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Annual Report For Small Business Issuers Subject
to the 1934 Act Reporting Requirements
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Year Ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-21417
CAPITAL TITLE GROUP, INC.
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(Name of Small Business Issuer in its charter)
Delaware 87-0399785
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2901 East Camelback Road, Phoenix, Arizona 85016
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (602) 954-0600
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Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act:
Common Stock, $.001 par value
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(Title of class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB, or any amendment to
this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $36,147,427.
On March 15, 2000, the aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant was $18,006,752. This
figure was estimated based on March 15, 2000 closing price of the Company's
common stock. The number of shares of Common Stock outstanding on March 15, 2000
was 16,957,901.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 2000 Annual Meeting of
Stockholders to be held on May 16, 2000 are incorporated by reference into Part
III.
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PART I
ITEM 1. BUSINESS
COMPANY HISTORY AND OVERVIEW
Capital Title Group, Inc. (the "Company") is a Delaware corporation which
acts as the parent holding company of the following subsidiaries:
Capital Title Agency Inc. ("Capital Title") is an Arizona corporation which
has operated under the authority of the State Banking Commission since
November 1, 1981. Capital Title is an independent title agency that
provides escrow services and, as an agent for five title insurance
companies, issues title insurance policies to the real estate industry in
Maricopa, Yavapai and Mohave Counties in Arizona. As of March 15, 2000
Capital Title operated 32 offices located throughout Maricopa, Yavapai and
Mohave Counties in Arizona.
New Century Title Company ("New Century"), a California corporation, is an
independent title agency that provides escrow and title services to the
real estate industry in selected California counties. New Century began
operations in July 1998 with the purchase of a dormant escrow and title
agency in San Diego, California. New Century currently has three offices in
San Diego County. New Century also has operations in northern California,
which it obtained by acquisition in November 1998. New Century currently
has 11 offices in Sonoma, Contra Costa and Alameda Counties in California.
During 1999, New Century was granted a license to operate in six additional
southern California counties and opened an office in Orange County in
February 2000.
The Company plans to continue its growth in Arizona and California, and as
conditions merit, to expand into other southern and southwestern states. The
Company intends to accomplish this planned expansion primarily through
recruitment of escrow officers with significant existing revenue production
based upon their relationships with real estate brokers, mortgage lenders and
other industry participants. The Company will attempt to attract these
significant producers through employment packages that include commissions based
on revenue generated and stock options.
The principal executive offices of the Company are located at 2901 East
Camelback Road, Phoenix, Arizona 85016 and the Company's telephone number is
(602) 954-0600.
COMPANY OPERATIONS
The Company is an independent title agency providing escrow services and,
as an agent for First American Title Insurance Company, Chicago Title
Corporation, Stewart Information Services Corporation, United General Insurance
Company, Old Republic Insurance Company and American Pioneer Title Insurance
Company, issues title insurance policies to service the real estate industry.
Capital Title's operations commenced in 1981 in Prescott, Arizona. The
Company is licensed to conduct business in three counties in Arizona and 10
counties in California. During late 1996 the Company began its expansion in
Maricopa County, Arizona and in 1998 expanded into Mohave County, Arizona along
with entering the California market.
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The Company's operations are positively impacted by the geographic
locations in which it operates as Arizona and California rank among the top
states in the nation in the rate of new job creation, population growth and
gains in personal income. Additionally, these states have some of the largest
single family housing markets in the nation with Phoenix and San Diego currently
the 6th and 7th largest cities in the United States as reported by the U.S.
Census Bureau.
December 1999 market share reports show Capital Title as the top title
insurer in Yavapai County. As of December 1999, Capital Title ranked third in
Maricopa County market share, having moved up from fourth in 1998 and from tenth
just three years before. The Company believes that its combination of
technology, management and employee stock options will play a significant role
in positively impacting its market share in the locations in which it is
currently operating and in the areas into which it expands.
INDUSTRY OVERVIEW
Title insurance has become accepted as the most efficient means of
determining title to, and the priority of interests in, real estate in nearly
all parts of the United States. Virtually all real property lenders require
their borrowers to obtain title insurance policies at the time mortgage loans
are made.
The major expense of a title agency company is the search and examination
function in preparing preliminary title reports, commitments and title policies,
and not from claim losses associated with said policies. Companies have focused
on advancing technology in order to reduce costs, improve accuracy and respond
to the continuing pressures within the real estate industry for faster and more
cost effective processing of transactions.
The Company possesses advanced title report generation and processing
technology that combines title information from multiple sources via electronic
data exchange. The Company has implemented this technology in its Arizona
operations and a substantial portion of its California operations. This
technology facilitates expansion of the Company's operations in existing
markets, and management believes it outperforms the technology of other major
title companies that possess greater resources than the Company.
TITLE POLICIES. Title insurance policies state the terms and conditions
upon which a title underwriter will insure title to real estate. The
beneficiaries of title insurance policies are generally buyers of real property
or secured lenders.
Title insurance is different from other types of insurance because it
relates to past events that affect title to property at the time of closing and
not unforeseen future events. Prior to issuing policies underwriters can
eliminate future losses by accurately performing searches and examinations. The
premium for title insurance is due in full on the closing date of the real
estate transaction and is based upon the purchase price of the property insured
or the amount of the secured loan.
Title insurance policies are issued on the basis of a preliminary report or
commitment. These reports are prepared after a search of public records, maps
and other relevant documents to ascertain title ownership and the existence of
easements, restrictions, rights of way, conditions, encumbrances or other
matters affecting the title to, or use of, real property. A visual inspection of
the property may also be made prior to the issuance of certain title insurance
policies.
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To facilitate the preparation of preliminary reports without the necessity
of manually searching public records, copies of public records, maps and other
relevant historical documents are compiled and indexed in a "title plant." Each
title plant relates to a particular county and is kept current on a daily or
other frequent basis by the addition of copies of recorded documents that affect
rights in real property in the particular county. Title companies often
subscribe to independent title information services to assist in the updating of
their title plants and the maintenance of title records.
DIRECT VS. AGENCY SALES. Preliminary reports and commitments to issue
policies are prepared by title underwriters (direct sales) or by independent
agents on behalf of the underwriters (agency sales). The terms and conditions
upon which the real property will be insured are determined in accordance with
the standard policies and procedures of the title underwriter. In direct sales,
the title underwriter issues the preliminary report and commitment and retains
the entire title premium paid in connection with the transaction. In agency
sales, the search and examination function is performed by the independent agent
and the majority of the premium collected is retained by the agent, with the
balance remitted to the title underwriter.
THE TITLE POLICY PROCESS. A brief description of the process of issuing a
title insurance policy is as follows:
(i) The customer, typically a real estate salesperson or broker, escrow
agent or lender, places an order for a title policy.
(ii) After the relevant historical data on the property is compiled, the
title officer prepares a preliminary report that documents (a) the
current status of title to the property, (b) any exemptions,
exceptions and/or limitations that might be attached to the policy
and (c) specific issues that need to be addressed and resolved by
the parties to the transaction before the title policy will be
issued (such as removal of prior tax liens and payment of prior
loans on the property). The preliminary report is circulated to all
the parties for satisfaction of any specific issues.
(iii) After all specific issues identified in the preliminary report are
satisfied, the escrow agent closes the transaction in accordance
with the instructions of the parties and the policy conditions.
(iv) Once the transaction is closed and all monies have been released,
the policy is issued (a) to the owner and the lender on a resale
transaction or (b) to the lender only on a refinancing transaction.
LOSSES AND RESERVES. The maximum amount of liability under a title
insurance policy is usually the face amount of the policy plus the cost of
defending the insurer's title against an adverse claim. The reserve for claim
losses is based upon known claims as well as losses the insurer expects to incur
based on historical experience and other factors, including industry averages,
claims loss history, current legal environment, geographic considerations and
type of policy written. Because the Company operates an independent agency, it
provides title insurance on behalf of third party underwriters. As such, the
Company's losses and reserves are less than those carried by a title insurance
underwriter (see Company Operations-Claims and Underwriting).
ECONOMIC FACTORS AFFECTING INDUSTRY. Title insurance revenue is closely
related to the level of activity in the real estate market and the average price
of real estate sales. Real estate sales are directly affected by the
availability of money to finance purchases. Other factors affecting real estate
activity include demand, mortgage interest rates, family income levels and
general economic conditions.
During 1999, there was a significant decrease in the refinance market from
1998 levels as a result of increased mortgage interest rates.
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COMPANY STRATEGY
The Company's strategy is to pursue aggressive growth in the title
insurance industry in the Southwestern United States. Essential elements of the
Company's strategy are as follows:
COMMITMENT TO SERVICE. The Company is built on three basic entrepreneurial
premises: (1) every employee is a salesperson for the Company; (2) the Company's
services are a one-stop, computer-based contact point for complete real estate
transactions; and (3) success is achieved through focus on an unequaled quality
of customer service. Because title insurance policies and escrow functions are
generally standardized, the level of service provided is the key differentiating
factor among competitors in the title industry. Through its commitment to
customer service, the Company seeks to build lasting relationships with its real
estate industry clients.
MARKET FOCUS. The Company's market focus is on real estate brokers and
mortgage lenders as this business has historically been more consistent and less
prone to fluctuation than commercial, new home sales or refinancing segments of
the market. To set itself apart as a service company, the Company continues to
enhance industry specific information technology to better serve its clients.
MANAGEMENT. The Company recognizes that its aggressive growth plan calls
for executive management with extensive industry operational and expansion
experience. The Company was co-founded by Donald R. Head, and he has served as
Chairman of the Board and Chief Executive Officer since inception. Mr. Head has
extensive experience as a developer and entrepreneur within the real estate
industry and has nearly 20 years of experience in the title insurance industry.
In February 1998, the Company appointed Milt Ferrantelli, Executive Vice
President of Capital Title Group and President of Capital Title Agency, Inc.'s
Arizona operations. Mr. Ferrantelli purchased United Title Insurance Agency in
1986 with two active partners and served as its President and Chief Executive
Officer prior to its acquisition by Norwest Financial in 1994. United Title held
the number one market share for title and escrow services in Maricopa County
from 1984 through 1994. Mr. Ferrantelli has over 25 years of experience in the
title and escrow industry in the Arizona marketplace.
In September 1999, the Company appointed Mervyn L. Morris as President of
California Operations for New Century Title Company. He is directly responsible
for the California operations. Prior to joining New Century, Mr. Morris was
Executive Vice President, Southern Division Manager for Old Republic Title
Company, covering 25 branch offices and approximately 600 employees. He has 28
years of experience in the California market.
In addition, the Company employs managers to run the day-to-day operations
in the counties the Company operates in and to support the above mentioned
executives. These managers average over 20 years of experience in the title and
escrow industry.
EQUITY PARTICIPATION BY ESCROW OFFICERS. Escrow officers are the major
revenue producers for title insurance companies. It is their business
relationships with real estate brokers, lenders and other industry participants
whom are primarily responsible for the direction of escrow and title business.
The Company will seek to attract the most successful escrow officers through
employment packages that include commissions based on revenue produced and stock
options as added motivational incentives. The Company believes such programs
will also promote Company loyalty, which will help to insulate the Company's
escrow officers from competitive recruiting efforts.
COMPANY OPERATIONS
The Company reported revenue of $36.1 million for the year ended December
31, 1999 compared to $23.2 million for the year ended December 31, 1998. (See
Management's Discussion and Analysis of Financial Condition and Results of
Operations).
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MARKETING. The Company believes that the primary source of its business is
from referrals from participants in the real estate industry such as real estate
brokers, mortgage lenders, developers and attorneys. In addition to the referral
market, the Company markets its services directly to larger brokerages and real
property lenders. Marketing activities are performed by the escrow officers of
the Company and marketing representatives whose sole function is the
solicitation of business from major real estate brokers, developers, owners and
lenders.
ESCROW SERVICE. The Company's escrow departments are responsible for
handling the consummation of real estate transactions.
The escrow officer and assistant typically prepare escrow documents
pursuant to the real estate contract. The escrow instructions provide guidance
to all concerned parties as to the conditions required for the real estate
transaction. The escrow officers then receipt in funds and disburse them
pursuant to the escrow instructions.
The escrow agent is held accountable by state governmental agencies for
strict compliance with its fiduciary responsibilities outlined by the escrow
instructions. The officer must possess a high degree of skill, professionalism
and confidentiality in the handling, preparation, collecting and recordation of
all escrow matters between the buyer, seller, real estate brokers and their
agents, developers, lenders and investors.
TITLE DEPARTMENT. The primary function of the title department is the
accumulation and analysis of various documents from the many sources that make
up the public record. From this analysis, a preliminary report is written
showing the present condition of title. This report is given to the escrow
officer who, in turn, distributes it to the parties involved in the purchase
agreement. After the preliminary report has been read and approved by all the
parties and the requirements of the report have been fulfilled, the escrow will
proceed to closing and a final title insurance policy will be issued.
The accumulation of title data from public records which provides the
history of each parcel of real estate in a particular county is referred to as a
"title plant." The Company has entered into multi-year service agreements for
title plant access in the counties it operates. In certain counties, the Company
may be a partial owner in a title plant or own a title plant which contains data
prior to the time period covered by a third party title plant provider. The
Company believes it will be able to obtain title plants on terms and conditions
that are acceptable to it as the Company expands into other markets; however,
there can be no assurance in this regard.
CLAIMS AND UNDERWRITING. The Company provides title insurance as an agent
of six title insurance companies. These services are provided pursuant to
Underwriting Agreements with each of these underwriters which state the
conditions on which the Company is authorized to issue a title insurance policy
on behalf of the underwriter and prescribe the circumstances under which the
Company may be liable to the underwriter if a policy loss is attributable to
errors made by the Company.
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Claims against title insurance policies normally arise out of human error.
During the process of accumulation and analysis of the public record, certain
inaccuracies and inconsistencies are encountered that sometimes result in a
situation in which interpretation of these documents could lead to a claim. With
certain exceptions, the Company's exposure is limited to $5,000 for any loss
resulting from a title insurance claim. The Company assumes the entire risk of
losses incurred in errors made during the escrow process; however, it has
secured insurance coverage to limit any significant losses.
OTHER SERVICES. In addition to title and escrow services, the Company also
provides account servicing, foreclosure and tax-free exchange services.
CUSTOMERS
The Company is not dependent upon any single customer or single group of
customers. The loss of any one customer would not have a material adverse effect
on the Company.
SEASONALITY
The title insurance business is closely related to overall levels of real
estate activity. Historically, real estate activity slows down in the winter
months with volumes showing significant improvements in the spring and summer
months. In addition, the title insurance business is cyclical due to the effect
of interest rate fluctuations on the level of real estate activity. Periods of
high interest rates adversely effect real estate activity and therefore premium
and escrow revenues.
COMPETITION
The title insurance business is highly competitive. Companies with
significant market share in Arizona and California include First American,
Chicago Title, Old Republic, Security Title, ATI Title Agency, Stewart Title,
Fidelity Title and Lawyers Title. The number and size of competing companies
varies in different geographic areas. In those areas where the Company operates
and intends to operate the Company will face competition from major national
insurance underwriters and other independent agencies, many of which have
financial and other resources greater than those of the Company. The Company
believes that quality and timeliness of service are the key competitive factors
in the industry because parties to a real estate transaction are usually
concerned with time schedules and costs associated with delays in the closing of
transactions. In those states where prices are not established by regulation,
the price of title insurance is also an important competitive factor.
REGULATION
The Company conducts its business under licenses granted by the State
Banking and Insurance Departments of the State of Arizona and the Department of
Insurance in California. The title insurance and escrow businesses generally are
subject to extensive regulation under applicable state laws. These laws
establish supervisory agencies with broad administrative powers relating to
issuing and revoking licenses, regulating trade practices, licensing agents,
approving policy forms and approving rate schedules. Failure to comply with
these regulations or an inability to secure or maintain any required licenses
could materially adversely affect the Company's business. The Company believes
that it is in material compliance with applicable laws and regulations and that
it will maintain and obtain all licenses required for the conduct of its
business.
