or the remaining
provisions hereof in any jurisdiction.
6.3 Counterparts.
This
Third Amendment may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument, and any party
hereto may execute this Third Amendment by signing any such
counterpart.
6.4 GOVERNING
LAW.
THIS THIRD AMENDMENT AND THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS. THE LOAN
DOCUMENTS ARE PERFORMABLE IN SAN ANTONIO, BEXAR COUNTY, TEXAS, AND BORROWER,
EACH L/C RIC AND LENDER WAIVE THE RIGHT TO BE SUED ELSEWHERE. BORROWER, EACH
L/C
RIC AND LENDER AGREE THAT THE STATE AND FEDERAL COURTS OF TEXAS LOCATED IN
SAN
ANTONIO, TEXAS SHALL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION WITH
THIS
THIRD AMENDMENT AND THE OTHER LOAN DOCUMENTS.
6.5 ENTIRE
AGREEMENT.
THIS WRITTEN AGREEMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS
THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
Executed
as of the date first written above.
| BORROWER: |
HALLMARK
FINANCIAL SERVICES, INC.
|
|
| |
|
|
| By: | ||
|
▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
President
and Chief Executive Officer
|
||
| L/C RICs: |
AMERICAN
HALLMARK INSURANCE COMPANY OF TEXAS
|
|
| PHOENIX INDEMNITY INSURANCE COMPANY | ||
| |
|
|
| By: | ||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
Chief
Financial Officer and Treasurer
|
||
OTHER
OBLIGORS:
ACO
HOLDINGS, INC.
ALLRISK
INSURANCE AGENCY, INC.
AMERICAN
HALLMARK AGENCIES, INC.
AMERICAN
HALLMARK GENERAL AGENCY, INC.
EFFECTIVE
CLAIMS MANAGEMENT, INC.
HALLMARK
CLAIMS SERVICE, INC.
HALLMARK
FINANCE CORPORATION
HALLMARK
GENERAL AGENCY, INC.
HALLMARK
UNDERWRITERS, INC.
| By: | ||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
|
||
|
Chief
Financial Officer and Treasurer
|
AEROSPACE
CLAIMS MANAGEMENT GROUP, INC.
| By: | ||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
||
|
Chief
Executive Officer
|
AEROSPACE
FLIGHT, INC.
AEROSPACE
HOLDINGS, LLC
AEROSPACE
INSURANCE MANAGERS, INC.
AEROSPACE
SPECIAL RISK, INC.
|
By:
|
||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
||
|
President
|
PAN
AMERICAN ACCEPTANCE
CORPORATION
| By: | ||
|
Donate
▇. ▇▇▇▇▇▇▇▇▇
|
||
|
President
|
TEXAS
GENERAL AGENCY, INC.
| By: | ||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
|
||
|
President
|
TGA
SPECIAL RISK, INC.
| By: | ||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇
|
||
|
President
|
|
LENDER:
|
THE
FROST NATIONAL BANK
|
By:_________________________________________
Print
Name:___________________________________
Print
Title:____________________________________
Exhibit
A
Exhibit
N
Exhibit
O
Exhibit
P