EXHIBIT 10.3
SECOND AMENDMENT TO INSURANCE
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PREMIUM FINANCING MANAGEMENT AGREEMENT AND GUARANTIES
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THIS SECOND AMENDMENT TO INSURANCE PREMIUM FINANCING MANAGEMENT AGREEMENT
AND GUARANTIES is made as of the 28th day of February, 1996, by and among Pan
American Bank, a federal savings bank (the "Bank"), BPN Corporation, a
California corporation (the "Contractor"), and Xxxxxxxxx X. X'Xxxx and Xxxxx
Xxxxxx and Xxxxxxx Xxxxxx (individually, a "Guarantor" and collectively the
"Guarantors").
RECITALS:
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A. Bank and Contractor are parties to that certain Insurance Premium
Financing Management Agreement, dated May 17, 1995 under which Contractor is to
provide Bank with management and related administrative services in connection
with the operation of the insurance premium finance loan business to be
conducted by the Bank (the "Agreement"). Guarantors are the sole shareholders
of Contractor and have guarantied the payment of certain obligations of
Contractor arising under the Agreement under Guaranties dated as of May 17, 1995
(each a "Guaranty" and collectively the "Guaranties"), subject to the dollar
limitations set forth therein.
B. Guarantors and Contractor and the Bank agreed to increase the gross
aggregate amount of IPF Loans for broker fee financing (as defined in the
Agreement) to be provided to brokers in accordance with the provisions of
Section 3.3(f) of the Agreement from $200,000 to $1,500,000 and as amended and
more fully set forth in The First Amendment to the Insurance Premium Financing
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Management Agreement and Guaranties dated October 1995, including Schedule 1
thereof ("The First Amendment").
C. Under the terms of The First Amendment, while aggregate broker loans
could increase to $1,500,000, the maximum net brokers fees outstanding at any
time before broker cash reserves (assumed to be a minimum of $375,000) would not
exceed $750,000 (as more fully set forth in Schedule 1 to The First Amendment)
or $375,000 after the broker reserves; and accordingly the Bank's risks exposure
from loss was to be limited to $187,500 (50% share of losses up to $375,000).
D. Furthermore, Schedule 1 to The First Amendment provided that the
maximum net brokers fees outstanding to the Eastwood Insurance Broker before
their broker cash reserves would not exceed $500,000, as part of the $750,000
limit referred to in C. above.
E. Guarantors and Contractor desire to have the Bank increase its funding
to allow for an increase in IPF loans so that the amount of net brokers fees
outstanding may exceed $750,000 and increase the single amount limit to Eastwood
beyond $500,000.
F. The Bank is willing to increase such financing but only if its total
exposure from broker fee financing does not exceed $187,500, the original amount
agreed to, and Guarantors and Contractor guaranty,indemnify and hold harmless
the Bank from any losses up to 50% of the first $375,000 of losses but not
exceeding $187,500.
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G. All capitalized terms used herein and not otherwise defined shall have
the meaning set forth therefor in the Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Modifications to the Agreement, the Agreement is hereby amended by adding
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to the end of subsection 13.1 as follows:
"further provided, however and included in the foregoing contractor's
indemnification of the Bank, Contractor hereby agrees that from this date
forward until June 30, 1996 it will assume all risk, liabilities and costs
resulting from losses in financing IPF broker fee loans in an amount
exceeding the sum determined as follows,
a. The amount of IPF loans for brokers' fees financed by the Bank will be
aggregated, as well as tracked by each individual broker loan, and
accounted for, including payments and advances, on a daily basis by
Contractor.
b. Any cash reserves collected from brokers as security in connection
with financing brokers' fees and deposited with the Bank, shall be
available to offset losses resulting from uncollected and unearned
brokers' fees upon IPF contract cancellation and as to each broker
based on their deposits.
c. If any broker fee is not repaid from customer contract payments or
directly from a broker to reimburse for unearned brokers fee resulting
from canceled contract within 90 days after presentment of the claim
to the broker by Contractor (which presentment will be within 60 days
after contract cancellation), then the balance owning shall be
recovered from the cash reserve account, and to the extent the reserve
is not sufficient to pay the unearned broker fee portion of the total
loan, then the unsecured and unpaid portion shall be deemed to be a
loss.
d. The Bank's share of such losses shall in no event exceed $187,500,
based on 50% of the amount such unsecured loan losses up to $375,000;
and Contractor shall assume all losses in excess thereof.
e. The total net outstanding amount of IPF broker loans financed (as
defined in Schedule 1 to The First Amendment to now) by the Bank at
any time, shall not exceed $1.25 million.
f. Contractor shall deliver to the Bank from time to time current
financial statements and adequate collateral as may be reasonably
required by the Bank to secure its obligation to the Bank.
g. On or before July 1, 1996 and in no event later than May 17, 1997 the
parties shall take the steps necessary to track and document the
actual performance of the broker loan financing and reassess the risk
therefrom and reach a mutual agreement to modify or replace this
Second Amendment; however it shall remain in full force and effect
until either mutually modified or replaced.
2. Modification to the Guaranties. The Guaranties are hereby amended as
follows:
a. The Guaranty of Xxxxxxxxx X. X'Xxxx is amended adding to the end of
paragraph 13 thereof the following sentence:
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"In addition to the foregoing liability of Guarantor there shall be
an amount equal to 40% of any loss resulting from any sums owing to
Bank and not paid by BPN Corporation under the last phrase of Section
13.1 of that certain Insurance Premium Financing Management Agreement
dated May 17, 1995, as modified by the Second Amendment to such
Agreement.
b. The Guaranty of Xxxxx Xxxxxx and Xxxxxxx Xxxxxx shall be amended by
adding to the end of paragraph 13 hereof the following sentence:
"In addition to the foregoing liability of Guarantor there shall be
an amount equal to 60% of any loss resulting from any sums owing to
Bank and not paid by BPN Corporation under the last phrase of Section
13.1 of that certain Insurance Premium Financing Management Agreement
dated May 17, 1995, as modified by the Second Amendment to such
Agreement.
3. Guarantors jointly agree to deliver to the Bank from time to time current
individual financial statements and adequate collateral as may be
reasonably required by the Bank to secure their obligation to the Bank.
4. Except as modified by this Amendment and The First Amendment, all other
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terms and provisions of the Agreement and the Guaranties shall remain in
full force and effect, without modification.
IN WITNESS WHEREOF, the undersigned have executed the foregoing Amendment.
BANK: PAN AMERICAN BANK
---- a Federal Savings Bank
By: /s/ XXXXXXXX X. GRILL
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Its: President
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CONTRACTOR: BPN CORPORATION
---------- a California Corporation
By: /s/ XXXXX X. XXXXXX
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Its: PRES
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GUARANTORS: /s/ XXXXXXXXX X. X'XXXX
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XXXXXXXXX X. X'XXXX
/s/ XXXXX X. XXXXXX
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XXXXX X. XXXXXX
/s/ XXXXXXX XXXXXX
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XXXXXXX XXXXXX
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