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EMPLOYEES
As of December 31, 1999, the Company had a total of 468 employees, of which
288 are located in Arizona and 180 are in California. The Company believes that
its relations with its employees are excellent.
ITEM 2. PROPERTIES
The Company conducts its business operations primarily in leased office
space. The Company currently leases offices at 46 locations with remaining lease
periods ranging from one to sixty months. The Company's monthly rental payments
at the foregoing locations are approximately $209,600. The Company owns a 24,000
square foot building in Phoenix, Arizona, which houses its corporate
headquarters and its Maricopa County operations. In addition, the Company owns
two buildings in Northern California in which it conducts title and escrow
operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in certain legal actions, which arise in the normal
course of its title business. The Company believes that none of these claims are
material, either individually or in the aggregate.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1999.
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been quoted on The Nasdaq SmallCap Market
under the symbol "CTGI" since September 21, 1998 and on the OTC Electronic
Bulletin Board market from May 15, 1997 to September 20, 1998.
The following table sets forth high and low bid prices of the Company's
Common Stock for the periods indicated. Bid quotations represent interdealer
prices, without retail mark-up, mark-down or commissions and may not represent
actual transactions.
Date High/Bid Low/Bid
---- -------- -------
1998
First Quarter $2.56 $1.56
Second Quarter 3.62 2.63
Third Quarter 4.50 3.25
Fourth Quarter 4.06 3.38
1999
First Quarter 3.94 3.00
Second Quarter 3.56 2.50
Third Quarter 2.88 2.13
Fourth Quarter 2.30 1.50
2000
First Quarter (through March 15) 2.00 1.31
As of December 31, 1999, the Company had issued and outstanding 16,947,901
shares of common stock. In addition, 3,900,000 shares are reserved for issuance
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under the Company's 1996 Stock Option Plan and 600,000 shares are reserved for
issuance under the Company's Directors Non-Employee Plan. At December 31, 1999,
there were 327 record holders of the Company's Common Stock.
In March 1998, the Company issued 463,500 warrants in conjunction with a
private placement. Each warrant entitles the holder to purchase one share of the
Company's common stock at $2.50 until September 30, 2000. In April 1998, the
Company issued 308,642 warrants to an investment banking firm that acted as
placement agent in connection with another private placement. Each warrant
entitles the holder to purchase one share of the Company's common stock at $1.62
until May 1, 2001.
The Company has never paid a dividend on its Common Stock. The Company does
not anticipate paying any dividends on its Common Stock in the foreseeable
future. Rather, the Company anticipates that its earnings, if any, will be
retained to fund the Company's working capital needs and the planned expansion
of its business. The payment of any dividends will be dependent upon the
discretion of the Board of Directors. Furthermore, under Delaware corporate law,
in the absence of current or retained earnings, the Company may be prohibited
from paying dividends (whether in cash or otherwise).
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the results of the operations and financial
condition of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto included elsewhere in this
report. Historical results and percentage relationships among accounts are not
necessarily an indication of trends in operating results for any future period.
OVERVIEW
Capital Title Group, Inc. reported an operating loss of $1,969,027 for the
year ended December 31, 1999 due to losses in its California operations, a
downturn in refinance business resulting from increased interest rates, and
costs associated with expansion. The California operations, which were heavily
dependent on the refinance market lost approximately $3,474,000 for the year
ended December 31, 1999. During late 1999, the Company had a change in four
senior management positions in California and is focusing on increasing its
residential resale business, which has historically been more stable and
profitable. Contributing to the loss, were increased operating costs associated
with the Company's commitment to its California operations as it invested in
expanding its infrastructure and branch operations. This approach to internal
growth was developed utilizing the same successful formula employed in growing
the Arizona market and was chosen because the strong economy earlier in the year
had placed excessive values on targeted acquisitions.
The Company's core operations in Arizona (Maricopa and Yavapai Counties)
had net income of approximately $2,974,000 (13.4% of revenue on a pre-tax basis)
for the year ended December 31, 1999. The net income in these counties was
negatively impacted by the decline in refinance business and costs associated
with opening seven new branch offices during 1999.
During the year ended December 31, 1999, there were approximately
$3,721,000 of operating expenses (net of revenue recognized) related to costs
for the Company's California and Mohave County (Arizona) operations. Excluding
these costs, income, before income taxes, from existing operations would have
been approximately $1,752,000 for the year ended December 31, 1999.
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RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the components
of the Company's revenue and expenses along with the percentage they bear to
total revenue:
<TABLE>
<CAPTION>
For The Years Ended December 31,
-------------------------------------------------------------------
1999 % 1998 % 1997 %
----------- ----- ----------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Title insurance premiums $22,979,047 63.6% $14,634,442 63.0% $5,359,001 64.2%
Escrow and related fees 11,087,910 30.7 7,030,248 30.3 2,190,641 26.2
Account servicing 510,475 1.4 504,813 2.2 341,292 4.1
Interest and other income 1,569,995 4.3 1,036,722 4.5 457,570 5.5
----------- ----- ----------- ----- ---------- -----
$36,147,427 100.0% $23,206,225 100.0% $8,348,504 100.0%
=========== ===== =========== ===== ========== =====
Personnel cost $20,819,793 57.6% $11,186,564 48.2% $4,650,618 55.7%
Escrow commissions 2,781,947 7.7 2,249,468 9.7 519,670 6.2
Title remittance fees 2,170,919 6.0 1,459,452 6.3 494,776 5.9
Rent 2,193,615 6.0 1,254,010 5.4 692,732 8.3
Other operating expenses 9,863,660 27.3 5,121,998 22.1 2,206,402 26.4
Interest expense 286,520 0.8 99,257 .4 71,458 .9
----------- ----- ----------- ----- ---------- -----
$38,116,454 105.4% $21,370,749 92.1% $8,635,656 103.4%
=========== ===== =========== ===== ========== =====
</TABLE>
FISCAL 1999 COMPARED TO FISCAL 1998
The Company's revenues increased by $12,941,202 or 55.8% for the year ended
December 31, 1999 as compared to the year ended December 31, 1998. Approximately
$9,300,000 of this increase resulted from 1999 being the first full year of
operations for companies acquired or opened during 1998. The remaining increase
is attributable to the Company's expansion and increased market share, primarily
in Arizona, and a favorable real estate market.
The Company's revenue from title insurance premiums and escrow fees is
primarily from three sources. The largest revenue source is from residential
resales. The current residential resale marketing projections for the counties
in which the Company operates predict that the resale market should continue to
be strong as new house prices continue to climb and the economy remains strong.
The Company's marketing plan is to have the vast majority of the Company's title
and escrow revenue be derived from the resale business. Historically, the resale
business has been more consistent and less subject to fluctuations than
commercial, new homes sales, or refinancing segments of the market. The
commercial, new home sales and refinancing markets tend to be more influenced by
interest rates and other economic conditions.
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Personnel costs, including commissions, are the most significant component
of the Company's operating expenses. The number of people employed by the
Company decreased from 477 on December 31, 1998 to 468 on December 31, 1999. For
the year ended December 31, 1999, personnel costs including commissions were
65.3% of total revenue compared to 57.9% of total revenue for the year ended
December 31, 1998. This increase was a result of lower productivity given the
decline in refinance business and higher costs associated with the Company's
California operations.
Title remittance fees relate to the amounts paid pursuant to title
insurance underwriting agreements the Company has with six national title
companies. Title remittance fees as a percentage of revenue have remained
relatively unchanged when comparing 1999 results with fiscal year 1998.
Rent expense increased as a percentage of revenue in the year ended
December 31, 1999 to 6.0% from 5.4% in 1998. This increase was a result of
adding new offices and the fixed nature of these costs in relation to revenue.
The significant components of other operating expenses include supplies,
utilities, insurance, depreciation, title plant maintenance and access, postage
and professional fees. Other operating expenses increased as a percentage of
total revenue to 27.3% in 1999 from 22.1% in 1998. This increase was the result
of increased costs related to the Company's expansion and the relatively fixed
nature of many of these expenses in relation to the decline in refinance
business.
No income tax provision was recorded for the year ended December 31, 1999
as a result of the net loss reported. As of December 31, 1999, the Company has a
net operating loss carryforward of $2,074,000.
FISCAL 1998 COMPARED TO FISCAL 1997
The Company's revenues increased by $14,857,721 or 178% for the year ended
December 31, 1998 as compared to the year ended December 31, 1997. Approximately
$3,626,000 of this increase resulted from acquisitions and startup operations.
The remaining increase is attributable to the Company's expansion and increased
market share in Maricopa and Yavapai counties, Arizona, a favorable real estate
market and favorable interest rates.
During the year ended December 31, 1998, there were approximately
$1,270,000 of operating expenses (net of revenue recognized) related to startup
costs for the Company's San Diego, California and Mohave County operations and
from costs associated with the Company's property and casualty insurance agency.
Excluding the startup costs (net of revenue recognized) of $1,270,000, income,
before income taxes, from existing operations would have been approximately
$3,105,000 for the year ended December 31, 1998.
Personnel costs, including commissions, are the most significant component
of the Company's operating expenses. Due to the growth the Company has been
experiencing since initiating its business plan, the number of people employed
by the Company increased from 175 on December 31, 1997 to 477 on December 31,
1998. For the year ended December 31, 1998, personnel costs including
commissions were 57.9% of total revenue compared to 61.9% of total revenue for
the year ended December 31, 1997. This decrease was a result of higher
productivity and the somewhat fixed nature of those expenses in relation to the
increase in revenue.
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Title remittance fees relate to the amounts paid pursuant to title
insurance underwriting agreements the Company has with five national title
companies. Title remittance fees as a percentage of revenue have remained
relatively unchanged when comparing 1998 results with fiscal year 1997.
Rent expense decreased as a percentage of revenue in the year ended
December 31, 1998 to 5.4% from 8.3% in 1997. These decreases were the result to
the fixed nature of these costs in relation to the increase in revenue.
The significant components of other operating expenses include supplies,
utilities, insurance, depreciation, title plant maintenance and access, postage
and professional fees. Other operating expenses decreased as a percentage of
total revenue to 22.1% in 1998 from 26.4% in 1997. This decrease was the result
of the relatively fixed nature of most of these expenses in relation to the
increase in revenue.
An income tax provision of $159,449 was recorded for the year ended
December 31, 1998 based on the estimated annual effective tax rate after giving
consideration to the available net operating loss carryforward. As of December
31, 1998, the Company's net operating loss carryforward was fully utilized.
LIQUIDITY AND CAPITAL RESOURCES
Capital Title Group requires capital to expand its geographical base, make
acquisitions, further implement its market penetration program, recruit and
train new personnel and purchase additional property and equipment to implement
its expansion program. During the year ended December 31, 1999, the Company
financed its operating and business development activities through operating
revenue, through the use of cash on hand, and through additional borrowings.
At December 31, 1999, the Company had current assets totaling $2,696,828
compared to current liabilities, which totaled $2,099,267. Management believes
that cash on hand, future cash receipts and borrowings available under its
credit facility will be sufficient to meet the Company's expansion plans and to
pay all obligations as they become due.
The Company has a $2,000,000 revolving line of credit, which bears interest
on any outstanding balance at the prime rate. At December 31, 1999, $500,000 had
been drawn against this credit facility, in addition to $150,000 which is
committed for a standby letter of credit pursuant to an office lease. In
addition, the Company has a commitment from the same bank, subject to bank
approval and various conditions being met, to lend up to $3,000,000 for
acquisitions and capital expenditures. These credit facilities mature in
February 2001.
In August 1999 the Company sold a building in Oakland, California, which
provided approximately $1,157,000 in cash and retired $1,515,000 in debt. In
September 1999, the Company purchased a building in Phoenix, Arizona to serve as
its corporate offices for $4,309,000. This purchase was financed with a 10-year
$3,130,000 loan, which bears interest at 8.32% per annum and requires monthly
principal and interest payments of $23,540.
12
<PAGE>
IMPACT OF YEAR 2000
In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. In late 1999, the Company completed its remediation
and testing of systems. As a result of those planning and implementation
efforts, the Company experienced no significant disruptions in business critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 issues, either with its
products, its internal systems, or the products and services of third parties.
The Company will continue to monitor its business critical computer applications
and those of its vendors throughout the year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-KSB contains certain forward-looking
statements. The forward-looking statements contained herein are based on current
expectations that involve a number of risks and uncertainties. Among others,
these forward-looking statements are based on assumptions that (a) the volume of
real estate transactions in the Company's market areas will remain at sufficient
levels to support the Company's business, (b) the Company will be able to
successfully integrate acquired businesses and the results of operations
therefrom will support the acquisition price, (c) that the Company will be able
to retain, and when needed, add key personnel, (d) that the Company's forecasts
will accurately anticipate market demand, (e) that there will be no material
adverse changes in the Company's existing operations and (f) the Company will be
able to obtain sufficient equity or debt funding to increase its capital
resources by the amount needed for new business acquisitions, if any.
Assumptions related to the foregoing involve judgments with respect to, among
other things, future economic, competitive and market conditions, and future
business decisions, all of which are beyond the control of the Company. Although
the Company believes that the assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate and,
therefore, there can be no assurance that the results contemplated in
forward-looking statements will be realized. In addition, the business and
operations of the Company are subject to substantial risks, which increase the
uncertainty inherent in such forward-looking statements. In light of the
significant uncertainties inherent in the forward-looking information included
herein, the inclusion of such information should not be regarded as a
representation by the Company, or any other person, that the Company's plans or
objectives will be achieved.
13
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
Report of Independent Auditors
Shareholders and Board of Directors
Capital Title Group, Inc.
