EXHIBIT 2
LOAN PURCHASE AND SALE AGREEMENT
THIS LOAN PURCHASE AND SALE AGREEMENT (the "Agreement") is entered into
as of November 1, 2002, by and between Hallmark Financial Services, Inc., a
Nevada corporation (the "Assignee") and LaSalle Bank National Association, a
national banking association (the "Assignor").
WHEREAS, the Assignor and Millers American Group, Inc., a Texas
corporation ("Millers"), entered into a Loan Agreement, dated as of
September 17, 1999, ("Loan Agreement") and certain other Loan Documents (as
defined below), pursuant to which the Assignor provided a revolving line of
credit to Millers;
WHEREAS, as inducement to the Assignor entering into the Loan Agreement
with Millers, Millers and Trilogy Holdings, Inc., a Nevada corporation
("Trilogy"), entered into a Security Agreement with the Assignor, dated as
of September 17, 1999, pursuant to which Millers and Trilogy granted a
security interest in certain of their assets to the Assignor;
WHEREAS, as an inducement to the Assignor entering into the Loan
Agreement with Millers, Effective Litigation Management, Inc., a Texas
corporation ("Effective"), and Financial and Actuarial Resources, Inc., a
Texas corporation ("Financial"), entered into a Security Agreement with the
Assignor, dated as of September 17, 1999, pursuant to which Effective and
Financial granted a security interest in certain of their assets to the
Assignor;
WHEREAS, as inducement to the Assignor entering into the Loan Agreement
with Millers, Trilogy entered into a Guaranty Agreement and a Stock Pledge
Agreement, both dated as of September 17, 1999, pursuant to which Trilogy
guaranteed the obligations of Millers under the Loan Agreement and pledged
the stock of certain subsidiaries;
WHEREAS, the Assignor wishes to assign for value the Assignor's
interest in the Loan and the Loan Documents (as defined below) and any
payment and performance obligations evidenced thereby; and
WHEREAS, the Assignee desires to become assignee for value of the
Assignor's interest in the Loan and the Loan Documents and any payment and
performance obligations evidenced thereby.
THEREFORE, in consideration of the mutual promises set forth herein and
other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties to this Agreement agree as follows:
SECTION 1
DEFINITIONS
1.1. For the purposes of this Agreement, the following terms shall have
the meanings indicated below:
(a) "Affiliate" means "affiliate" as defined in either (a)
Bankruptcy Code S 101(2) or (b) Rule 144 of the Securities Act.
(b) "Agreement" means this Loan Purchase and Sale Agreement,
including all Schedules and Exhibits hereto.
(c) "Assumed Obligations" means all of the duties and obligations
of the Assignor under the Loan Documents or occurring in connection with the
Transferred Rights (including, but not limited to, the Assignor's duties and
obligations as both "Lender" and "Agent" under the Loan Documents);
excluding, however, Retained Obligations.
(d) "Business Day" means any day other than a Saturday, Sunday or
other day on which banks in Chicago, Illinois are required by law to close.
(e) "Claim" means, without limitation, any claim, cause of action,
remedy, right, demand, or legal or regulatory proceeding.
(f) "Closing" means the closing of the transaction described in
this Agreement.
(g) "Closing Date" shall have the meaning set forth in Section 3.1
hereof.
(h) "Collateral" means any property, whether real or personal,
tangible or intangible, of whatever kind and wherever located, whether now
owned or hereafter acquired or created, in or over which an Encumbrance has
been granted to or for the benefit of the Lenders under the Loan Documents.
(i) "Commitments" means the amount of funds which the lender is or
may be obligated to provide to Millers under the Loan Documents (subject to
the terms and conditions thereof) as of the Closing Date, as set forth in
Schedule 1(i).
(j) "Distribution" means any payment or other distribution of cash
(including interest), notes, securities or other property (including
Collateral) or proceeds under or in respect of the Transferred Rights.
(k) "Encumbrance" means any (a) mortgage, pledge, lien, security
interest, charge, hypothecation or other encumbrance, security agreement,
security arrangement or adverse claim against title of any kind; (b)
purchase or option agreement or put arrangement; (c) subordination agreement
or arrangement other than as specified in the Loan Documents; or (d)
agreement to create or effect any of the foregoing.
(l) "Entity" includes any individual, partnership, corporation,
limited liability company, association, estate, trust, business trust, other
type of entity and Governmental Authority.
(m) "Governmental Authority" means any federal, state or other
governmental department, agency, institution, authority, regulatory body,
court or tribunal, foreign or domestic, and includes arbitration bodies,
whether governmental, private or otherwise.
(n) "Impairment" means any claim, counterclaim, setoff, defense,
action, demand, litigation (including administrative proceedings or
derivative actions), Encumbrance, right (including expungement, avoidance,
reduction, contractual or equitable subordination, or otherwise) or defect,
other than those created pursuant to the Loan Documents, the effect of which
does, or would, materially and adversely affect the Transferred Rights in
whole or in part.
(o) "Lender" means a lender under the Loan Agreement and its
successors, transferees, and assigns.
(p) "Loan" means the obligations and debt evidenced by the Loan
Documents.
(q) "Loan Agreement" has the meaning set forth in the recitals to
this Agreement.
(r) "Loan Documents" means each of the documents, instruments and
agreements listed as "Loan Documents" on Schedule 1(r).
(s) "Obligor" means Millers, Effective, Financial, Trilogy, any
other guarantor(s) or endorser(s) of the Loan, and any Affiliate thereof
whose property constitutes Collateral.
(t) "Purchase Price" means $6.5 million.
(u) "Retained Obligations" means all obligations and liabilities
of the Assignor under the Loan Documents that (a) result from the Assignor's
material breach of its representations, warranties, covenants or agreements
under this Agreement or any Loan Document or (b) result from the Assignor's
bad faith, gross negligence or willful misconduct.
(v) "Securities Act" means the Securities Act of 1933, 15 U.S.C.
SS 77a et seq., as amended, and the rules and regulations promulgated under
it.
(w) "Transferred Rights" means any and all of the Assignor's
right, title and interest in, to and under the Loan and the Loan Documents,
including all accrued and unpaid interest thereon, and to the extent related
thereto, the following:
(i) all other amounts funded by or payable to the Assignor
under the Loan Documents and all obligations owed to the
Assignor in connection with the Loan and the Commitment;
(ii) all claims (including "claims" as defined in Bankruptcy
Code S 101(5)), suits, causes of action, and any other right
of the Assignor, whether known or unknown, against Millers or
any of their respective Affiliates, agents, representatives,
contractors, advisors or any other Entity including, to the
extent permitted to be assigned under applicable law, all
contract claims, tort claims, malpractice claims and claims
under any law governing the purchase and sale of, or
indentures for, securities;
(iii) all Collateral of any kind for or in respect of the
Loan Documents;
(iv) all cash, securities or other property, and all setoffs
and recoupments, received, applied or effected after the
Closing Date by or for the account of the Assignor under the
Loan and the Commitment, if any, and other extensions of
credit under the Loan Documents (whether for principal,
interest, fees, reimbursement obligations or otherwise)
effected after the Closing Date;
(v) the economic benefit of permanent commitment reductions,
permanent repayments of principal and amendment, consent,
wavier and other similar non-ordinary course fees received by
the Assignor from and after the Closing Date; and
(vi) all proceeds of the foregoing received after the Closing
Date.