We have audited the accompanying consolidated balance sheets of Capital
Title Group, Inc. and Subsidiaries (the Company) as of December 31, 1999 and
1998, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the two years in the period ended December
31, 1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company at December 31, 1999 and 1998, and the consolidated results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/ Ernst & Young LLP
Phoenix, Arizona
March 3, 2000
14
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
-------------------------
1999 1998
----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,884,059 $ 4,833,826
Accounts receivable, net 110,796 364,725
Notes and other receivables 291,262 406,028
Other current assets 410,711 575,875
----------- -----------
Total Current Assets 2,696,828 6,180,454
Property and Equipment, net 11,259,054 8,863,133
Other Assets:
Notes receivable 72,608 231,531
Investment in title plant 521,278 520,249
Deposits and other assets 403,224 473,963
Goodwill 246,399 259,024
----------- -----------
Total Assets $15,199,391 $16,528,354
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 717,507 $ 532,346
Accounts payable 362,786 664,737
Accrued expenses 1,018,974 2,656,572
----------- -----------
Total Current Liabilities 2,099,267 3,853,655
Long-Term Debt 4,173,032 1,766,815
Other Liabilities 383,236 117,905
Stockholders' Equity:
Common stock, $.001 par value, 50,000,000 shares
authorized, 16,947,901 and 16,926,791 shares
issued and outstanding in 1999 and 1998,
respectively 16,948 16,927
Additional paid-in capital 10,667,177 10,944,294
Accumulated deficit (2,140,269) (171,242)
----------- -----------
Total Stockholders' Equity 8,543,856 10,789,979
----------- -----------
Total Liabilities and Stockholders' Equity $15,199,391 $16,528,354
=========== ===========
The accompanying notes are an integral part
of the consolidated financial statements
15
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
---------------------------
1999 1998
------------ -----------
REVENUE:
Title insurance premiums $22,979,047 $14,634,442
Escrow and related fees 11,087,910 7,030,248
Account servicing 510,475 504,813
Interest and other income 1,569,995 1,036,722
----------- -----------
36,147,427 23,206,225
----------- -----------
EXPENSES:
Personnel costs 20,819,793 11,186,564
Escrow commissions 2,781,947 2,249,468
Title remittance fees 2,170,919 1,459,452
Rent 2,193,615 1,254,010
Other operating expenses 9,863,660 5,121,998
Interest expense 286,520 99,257
----------- -----------
38,116,454 21,370,749
----------- -----------
Income (loss) before income taxes (1,969,027) 1,835,476
Income tax provision -- 159,449
----------- -----------
Net income (loss) $(1,969,027) $ 1,676,027
=========== ===========
Net income (loss) per common share:
Basic $ (.12) $ .11
=========== ===========
Diluted $ (.12) $ .11
=========== ===========
Weighted average shares outstanding:
Basic 16,868,292 14,566,390
=========== ===========
Diluted 16,868,292 15,938,041
=========== ===========
The accompanying notes are an integral part
of the consolidated financial statements
16
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
----------------------- Paid-in Accumulated
Shares Par Value Capital Deficit
------ --------- ------- -------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 11,231,029 $ 11,231 $ 2,653,731 $(1,847,269)
Shares issued in private placements,
net of costs of $754,000 4,727,415 4,728 5,946,886 --
Shares issued in connection
with options exercised 7,700 7 7,693 --
Shares issued in connection
with convertible notes 250,000 250 249,750 --
Shares issued in connection
with acquisitions 710,647 711 2,086,234 --
Net income -- -- -- 1,676,027
---------- -------- ------------ -----------
Balance at December 31, 1998 16,926,791 16,927 10,944,294 (171,242)
Shares issued in connection
with options exercised 127,900 128 127,772 --
Escrowed shares to Northwestern's
stockholders returned to Company (146,790) (147) (453,998) --
Shares issued to retire debt 15,000 15 29,985 --
Shares issued for building 25,000 25 19,124 --
Net loss -- -- -- (1,969,027)
---------- -------- ------------ -----------
Balance at December 31, 1999 16,947,901 $ 16,948 $ 10,667,177 $(2,140,269)
========== ======== ============ ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
17
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) (1,969,027) $ 1,676,027
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation and amortization 1,389,924 678,658
Changes in operating assets and liabilities,
net of effects from purchase of subsidiaries:
Accounts receivable 181,489 (182,420)
Notes and other receivables 36,253 (102,836)
Other current assets 163,842 (492,979)
Deposits and other assets 1,258 (97,052)
Accounts payable (253,345) 198,767
Accrued expenses (1,637,598) 753,728
Other liabilities 12,421 39,905
----------- -----------
Net Cash Flows - Operating Activities (2,074,783) 2,471,798
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net additions to property and equipment (5,013,538) (3,192,277)
Cash received from sale of property and
equipment 1,156,982 --
Purchase/sale of subsidiaries, net cash (107,035) 209,921
Collection of loans receivable 290,542 --
Purchase of title plant (1,029) (97,447)
----------- -----------
Net Cash Flows - Investing Activities (3,674,078) (3,079,803)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings 4,630,000 125,000
Debt service payments (1,958,806) (581,254)
Proceeds from the issuance of stock, net 127,900 5,699,182
----------- -----------
Net Cash Flows - Financing Activities 2,799,094 5,242,928
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (2,949,767) 4,634,923
CASH AT THE BEGINNING OF THE YEAR 4,833,826 198,903
----------- -----------
CASH AT THE END OF THE YEAR $ 1,884,059 $ 4,833,826
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
18
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF CORPORATION:
Capital Title Group, Inc. (the "Company") is a Delaware corporation, which acts
as the parent holding company of the following subsidiaries.
Capital Title Agency, Inc. ("Capital Title") is an Arizona corporation, which
has operated under the authority of the State Banking Commission since November
1, 1981. Capital Title is an independent title agency providing escrow services
and, as an agent for six title insurance companies, issues title insurance
policies to the real estate industry in Maricopa, Yavapai and Mohave Counties in
Arizona. As of March 1, 2000 Capital Title operated 32 offices located
throughout Maricopa, Yavapai and Mohave Counties in Arizona.
New Century Title Company ("New Century"), a California corporation, is an
independent title agency that provides escrow and title services to the real
estate industry in selected California counties. New Century began operations in
July 1998 with the purchase of a dormant escrow and title agency in San Diego,
California. New Century currently has three offices in San Diego County. New
Century also has operations in northern California, which it obtained by
acquisition in November 1998. New Century currently has 11 offices in Sonoma,
Contra Costa and Alameda Counties in California. During 1999, New Century was
granted a license to operate in six additional southern California counties and
opened an office in Orange County in February 2000.
BASIS OF PRESENTATION:
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material inter company accounts
and transactions have been eliminated in consolidation.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and the accompanying notes. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents include all highly liquid investments purchased with
an initial maturity of three months or less.
19
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
ACCOUNTS RECEIVABLE:
The Company uses the allowance method to account for non-collectible accounts
receivable. The allowance is established based upon a review of the individual
accounts and the Company's prior collection history. The allowance for
non-collectible accounts was $13,750 and $27,942 in 1999 and 1998, respectively.
INCOME RECOGNITION:
Title insurance premiums and escrow fees are recognized as revenue at the time
of closing the related real estate transaction. Income from account servicing
and other fees is recognized when the service is performed. Income from
insurance recoveries is recognized when the dispute is settled and the money is
received.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost and are being depreciated on a
straight-line basis over estimated useful lives and consist of the following:
Useful Lives 1999 1998
------------ ----------- -----------
Land and construction in progress N/A $ 656,577 $ 1,872,271
Buildings and leasehold improvements 10-40 years 6,759,648 4,174,975
Office equipment 5 years 6,016,139 4,533,085
Furniture and fixtures 7 years 3,006,607 2,583,289
Vehicles 5 years 85,456 270,098
----------- -----------
16,524,427 13,433,718
Less: accumulated depreciation and
amortization (5,265,373) (4,570,585)
----------- -----------
$11,259,054 $ 8,863,133
=========== ===========
CAPITAL LEASE OBLIGATION:
The Company is the lessee of office equipment under capital lease agreements,
which expire throughout the year 2000. The asset and liability under the capital
lease are recorded at the lower of the present value of the minimum lease
payments or the fair market value of the asset. The asset is amortized over the
lower of its related lease term or its estimated productive life.
TITLE PLANT:
Title plants are recorded at the cost incurred to construct and organize
historical title information to the point it can be used to perform title
searches. Cost incurred to maintain, update and operate title plants is expensed
as incurred. Title plants are not amortized as they are considered to have an
indefinite life if maintained.
20
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
GOODWILL:
The Company recorded approximately $263,000 of goodwill in 1998 related to cost
in excess of net assets acquired pursuant to its purchase of a title agency in
San Diego, California. Goodwill is being amortized over twenty years and
accumulated amortization at December 31, 1999 was approximately $16,736.
IMPAIRMENT OF LONG-LIVED ASSETS:
In accordance with the Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, the Company
records impairment losses on long-lived assets used in operations when events
and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets. This methodology includes goodwill and
intangible assets acquired. As of December 31, 1999, management has not
identified any events or circumstances which indicate that any assets are
impaired.
INCOME TAXES:
The Company and its subsidiaries file consolidated federal and state income tax
returns. The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards Statement No. 109 ACCOUNTING FOR INCOME TAXES.
Statement 109, provides that deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax basis, and the utilization of the net operating loss
("NOL") carryforwards, net of valuation allowances. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.
EARNINGS PER SHARE:
The Company calculates earnings per share ("EPS") in accordance with the
Financial Accounting Standards Board Statement No. 128, EARNINGS PER SHARE.
Basic EPS excludes any dilutive effects of options, warrants and convertible
securities.
The following table sets forth the computation of basic and diluted EPS:
<TABLE>
<CAPTION>
For the year ended December 31,
-----------------------------------------------------------------------
1999 1998
----------------------------------- ---------------------------------
Per share Per share
Net loss Shares amount Net income Shares amount
----------- ---------- ------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $(1,969,027) 16,868,292 $(0.12) $1,676,027 14,566,390 $0.11
====== =====
Effect of Dilutive Securities:
Stock options -- -- -- 1,237,569
Warrants -- -- -- 134,082
----------- ---------- ---------- ----------
Diluted EPS $(1,969,027) 16,868,292 $(0.12) $1,676,027 15,938,041 $0.11
=========== ========== ====== ========== ========== =====
</TABLE>
21
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company discloses fair value information about financial instruments where
it is practicable to estimate their value in accordance with Statement No. 107,
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. The Company estimates
that the carrying value of its financial instruments, consisting of cash, cash
equivalents, certificates of deposit, notes receivable and debt obligations
approximate their fair values at December 31, 1999 and 1998.
RECLASSIFICATIONS:
Certain reclassifications have been made to the prior period financial
statements to conform to the current period presentation.
2. ACQUISITION:
In November 1998, the Company acquired Northwestern Consolidated Corporation for
a purchase price of approximately $3.5 million in cash and 665,647 restricted
shares of its common stock. The merger, which is being accounted for as a
purchase, was effective November 1, 1998.
The assets acquired and liabilities assumed in this acquisition were as follows:
Assets acquired at fair value $ 7,917,911
Liabilities assumed at fair value (2,454,351)
-----------
Total purchase price $ 5,463,560
===========
The unaudited proforma results of operations, assuming this acquisition occurred
at the beginning of 1998, is indicated in the following table. These unaudited
proforma results do not purport to be indicative of the results of operations
which actually would have resulted had the combination been in effect for the
entire year ended December 31, 1998.
Revenue $31,583,000
Net income $ 2,335,000
Basic EPS $ 0.15
Diluted EPS $ 0.14
3. CASH IN ESCROW:
The Company is the custodian of cash deposited by customers with specific
instructions as to its disbursement from active escrow, trust and account
servicing. The balances in these accounts have not been included in these
financial statements. As of December 31, 1999, the accounts contain balances of
approximately $49,860,000.
4. CONCENTRATION OF CREDIT RISK:
The Company maintains cash and cash equivalents with various financial
institutions. Deposits not to exceed $100,000 at each institution are insured by
the Federal Deposit Insurance Corporation. At December 31, 1999, the Company had
uninsured cash and cash equivalents of approximately $726,460.
22
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. INCOME TAXES:
The income tax provision consists of the following:
Year Ended December 31,
-----------------------
1999 1998
-------- --------
Current tax provision $ -- $119,544
Deferred tax provision -- 39,905
-------- --------
$ -- $159,449
======== ========
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets as of December 31, 1999 and 1998 are as
follows:
1999 1998
--------- ---------
Accounts receivable $ 60,000 $ 5,501
Property and equipment (156,251) (115,980)
Alternative minimum credit 45,588 70,574
Net operating loss carryforwards 850,071 --
Other 10,000 --
--------- ---------
809,408 (39,905)
Less: valuation allowance (849,313) --
--------- ---------
$ (39,905) $ (39,905)
========= =========
At December 31, 1999, the Company has a net operating loss carryforwards of
approximately $2,074,000 for federal and state income tax purposes.
The reconciliation of the provision for income taxes with the expected income
taxes based on the statutory federal income tax rate is as follows:
Year Ended December 31,
-------------------------
1999 1998
--------- ---------
Expected income tax provision (benefit)
at the federal statutory rate $(669,469) $ 642,106
State income taxes net of federal benefit (154,481) 16,154
Effect of rate schedule -- (5,334)
Effect of net permanent differences 15,470 15,612
Effect of alternative minimum tax -- 70,574
Utilization of net operating loss carryover -- (579,663)
Other (40,833) --
Increase to valuation reserve 849,313 --
--------- ---------
$ -- $ 159,449
========= =========
23
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. LONG TERM DEBT:
Long term debt consists of the following:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
8.32% term loan with GMAC Commercial Mortgage, with monthly
installments of $23,940 including principal and interest, due
August 2009; secured by a building $3,120,223 $ --
Note payable to Imperial Bank bearing interest at the prime rate,
with monthly principal payments of $2,800, due December 2002;
secured by a building 1,000,000 --
Credit line with Imperial Bank bearing interest at the prime rate,
credit line matures February 2001; secured by furniture and
equipment 500,000 --
Capital lease obligations, with varying rates of 9% to 13%
throughout the year 2000; secured by equipment 231,181 467,041
8% note payable to an individual, with monthly installments of
$435, including principal and interest, due October 2011; secured
by land 39,135 41,173
8.75% note payable to Imperial Bank of California, with monthly
principal installments of $1,417 plus accrued interest;
secured by a building -- 1,523,969
8.2% note payable to Imperial Bank of Arizona, with monthly
installments of $11,000 including principal and interest;
secured by furniture and equipment -- 105,978
Note payable to Imperial Bank of California, with monthly
interest payments at prime plus 1% -- 36,000
Convertible notes -- 125,000
---------- ----------
4,890,539 2,299,161
Less: current portion (717,507) (532,346)
---------- ----------
$4,173,032 $1,766,815
========== ==========
</TABLE>
24
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
On February 2, 1998, the Company issued $125,000 in convertible notes for the
purpose of obtaining capital for expansion. The convertible notes required
payment of interest only for eighteen months at prime plus 2 1/2%. The note
holders had an option to convert the obligation into common stock of the Company
at $2.00 per share. In August 1999 the notes were retired by the payment of
$95,000 with the balance owed converted to 15,000 shares of the Company's common
stock.
In February 1999, the Company secured a $5,000,000 credit facility from a bank,
which will bear interest on any outstanding balance at the prime rate. This
credit facility is comprised of a $2,000,000 revolving line of credit and a
$3,000,000 term loan to be used for future acquisitions. As of December 31, 1999
$500,000 was drawn on the credit line in addition to $150,000, which is
committed for a standby letter of credit required pursuant to an office lease.
The maturities of long-term Debt as of December 31, 1999 were as follows:
2000 $ 717,507
2001 124,826
2002 976,026
2003 34,554
2004 36,832
Thereafter 3,000,794
----------
$4,890,539
==========
7. OPERATING LEASE COMMITMENTS:
The Company leases offices and office equipment at 46 locations. The remaining
lease periods range from one month to sixty months with renewal options up to
ten years. For the years ended December 31, 1999 and 1998 rental expense was
$2,193,615 and $1,254,010 respectively.
The Company's future minimum lease commitments as of December 31, 1999 were as
follows:
2000 $ 2,699,385
2001 2,336,099
2002 1,906,927
2003 1,167,470
2004 560,499
Thereafter 4,799,642
-----------
$13,470,022
===========
25
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. RELATED PARTY TRANSACTIONS:
During the year ended December 31, 1998, the Company paid $55,866 to Dale A.
Head for legal services. Dale A. Head is Donald R. Head's brother. In October
1998, the Company hired Dale A. Head as Executive Vice President and General
Counsel.
9. CONTINGENCIES AND UNCERTAINTIES:
The Company is a defendant in various lawsuits and claims, which it is
vigorously defending. It is management's contention that such matters arise out
of the normal course of business, primarily related to title and escrow
disputes. While the results of litigation cannot be predicted with certainty,
management believes, based on the advice of legal counsel, that the final
outcome of such lawsuits and claims will not have a material adverse effect on
the Company's financial position, results of operations, or liquidity. As of
December 31, 1999 and 1998, the Company had accrued $155,000 and $173,000,
respectively, for possible title and escrow losses.
The California State Controller's Office is currently examining all title
companies to identify unclaimed property escheatable to the State of California.
At December 31, 1999, the Company has an accrual of approximately $203,000
related to escheatable funds owed by subsidiaries the Company acquired.
Approximately $166,000 was remitted to the State of California in January 2000
to fulfill the Company's obligations identified in the examination of its
northern California operations. The examination of the Company's southern
California operations is still ongoing but management believes the outcome will
not have a material adverse effect on the Company's financial position, results
of operations or liquidity.
10. SUPPLEMENTARY CASH FLOW INFORMATION:
The following supplemental cash flow information is provided with respect to
interest and tax payments, as well as certain non-cash investing and financing
activities.
Year Ended December 31,
-----------------------
1999 1998
-------- --------
Cash paid during the year:
Interest $ 286,520 $ 99,257
Income taxes 228,604 --
Non-cash investing and financing activities:
Equipment purchased under capital leases -- 372,270
Conversion of convertible debt 30,000 250,000
Shares issued in connection with a building purchase 19,149 260,136
Acquisition of New Century Title Company -- 95,000
Acquisition of Northwestern Consolidated Corporation (454,140) 806,556
26
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. EMPLOYEE BENEFIT PLAN:
PROFIT SHARING PLAN:
The Company maintains a profit sharing plan under Section 401(k) of the Internal
Revenue Code. Under this plan, substantially all full-time employees may elect
to defer up to 15% of their salary. The Company contributes $.25 for every $1.00
the employee contributes, up to a maximum of four percent of the employee's
earnings. Vesting of matching contributions is based on certain service
requirements. Employees are fully vested after six years of service.
Employer contributions for the years ended December 31, 1999 and 1998 were
approximately $72,660 and $33,600, respectively.
CAFETERIA PLAN:
The Company maintains an Internal Revenue Code Section 125 Cafeteria Plan as a
benefit to its employees. The plan provides for employee and dependent coverage
to be paid from before tax compensation. As such, there is no effect on the
financial statements.
12. PRIVATE PLACEMENTS OF COMMON STOCK:
On March 31, 1998, the Company completed a private placement of 463,500 units at
$3.00 per unit. Each unit consisted of two shares of common stock and a warrant
to purchase one share of common stock at a per share price of $2.50 within a two
year period. The net proceeds from this private placement were approximately
$1.3 million.
On April 30, 1998 the Company completed a $5.0 million private placement of
common stock in which 3,703,703 shares of common stock were issued at $1.35 per
share. In addition, the Company issued three-year warrants to purchase an
additional 308,642 shares of common stock at $1.62 per share to an investment
banking firm that acted as placement agent in the transaction. The net proceeds
from this private placement of approximately $4.4 million were used by the
Company to support expansion of its business in Arizona and California and for
working capital and general corporate purposes.
On October 29, 1998, the Company issued 86,712 shares of common stock to
developers in a transaction to acquire a build-to-suit building for its
corporate offices.
13. STOCK OPTION PLANS:
The Company has elected to follow Accounting Principles Board Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25") and related Interpretations
in accounting for its 1996 Stock Option Plan and the Company's Non-Employee
Directors Stock Option Plan because, as discussed below, the alternative fair
value accounting provided for under FASB Statement No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION (Statement 123) requires use of option valuation
models that were not developed for use in valuing stock options. Under APB 25,
because the exercise price of the Company's stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.
27
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company's 1996 Stock Option Plan ("The Plan") has authorized the grant of
common stock options to all the Company's employees. Currently, 3,900,000 shares
of Common Stock are authorized for issuance pursuant to the Plan. As of December
31, 1999, 2,728,400 shares have been granted under the Plan. All options granted
have 5-year terms. Fifty percent of the options can be exercised after two
years, the remaining shares can be exercised after three years provided the
optionee remains employed with the Company at such vesting date. Options granted
under the Plan are not transferable and the per share exercise price of an
incentive stock option granted under the Plan may not be less than the fair
market value of the common stock on the date of grant.
The Company's Non-Employee Directors Stock Option Plan ("Directors Plan") has
authorized the grant of options to non-employee members of the Board of
Directors and advisory boards. Currently, 600,000 shares of Common Stock are
authorized for issuance pursuant to the Directors Plan. As of December 31, 1999,
496,000 shares have been granted under the Directors Plan. All options granted
have 5-year terms. Fifty percent of the options can be exercised after two
years; the remaining shares can be exercised after three years provided the
optionee remains an eligible director at such vesting date. Upon election to the
Board of Directors each board member is granted the option to purchase 15,000
shares of common stock. In addition to the foregoing option grants, each year
every non-employee director automatically receives an option to acquire 10,000
shares of the Company's common stock on the third business day following the
date the Company publicly announces its annual financial results; provided that
such director has attended at least 75% of the meetings of the Board of
Directors and the Board Committees of which such non-employee director is a
member in the preceding fiscal year.
A summary of the Company's stock option activity pursuant to its stock option
plans, and related information for the years ended December 31, 1999 and 1998 is
as follows:
1999 1998
------------------- --------------------
Weighted Weighted
Average Average
Options Price Options Price
------- ----- ------- -----
Outstanding - beginning of year 2,778,150 $1.53 1,760,150 $1.10
Granted 929,950 2.75 1,104,600 2.25
Exercised (127,900) 1.00 (7,700) 1.00
Forfeited (355,800) 2.05 (78,900) 1.74
---------- ----------
Outstanding - end of year 3,224,400 1.84 2,778,150 1.53
========== ==========
Exercisable at end of year 1,271,100 1.06 569,500 1.00
========== ==========
Weighted - average fair value of
options granted during the year $ 1.27 $ 1.01
========== ==========
28
<PAGE>
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Pro forma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions: risk-free
interest rate of 4.5%; dividend yields of 0%; volatility factors of the expected
market price of the Company's common stock for 1999 and 1998 of .49 and .44,
respectively; and a weighted-average expected life of the option for 1999 and
1998 of 4 years and 5 years, respectively.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility.
Because the Company's stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. If the Company had
accounted for its stock-based compensation plans using a fair value based method
of accounting, the pro forma information would have been reported as follows:
Year ended December 31,
-------------------------
1999 1998
----------- ----------
Pro forma net income (loss) $(2,639,686) $1,294,066
Pro forma net income (loss) per share-basic $ (0.16) $ 0.09
Pro forma net income (loss) per share-diluted $ (0.16) $ 0.08
14. SEGMENT INFORMATION:
The Company adopted Statement of Financial Accounting Standards No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION ("SFAS 131")
in the fiscal year ended December 31, 1998. SFAS 131 establishes standards for
reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports issued to stockholders. SFAS 131 also establishes
standards for related disclosures about products and services and geographic
areas. To date, the Company has viewed its operations as principally one
segment; services and one geographic region; the Southwestern United States.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
29
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required by this Item is incorporated by reference to the
Company's Proxy Statement for its 2000 Annual Meeting of Stockholders.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Company's Proxy Statement for its 2000 Annual Meeting of Stockholders.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Company's Proxy Statement for its 2000 Annual Meeting of Stockholders.
ITEM 12. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index to Exhibits
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
2 Share Exchange Agreement between Capital Title Agency, Inc.
and Norvex, Inc. dated May 23, 1996 (1)
3.1 Certificate of Incorporation (1)
3.2 Amended and Restated Bylaws
10.1 Underwriting Agreement between Capital Title Agency, Inc. and
Old Republic National Title Insurance Company dated March 1,
1996 (1)
10.2 Underwriting Agreement between Capital Title Agency, Inc. and
First American Title Insurance Company dated August 16, 1996 (1)
10.3 Image Service Agreement between Capital Title Agency, Inc. and
Security Union Title Insurance Company dated June 5, 1996 (1)
10.4 Title Plant Service Agreement between Capital Title Agency,
Inc. and Diversified Information Services Corporation dated
March 1, 1996 (1)
10.5 Office Lease between Capital Title Agency, Inc. and 4808
Corporation dated June 7, 1996 (1)
10.6 Promissory Note between PWCC, Inc. and BankOne Arizona, NA
dated January 5, 1996 (1)
10.7 Assumption Agreement between Capital Title Agency, Inc. and
PWCC, Inc. dated January 5, 1996 (1)
10.8 Employment Agreement between Registrant and Donald R. Head
dated June 1, 1996 (1)
10.9 Employment Agreement between Registrant and Andrew A. Johns
dated June 1, 1996 (1)
10.10 Promissory Note between Capital Title Group, Inc. and Imperial
Bank, dated November 15, 1996 (2)
10.11 Financial Advisor Agreement between Registrant and Miller
Capital Corporation dated June 17, 1997 (2)
10.12 Employment Agreement between Capital Title Agency, Inc. and
Milt Ferrantelli dated June 17, 1997 (2)
10.13 Underwriting Agreement between Capital Title Agency, Inc. and
United General Insurance Company dated January 21, 1998. (2)
10.14 Credit Line Agreement between Registrant and Imperial Bank,
dated November 17, 1997 (2)
10.15 Acquisition Consulting Agreement between Registrant and Miller
Capital Corporation dated January 28, 1998. (2)
30
<PAGE>
Exhibit Method of
No. Description Filing
- ------- ----------- ---------
10.16 Issuing Underwriting Agreement between Capital Title Agency,
Inc. and Chicago Title Insurance Company dated April 1, 1998. (3)
10.17 Placement Agent Agreement between Registrant and Sanders
Morris Mundy Inc. dated April 13, 1998. (3)
10.18 Title Plant Agreement between Registrant and Security Union
Title Insurance Company dated April 29, 1998 (3)
10.19 Amendment to Acquisition Consulting Agreement between
Registrant and Miller Capital Corporation dated June 12, 1998. (3)
10.20 Financial Advisor Agreement between Registrant and Miller
Capital Corporation dated June 16, 1998. (3)
10.21 Purchase and Sale Agreement between Registrant and KDC-AZ, LLC
dated July 1, 1998 (3)
10.22 Merger Agreement among Registrant, Northwestern Consolidated
Corporation and related subsidiaries dated September 1, 1998. (4)
10.23 Credit Agreement between Registrant and Imperial Bank dated
February 1, 1999. (3)
10.24 Access Agreement By and Between Security Union Title Insurance
Company and New Century Title Company dated September 30,
1999. *
10.25 Title Plant Lease and Service Agreement by and between
Security Union Title Insurance Company and Capital Title
Agency Inc. dated May 19, 1999. *
10.26 Promissory Note between CTG Building Co. and GMAC Commercial
Mortgage Corporation dated July 30, 1999. *
10.27 Amendment to Underwriting Agreement by and between Stewart
Title Guaranty Company and New Century Title Company dated
September 28, 1999. *
21 Subsidiaries *
23 Consent of Ernst & Young LLP *
27 Financial Data Schedule *
- ----------
* Filed herewith
(1) Incorporated by reference to the Registrant's Form 10-QSB filed with the
Securities and Exchange Commission on September 20, 1996.
(2) Incorporated by reference to the Registrant's Form 10-KSB for the year
ended December 31, 1997, filed with the Securities and Exchange Commission
on March 25, 1998.
(3) Incorporated by reference to the Registrant's Form 10-KSB for the year
ended December 31,1998, filed with the Securities and Exchange Commission
on March 23, 1999.
(4) Incorporated by reference to the Registrant's Form 8-K filed with the
Securities and Exchange Commission on December 10, 1998.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ended
December 31, 1999.
31
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CAPITAL TITLE GROUP, INC.
By /s/ Donald R. Head
-------------------------------------
Donald R. Head
Chief Executive Officer
Date: March 24, 2000
In accordance with the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Donald R. Head Chairman of the Board and /s/ Donald R. Head March 24, 2000
Chief Executive Officer -------------------------
Mark C. Walker Vice President, Chief /s/ Mark C. Walker March 24, 2000
Financial Officer and -------------------------
Treasurer
Richard A. Alexander Director /s/ Richard A. Alexander March 24, 2000
-------------------------
David C. Dewar Director /s/ David C. Dewar March 24, 2000
-------------------------
Theo F. Lamb Director /s/ Theo F. Lamb March 24, 2000
-------------------------
Robert B. Liverant Director /s/ Robert B. Liverant March 24, 2000
-------------------------
Stephen A McConnell Director /s/ Stephen A McConnell March 24, 2000
-------------------------
Ben T. Morris Director /s/ Ben T. Morris March 24, 2000
-------------------------
</TABLE>
32
CONFIDENTIAL Agreement No. 99-33
ACCESS AGREEMENT
BY AND BETWEEN
SECURITY UNION TITLE INSURANCE COMPANY
("Security Union")
AND
NEW CENTURY TITLE COMPANY
("Customer")
DATED
SEPTEMBER 30, 1999
STD.AGT. 8/98
<PAGE>
Table of Contents
Recitals 1
Terms of the Agreement 1
A. Introduction 1
B. On-line Data Base Access 6
C. Physical Access to Title Records 9
D. Off-site Access to Certain Title Records 11
E. Space Use 12
F. CPN Inquiry System Use 14
G. Image System Use 16
H. Special Software Use 17
I. TITLE-Tax Service 19
J. DELAYED RECON TRACKING SYSTEM 20
K. GENERAL TERMS AND CONDITIONS 22
MASTER SCHEDULE ATTACHED
COUNTY SCHEDULE - PI/GI ATTACHED
COUNTY SCHEDULE - OTHER SERVICES ATTACHED
-0-
<PAGE>
SECURITY UNION TITLE INSURANCE COMPANY
ACCESS AGREEMENT
THIS AGREEMENT is being executed on the day of , . The parties to this
Agreement are SECURITY UNION TITLE INSURANCE COMPANY, a California corporation
("Security Union") and NEW CENTURY TITLE COMPANY, a California corporation
("Customer").
RECITALS
This Agreement is being entered into for the purpose of providing Customer
with access to certain records or data owned by Security Union or its providers
and to certain services or software offered by or through Security Union,
pertaining to real property in the County or Counties of the State of California
(each, a "County") set forth on the applicable County Schedule(s) or to
transactions relating to such real property. Any information furnished hereunder
may be contained in physical documents or books (for example, on microfilm or in
lot books) or in one or more separate electronically accessible data bases.
TERMS OF THE AGREEMENT
In consideration of the facts recited above and the mutual promises set out
below, the parties agree as follows:
A. INTRODUCTION
A.1. SCHEDULES
Attached hereto and made an integral part hereof are a Master Schedule and
one or more County Schedules. By mutual Agreement, Customer and Security
Union may amend this Agreement: to add or delete a County Schedule; or to
amend any County Schedule to modify the scope of access for a particular
County; or to amend the Master Schedule. Customer acknowledges that the
fees payable hereunder are subject to change as provided herein and upon
any addition to, deletion from, or other modification of a County Schedule.
A.2. CERTAIN JOINTLY OWNED INFORMATION
In certain Counties, selected Title Record information is jointly owned by
Security Union and one or more other co-owners. Customer access to any such
jointly-owned information may be provided by a County Schedule to this
Agreement or by a separate Agreement among Customer, Security Union and the
joint owner(s). If jointly-owned information is made available to Customer
under this Agreement, the co-owner(s) is (are) identified on the applicable
County Schedule for such County. Co-Owners are protected, included and
obligated collectively with Security Union, by all appropriate provisions
of this Agreement wherever jointly-owned information is identified on the
applicable County Schedule. The term "Security Union" in such circumstances
shall include the co-owner(s).
-1-
<PAGE>
A.3. CERTAIN DEFINITIONS
(a) DATA BASES. For each County set forth on a County Schedule, the "Data
Bases" consist of certain designated records of Security Union
accessible via an on-line system. The PI/GI Data Base includes the
property index ("PI") and the General Index (the "GI" and sometimes
known as the Individual/Corporation Index). Security Union's
Corporation, Limited Partnership and Notary Inquiry System ("CPN
System") is a state-wide Data Base which contains certain information
provided to Security Union by the Office of the Secretary of State of
the State of California. Security Union's Image System contains
electronic copies of certain Maps, Official Records and Starters
("Image System"). The Title-Tax Service Data Base consists of tax,
bond and assessment information. Security Union may develop, or
acquire the right to offer access to, other Data Bases. If access to
any such other Data Base is made available by Security Union to
Customer, any special terms of such access shall be as set forth in an
amendment hereto or on an amended County Schedule, as applicable.