1.2. Terms that are defined in other provisions of this Agreement have
the meanings given to them in those provisions.
1.3. Terms defined in the Loan Agreement and not otherwise defined in
this Agreement shall have the same meaning in this Agreement as in the Loan
Agreement.
SECTION 2
ASSIGNMENT OF LOAN DOCUMENTS; ALLOCATION OF LOAN PAYMENTS
2.1. Assignment of Loan Documents. (a) In consideration of the
Purchase Price, subject to the terms, provisions and conditions of this
Agreement, the Assignor hereby agrees to assign unto the Assignee, and the
Assignee hereby agrees to accept from Assignor, on the Closing Date the
Transferred Rights and the Assumed Obligations. Except as expressly set
forth in Section 7 hereof, the Assignor and the Assignee agree that this
Agreement is made without recourse to the Assignor, or any past, present or
future Affiliate, subsidiary, parent or participant of the Assignor. Except
as expressly set forth in Section 4 of this Agreement, this Agreement is
made by the Assignor strictly on an as-is, where-is basis, and without any
representations or warranties of any kind or nature whatsoever, whether
express, implied or imposed by law.
(b) The Assignee assumes no duties or obligations other than the
Assumed Obligations, and the Assignor shall remain responsible for all
Retained Obligations.
(c) This Agreement is intended to, and upon execution hereof and
satisfaction or waiver of the conditions precedent set forth in Section 3
shall, effect a true sale of the Transferred Rights.
2.2. Allocation of Loan Payments. (a) All payments of principal and
interest, any late charges, prepayment fees or premiums, and all other sums
received by the Assignor or the Assignee in respect of the Loan shall be
allocated as follows:
(i) All scheduled Distributions received by the Assignor prior to
the Closing Date shall be the property of the Assignor, without
adjustment to the Purchase Price; and
(ii) All Distributions received by the Assignor or the Assignee on
and after the Closing Date shall be the property of the Assignee,
without adjustment to the Purchase Price.
(b) The Assignor shall remit to the Assignee any Distributions
received by the Assignor on and after the Closing Date within five (5)
Business Days of the Assignor's receipt of any such Distributions.
2.3 Consent of Assignor. The Assignor hereby consents to the Note
issued by Millers to the Assignor, dated September 17, 1999, being amended
after the Closing such that Hallmark replaces the Assignor as "Lender" under
the Note.
SECTION 3
CLOSING CONDITIONS AND COVENANTS
3.1. Time and Place of Closing. The Closing shall occur on November 1,
2002, at 9:00 a.m. (Chicago time), time being of the essence, at the offices
of Sidley Austin Brown & Wood, located at 10 South Dearborn Street, Bank One
Plaza, Chicago, Illinois 60603, or at such other time or place as is
mutually agreed to, in writing, by the Assignor and the Assignee. The time
and date on which the Closing actually occurs is referred to as the "Closing
Date".
3.2. Assignors' Closing Deliveries. At the Closing, the Assignor shall
deliver (or cause to be delivered) to the Assignee:
(i) the Assignor's promissory note executed by Millers in favor
of the Assignor, duly endorsed by the Assignor to the Assignee;
(ii) all stock certificates and stock powers provided to the
Assignor from any of Millers, Effective, Financial and Trilogy
pursuant to the Loan Documents;
(iii) true and correct copies of all documents identified in
Schedule 1(r);
(iv) a fully executed copy of the General Assignment, attached
hereto as Exhibit A, which General Assignment shall be executed
and delivered by the Assignor only after the Assignor's receipt of
the Purchase Price pursuant to Section 3.3(a) of this Agreement;
and
(v) a certificate executed by a duly authorized representative of
the Assignor (i) certifying that all of the representations and
warranties of the Assignor set forth herein are true and correct
in all material respects as of the Closing Date and (ii) setting
forth, as of the Closing Date, the principal balance of the Loan
as well as all accrued and unpaid interest relating to the Loan.
3.3. Assignee's Closing Deliveries. At the Closing, the Assignee shall
deliver (or cause to be delivered) to the Assignor:
(i) the Purchase Price, by confirmed wire transfer of immediately
available funds, in lawful money of the United States of America,
to the following account:
LaSalle Bank National Association
ABA #071000505
Credit Commercial Loan Account of
Millers American Group
Notify: James Thompson
312-904-8092
(ii) a certificate executed by a duly authorized representative of
the Assignee certifying that all of the representations and
warranties of the Assignee set forth herein are true and correct
in all material respects as of the Closing Date.
3.4. Condition to the Assignor Closing. The Assignor's obligation to
consummate the Closing shall be contingent upon the Assignee, Millers,
Effective, Financial and Trilogy executing the Consent and Release Agreement
set forth in Exhibit B.
3.5. Condition to the Assignee Closing. The Assignee's obligation to
consummate the Closing shall be contingent upon Millers, Effective,
Financial and Trilogy agreeing, in writing, to amend the Loan Documents in
such a manner as substantially similar to paragraph 2. of the Consent,
Amendment and Release Agreement attached hereto as Exhibit B.
3.6. Transfer and Recordation Taxes; Responsibility for Recording. The
Assignee acknowledges that it is the Assignee's responsibility to promptly
and diligently record, at the Assignee's sole expense, all assignments and
notices necessary to effect the transaction described in this Agreement.
The Assignee further acknowledges that it is responsible for, and shall pay
when due and payable, all filing and recording fees and taxes, costs and
expenses, and any state or county documentary taxes, if any, with respect to
the filing or recording of any document or instrument contemplated hereby.
The Assignee shall prepare any such document or instrument, in form and
substance reasonably acceptable to the Assignor, to be executed by the
Assignor. The Assignee further acknowledges that it is the Assignee's sole
responsibility to record all assignments, instruments or other documents
delivered to the Assignee pursuant to this Agreement, including, but not
limited to, any instruments necessary to perfect any security interest under
the Loan.
3.7. Closing Expenses. Whether or not the transactions contemplated by
this Agreement are completed, each of the Assignee and the Assignor shall be
responsible for the payment of each of their own costs and expenses in
negotiating and carrying out their obligations under this Agreement,
including, without limitation, the costs of counsel.
3.8. Further Assurances. The Assignor and the Assignee shall execute
and deliver to the others all such documents, and take such further actions
as the other may reasonably deem necessary from time to time, to effect the
assignment of the Loan in accordance with the terms of this Agreement;
provided that all such documents to be executed and actions to be taken by
the Assignor shall be without recourse, representation or warranty of any
kind to the Assignor, except as expressly provided in Section 4 of this
Agreement.
SECTION 4
ASSIGNOR'S REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS
4.1. Representations and Warranties. The Assignor makes the following
representations and warranties for the benefit of the Assignee as of the
date of this Agreement:
(a) Organizational Matters. The Assignor is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization.