(b) GROSS TITLE PREMIUMS. The term "Gross Title Premiums" means all
premiums and other fees charged by Customer for Title Orders
(including cancellation fees), as well as any other reports or
products in which Title Records are used and from which Customer
generates income. To the extent applicable, such amounts shall be
determined and reported by Customer to Security Union on a County by
County basis.
(c) LOT BOOKS. For each County set forth on a County Schedule, "Lot Books"
consist of copies of indices in tangible form of recorded documents
relating to parcels of real property in such County (for example,
Numbered Tracts, Alphabetical Tracts, Ranchos and Sectional Lands).
Lot Books may be available as specified in such Schedule.
(d) MAPS. For each County set forth on a County Schedule, "Maps" consist
of copies of diagrams and other graphic representations of boundaries
relating to parcels of real property in such County. Maps may be
available as specified in such Schedule.
(e) OFFICIAL RECORDS. For each County set forth on a County Schedule,
"Official Records" (excluding Maps) consist of copies of items
recorded in the County Recorders' Office. Official Records may be
available as specified in such Schedule.
(f) PROVIDER. The term "Security Union" means each of the persons which
owns (or co-own) or distributes, furnishes, licenses or otherwise
makes available to Security Union information, software or other
similar material which is made available to, or which is used
(directly or indirectly) by Customer under this Agreement.
(g) STARTERS. For each County set forth on a County Schedule, "Starters"
consist of copies of previously issued policies of title insurance,
preliminary reports, guarantees and binders. Customer acknowledges:
(1) that the availability of particular Starters under this Agreement
shall be determined by Security Union and will not include any
Starters of any other company which Security Union may have in its
possession by reason of an Agreement with that company if the
Agreement with that company contains a provision restricting the use
of their Starters to Security Union; (2) that access to Starters
-2-
<PAGE>
issued by Ticor Title Insurance Company of California or its
predecessors (the "Ticor Starters") is subject to separate pricing as
set forth on the applicable County Schedule; and (3) that Customer
shall furnish Security Union a full and complete copy of each Starter
issued by Customer on parcels of real property in a County as a
condition of having access to Starters from Security Union in such
County. Copies of Customer furnished Starters shall be delivered,
without warranty as to correctness, to the manager of the Security
Union facility which services such County on or before the fifth (5th)
work day following the month in which the Starter was issued. Such
copies shall become the property of Security Union, free of any
restrictions, and Security Union shall have the right to use,
reproduce, distribute and sell such copies without accounting to
Customer. Customer agrees that neither Security Union nor any person
providing copies of Starters to Security Union shall have any
responsibility to Customer, or any person claiming through Customer,
for any error or omission in any Starter.
(h) TITLE ORDER. The term "Title Order" means an order, by a customer of
Customer, of a Title Search and an examination thereof which may
result in the issuance of an evidence of title (for example, a title
policy, binder, guarantee, or endorsements) or delivery of other
reports or products in which Title Records are used (for example, a
preliminary report). Security Union's on-line system contains
information on the Title Orders Customer has "opened" on such system.
(i) TITLE PLANT. The term "Title Plant" means a currently maintained index
of land records and copies of Official Records and other materials
related thereto, excluding Starters, for a County.
(j) TITLE RECORDS. For each County set forth on a County Schedule,
Security Union or its Security Unions own or have the right to use
land title records and materials (including on-line accessible Data
Bases, Tax and Assessment records, Lot Books, Maps, Official Records
and Starters, each as defined herein) which are sometimes referenced
in this Agreement collectively as the "Title Records" for a County.
The Title Records shall also include any additions and shall be
subject to any deletions made through Security Union's customary daily
input and purging procedures. Lot Books, Maps, Official Records,
Starters and other materials included in the Title Records are
maintained in one or more formats or media determined by Security
Union (for example, on microfilm or paper or in electronic form as
digital files) and Security Union reserves the right to modify any
such format or medium from time to time. Both parties recognize that
Security Union or its Security Unions may in the future acquire
records and materials through purchase, lease, assignment or other
method of transfer and that Security Union may restrict, or may be
restricted from allowing, Customer from using such records and
materials. Any records and materials so acquired and restricted are
not included in this Agreement.
(k) TITLE-TAX SERVICE. For each County set forth on a County Schedule,
"Computerized Tax Service" consists of tax service to Customer by way
of access to and retrieval of information from Security Union's
subsidiary, Title-Tax, Inc., ("Title-Tax"). Title-Tax Service consists
of a data base of computerized tax, bond and assessment information
for each County and hereinafter referred to as the "Tax Plant(s)" and
includes features for automatic date down of open orders (bad checks
and canceled payments included), and making partial tax searches (for
current taxes only).
-3-
<PAGE>
(l) DELAYED RECON TRACKING SERVICE. For each County set forth on a County
Schedule, "Delayed Recon Tracking Service" consists of services for
the purpose of tracking deeds of trust and reconveyances ("Tracking
System"). The Tracking System is designed to meet the requirements of
California Civil Code "2941(b) (3), which sets forth a procedure in
which a title insurer that has processed a pay-off of a deed of trust,
can execute and record a Release of Obligation if the trustee does not
record a reconveyance within a specified period of time.
(m) TITLE SEARCH. The term "Title Search" means the functions of
identifying, locating and copying the proper accounts and documents
(including information from on-line accessible Data Bases, Lot Books,
Maps, Official Records, and Starters) which are necessary for
examining, reporting on and otherwise issuing an evidence of title on
specific parcels of real property.
(n) PC OR PCS. The term "PC" or "PCs" means a single or group of
terminals, workstations or personal computers of all types including
printers or any method of accessing information from the Security
Union on-line Data Bases by way of telephone data line modem(s).
(o) INQUIRY(IES). An "Inquiry(ies)" means any instance of accessing
Security Union Data Bases including but not limited to, Inquiry by
Date/Document reference, General Index (AKA Individual/Corporation)
Inquiries and Property Information Inquiries. Each instance of such
inquiries to screen and each instance of such inquiries to printer are
counted separately.
A.4. ACCESS
For each County selected on a County Schedule, Security Union grants
Customer nonexclusive access during normal working hours (as set by
Security Union) to those portions of the Title Records and will perform
the services identified in such County Schedule. Such access and
services are subject to all the other provisions of this Agreement. For
example: (a) if a County Schedule provides for Customer access to
on-line Data Bases for which Security Union furnishes software for
remote access such as the Image System, then the provisions of section B
(On-line Data Base Access), section G (Image System Use), section H
(Special Software Use) and section K (General Terms and Conditions) are
all applicable to such use; or (b) if Customer does not use Portable
Media furnished by Security Union, then the provisions of section D
(Off-site Access to Certain Title Records) are not applicable to
Customer.
A.5. TERM
The effective date of this Agreement is set forth on the Master
Schedule. Unless sooner terminated in accordance with the provisions
hereof, this Agreement shall continue in effect so long as any County
Schedule hereunder is in effect. The term of each County Schedule under
this Agreement will commence and expire on the dates set forth therein.
Unless otherwise provided to the contrary in the Master Schedule or a
County Schedule, each County Schedule shall be automatically extended
for successive additional terms of duration equal to the Initial Term
set forth in the then current Master Schedule unless either party gives
written notice to the other party of its election not to so extend at
least six (6) months (but not more than twelve (12) months) prior to the
end of the initial term or of any additional term for such County
Schedule.
-4-
<PAGE>
B. ON-LINE DATA BASE ACCESS
The provisions of this section B apply, in addition to any other applicable
section, if a County Schedule provides that Customer may access any Data Base
for such County either from PCs owned by Security Union or Customer at a
Security Union facility or from Customer PCs in some other location. Other
sections of this Agreement which may be applicable to on-line Data Base access
include: section F (CPN System Use), section G (Image System Use), section H
(Special Software Use), section I (Title-Tax Service), and section J (Recon
Tracking Service) in addition to the other relevant provisions of this
Agreement.
B.1. DATA BASE ACCESS FEES
The monthly fee, monthly minimum fee and additional fees to Customer for
on-line access to each Data Base for a County shall be as set forth on the
applicable County Schedule. The monthly minimum fee shall be due and
payable regardless of whether or not Customer finds it necessary to access
such Data Base. Customer shall pay the applicable fee for additional ports
for each County in which Customer requires more than two ports into
Security Union's on-line system. Customer agrees that in addition to the
definition of Inquiry or Inquiries at Section A.3(o), Security Union shall
not be responsible to Customer for the number of inquiries made. The reason
for inquiries is strictly Customer's responsibility. Customer has observed
and understands the Security Union system of inquiry counting and accepts
that system, including the amount of data provided to customer by Security
Union for purposes of billing, as reasonable.
B.2. CUSTOMER EQUIPMENT, TELEPHONE LINE AND SUPPLIES
(a) CERTAIN REQUIREMENTS. Security Union will notify Customer of Security
Union's requirements for Customer hardware and third party software
needed for Customer to connect to Security Union's on-line system.
Customer is responsible for the selection, payment and acquisition,
installation and maintenance of such hardware and software, and
related supplies. Security Union may suspend Customer access to an
on-line system if Customer supplied hardware or third party software
fails to meet Security Union requirements.
(b) CERTAIN EQUIPMENT. Security Union will arrange for the installation
and maintenance of the telephone data transmission service and the
related Customer premises data interconnection device, DSU/CSU or data
modem ("modem"). All expenses related thereto (including monthly
rental of the modem) are payable by Customer to Security Union.
(c) SYSTEM ENHANCEMENTS. Customer shall convert to or provide equipment
required and as specified by Security Union, at Customer's own
expense, to access Security Union Data Base system enhancements.
B.3. SECURITY CONCERNS
(a) PASSWORDS. In connection with on-line Data Base access, Security Union
may establish identification codes and password security. In such
cases, Customer is responsible for choosing one or more secure
passwords and for keeping all passwords secret. In the event of a
security breech or unauthorized access to an on-line Data Base through
use of a Customer identification code and password, Customer agrees to
contact Security Union immediately upon discovering such a breach.
Customer is responsible for the results of and any costs incurred as a
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result any such unauthorized access until notice of such a security
breach is given to Security Union.
(b) UNSECURE PASSWORDS. Security Union reserves the right to check the
security of Customer passwords. If a Customer password is found to be
unsecure, Security Union reserves the right to immediately suspend
access to the applicable Data Base without notice.
(c) NO BYPASSING SECURITY. Customer agrees to not attempt to bypass any
security mechanisms in place on any Security Union on-line system, or
to use any Security Union on-line system or service to attempt to
bypass any security mechanisms in place on any other system. This
includes, but is not limited to, running any password cracking
software, or attempting to access a system which Customer knows or
reasonably should know it is not authorized to access in the manner or
to the extent attempted.
B.4. INTERRUPTION OF ON-LINE ACCESS
(a) TEMPORARY INTERRUPTIONS. The parties recognize that the input and
retrieval of the information contained in any Security Union computer
system is subject to the hazards of temporary interruptions by reason
of equipment or communications failures arising out of numerous
possible causes and that Security Union is not a guarantor of the
constant and continual availability of the Security Union computer
system or Customer's access to it. Security Union does, however, agree
that it shall maintain a reasonable capability to provide timely,
workmanlike repair and maintenance service whenever its computer
system becomes temporarily inoperable.
(b) SECURITY COPY. Security Union further covenants and agrees that it
shall at all times maintain a security copy of the Data Bases. The
security copy shall be stored away from the location of Security
Union's other land records and updated daily.
(c) INOPERABLE PCS. If PCs located in a Security Union facility and used
by or under the management control of either Security Union personnel
or Customer personnel become inoperable, the parties shall reasonably
cooperate with each other, on a resources available basis, to share in
the use of the other's PCs located in such facility without cost for
the period of time reasonably necessary to bring the inoperable PC
into normal operation. The party having a PC which has become
inoperable must take all reasonable steps to place the PC back into an
operational status as soon as practicable.
(d) COMPUTER SYSTEM LIABILITY DISCLAIMER. Notwithstanding any provision of
this Agreement to the contrary, Customer agrees that Security Union
shall incur no liability to Customer in the event of any damage or
destruction to any Security Union computer system or the
communications network through which Customer accesses such computer
system. Security Union shall not be required to reconstitute or
reconstruct the then existing computer system if such computer system
is damaged or destroyed from any cause whatsoever.
B.5. SYSTEMS CHANGES
(a) SYSTEMS CHANGES. It is anticipated that Security Union may, during the
term of this Agreement, but without obligation to do so, make certain
systems enhancements in the methods of input, storage or retrieval or
make other changes or develop new systems or Data Bases. It is agreed
by Customer that Security Union will have the right to make
enhancements, changes or additions so long as the use by Customer of a
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Data Base(s) as set forth on the applicable County Schedule(s) is
comparable to the use provided to other users of such Data Base(s).
Security Union reserves the right to discontinue offering a system or
Data Base which has been functionally replaced as a result of any such
enhancements or changes upon not less than six (6) months notice to
Customers.
(b) SEPARATELY PRICED OPTIONS. If the benefits or services provided by any
systems enhancements, changes or additions mentioned above are offered
as separately priced options or services, then any such options or
services will not be available to Customer as part of any fees as
initially set forth on a County Schedule.
C. PHYSICAL ACCESS TO TITLE RECORDS
The provisions of this section C apply, in addition to any other applicable
section, if a County Schedule provides that Customer has physical access to
Title Records and other materials for such County located in a Security Union
facility (whether or not Security Union makes designated space available for use
by Customer). On-line access to electronic images of Title Records and other
materials is not included in this section.
C.1. STARTERS
To the extent set forth on the applicable County Schedule(s), Security
Union shall make available to Customer those Starters which are physically
located at Security Union's facility or within Security Union's Image
System for the affected County, subject to the provisions of paragraph
A.3.(g).
C.2. LOT BOOKS
To the extent set forth on the applicable County Schedule(s), Security
Union agrees to make available to Customer Lot Books located at Security
Union's facility for such County(s).
C.3. MAPS
To the extent set forth on the applicable County Schedule(s), Security
Union agrees to make available to Customer Maps located at Security Union's
facility for such County(s).
C.4. OFFICIAL RECORDS
To the extent set forth on the applicable County Schedule(s), Security
Union agrees to make available to Customer Official Records located at
Security Union's facility for such County(s).
C.5. PHYSICAL ACCESS FEES
The monthly fee and monthly minimum fee to Customer for physical access to
Title Records at a Security Union facility shall be as set forth on the
applicable County Schedule. The monthly minimum fee shall be due and
payable regardless of whether or not Customer finds it necessary to use any
Title Records.
C.6. USE OF EQUIPMENT; REFILING AND PRINTING
To the extent made available by Security Union at a facility, Customer may
use Security Union printers and other duplication equipment on a shared
basis with other Security Union customers using such facility. Security
Union shall provide personnel and equipment necessary for the refiling of
all film cassettes or reels pulled for use by Customer and for printing,
upon request, one initial copy for Customer of any physical Title Record
which Security Union now or in the future deems necessary to restrict from
general access. Security Union shall bill and Customer shall pay its
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monthly pro rata share of Security Union's cost of providing such equipment
and services.
C.7. OWNERSHIP AND USE OF THE SECURITY UNION FACILITY
(a) SECURITY UNION CONTROL. Customer agrees that the use of the Security
Union facilities and its contents shall at all times be in the custody
and under the supervision of an employee of Security Union.
(b) NO REMOVAL OF RECORDS. No part of any Title Record in tangible form
(for example, Lot Books or microfilm) shall be removed from the
premises of Security Union.
(c) COPIES OF DOCUMENTS. Subject to the other provisions of this
Agreement, Customer shall have the right to make photo copies of
individual documents and other Title Record information maintained in
a Security Union facility.