(b) Ownership of Loan Documents. Except as may be set forth in
any agreement, document or instrument identified in Schedule 1(r) hereto,
the Assignor is the owner of an undivided legal and equitable interest in
and to the Transferred Rights, and the Assignor has not previously assigned
or participated the Transferred Rights, in whole or in part, to any Entity.
(c) Broker. The Assignor has not engaged any finder, broker or
intermediary with respect to this Agreement or the transactions evidenced
hereby, or directly or indirectly caused any finder's fee, commission or
other compensation or expense reimbursement to become owing to any third
party with respect to this Agreement or the transactions evidenced hereby.
(d) Non-Contravention. The Assignor's execution, delivery and
performance of this Agreement will not result in a breach of any provision
of (i) the Assignor's organization documents, (ii) any statute, law, writ,
order, rule or regulation of any Governmental Authority applicable to the
Assignor or (iii) any judgment, injunction, decree or determination
applicable to the Assignor, the effect of which would be to nullify the
assignment of the Transferred Rights or materially diminish the value of the
Transferred Rights.
(e) Authority and Enforceability. This Agreement (i) has been
duly and validly authorized, executed and delivered by the Assignor and (ii)
is the legal, valid and binding obligation of the Assignor, enforceable
against the Assignor in accordance with its terms, except that such
enforceability against the Assignor may be limited by bankruptcy, insolvency
or other similar laws of general applicability affecting the enforcement of
creditors' rights generally and by the court's discretion in relation to
equitable remedies. No notice to, registration with, consent or approval
of, or any other action by, any relevant Governmental Authority or other
Entity is or will be required for the Assignor to execute, deliver and
perform its obligations under this Agreement, except as set forth in Section
3.4 hereof.
(f) Pending Proceedings. No litigation is (i) pending against
the Assignor or (ii) to the best of the Assignor's knowledge, threatened
against Assignor before any relevant Governmental Authority that, in the
aggregate, will materially and adversely affect (x) the Transferred Rights
or (y) any action taken or to be taken by the Assignor under this Agreement.
(g) Information on Loan. The principal amounts of the Loans
outstanding and the Commitments, if any, as of the Closing Date are
accurately stated in Schedule 1(i). All permanent commitment reductions,
permanent prepayments of principal and other similar non-ordinary course
fees received by the Assignor in connection with the Transferred Rights
within 95 days prior to the Closing Date are accurately stated in Schedule
4.1(g).
(h) Not an Insider. Except as set forth in Schedule 4.1(h), the
Assignor is not and has never been (i) an "insider" of Millers or any
Obligor (as "insider" is defined in Bankruptcy Code S 101(31)) or (ii) an
Affiliate of Millers or any Obligor.
(i) Voidance of Transferred Rights. Except as set forth in
Schedule 4.1(i), the Assignor has not received any written notice other than
those publicly available that (i) any payment or other transfer made to or
for the account of the Assignor from or on account of Millers or any Obligor
under the Transferred Rights is or may be void or voidable as an actual or
constructive fraudulent transfer or as a preferential transfer or (ii) the
Transferred Rights, or any portion of them, are void, voidable,
unenforceable or subject to any Impairment.
(j) Accredited Investor. The Assignor is an "accredited
investor" as defined in Rule 501 under the Securities Act.
(k) Loan Documents. The Assignor has provided to the Assignee
true, correct and complete copies of the Loan Documents.
(l) Waivers. Except for consents and waivers given by the
Assignor generally pursuant to and in accordance with the Loan Agreement,
the Assignor has not given its consent to change, nor has it waived, any
term or provision of any Loan Document.
(m) All Relevant Documents. Schedule 1(r) contains all material
documents received by the Assignor relating to the Loan and the Collateral,
including, but not limited to, all agreements, waivers, consents,
supplements, foreclosures, notices and amendments.
(n) Conduct of the Assignor. The Assignor has not engaged in any
acts or conduct or made any omissions that will result in the Assignee
receiving a lower amount of payments or distributions than it otherwise
would be entitled to under the Loan Documents, or treatment less favorable
(including the timing of payments or distributions) than it otherwise would
be entitled to under the Loan Documents.
(o) Performance. The Assignor has performed, and has complied
with, all obligations required to be performed or complied with by it under
the Loan Documents and is not in breach of any provisions of the Loan
Documents.
(p) Material Adverse Effect. Assignor is not a party to any
document, instrument or agreement that could materially and adversely affect
the Transferred Rights or Assignee's rights and remedies under this
Agreement.
4.2. Acknowledgement. The Assignor acknowledges the following as of
the date of this Agreement:
(a) The Assignor (i) is a sophisticated investor with respect to
the sale of the Transferred Rights and the retention of the
Retained Obligations, (ii) has adequate information
concerning the business and financial condition of Millers or
any Obligor to make an informed decision regarding its sale
of the Transferred Rights and its retention of the Retained
Obligations and (iii) has independently and without reliance
upon the Assignee, and based on such information as the
Assignor has deemed appropriate, made its own analysis and
decision to enter into this Agreement, except that the
Assignor has relied upon the Assignee's express
representations, warranties, covenants, and indemnities in
this Agreement.
(b) The Assignee has not given the Assignor any investment
advice, credit information or opinion on whether the sale of
the Transferred Rights or the retention of the Retained
Obligations is prudent.
(c) (i) The Assignee currently may have, and later may come into
possession of, information with respect to the Transferred
Rights, Millers, any Obligor or any of their Affiliates that
is not known to the Assignor and that may be material to a
decision to sell the Transferred rights and to retain the
Retained Obligations ("Assignor Excluded Information"), (ii)
the Assignor has determined to sell the Transferred Rights
and to retain the Retained Obligations notwithstanding its
lack of knowledge of the Assignor Excluded Information and
(iii) the Assignee shall have no liability to the Assignor,
and the Assignor waives and releases any claims that it might
have against the Assignee or any of the Assignee's Affiliates
whether under applicable securities laws or otherwise, with
respect to the nondisclosure of the Assignor Excluded
Information in connection with the transactions contemplated
hereby; provided, however, that the Assignor Excluded
Information shall not and does not affect the truth or
accuracy of the Assignee's representations and warranties in
this Agreement.
(d) The Assignor's sale of the Transferred Rights to the Assignee
is irrevocable and the Assignor shall have no recourse to the
Transferred Rights.
SECTION 5
ASSIGNEE'S REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS
5.1. Representations and Warranties. The Assignee makes the following
representations and warranties for the benefit of the Assignor, as of the
date of this Agreement:
(a) Organizational Matters. The Assignee is duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization, and is registered or qualified
to conduct business in all other jurisdictions in which the
failure to be so registered or qualified would affect the
ability of the Assignee to perform the Assignee's obligations
under this Agreement and the Loan Documents.