(d) CONDUCT OF EMPLOYEES. The use of a Security Union facility by Customer
and the conduct and physical appearance of employees of Customer while
on the premises of Security Union shall all be subject to the same
directives and instructions by Security Union now or in the future
directed to employees of Security Union. Security Union shall have the
right to refuse entrance and access to any employee of Customer not
complying with directives and instructions of Security Union.
C.8. FUTURE CHANGES TO ACCESS SYSTEMS
(a) FUTURE CHANGES. Security Union may in the future develop or acquire
new systems or enhance existing systems that may provide and require
Customer's use of new methods for the retrieval of Title Record
information now stored on microfilm or other media by way of the
addition of new hardware or software designed to interface with
computer storage other than as presently provided for in this
Agreement.
(b) SEPARATELY PRICED OPTIONS. If the benefits or services provided by any
new systems or enhancements mentioned above are offered as separately
priced options or services, then any such options or services will not
be available to Customer as part of any fees as initially set forth on
a County Schedule.
D. OFF-SITE ACCESS TO CERTAIN TITLE RECORDS
The provisions of this section D apply, in addition to any other applicable
section, if a County Schedule provides that Security Union will furnish a copy
of specified Title Records on media such as microfilm ("Portable Media") to
Customer for use at Customer's premises, in lieu of at a Security Union
facility.
D.1. OFF-SITE PORTABLE MEDIA USE FEES
The initial fee and monthly fee to Customer for off-site use of specified
Portable Media shall be as set forth on the applicable County Schedule.
Security Union will deliver such Portable Media to Customer within 60 days
of complete execution of the applicable County Schedule or amendment
thereto which provides for its delivery.
D.2. COPIES OF DOCUMENTS
Customer will not copy or make duplicate sets in any media of Portable
Media made available by Security Union. However, subject to the other
provisions of this Agreement, Customer shall have the right to make photo
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copies of individual documents and other Title Record information
maintained on the Portable Media solely for the purpose of use in
Customer's work files.
D.3. STORAGE AND RELOCATION OF PORTABLE MEDIA
Customer will keep the Portable Media made available by Security Union at
the premises identified on the applicable County Schedule. Outside of
Customer's normal business hours, such Portable Media will be stored in a
locked cabinet. No part of such Portable Media shall be removed from the
premises of Customer without the consent of Security Union; such consent
will not be unreasonably withheld in the event of the relocation of
Customer's premises.
D.4. AVAILABILITY ON IMAGE SYSTEM.
In the event Security Union causes the applicable Portable Media to be
available on its Image System, then Security Union may, at its discretion,
require Customer to discontinue off-site use of the Portable Media and
begin use of the same media via the Image System.
D.5. INSURANCE AND REIMBURSEMENT OF VALUE
In addition to other insurance required in this Agreement, Customer shall
maintain and pay the premium for insurance covering any occurrence of
damage or loss of the portable media. The amount of the insurance shall be
the amount set forth on the County Schedule providing for the use of the
portable media. Customer agrees that the amount set forth in the County
Schedule shall be the minimum amount due and payable to Security Union in
event of the loss or theft of the portable media.
D.6. RETURN OF PORTABLE MEDIA
If Customer discontinues active use of Portable Media made available by
Security Union in a County, or if any County Schedule under which such
Portable Media is made available is terminated or expires, the applicable
Portable Media will be returned promptly to Security Union. However, if
Customer elects to use the on-line Image System (when, as and if such a
system is offered by Security Union for a County), then Customer shall
return the affected Portable Media after the lapse of a 60-day transition
period.
E. SPACE USE
The provisions of this section E apply, in addition to any other applicable
section, in the event that a County Schedule provides that Customer has use of
designated space in a Security Union facility for such County.
E.1. DESK SPACE, EQUIPMENT AND SUPPLIES
(a) DESK AND EQUIPMENT SPACE; AUTHORIZED USE. Security Union agrees to
make available, at Security Union's facility, certain office space for
desks and equipment as may be reasonably necessary to be used by
employees of Customer for the purpose of permitting physical access to
the Title Records maintained at such facility in tangible form to the
extent set forth on the applicable County Schedule. Customer shall use
such office space solely to perform Title Searches of specific parcels
of real property which are the subject of Title Orders to Customer or
normal customer service provided by Customer. Customer functions not
related to performing a Title Search, including without limitation the
actual examination of the title and the process of "writing up" a
title examination, are not to be performed at a Security Union
facility.
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(b) EQUIPMENT AND SUPPLIES. All equipment and third party services (for
example, microfilm viewer-printers, copiers and telephone service)
used by Customer's employees at a Security Union facility are to be
installed and paid for by Customer, and all supplies and materials
used by Customer's employees at such facility are to be paid for by
Customer. However, Customer may use Security Union's equipment and
services, to the extent available and as provided in section C.6. All
personal property stored by Customer in a Security Union facility will
be at the sole risk of the Customer. Security Union shall not be
liable for any misuse or unauthorized use of Customer's equipment or
property, including telephone equipment and lines. Customer
acknowledges that Security Union may charge access fees relating to
third party vendor access to Security Union facilities such as
telephone equipment rooms.
(c) EMERGENCY ACCESS. In emergency situations, Security Union will, at the
expense of Customer, cooperate with Customer in endeavoring to provide
for the opening of a Security Union facility and the supervision by an
employee of Security Union, for Customer's physical access to Title
Records in order to satisfy Customer's reasonable access requirements.
Customer shall comply with the policies of the manager of the
applicable Security Union facility regarding reasonable notice and
other emergency access requirements.
E.2. SPACE USE FEE
(a) FEES. The monthly fee and monthly minimum fee to Customer for use of
the office space occupied by Customer's personnel, equipment and
furniture at Security Union's facility shall be as set forth on the
applicable County Schedule. The monthly minimum fee shall be due and
payable regardless of whether or not Customer finds it necessary to
use space at a Security Union facility. Adjustments shall be made to
the space use fee effective on the first day of a month designated by
Security Union on the applicable County Schedule; after the initial
adjustment date, such adjustment date may be changed upon advance
written notice by Security Union; however, such adjustments will not
be made more frequently than every twelve months during the initial
term and any additional term of the applicable County Schedule. The
adjustment in the fee shall be an increase or a decrease as necessary
to adjust the space use fee to an amount equal to the actual average
square foot building expense of the prior twelve month period,
together with the rent rate to be paid by Security Union during the
succeeding twelve month period. Building expenses shall include, but
not be limited to: premises rent, utilities, music/paging system,
janitorial and refuse service, building, parking lot, rest room,
heating and air conditioning maintenance, together with a ten percent
(10%) administrative fee.
(b) MINIMUM SPACE. The amount of space set forth on the applicable County
Schedule is Customer's minimum space requirement for such County. In
Security Union's discretion and on a space available basis, Customer
may increase its minimum space requirement, and Customer shall pay for
increased minimum space at the same square footage rate as for its
prior minimum space. The minimum space required may be decreased only
if Security Union has a substitute use or other need for such
decreased amount of space. Any decrease in the minimum space
requirement must be agreed to in writing by both parties.
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F. CPN INQUIRY SYSTEM USE
The provisions of this section F apply, in addition to any other applicable
section, if a County Schedule provides that Customer may access that portion of
the Title Records known as the CPN System either from Security Union or Customer
PCs at a Security Union facility or from a Customer PC in some other location.
Since the CPN System is a Data Base and a Product is furnished to Customer in
connection with Customer's on-line access, section B (On-line Data Base Access)
and section H (Special Software Use) are also applicable in addition to the
other relevant provisions of the Agreement.
F.1. CPN SYSTEM
Security Union shall, through use of the CPN System, provide Customer at the
location(s) specified on the applicable County Schedule with data as to the
status of corporations, limited partnerships and notaries, as such information
is provided to Security Union by the Office of the Secretary of State of the
State of California.
F.2. CPN SERVICE FEES
The service fee for inquiries into the CPN System shall be as set forth on the
applicable County Schedule. Security Union reserves the right to increase such
fees upon thirty (30) days written notice.
F.3. STANDARD OF PERFORMANCE
Security Union is purchasing the basic information for the CPN System from the
Office of the Secretary of State of State of California. In addition to all
warranty exclusions, disclaimers, limitations of liabilities and indemnities
applicable to Title Records generally, Security Union disclaims any
responsibility or liability for the accuracy of any of the information contained
therein or for any information delivered to Customer. THE INFORMATION IS
PRODUCED AND SOLD FOR GENERAL INFORMATION PURPOSES ONLY, SAID INFORMATION IS NOT
TO BE CONSTRUED AS HAVING THE LEGAL EFFECT OF A CERTIFIED COPY BY THE SECRETARY
OF STATE OF ANY OF THE INFORMATION OR AN OFFICIAL CERTIFICATION OF FILING BY THE
SECRETARY OF STATE. When information is displayed on a video display, the
following statement shall appear continuously on the first screen line at the
beginning of each record in pica size type or larger and in capitals:
THIS DATA IS FOR INFORMATION PURPOSES ONLY, CERTIFICATION CAN ONLY BE
OBTAINED THROUGH THE SACRAMENTO OFFICE OF THE CALIFORNIA SECRETARY OF
STATE.
Such statement may not be altered, abbreviated or modified in any way. Customer
shall indemnify, defend and save harmless Security Union and the State of
California, their officers, directors, affiliates, agents and employees from any
and all claims and losses accruing or resulting to any and all persons, firms or
corporations as a direct result of errors or omissions introduced into the CPN
System or data by anyone or/and resulting from the dissemination by anyone of
any or all of the information contained in the CPN System.
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G. IMAGE SYSTEM USE
The provisions of this section G apply, in addition to any other applicable
section, if a County Schedule provides that Customer may access that portion of
the Title Records known as the Image System for such County either from Security
Union or Customer PCs at a Security Union facility or from a Customer PC in some
other location. Since the Image System is a Data Base and a Product is furnished
to Customer in connection with Customer's on-line access, section B (On-line
Data Base Access) and section H (Special Software Use) are also applicable in
addition to the other relevant provisions of the Agreement.
G.1. IMAGE SYSTEM
Security Union shall, through use of the Image System, provide Customer at
the location(s) specified on the applicable County Schedule with electronic
copies of document images via on-line access to such system.
G.2. IMAGE SERVICE FEES
The service fees for inquiries into the Image System shall be as set forth
on the applicable County Schedule. The amount of such fees will depend on
one or more factors, including: the form of service utilized by Customer
(for example, Automated Image Service or On-Demand Image Service), the
basis of the document request (for example, Per Item Basis or Per Order
Basis), the type of document(s) requested (for example, Official Records,
Maps, Starters, etc.), the quantity of the document(s) requested, etc., as
set forth on the applicable County Schedule. If copies of documents are
maintained in folders on the Image System, storage fees will be incurred.
The total fees for on-line access to the Image System for each month will
be no less than the amount specified as the minimum monthly fee for Image
System use on the applicable County Schedule. This minimum monthly fee will
be due and payable regardless of whether or not Customer retrieves any
document images.
G.3. STANDARD OF PERFORMANCE
In addition to all warranty exclusions, disclaimers, limitations of
liabilities and indemnities applicable to Title Records generally: In the
event that Customer discovers an error, defect or omission in any document
image, Security Union's sole obligation, and Customer's exclusive remedy
with respect thereto, is to replace such image with a duplicate image of
the applicable document if a better image is available from the source
thereof (for example, for a recorded document, in the official records of
the applicable County Recorder).
H. SPECIAL SOFTWARE USE
The provisions of this section H apply, in addition to any other applicable
section, if Security Union delivers one or more computer software programs or
products (each a "Product" and including any enhancements thereto) to Customer
for use either on Security Union or Customer PCs at a Security Union facility or
on Customer PCs in some other location. A Product may be delivered to Customer
as a "stand alone" item or in connection with another service set forth on a
County Schedule.
H.1. USE OF THE PRODUCT
Security Union grants Customer a non-exclusive, non transferable license to
use each Product covered by and subject to this section H during the term
of the applicable County Schedule on any PC which meets the Security
Union's specifications. At the expiration or termination of the applicable
County Schedule, Customer will purge all copies of the Product from its PCs
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and any storage media, and upon request of Security Union certify that it
has done so.
H.2. LICENSE FEES
If use of a Product is subject to a separate license fee, the monthly fee,
monthly minimum fee and any additional fees for such shall be as set forth
on the applicable County Schedule. The amount of such fees will depend on
one or more factors, including: the authorized number of copies, PCs or
users; the number of inquiries; separately priced options, if any,
selected; etc. Products for which the fees are based on the number of
licensed copies, PCs or users, shall not be used in excess of the
applicable quantity or other limitation set forth on the applicable County
Schedule without Customer notifying Security Union, executing the
applicable updated County Schedule and the payment of additional fees from
the date such excess use commences.
H.3. RESTRICTED USE
Customer shall use the Product solely for the purpose of accessing a
Security Union Data Base to the extent provided on the applicable County
Schedule or for such other purpose set forth in the user materials
accompanying the Product.
H.4. BACKUP COPIES
In addition to the authorized number of licensed copies, Customer may make
one copy of the Product software for backup purposes. Written documentation
may not be copied or distributed to others.
H.5. CERTAIN RESTRICTIONS
Customer shall not disclose or transfer the Product, or any copy thereof,
except in connection with a permitted transfer of the Agreement. Customer
shall not reverse engineer, decompile, disassemble, copy or create a
derivative work of the Product contrary to this Agreement or applicable
law.
H.6. TELEPHONE SUPPORT AND MAINTENANCE
Security Union will provide (i) reasonable amounts of consultation via
telephone to assist Customer in the use of the Product and (ii) all
enhancements to the Product developed by Security Union and generally made
available to other Security Union customers of the Product, except
separately priced options. Unauthorized changes or attempted changes by
Customer to the Product or the failure of Customer to properly install the
Product or updates thereto, shall, at the sole and exclusive option of
Security Union, terminate the support and maintenance provisions of this
Agreement with respect to such Product. In the event Security Union
provides services at Customer's request to correct a suspected error, and
such error is either non-existent or the result of an unauthorized change
to the Product, Customer agrees to compensate Security Union for its
services, but in no case shall said compensation exceed Security Union's
prevailing commercial prices plus reasonable expenses.
H.7. LIMITED WARRANTY/LIMITATION OF LIABILITY
The Product is licensed to Customer "AS IS." The provisions of section K
(General Terms and Conditions) relating to warranty exclusions,
disclaimers, limitations of liabilities and indemnities are applicable to
the use of the Product. Customer assumes full responsibility for the
results obtained using a Product.
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H.8. U.S. GOVERNMENT RESTRICTED RIGHT
The Product and related materials are provided with RESTRICTED RIGHTS. Use,
duplication, or disclosure by the Government is subject to restrictions as
set forth in subparagraph (c)(1)(ii) of the Rights in Technical Data and
Computer Software clause at DFARS 252.227-7013 or subparagraphs (c)(1) and
(2) of the Commercial Computer Software Restricted Rights clause at 48 CFR
52.227-19, as applicable. Contractor/manufacturer is Security Union Title
Insurance Company at the address set forth below its signature.
I. TITLE-TAX SERVICE
The provisions of this section I apply, in addition to any other applicable
section, if a County Schedule provides that Security Union will furnish
Title-Tax Service to Customer either from Security Union or Customer PCs at a
Security Union facility or from a Customer PC in some other location. Since
Title-Tax Service is a Data Base, section B (On-line Data Base Access) is
applicable in addition to the other relevant provisions of the Agreement.
I.1. TAX SERVICE
Security Union shall through its subsidiary, Title-Tax Inc., provide the
services described in this section and at section A.3(K) of this Agreement.
I.2. ADDITIONAL SERVICES
Security Union agrees that the following additional services will be
provided to Customer pertaining to real property located in the County(s).
(i) The current status of real property taxes and depositing payments of
taxes and assessments furnished by the Customer with the designated
taxing authority in said County(s), and
(ii) Abstracting of court records of the courts located in the County(s),
including the United States Bankruptcy Court, the Superior Court and
the Municipal Court (including the Small Claims Division); and filing
Satisfactions, Releases and other court documents as furnished by
Customer, in the above mentioned Courts, all hereinafter referred to
as "Court Services".
I.3. MINIMUM MONTHLY FEE.
Customer agrees that during the period of this Agreement, Customer shall
pay Title-Tax each month a minimum monthly fee. That fee shall be the per
order fee(s) set forth on the County Schedule for each and every title
order Customer opens for the County(s) regardless of whether or not
Customer finds it necessary to use Title-Tax Services for any order(s).
I.4 REIMBURSEMENT OF EXPENSES
Customer agrees to reimburse Title-Tax, monthly, for any out-of-pocket
expenses incurred by Title-Tax. "Out-of-pocket expenses" means any amount
paid or service performed, and not specifically provided for in the
Agreement by Title-Tax on behalf of Customer. Such out-of-pocket expenses
shall be billed monthly by Title-Tax to Customer. Such billing is to be
paid by Customer within ten (10) days of the receipt thereof.
I.5. INDEMNIFICATION
Title-Tax shall indemnify and hold Customer harmless for losses resulting
from the errors or omissions in the Tax Plant or from the errors or
omissions of Title-Tax's employees in obtaining or reporting information
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requested by Customer up to a maximum of Twenty-five Thousand Dollars
($25,000.00) per order; provided, however, Title-Tax shall not be liable
for errors or omissions (1) of any state, county, or local municipality
employee; or (2) contained in the records, files, books or documents
(including magnetic tape files) of said state, county or municipality; or
(3) by reason of any revision, correction or change made in such records,
files, books or documents after their incorporation into the Tax Plant.
J. DELAYED RECON TRACKING SERVICE
The provisions of this section J apply, in addition to any of the applicable
sections, if a County Schedule provides that Security Union will furnish Delayed
Recon Tracking Service to Customer from either Security Union or Customer PCs at
a Security Union facility or from a Customer PC in some other location. Since
the Delayed Recon Tracking System includes access to a Data Base and a Product
is furnished to Customer in connection with Customer's on-line access, section B
(On-line Data Base Access) and section H (Special Software Use) are also
applicable in addition to the other relevant provisions of the Agreement.
J.1 DELAYED RECON TRACKING SERVICE
Security Union shall provide Customer with the following services through
use of the Tracking System and Security Union employees by performing the
following:
* Initiate tracking requests not less than twice a week upon receipt of
tracking information as provided by Customer.
* Enter all data necessary to initiate the tracking of a deed of trust.
* Review daily "adds report" to ensure all tracking requests given to
Security Union have been entered into the Tracking System.
* Provide Customer with a copy of any "matched report" generated by the
system which lists reconveyances that have been recorded for deeds of
trust that have been entered into the Tracking System. If no recorded
reconveyance is found in Security Union's Title Plant System 80 days
after the entry of the tracking request, Security Union will:
* Sign and notarize the "Affidavit of Service by Mail".
* Sign and mail "Notice of Intent to Record Release of Obligation Under
Deed of Trust" to the appropriate parties per CC "2941(b)(3).
If no recorded reconveyance is found in Security Union's Title Plant
System, 91 days after the entry of the tracking request, Security Union
will deliver to Customer, the signed Affidavit of Service by Mail, a copy
of the Notice of Intent to Record Release of Obligation Under Deed of Trust
and the Release of Obligation under Deed of Trust to be signed and recorded
by the Customer.
J.2 CUSTOMER'S OBLIGATION.
In order to assure prompt and quality service, Customer shall provide to
Security Union, a completed Delayed Recon Tracking Data Form ( to be
designed and provided by Security Union), to enable Security Union's
Delayed Recon Tracking System Operator to complete the input of the
tracking information.
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J.3 LIABILITY
(a) LIMITATION OF DAMAGE. Security Union shall be responsible for any
Security Union input error in entering the data as provided by
Customer into the Tracking System, but only to the extent of the fees
charged for the tracking input found to be in error. Upon being
advised of an error by Customer, Security Union will either re-process
the tracking request at no charge or allow Customer credit for the
fees charged for the input that was in error, as directed by Customer.
(b) DISCLAIMER OF LIABILITIES. In addition to the provisions of section
K.14 (b) of this Agreement, Security Union and Customer agree that no
other person, firm or corporation not a party to this Agreement has or
shall acquire any rights under this Agreement. Security Union and
Customer also agree that Security Union assumes no liability, and
shall not be held liable to any property owner or party to any deed of
trust entered in the Tracking System, except as stated at Paragraph
J.3(a) above.
(c) ACCURACY OF CUSTOMER INFORMATION. It is understood and agreed between
the parties that Security Union will rely, on the accuracy of the
information provided by Customer. It is further understood and agreed
between the parties that Security Union will make no investigation
into and shall have no responsibility for the propriety, or lack
thereof, of releasing any deed of trust entered into the Tracking
System.
J.4 USE OF TRACKING SYSTEM.
Services furnished to Customer under this Agreement are to be used by
Customer solely for the purpose of tracking reconveyances on specific
parcels of real property involved in Customer's title orders.
J.5 CANCELLATION OF DELAYED RECON TRACKING SERVICES.
Security Union may cancel the services provided by this section without any
prior written notice for any of the following reasons:
(a) CUSTOMER DISCONTINUES BUSINESS IN COUNTY. For any County in which
Customer discontinues business for any reason whatsoever. Since it
will be difficult for Security Union to determine the extent of its
damages should this Agreement or the services provided by this section
be canceled prior to its original term, Customer agrees to pay to
Security Union a sum equal to the total fees for the three months
immediately preceding the cancellation, as liquidated damages and not
as a penalty.
(b) TITLE PLANT AGREEMENT CANCELLATION. For any County in which Customer's
Agreement with Security Union for use of its title plant(s) terminates
for any reason.
J.6. TERMINATION ON DEFAULT BY CUSTOMER
In the event of a default by Customer for any reason, Security Union will
be under no further obligation to continue to mail notices of Intent to
Record Release of Obligation under Deed of Trust, or to deliver Release of
Obligation under Deed of Trust documents to Customer until such time as
said default is cured.
J.7. SYSTEMS CHANGES
Security Union may in the future develop or acquire systems enhancements
that may provide for additional services. These systems enhancements may
provide Customer with a more efficient system. If and when those systems
enhancements are available, Security Union and Customer will enter into
good faith negotiations to arrive at additional charges for Customer's use
of the Tracking System.
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K. GENERAL TERMS AND CONDITIONS
All Customer access to, or use of, Security Union Title Records, systems,
products, services or facilities under this Agreement is subject to the
provisions of this section K, in addition to any other applicable section.
K.1. LIMITATIONS ON ACCESS
(a) CUSTOMER USE ONLY. Access to the Title Records, including access to
the Data Bases, Lot Books, Maps, Official Records, Starters and other
materials, products, software and services, shall be limited to the
employees of Customer who perform Title Searches of specific parcels
of real property pursuant to Title Orders of, and related customer
service for, customers of Customer. Such limitation will apply whether
such use or access is at a Security Union facility or at some other
location used by Customer.
(b) NO TOURS OR DEMONSTRATIONS. Customer will not (1) conduct any 'tour'
of, or give access to, any facility where the Title Records are
located, or (2) demonstrate the use of the Security Union on-line
system or other systems, or make the documentation for such systems
available, except to train and indoctrinate persons who are authorized
employees and contractors of Customer acting within the scope of this
Agreement.
K.2. OWNERSHIP AND USE
(a) TITLE RECORDS. The Title Records shall at all times remain the
property of Security Union or its Security Unions.
(b) PRODUCTS, SYSTEMS AND DOCUMENTATION. All programs, data bases, manuals
and documentation relating to any Product, Data Base or system
(including without limitation, compression, storage, and retrieval
techniques and formats and any enhancements made thereto) are and
shall remain the property of Security Union or its Security Unions.
Each Product and Data Base compilation is protected by United States
copyright laws and international treaty provisions. Customer agrees to
treat manuals and documentation provided as part of any Product or
system as proprietary information of Security Union or its Security
Unions and make them available solely to Customer's employees or
authorized representatives on a need-to-know basis. Customer further
agrees to not make copies of such manuals and documentation. Customer
agrees to return all applicable Security Union property upon
termination of this Agreement or of a County Schedule.
(c) NO UNAUTHORIZED USE. Customer agrees to make no reproductions of the
Title Records or use or permit use of the information obtained
therefrom except as provided in this Agreement.
(d) TITLE USE ONLY. Title Records made available to Customer under this
Agreement are to be used by Customer solely for the purpose of
conducting Title Searches of specific parcels of real property and
examinations thereof in connection with bona fide Title Orders of
Customer. Without limiting the generality of the foregoing, Customer
agrees that access to the Title Records shall not be utilized by
Customer or any of its employees for the purpose of furnishing any
Title Record information to any other title insurance company, title
company, or any person, firm or corporation except Customer and
Customer's customers in the ordinary course of its business. However,
Customer shall have the right to utilize the Title Records to furnish
the usual customer service as to inquiry by customers of Customer as
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regards specific parcels of land or specific documents covered in such
Title Records; provided that Customer shall not deliver a copy of any
Starter not furnished to Security Union by Customer to any other
person.
(e) NO AGREEMENTS FOR USE BY CUSTOMER. Customer shall not be allowed to
provide for extraordinary title service Agreements to its customers.
Use of the Data Bases and the Title Records is to be limited to
specific bona fide orders for title insurance policies, binders,
guarantees, endorsements and reports covering specific parcels of real
property. However, Customer shall have the right to utilize the Data
Bases and the Title Records to furnish the usual customer service as
to inquiry by customers of Customer as regards specific parcels of
land or specific information in the Data Bases and the Title Records.
(f) OTHER USES BY SECURITY UNION. Security Union shall have the right,
during the term of this Agreement, to enter into other contracts with
any title insurer, title company or any other person, firm or
corporation, covering all or any part of the Title Records or Security
Union's facilities. Those contracts may include, but shall not be
limited to, information access Agreements, Title Plant leases, Title
Plant service Agreements, underwriting contracts or any combination of
the above.
(g) NONEXCLUSIVE USE. It is recognized by the parties that Security Union
and its affiliates shall continue to use the Title Records in the
usual and ordinary course of business of reporting upon and insuring
land titles, while at the same time furnishing services to Customer as
well as others.
(h) ADVERTISEMENT OF USE OR OWNERSHIP. During the term of the Agreement,
Customer shall not publicize to the public that Customer owns any
Title Records or Security Union Title Plant or has any interest
therein except such rights as are specifically granted to Customer by
this Agreement. Likewise, during the term of this Agreement, Security
Union shall not, in any advertisement or publicity, state that
Customer is dependent upon Security Union for use of the Title Records
or any Security Union facility. Security Union may, however, publicize
to whatever extent it may desire, its ownership of the Title Records
and its facilities and services.
K.3. CERTAIN REMEDIES
In the event that Customer (a) makes any unauthorized copy or duplicate set
of any Portable Media or Product, or (b) fails to return any Portable Media
or Product promptly when due; then Customer acknowledges and agrees: (1)
that remedies at law shall not be adequate; (2) that Security Union will
suffer irreparable harm; and (3) that Security Union shall be entitled, not
only to its damages, but also to injunctive relief without the necessity of
posting bond.
K.4. DUE CARE USE
Customer agrees to exercise due care in the use of Security Union
facilities, services, systems and information, so as to prevent loss or
damage. Customer also agrees that it shall be liable to Security Union
(and, if applicable, its Security Unions) for any loss or damage to any
property of Security Union or its Security Unions arising out of a failure
to exercise due care or arising out of an intentional, dishonest or
fraudulent act of an employee of Customer.
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K.5. TRAINING AND SPECIAL SERVICES
(a) TRAINING. Security Union will provide reasonable initial training in
the use of Security Union on-line systems or Products at no additional
charge per its then current training policies. Customer is responsible
for training its new employees; however, additional training requested
by Customer will be scheduled and provided on a resources available
basis at Security Union's then current fee.
(b) SPECIAL SERVICES. In the event that Customer requests Security Union
to supply special services, reports or items, Customer will pay the
then current fees for Security Union labor, out-of-pocket expenses
paid or incurred and an administrative fee. Security Union will
provide an estimate of such fees upon request.
K.6. PAYMENT DUE DATE; AUDIT
(a) WRITTEN REPORT. Fees based upon gross title premiums must be paid to
Security Union no later than the tenth (10th) work day of each month.
At the same time Customer must furnish a written report to Security
Union, showing the information necessary to enable Security Union to
determine the amount of Gross Title Premiums for the prior month. This
information shall be confidential to and used by Security Union's
auditors, accounting personnel and management and shall not be used
for other purposes by Security Union. The report form shall be
designed and furnished by Security Union and signed by an officer of
Customer.
(b) DUE DATE. All monies due from Customer are due and payable to Security
Union shall be due and payable within 15 days after the invoice date
with the exception of fees based on Gross Title Premiums (including
any applicable minimum monthly fee) which are due and payable together
with the report for such month as set forth at K.6(a) above.
(c) PAYMENT. Reports and payment shall be sent to:
Security Union Title Insurance Company
1007 East Cooley Drive
Colton, California 92324
Attention: Accounts Receivable
Reports and payment shall continue to be sent to this address until
notified in writing as set forth in this Agreement. The fees, set
forth in this Agreement or in any County Schedule, for any partial
month of Customer's use of the Title Records at the beginning or end
of any term of the applicable County Schedule shall be prorated
according to the total number of days of use as that number of days
relates to the total number of days in the affected month. A default
exists under this Agreement whenever Customer fails to pay, when due
and payable, any sum payable to Security Union for a period of fifteen
(15) days after the sum has become due and payable. To cure that
default, the sum then due, plus a late payment fee equal to ten
percent (10%) of the sum then due (or the maximum rate or amount
allowed by applicable law if less), must be paid to Security Union.
(d) AUDIT. Security Union shall have the right to audit the accounts of
Customer, at the expense of Security Union, in order to verify the
correctness of the sums of money being paid to Security Union by
Customer. These audits shall be conducted so as not to unreasonably
interfere with the normal business routine of Customer. Upon request
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of Security Union, Customer shall supply the following to Security
Union at the end of each fiscal year:
* A complete, signed copy of all Customer's audited reports to the
Insurance Commissioner of the State of California;
* Audited financial statements for each County in which fees due
hereunder are based upon Customer's Gross Title Premiums in such
County.
No information need be given to Security Union regarding any of the
business affairs of Customer other than information necessary to
determine the correctness of the amounts of sums paid to Security
Union under this Agreement. If the audit discloses that Customer
under-reported fees to Security Union, Customer shall pay promptly
such under-reported amount, together with interest at the maximum rate
allowed by law. In addition, if such under-reported amount is in
excess of five percent (5%) of the reported amount for the period
covered by the audit, then Customer shall promptly reimburse Security
Union for its audit expenses.
(e) TAXES. The fees and charges do not include taxes. Customer will pay,
or reimburse, Security Union for payment of, any applicable sales,
use, personal property or similar taxes and any government charges
based on transactions hereunder, exclusive of corporate income or
franchise taxes based on Security Union's net income.
(f) FEE ADJUSTMENTS. Except as provided below, Security Union may increase
the fees set forth in each County Schedule, annually as of January 1,
by the percentage amount indicated by the annual change in the
Consumer Price Index for urban wage earners and clerical workers for
the Los Angeles/Riverside/Anaheim Area of the State of California as
compiled by the U.S. Department of Labor, Bureau of Labor Statistics
("Index") for the twelve (12) months immediately preceding the
adjustment date. The provisions of this paragraph K.6.(f) do not apply
to fees based on Gross Title Premiums or which are subject to
adjustment under other provisions of this Agreement.