(b) Authority and Enforceability. (i) This Agreement has been
duly and validly authorized, executed and delivered by the
Assignee and is the legal, valid and binding obligation of
the Assignee, enforceable against the Assignee in accordance
with its terms, except that such enforceability against the
Assignee may be limited by bankruptcy, insolvency or other
similar laws of general applicability affecting the
enforcement of creditors' rights generally and by the court's
discretion in relation to equitable remedies; and (ii) no
notice to, registration with, consent or approval of, or any
other action by, any relevant Governmental Authority or other
Entity is or will be required for the Assignee to execute,
deliver and perform its obligations under this Agreement.
(c) No Financial Contingency. The Assignee has sufficient funds
immediately available to it to enable the Assignee to fully
perform its obligations under this Agreement. The Assignee
acknowledges and agrees that this Agreement is not contingent
upon the Assignee obtaining any financing of any part of the
Purchase Price.
(d) Broker. The Assignee has not engaged any finder, broker or
intermediary with respect to this Agreement or the
transactions evidenced hereby, or directly or indirectly
caused any finder's fee, commission or other compensation or
expense reimbursement to become owing to any third party with
respect to this Agreement or the transactions evidenced
hereby.
(e) Sophisticated Investor. The Assignee (i) is a sophisticated
investor with respect to the purchase of the Transferred
Rights and the Assumed Obligations, (ii) has adequate
information concerning the business and financial condition
of Millers and any Obligor including, but not limited to,
Effective, Financial and Trilogy, to make an informed
decision regarding the purchase of the Transferred Rights and
the Assumed Obligations and (iii) has independently and
without reliance upon the Assignor, and based on such
information as the Assignee has deemed appropriate, made its
own analysis and decision to enter into this Agreement,
except that the Assignee has relied upon the Assignor's
express representations, warranties, covenants and
indemnities in this Agreement. The Assignee has not relied
in entering into this Agreement upon any oral or written
information or statements from the Assignor or any of the
Assignor's employees, attorneys, affiliates, agents or
representatives, other than the express representations and
warranties of the Assignor contained in Section 4 of this
Agreement.
(f) Knowledge and Experience. The Assignee or its advisors have
knowledge and experience in financial and business matters,
relating to the ownership and collection of loan assets, and
the Assignee or its advisors are capable of evaluating the
merits and risks of investment in such assets.
(g) Financial Capability. The Assignee has the financial
capability to hold the Loans and the Collateral for an
indefinite period of time and to bear the economic risks of,
including a complete loss of the Assignee's investment in,
the acquisition of the Loans, the Collateral and the Loan
Documents.
(h) Own Account. The purchase of the Loan by the Assignee is for
its own account and not with a view to any resale.
(i) No Conflicts. The execution and delivery of this Agreement
by the Assignee, the performance by the Assignee of its
obligations under this Agreement and the Loan Documents, and
the consummation of the transactions contemplated hereby,
does not and will not: (i) violate any laws, statutes,
regulations, ordinances, writs, judgments, decrees,
injunctions, administrative rulings or similar orders
applicable to the Assignee; (ii) conflict with or result in a
violation of the Assignee's Articles of Incorporation or By-
laws; or (iii) conflict with or violate any contract or
agreement to which the Assignee is a party.
(j) Reliance. Except as otherwise provided in this Agreement,
the Assignee has not relied and will not rely on the Assignor
to furnish or make available any documents or other
information regarding the credit, affairs, financial
condition or business of Millers or any Obligor, or any other
matter concerning Millers or any Obligor.
(k) Accredited Investor. Assignee is an "accredited investor" as
defined in Rule 501 under the Securities Act.
(l) Pendency Proceedings. No litigations are (i) pending against
the Assignee or (ii) to the best of Assignee's knowledge,
threatened against the Assignee before any relevant
Governmental Authority, that in the aggregate, will
materially and adversely affect any action taken or to be
taken by the Assignee under this Agreement.
5.2. Acknowledgments. The Assignee acknowledges the following as of
the date of this Agreement.
(a) No employee or representative of the Assignor has been
authorized to make any statements or representations other
than those specifically contained in Section 4 of this
Agreement. Without limiting the generality of the foregoing,
the Assignee acknowledges that the Assignor has not made any
representation or warranty as to the status of the Loan or
Collateral.
(b) The Loan and the Collateral may have limited or no liquidity.
(c) In order to exercise any of its rights acquired under this
Agreement, the Assignee must comply in all material respects
with all applicable laws and regulations, including, without
limitation, all insurance laws and regulations and all other
laws and regulations of all applicable government bodies.
(d) Millers is in default of the Loan Agreement for, among other
reasons, failure to pay interest in the amount of $73,528.12
when due on September 1, 2002.
(e) (i) The Assignor currently may have, and later may come into
possession of, information with respect to the Transferred
Rights, Millers, any Obligor or any of their Affiliates that
is not known to the Assignee and that may be material to a
decision to acquire the Transferred rights and assume the
Assumed Obligations ("Assignee Excluded Information"), (ii)
the Assignee has determined to purchase the Transferred
Rights and assume the Assumed Obligations notwithstanding its
lack of knowledge of the Assignee Excluded Information, and
(iii) the Assignor shall have no liability to the Assignee,
and the Assignee waives and releases any claims that it might
have against the Assignor or any of the Assignor's
Affiliates, whether under applicable securities laws or
otherwise, with respect to the nondisclosure of the Assignee
Excluded Information in connection with the transactions
contemplated hereby; provided, however, that the Assignee
Excluded Information shall not and does not affect the truth
or accuracy of the Assignor's representations and warranties
in this Agreement.
(f) The Assignee has received copies of the Loan Documents and,
without any way limiting the representations and warranties
of the Assignor contained in this Agreement, the Assignee is
assuming all risk with respect to the accuracy or sufficiency
of such documents and information.
(g) The Assignor's sale of the Transferred Rights to the
Assignee, and the Assignee's assumption of the Assumed
Obligations, are irrevocable.
SECTION 6
CONFIDENTIALITY
6.1. Non-Disclosure of Terms. The parties to this Agreement agree not
to disclose, directly or indirectly, at any time, before or after the
Closing, the terms of this Agreement and the transactions contemplated
hereby, unless all parties to this Agreement have given their express
written approval of such disclosure; provided, however, this Section 6.1
shall not be construed to prohibit the following disclosures: (i)
disclosures as may be required for insurance regulatory, federal securities,
tax, accounting or other reporting purposes; (ii) disclosures to legal
counsel, independent accountants and other representatives; (iii)
disclosures to corporate parents and other corporate affiliates; (iv)
disclosures required by law or a valid court order; (v) disclosures of
matters of which there is public knowledge other than as a result of
disclosures made in breach hereof; and (vi) disclosures reasonably occurring
in connection with disputes over the terms of this Agreement.
6.2. Confidential Information. Each of the Assignor and the Assignee
agree that it will treat in confidence all documents, materials and other
information which it shall have obtained regarding the other party during
the course of the negotiations leading to the consummation of the
transactions contemplated hereby (whether obtained before or after the date
of this Agreement). In the event the transactions contemplated hereby shall
not be consummated, each party will return to the other party all copies of
nonpublic documents and materials which have been furnished in connection
herewith; such documents, materials and information shall not be
communicated to any person or entity (other than to the Assignor's and the
Assignee's counsel, accountants and financial advisors). No person or
entity shall use any confidential information in any manner whatsoever
except solely for the purpose of evaluating the proposed assignment of the
Loan. The obligations of the Assignor and the Assignee under this Section
6.2 to treat such documents, materials and other information in confidence
shall not apply to the following disclosures: (i) disclosures as may be
required for insurance regulatory, federal securities, tax, accounting or
other reporting purposes; (ii) disclosures to legal counsel, independent
accountants and other representatives; (iii) disclosures to corporate
parents and other corporate affiliates; (iv) disclosures required by law or
a valid court order; (v) disclosures of matters of which there is public
knowledge other than as a result of disclosures made in breach hereof; and
(vi) disclosures reasonably occurring in connection with disputes over the
terms of this Agreement.
SECTION 7
ASSIGNORS' AND ASSIGNEES' REMEDIES
7.1. Assignee's Covenants. (a) The Assignee and the Assignee's
successors and assigns hereby jointly and severally indemnify and hold
harmless the Assignor, and the Assignor's parents, subsidiaries and
Affiliates, and their respective successors and assigns, and all of their
officers, directors, employees, consultants, attorneys, advisors and agents,
from and against any and all Claims, liabilities, judgments, forfeitures,
assessments, losses, fines, penalties, costs, damages, expenses and fees,
including reasonable attorney's fees (including, without limitation, the
internally allocated cost of staff counsel) and expert witness fees,
sustained or incurred by the Assignor, or the Assignor's parents,
subsidiaries or Affiliates, or their respective successors and assigns, or
any of their officers, directors, employees, consultants, attorneys,
advisors or agents, as a result of, or arising from, or relating to:
(i) any material breach or inaccuracy of any representation
or warranty made by the Assignee to the Assignor herein;
(ii) any material breach by the Assignee of any of the
covenants of this Agreement to be performed by the Assignee;
(iii) any breach of contract or tortious or unlawful acts or
omissions of the Assignee with respect to the Loan, the
Collateral or any transactions contemplated by the Loan
Documents on or after the Closing;
(iv) any claim made by any person, organization or
association against the Assignor with respect to the Loan,
the Loan Documents or the Collateral, from facts occurring on
or after the Closing Date;
(v) the Assignee's violation of any law relating to unfair credit
collection practices, (the Assignee agrees to notify the
Assignor, in writing, within five (5) Business Days of notice
or knowledge of any such claim, demand or assertion of a
violation of such law); or
(vi) the failure of the Assignee to record any assignments or
notices, or to pay such amounts, required pursuant to Section
3.6 of this Agreement.
(b) Except for the remedies set forth in this Section 7.1 hereof,
the Assignor hereby waives any Claim the Assignor might now or in the future
have against the Assignee, or any of the Assignee's employees, attorneys,
Affiliates, agents or representatives as a result of this Agreement;
provided, however, that this waiver does not include any Claim the Assignor
may have as a result of the Assignee's fraud or willful misconduct in
connection with this Agreement.
7.2 Assignor's Covenants. (a) The Assignor and the Assignor's
successors and assigns hereby jointly and severally indemnify and hold
harmless the Assignee, and the Assignee's parents, subsidiaries and
Affiliates, and their respective successors and assigns, and all of their
officers, directors, employees, consultants, attorneys, advisors and agents,
from and against any and all Claims, liabilities, judgments, forfeitures,
assessments, losses, fines, penalties, costs, damages, expenses and fees,
including reasonable attorneys' fees (including, without limitation, the
internally allocated cost of staff counsel) and expert witness fees,
sustained or incurred by the Assignee, or the Assignee's parents,
subsidiaries or Affiliates, or their respective successors or assigns, or
any of their officers, directors, employees, consultants, attorneys,
advisors or agents, as a result of, or arising from, or relating to:
(i) any material breach or inaccuracy of any representation or
warranty made by the Assignor to the Assignee herein;
(ii) any material breach by the Assignor of any of the covenants
of this Agreement to be performed by the Assignor;
(iii) any breach of contract or tortious or unlawful acts or
omissions of the Assignor with respect to the Loan, the
Collateral or any transactions contemplated by the Loan
Documents prior to the Closing;
(iv) any claim made by any person, organization or
association against the Assignee with respect to the Loan,
the Loan Documents or the Collateral, from facts occurring
prior to the Closing Date; or
(v) the Assignor's violation of any law relating to unfair credit
collection practices (the Assignor agrees to notify the
Assignee, in writing, within five (5) Business Days of notice
or knowledge of any such claim, demand or assertion of a
violation of such law).
(b) Except for the remedies set forth in this Section 7.2 hereof,
the Assignee hereby waives any Claim the Assignee might now or in the future
have against the Assignor, or any of the Assignor's employees, attorneys,
Affiliates, agents or representatives as a result of this Agreement;
provided, however, that this waiver does not include any Claim the Assignee
may have as a result of the Assignor's fraud or willful misconduct in
connection with this Agreement.
7.3 Third Party Actions. If a third party commences any action or
makes any demand against either party to this Agreement for which such party
("Indemnified Party") is entitled to indemnification under this Agreement
from the other party to this Agreement ("Indemnifying Party"), such
Indemnified Party will promptly notify the Indemnifying Party in writing of
such action or demand; provided, however, that if the Indemnified Party
assumes the defense of the action and fails to provide prompt notice to the
Indemnifying Party, such failure shall not limit in any way the Indemnifying
Party's obligation to indemnify the Indemnified Party, except to the extent
that such failure materially prejudices the Indemnifying Party's ability to
defend the action. The Indemnifying Party may, at its own expense and
without limiting its obligation to indemnify the Indemnified Party,
participate in the defense of such action with counsel reasonably
satisfactory to the Indemnified Party. The Indemnifying Party may also, at
its own expense, assume the total defense of such action from the
Indemnified Party with counsel reasonably acceptable to the Indemnified
Party; provided, the Indemnifying Party provides in writing that it will
indemnify the Indemnified Party and waive all objections thereto. In any
event, the party that has assumed the defense of such action shall provide
the other party with copies of all notices, pleadings and other papers filed
or served in such action. Neither party shall make any settlement or
adjustment without the other party's prior written consent, which consent
(i) in the case of the Indemnifying Party will not be unreasonably withheld
if the settlement or adjustment involves only the payment of money damages
by the Indemnifying Party and (ii) in the case of the Indemnified Party may
be withheld for any reason if the settlement or adjustment involves
performance or admission by the Indemnified Party.
7.4. Reimbursement for Use of Assignors' Agents. In the event of
litigation with respect to the Loan in which the Assignor, or any of the
Assignor's employees, agents or attorneys, are requested or required, by
subpoena, court order or otherwise, to perform any acts, including, but not
limited to, testifying in litigation, preparing responses to subpoenas or
other legal process or pleadings, and/or performing any review of public or
private records such as tracing funds, whether or not said litigation is
commenced by the Assignee, any Obligor or any other party, the Assignee
shall indemnify and promptly reimburse the Assignor for all costs and
expenses incurred in connection therewith; provided, however, that the
foregoing shall not extend to attorney's fees, costs and expenses incurred
by the Assignor in connection with any dispute arising out of or relating to
this Agreement and shall not extend to attorneys' fees, costs or expenses
incurred by the Assignor with respect to any litigation resulting from
Claims caused by any breach of contract under a Loan Document by the
Assignor's negligent or tortious or unlawful acts or omissions under the
Loan Documents or with respect to the Loans or the Collateral.
SECTION 8
ASSIGNEE'S POST-CLOSING COVENANTS
8.1. Reports to Taxing Authorities. The Assignee agrees to submit all
Internal Revenue Service forms and information returns with respect to the
Obligors, and any applicable state-required returns and forms, to the extent
required by applicable law, for the full year in which the Closing occurs
and thereafter; provided, however, that the Assignor shall not be prohibited
from submitting such Internal Revenue Service forms and information returns
with respect to the Obligors, and any applicable state-required returns and
forms as the Assignor deems appropriate. The Assignor agrees to submit all
Internal Revenue Service forms and information that it is required to
directly submit irrespective of the transfer of the Loan to the Assignee.
8.2. Notice of Claim. Each party to this Agreement shall promptly
notify the other party hereto of any Claim, threatened Claim, litigation or
threatened litigation against such party which shall at any time come to the
notifying party's attention, relating to the Loan.
SECTION 9
MISCELLANEOUS PROVISIONS
9.1. Notice. All notices and other communications required or
permitted under this Agreement shall be in writing and shall be deemed to
have been duly given and delivered (i) when delivered personally, (ii) if
transmitted by fax, when confirmation of transmission is received, or (iii)
if sent by registered or certified United States mail (return receipt
requested), or by overnight mail or overnight courier, when received; and
shall be addressed as follows:
If to Assignor:
LaSalle Bank National Association
135 South LaSalle Street
Suite 2140
Chicago, Illinois 60603
Attention: James D. Thompson
Telecopy: 312-904-8169
with a copy to:
Sidley Austin Brown & Wood
Bank One Plaza
10 South Dearborn Street
Chicago, Illinois 60603
Attention: Michael P. Goldman
Telecopy: 312-853-7036
If to the Assignee:
Hallmark Financial Services, Inc.
14651 Dallas Parkway
Suite 900
Dallas, Texas 75240
Attention: Chief Executive Officer
Telecopy: 972-788-0520
with a copy to:
Akin, Gump, Strauss, Hauer & Feld
1700 Pacific Avenue
Dallas, Texas 75201
Attention: Terry M. Schpok
Telecopy: 214-969-4343
9.2. Severability. Each provision of this Agreement is intended to be
severable. If any term, covenant, condition or provision hereof is
unlawful, invalid or unenforceable for any reason whatsoever, and such
illegality, invalidity or unenforceability does not affect the remaining
parts of this Agreement, then all such remaining parts hereof shall be valid
and enforceable and shall have full force and effect as if the invalid or
unenforceable part had not been included.
9.3. Amendment. This Agreement may not be amended except by an
instrument in writing signed by a duly authorized representative of the
Assignor and the Assignee.
9.4. Headings. The headings contained in this Agreement are inserted
for convenience only and shall not affect the meaning or interpretation of
this Agreement or any provision hereof.
9.5. Construction. Unless the context otherwise requires, singular
nouns and pronouns, when used herein, shall be deemed to include the plural
of such noun or pronoun, pronouns of one gender shall be deemed to include
the equivalent pronoun of the other gender and references to a particular
Section, Schedule or Exhibit shall be deemed to mean the particular Section
of this Agreement and any Schedule or Exhibit attached hereto. The parties
acknowledge that each party and its counsel have reviewed this Agreement and
the parties hereby agree that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not
be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits hereto.
9.6. Non-Assignability. This Agreement and the terms, covenants,
conditions, provisions, obligations, undertakings, rights and benefits
hereof, including the Schedules and Exhibits hereto, shall be binding upon
and shall inure to the benefit of the undersigned parties and their
respective heirs, executors, administrators, representatives and assigns.
The Assignee shall not assign this Agreement, or any of the Assignee's
rights, powers, duties or obligations hereunder, without the prior written
consent of the Assignor, which may not be unreasonably delayed or withheld.
Subject to Section 5.1(h) of this Agreement, nothing herein shall prevent
the Assignee from selling, assigning or granting a participation in or
otherwise transferring all or part of the Transferred Rights.
9.7. Prior Understandings; Integrated Agreement. This Agreement
supersedes any and all prior discussions, documents and agreements, written
or oral, among the parties hereto with respect to the assignment of the Loan
and the Loan Documents and other matters contained herein and this Agreement
contains the sole, final and complete expression and understanding among the
parties hereto with respect to the transactions contemplated herein.
9.8. Counterparts. This Agreement may be executed and delivered in any
number of counterparts, each of which shall constitute an original, but all
of which shall constitute but one and the same instrument.
9.9. Survival. Each and every representation, warranty and covenant
herein made by the Assignor and the Assignee shall survive the Closing, and
shall not merge into any document executed as part of the Closing, but
instead shall be independently enforceable except to the extent expressly
limited in Section 8.
9.10. Governing Law; Jurisdiction and Venue.
(a) This Agreement shall be construed, and the rights and
obligations of the parties hereunder determined, in
accordance with the substantive laws of the state of
Illinois, without regard to conflict of law principles.
(b) For purposes of any suit, action or proceeding involving this
Agreement, the parties hereto hereby expressly submit to each
of the jurisdiction of all Federal and State Courts sitting
in the Northern District of Illinois.
(c) The parties hereto hereby irrevocably waives any objection
that such parties may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out or
relating to this Agreement brought in any Federal or State
Court sitting in the Northern District of Illinois and hereby
irrevocably waive any claim that any such suit, action or
proceeding brought in any such court has been brought in an
inconvenient form.
9.11. No Third-Party Beneficiaries. No person, organization or
association other than the Assignor and the Assignee shall have any rights
or claims under this Agreement.
9.12. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EACH MAY HAVE TO A TRIAL BY
JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT AND AGREE
THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
HALLMARK FINANCIAL SERVICES, Inc., LASALLE BANK NATIONAL ASSOCIATION,
AS THE ASSIGNEE AS AGENT AND ASSIGNOR
By: ___________________________ By: ___________________________
Name: ___________________________ Name: ___________________________
Title: ___________________________ Title: ___________________________
SCHEDULE 1(i)
Principal Amount Outstanding, Commitment and Unfunded Commitment
Principal Amount Outstanding $14,850,000.00
Commitment $20,000,000.00
Unfunded Commitment $ 5,150,000.00
SCHEDULE 1(r)
Loan Documents *
1. Loan Agreement, dated as of September 17, 1999, between the
Assignor and Millers
2. Note, dated as of September 17, 1999, executed by Millers in
favor of the Assignor
3. Guaranty, dated as of September 17, 1999, from Trilogy for
the benefit of the Assignor
4. Security Agreement, dated as of September 17, 1999, from
Millers and Trilogy to the Assignor
5. Security Agreement, dated as of September 17, 1999, from
Effective and Financial to the Assignor
6. Stock Pledge Agreement, dated as of September 17, 1999, from
Millers to the Assignor, with respect to the stock of Trilogy
7. Stock Pledge Agreement, dated as of September 17, 1999, from
Trilogy to the Assignor, with respect to the stock of
insurance company subsidiaries
Additional Documents
1. Stock Certificate No. 1 representing 1,000 shares of Trilogy
common stock and the Assignment Separate from Certificate
2. Stock Certificate No. 6 representing 103,267 shares of
Millers Insurance Company common stock and the Assignment
Separate from Certificate
3. Stock Certificate No. 6 representing 500,000 shares of
Phoenix Indemnity Insurance Company common stock and the
Assignment Separate from Certificate
4. Secretary's Certificate of Borrower (with Incumbency):
a. Articles of Incorporation
b. By-laws
c. Corporate Resolutions
* All listed Loan Documents include all schedules and exhibits attached
thereto.
5. Secretary's Certificate of Trilogy (with Incumbency):
a. Articles of Incorporation
b. By-laws
c. Corporate Resolutions
6. Secretary's Certificate of Millers Insurance Company:
a. Articles of Incorporation
b. By-laws
c. Certificate of Authority
7. Secretary's Certificate of Phoenix Indemnity Insurance
Company:
a. Articles of Incorporation
b. By-laws
c. Corporate Resolutions
d. Certificates of Authority
8. Corporate Documents of Effective Litigation Management, Inc.:
a. Articles of Incorporation
b. By-laws
c. Corporate Resolutions
9. Corporate Documents of Financial and Actuarial Resources,
Inc.:
a. Articles of Incorporation
b. By-laws
c. Corporate Resolutions
10. Compliance Certificate
11. Solvency Certificate from Borrower
12. UCC, federal and state tax lien, pending suit, bankruptcy and
judgment lien searches for the following names in each
jurisdiction in which it maintains offices, collateral or
operations, as reasonably required by LaSalle under the Loan
Documents:
a. Millers American Group, Inc.
b. Millers Insurance Company
c. Trilogy Holdings, Inc.
d. Phoenix Indemnity Insurance Company
e. Millers Mutual Fire Insurance Company
13. Notice of Borrowing:
a. Wire Transfer Instructions
14. Payment of fees and expenses
15. UCC-1 Financing Statements
a. Borrower (Blanket - S/S Texas)
File No.: 99-194313 - File Date: 9/24/99
b. Trilogy (Blanket - S/S Nevada)
File No.: 9914683 - File Date: 9/24/99
c. Effective (Blanket - S/S Texas)
File No.: 99-194314 - File Date: 9/24/99
d. Financial Resources (Blanket - S/S Texas)
File No.: 99-194311 - File Date: 9/24/99
e. Borrower (Pledge of Trilogy - S/S Texas)
File No.: 99-194312 - File Date: 9/24/99
f. Trilogy (Pledge of Phoenix and Millers - S/S Nevada
File No.: 9914684 - File Date: 9/24/99
16. Certificate of Account Status, dated. September 17,
1999, of Millers American Group, Inc.
17. Certificate of Account Status, dated. September 9, 1999,
of Effective Litigation Management, Inc.
18. Certificate of Account Status, dated. September 9, 1999,
of Financial & Actuarial Resources, Inc.
19. Certificate of Existence, dated. September 9, 1999, of
Trilogy Holdings, Inc.
20. Certificate of Authority, no. 12080, for the Millers
Insurance Company
21. Arizona Certificate of Authority and Certificate of
Authorization and Deposit of Phoenix Indemnity Insurance
Company
22. Correspondence from Assignor to Millers American
Group, Inc. ("Millers") advising Millers that
Millers is in default under the Loan, and a
response from Millers dated September 21, 2001
SCHEDULE 4.1(G)
Permanent Commitment Reductions, Permanent Prepayments of
Principal and Other Similar Non-Ordinary Course Fees
NONE
SCHEDULE 4.1(H)
Insider Relations
NONE
SCHEDULE (I)
Voidance Notices
NONE
EXHIBIT A
Form of General Assignment
Attached
EXHIBIT A
GENERAL ASSIGNMENT
LaSalle Bank Association, a national banking association (the
"Assignor"), in consideration of Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, hereby sells, grants, assigns, transfers and conveys to
Hallmark Financial Services, Inc., a Nevada corporation (the "Assignee"),
subject to the terms of the Sale Agreement (as hereinafter defined), all of
the Assignor's right, title and interest in and to the Loan Documents
(including, but not limited to, the Assignor's rights, title and interest as
both "Lender" and "Agent" under the Loan Documents), together with all
duties and obligations evidenced by the Loan Documents (including, but not
limited to, the Assignor's duties and obligations as both "Lender" and
"Agent" under the Loan Documents), and all of Assignor's right, title and
interest in and to the Collateral.
For purposes of this General Assignment, the capitalized terms not
otherwise defined herein shall have the meanings set forth in the Loan
Purchase and Sale Agreement, dated as of _______________, 2002 (the "Sale
Agreement"), by and between the Assignee and the Assignor.
THIS GENERAL ASSIGNMENT IS MADE WITHOUT RECOURSE AND WITHOUT
REPRESENTATION OF ANY NATURE, EXPRESS OR IMPLIED, WITH THE SOLE EXCEPTION OF
THOSE LIMITED REPRESENTATIONS SET FORTH IN SECTION 4 OF THE SALE AGREEMENT.
This Agreement may be executed and delivered in any number of
counterparts, each of which shall constitute an original, but all of which
shall constitute but one and the same instrument.
IN WITNESS WHEREOF, each of the Assignor and the Assignee have caused
this General Assignment to be executed and delivered by its duly authorized
representative.
HALLMARK FINANCIAL SERVICES, INC., LASALLE BANK NATIONAL ASSOCIATION,
AS THE ASSIGNEE AS THE ASSIGNOR
By: ___________________________ By: ___________________________
Name: ___________________________ Name: ___________________________
Title: ___________________________ Title: ___________________________
EXHIBIT B
Form of Consent and Release Agreement
Attached
EXHIBIT B
CONSENT, AMENDMENT AND RELEASE AGREEMENT
THIS CONSENT, AMENDMENT AND RELEASE AGREEMENT (this "Agreement")
is entered into as of October ___, 2002, by and among LaSalle Bank National
Association, a national banking association ("LaSalle"), Millers American
Group, Inc., a Texas corporation ("Millers"), Effective Litigation
Management, Inc., a Texas corporation ("Effective"), Financial and Actuarial
Resources, Inc., a Texas corporation ("Financial"), and Trilogy Holdings,
Inc. a Nevada corporation ("Trilogy").
WHEREAS, LaSalle and Millers entered into a Loan Agreement, dated
as of September 17, 1999, and other agreements in conjunction therewith (the
"Loan Agreement"), pursuant to which LaSalle provided a revolving line of
credit to Millers (the "Loan");
WHEREAS, as inducement to LaSalle entering into the Loan
Agreement, Millers and Trilogy entered into a Security Agreement with
LaSalle, dated as of September 17, 1999, pursuant to which Millers and
Trilogy granted a security interest in certain of their assets to LaSalle
("Miller/Trilogy Security Agreement");
WHEREAS, as inducement to LaSalle entering into the Loan
Agreement, Effective and Financial entered into a Security Agreement with
LaSalle, dated as of September 17, 1999, pursuant to which Effective and
Financial granted a security interest in certain of their assets to LaSalle
("Effective/Financial Security agreement");
WHEREAS, as inducement to LaSalle entering into the Loan
Agreement, Trilogy entered into a Guaranty Agreement ("Trilogy Guaranty")
and a Stock Pledge Agreement ("Trilogy Stock Pledge Agreement"), both dated
as of September 17, 1999, pursuant to which Trilogy guaranteed the
obligations of Millers under the Loan Agreement and pledged the stock of
certain subsidiaries (Millers/Trilogy Security Agreement,
Effective/Financial Security Agreement, Trilogy Guaranty and Trilogy Stock
Pledge Agreement are hereinafter referred to collectively as the "Loan
Documents");
WHEREAS, LaSalle wishes to assign to Hallmark Financial Services,
Inc. a Nevada corporation ("Hallmark"), for value, all of LaSalle's rights,
title and interest in and duties and obligations under the Loan and Loan
Documents, and any payment and performance obligations evidenced thereby;
WHEREAS, in order to assign LaSalle's duties and obligations as
"Agent" under the Loan Agreement, the Loan Agreement must be amended; and
WHEREAS, Millers, Effective, Financial and Trilogy consent to the
assignment contemplated herein.
THEREFORE, in consideration of the mutual promises set forth
herein and other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties to this Agreement agree as
follows:
1. Consent to Assignment. To the extent each of Millers,
Effective, Financial and Trilogy is a party to any of the Loan Documents or
otherwise is entitled to a consent right, each of Millers, Effective,
Financial and Trilogy hereby consents to the assignment of the Loan and the
Loan Documents from LaSalle to Hallmark, and the assumption by Hallmark of
all rights, title and interest in and duties and obligations of LaSalle
under the Loan and the Loan Documents (including, but not limited to, all
rights to any collateral and security interests under the Loan Document), in
accordance with the terms of the relevant Loan Documents.
2. Amendment to Loan Agreement. (a) Pursuant to Section 12.7
of the Loan Agreement, Section 9.3 of the Loan Agreement is hereby amended
such that the second sentence of Section 9.3 of the Loan Agreement is
deleted and replaced with the following:
LaSalle agrees that it shall continue to act as Agent
throughout the term of the Loan; provided, however, if LaSalle should
assign all of its interest in the Loan to a third party, that third
party shall become Agent under the Loan Agreement if agreed to between
LaSalle and such third party.
(b) Millers, Effective, Financial and Trilogy acknowledge that
pursuant to Section 1 of this Agreement, Hallmark will assume all duties and
obligations of LaSalle under the Loan Documents (including all duties and
obligations under the Loan Documents as "Agent"), and in conjunction
therewith, each of Millers, Effective, Financial and Trilogy consent to
amending the Loan Instruments (as defined in the Loan Agreement) such that
Hallmark shall be the "Agent" under the Loan Documents. On and after the
Closing Date, Millers, Effective, Financial and Trilogy shall provide
Hallmark with all documents and information it was required to provide to
LaSalle under the Loan Documents.
3. Release. Except for any claims or causes of actions arising
under this Agreement, each of Millers, Effective, Financial and Trilogy
hereby irrevocably releases LaSalle, and LaSalle's agents, representatives,
directors, officers and employees, from any and all claims, causes of
action, counterclaims, liabilities, obligations, remedies, rights or demands
of any kind or nature, whether known or unknown, which each such party had,
has, or may ever have, against LaSalle, which relate to or arise from the
Loan, Loan Documents or the collateral or security interests contained in
the Loan Documents.
4. Less than Full Value. Millers, Effective, Financial and
Trilogy acknowledge that LaSalle will be assigning the Loan to Hallmark for
less than the total amount outstanding on the Loan.
5. Severability. Each provision of this Agreement is intended
to be severable. If any term, covenant, condition or provision hereof is
unlawful, invalid or unenforceable for any reason whatsoever, such
illegality, invalidity or unenforceability shall not affect the remaining
parts of this Agreement, and all such remaining parts hereto shall be valid
and enforceable and shall have full force and effect as if the invalid or
unenforceable part had not been included.
6. Amendment. This Agreement may not be amended except by an
instrument in writing signed by a duly authorized representative of all of
the parties hereto.
7. Headings. The headings contained in this Agreement are
inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provision hereof.
8. Construction. The parties hereto acknowledge that each party
and its counsel have reviewed this Agreement and the parties hereby agree
that the normal rule of construction to the effect that any ambiguities are
to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any amendments, schedules or exhibits
hereto.
9. Prior Understandings; Integrated Agreement. This Agreement
supersedes any and all prior discussions, documents and agreements, written
or oral, among the parties hereto with respect to the sale and assignment of
the Loan Documents and other matters contained herein, and this Agreement
contains the sole, final and complete expression and understanding among the
parties hereto with respect to the transactions contemplated herein.
10. Counterparts. This Agreement may be executed and delivered
in any number of counterparts, each of which shall constitute an original,
but all of which shall constitute but one and the same instrument.
11. Governing Law; Jurisdiction and Venue.
(a) This Agreement shall be construed, and the rights and
obligations of the parties hereunder determined, in
accordance with the substantive laws of the state of
Illinois, without regard to conflict of law principles.
(b) For purposes of any suit, action, or proceeding involving
this Agreement, the parties hereto hereby expressly submit to
each of the jurisdiction of all Federal and State Courts
sitting in the Northern District of Illinois.
(c) The parties hereto hereby irrevocably waive any objection
that such parties may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out or
relating to this Agreement brought in any Federal or State
Court sitting in the Northern District of Illinois and hereby
irrevocably waive any claim that any such suit, action or
proceeding brought in any such court has been brought in an
inconvenient form.
12. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EACH MAY HAVE TO A TRIAL BY
JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT AND AGREE
THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
LASALLE BANK NATIONAL ASSOCIATION MILLERS AMERICAN GROUP, INC.
By: ___________________________ By: ___________________________
Name: ___________________________ Name: ___________________________
Title: ___________________________ Title: ___________________________
EFFECTIVE LITIGATION MANAGEMENT, INC. TRILOGY HOLDINGS, INC.
By: ___________________________ By: ___________________________
Name: ___________________________ Name: ___________________________
Title: ___________________________ Title: ___________________________
FINANCIAL AND ACTUARIAL RESOURCES, INC.
By: ___________________________
Name: ___________________________
Title: ___________________________
Acknowledgement:
HALLMARK FINANCIAL SERVICES, INC.
By: ___________________________
Name: ___________________________
Title: ___________________________