K.7. PROVIDER ARRANGEMENTS
Certain materials and information provided or made available to Customer
under this Agreement are obtained by Security Union from third party
Security Unions. In the event that any such Security Union fails to deliver
(or delays the delivery of) such material or information (through no fault
of Security Union) or in the event that any such Security Union materially
and adversely modifies the conditions or cost to Security Union of
obtaining such material or information, then Security Union, at its option,
may: (a) use reasonable efforts to seek alternative sources of supply on
commercially reasonable terms; or (b) suspend or terminate its obligations
to Customer under this Agreement whether with respect to the portion of
such Agreement which relates thereto or with respect to the entire
Agreement upon thirty (30) days written notice; or (c) notwithstanding any
other provision of this Agreement to the contrary, increase the applicable
fees or charges upon thirty (30) days written notice; or (d) any
combination of the foregoing. Security Union will incur no liability to
Customer with respect to any action or omission under this section K.7. In
the event that Customer receives a notice pursuant to this section K.7.
substituting a service or increasing the
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price thereof, then Customer may terminate such service if it notifies
Security Union within thirty (30) days after receipt of notice from
Security Union regarding such service.
K.8. EQUIPMENT FURNISHED BY SECURITY UNION
If Customer purchases or leases any equipment from Security Union, then the
terms and conditions related thereto are as set forth in an addendum hereto
or in a separate Agreement. Unless Customer timely exercises the purchase
option, if any, with respect to leased or rented equipment, Customer shall
return all equipment leased or rented from Security Union upon termination
or expiration of this Agreement as provided on the applicable addendum or
Agreement.
K.9. SERVICES NOT FURNISHED
Security Union shall not be obligated to furnish any information or service
not specifically set forth in this Agreement or a County Schedule,
including without limitation: (a) any tax, bond or assessment information;
(b) any title engineer or other help for the purpose of verifying or
creating a legal description of land involved in Customer's Title Orders;
or (c) any parking facilities for Customer's employees.
K.10. CUSTOMER REPRESENTATION
Customer hereby represents and warrants to Security Union that neither its
execution of this Agreement nor its performance under this Agreement will
be a violation of any other Agreement, judgment or order to which it is a
party or under which it or its property is subject.
K.11. CUSTOMER INVESTIGATION AND SATISFACTION
Customer has made its own independent investigation of the Title Records,
the operation of the on-line system, Data Bases (including the scope
thereof and the method of input, storage and retrieval of the information
contained therein), the nature and scope of information available in
tangible form, as well as the quality and completeness of all such
information, the type of documents indexed, the criteria in effect for
including or excluding specific types of documents in daily input
procedures, the criteria in effect for deleting by purging procedures,
specific types of documents and the method of counting inquiries to the
computer. Customer is satisfied that input, storage and retrieval methods,
the quality of the Title Records, the criteria for input and purging and
the method of counting inquiries to the computer are satisfactory for the
purposes intended in this Agreement.
K.12. PERIODIC CUSTOMER REPORTS
Upon Security Union's request, Customer will provide written verification
of information concerning Customer, including points of contact and
equipment configurations. Such reports will also include Customer's
certification that it is in compliance with the terms and provisions of
this Agreement.
K.13. NONLIABILITY FOR INJURY OR PROPERTY DAMAGE
(a) NONLIABILITY. Security Union shall not be liable for injuries to any
employees, guests or invitees of Customer nor for damage to property
of Customer caused by the conditions of any Security Union facility.
(b) INJURY OR PROPERTY DAMAGE. Customer agrees to neither hold nor attempt
to hold Security Union, its agents or employees liable for any injury
or damage, either proximate or remote, occurring through or caused by
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any repairs, alterations, injury or accidents in or to the premises,
or adjacent to the premises or in other parts of the premises in which
Title Records are stored, accessed or located, whether by reason of
the negligence or fault of Security Union, another Customer or any
other person. Security Union shall not be liable for any injury or
damage occasioned by gas, smoke, rain, snow, wind, ice, hail, water,
lightning, earthquakes, war, civil disorder, strike, defective
electrical wiring or the breaking or stoppage of the plumbing or
sewage upon or in the building or adjacent premises, whether the
breakdown or stoppage results from freezing or otherwise and no matter
how often injury or damage occurs
K.14. WARRANTY EXCLUSIONS AND DISCLAIMERS
(a) WARRANTY EXCLUSION AND LIMITATION OF DAMAGE. NEITHER SECURITY UNION
NOR ITS PROVIDERS MAKE ANY WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, CONCERNING THE ACCURACY OR
COMPLETENESS OF THE TITLE RECORDS MADE AVAILABLE TO CUSTOMER, WHETHER
IN TANGIBLE FORM OR VIA AN ON-LINE SYSTEM OR CONCERNING ANY PRODUCT.
Customer agrees that in no event shall Security Union (and, if
applicable, its Security Unions) be liable for any lost profits or for
any special, consequential or exemplary damages, even if Security
Union has been advised of the possibility of such damages.
(b) DISCLAIMER OF LIABILITIES. Security Union and Customer agree that no
other person, firm or corporation not a party to this Agreement
acquires any rights under this Agreement except as specifically
provided herein. Security Union and Customer also agree that Security
Union (and, if applicable, its Security Unions) assumes no liability
and shall not be held liable to Customer, or to Customer's customers
or insureds, or to any other person to whom Customer may furnish any
title policy, binder, guarantee, endorsement or other title assurance,
or any report or title information, by reason of any error or omission
or assertion of error or omission in any information (including any
Title Records obtained from a Security Union facility or via an
on-line system and furnished to Customer by Security Union) or
resulting from the use of any Product.
K.15. INDEMNIFICATION
(a) ALLEGED ERRORS OR OMISSIONS. If Customer, or any customer of Customer
or any other person claims or asserts that Security Union or its
Security Unions have any liability by reason of an error or omission
in any information (including Title Records obtained from any Security
Union facility or via an on-line system) furnished to Customer by
Security Union or resulting from the use of any Product, Customer
agrees to indemnify and hold Security Union, its affiliates and its
Security Unions, and their respective directors, officers, employees
and agents (the "Indemnified Parties") harmless from and against the
claim or demand, including all costs, expenses, attorneys' fees and
actual loss or losses incurred or sustained by reason of the claim or
assertion.
(b) PERSONAL INJURY AND PROPERTY DAMAGE. Customer accepts the premises
where the Title Records used by Customer are located and agrees to
defend, indemnify and hold the Indemnified Parties harmless from any
and all claims, damages, liabilities, losses or actions, including
costs, expenses and attorneys' fees, arising out of actions or claims
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by employees, guests or invitees of Customer, by reason of death,
injuries to person or damage to property arising out of or relating to
use of such premises or use of any equipment located on such premises.
(c) OTHER MATTERS. Customer will indemnify, defend and hold harmless the
Indemnified Parties, against and in respect to any and all claims,
damages, liabilities, losses or actions, including costs, expenses and
attorneys' fees, arising out of actions or claims which any
Indemnified Party may at any time suffer, incur, or become subject to
as a result of or in connection with any of the following: (1) the
inaccuracy of any representation made by Customer; (2) Customer's
breach of, or failure to perform, any of its warranties, covenants,
promises, or obligations arising under this Agreement; (3) Customer's
violation of any Federal, State or local law or regulation.
(d) PROCEDURES. When a claim or assertion is made, Security Union agrees
to promptly give notice to Customer. Customer shall have the right, if
it so elects, to provide for the defense of Security Union, in any
action or litigation based upon or involving the claim or assertion,
by counsel of Customer's own choosing, and approved in writing by
Security Union, at Customer's own expense and to pursue litigation to
final determination. Customer shall also have the right, whether or
not any action or litigation results, to compromise or settle the
claim on behalf of Security Union but at the sole cost of Customer.
K.16. INSURANCE
If Customer employees are authorized physical access to Title Records at,
or space use in, any Security Union facility, Customer agrees to maintain
and pay the premium for the following insurance coverage during the entire
term of this Agreement, together with any special endorsements as
specified:
(a) WORKERS' COMPENSATION INSURANCE. Workers' Compensation Insurance to
meet statutory requirements of the State of California (or approval by
the State of California to be permissibly self-insured) and Employers'
Liability coverage with minimum limits of One Million Dollars
($1,000,000.00) for all persons employed by Customer who may come on
to or occupy the premises of Security Union and Customer shall have
its carrier waive any right of subrogation thereunder with respect to
Security Union.
(b) COMPREHENSIVE GENERAL LIABILITY INSURANCE. Comprehensive General
Liability Insurance covering all injuries to persons or damages to
property that occur in or about the premises of Security Union. This
policy shall provide at least the following coverage and limits:
(1) The policy shall name Security Union as an Additional Insured.
(2) The policy shall carry a minimum combined single liability limit
of One Million Dollars ($1,000,000.00), or such higher amount as
Security Union may from time to time reasonably require.
(3) The policy shall be endorsed with a cross-liability endorsement
stating that in the event that a claim is brought by one insured
against another insured under the policy, or by an employee of
one insured against another insured under the policy, each
insured shall be considered a separate insured for the purpose of
the insurance.
(4) The policy shall be written on a 'caused by any occurrence'
rather than written on the 'caused by accident' basis for bodily
injury and property damage liability coverage.
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(5) The policy shall be written with a blanket contractual liability
endorsement providing automatic coverage for bodily injury or
property damage, assumed under any type of written contract in
addition to types of contracts defined in the policy form, except
any contract under which the insured assumes liability for the
sole negligence of an indemnified party.
(6) The policy shall be written using a 'personal injury' endorsement
providing coverage for claims arising out of false arrest, false
imprisonment, defamation of character, libel and slander,
wrongful eviction, and invasion of privacy, and such endorsement
shall not contain an exclusion of coverage for claims for
personal injury (or death) brought by employees of an insured (or
heirs or personal representatives of a deceased employee).
(c) PROPERTY DAMAGE INSURANCE. Customer shall obtain and maintain during
the entire term of this Agreement All Risk Property Damage coverage
for its personal property, trade fixtures, any interior improvements
constructed within the premises of Security Union and any alterations
to the premises made by Customer pursuant to any County Schedule under
this Agreement, all on a replacement cost basis. Customer shall have
its carrier waive any right of subrogation on behalf of Security
Union. To the extent that Customer has Security Union property (such
as modems, other equipment or Portable Media) on the premises of
Customer, Customer shall insure such property in an amount sufficient
to cover the replacement cost thereof.
(d) OTHER INSURANCE MATTERS
(1) All insurance required of Customer under this Agreement shall be
primary coverage and shall not be contributing with any other
insurance maintained by Security Union. The insurance must be
written by insurance companies reasonably satisfactory to
Security Union. Customer must provide Security Union prior to
occupancy, and annually thereafter, satisfactory Certificates of
Insurance evidencing Customer's compliance with the minimum
requirements as specified in this clause. The Certificates of
Insurance supplied by Customer to Security Union must specify
that thirty (30) days written notice of cancellation or
non-renewal shall be provided to Security Union.
(2) The insurance policies must insure performance by the Customer of
the indemnity provisions of this Agreement related to the use of
the premises.
(3) If Customer fails to obtain any of the insurance required in this
Agreement, Security Union may, but is not obligated to, obtain
the insurance on behalf of Customer and the cost of obtaining the
insurance must be paid by Customer as additional fees with the
first payment of fees which are due subsequent to Security Union
incurring any such costs.
K.17. TITLE PLANT BUILT BY CUSTOMER
Customer agrees that if at any time during the term of this Agreement it
elects to build or participate in the building of a Title Plant or to
continue the maintenance of its existing Title Plant for any County, it
shall do so without the use of any Title Records obtained from a Security
Union facility or via any Security Union on-line system. An election by
Customer to build or participate in the building of a Title Plant or the
maintenance of its existing Title Plant shall not discharge or relieve
Customer of any of its obligations under this Agreement.
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K.18. DISASTER OR OTHER INTERRUPTION OF SERVICE
If at any time either party to the Agreement is prevented from performance
when due (other than performance consisting of payment of money) by a
disaster such as or resulting from flood, hurricane, cyclone, earthquake,
fire or other event commonly referred to as an Act of God, causing
extensive destruction or damage; or by acts of war, riot, unlawful
assembly, strikes, explosions, peaceful protest gatherings or other similar
events causing or accompanied by a lack of access or extensive destruction;
so that it is impossible or unreasonably difficult for that party to
perform, then its failure to perform when performance is due shall be
deemed excused. Provided, however, that party must take all reasonable
steps to remedy its non-performance or delay in performance with the least
possible delay, and by doing whatever may reasonably be done to mitigate
the adverse effect of its non-performance upon the other party to this
Agreement.
K.19. CHANGE OF LOCATION
Security Union shall have the right at any time to move the physical
location of each of the Security Union on-line systems, Data Bases, Title
Records or facilities from one location to any other location. Security
Union shall endeavor to provide Customer three (3) months notice where any
such change of location would effect the space or physical access to Title
Records furnished to Customer under this Agreement
K.20. COMPETITION
This Agreement shall not operate to deny either party the right and
opportunity to compete with each other, or to compete on an equal basis on
the open market. Nothing contained in this Agreement is to be deemed to
constitute an association, partnership or joint liability between the
parties. The parties have no intention or thought to agree between
themselves, or even to confer together, as to underwriting methods, as to
fees or premiums to be charged by them to their customers, or as to any
other processes or practices of either party except as otherwise stated or
prescribed by any Issuing Agency Agreement entered into between the parties
or, if applicable, their affiliates.
K.21. DEFAULT
(a) TERMINATION ON DEFAULT. If either party does not faithfully perform
all of the terms and provisions of this Agreement or in any manner
fails, refuses or neglects to perform its obligations under this
Agreement and does not cure that default within ten (10) days after
receipt of written notice specifying the default, then this Agreement
may be terminated by the party not in default.
(b) SUSPENSION OF SERVICE. In the event of default not timely cured,
Security Union may discontinue the right of Customer to any access or
service provided for in this Agreement without liability.
(c) NONEXCLUSIVE REMEDIES. If an uncured breach of Customer relates to a
County, Security Union may elect to terminate the applicable County
Schedule(s) or suspend service to Customer in the applicable County;
alternatively, in the event of an uncured breach of Customer, Security
Union may elect to terminate or suspend service to Customer under all
Agreements between Customer and Security Union. Any right of
termination or suspension of service is in addition to any other
remedy under the applicable Agreement or provided by law or in equity.
(d) NON-WAIVER. Failure by either party to declare a termination of this
Agreement for the breach of any one or more of the provisions
contained in this Agreement or a failure of either party to take
action under the provisions of this Agreement for a breach shall never
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be construed as a waiver of the breach or any subsequent breach of the
same or other provisions of this Agreement. But, on the contrary,
either party may at any time take advantage of and act upon the breach
in accordance with applicable provisions of this Agreement.
K.22. CONSTRUCTION AND PERFORMANCE
This Agreement shall not be construed against the party preparing it, but
shall be construed as if all parties prepared this Agreement. The headings
of each section and paragraph are to assist in reference only and are not
to be used in the interpretation of this Agreement.
K.23. DISPUTE RESOLUTION
If either party institutes an action against the other party for breach of
this Agreement, at Security Union's option, arbitration shall be conducted
in accordance with the Rules of Commercial Arbitration of the American
Arbitration Association ("AAA"). The arbitration shall be conducted in Los
Angeles by a single arbitrator. If the parties have not agreed to a
mutually acceptable arbitrator within thirty (30) days of the date of the
notice to arbitrate, the arbitrator shall be selected by the AAA from its
regularly maintained list of commercial arbitrators familiar with matters
similar to the subject of this Agreement. The arbitrator shall conduct a
single hearing for the purpose of receiving evidence and shall render a
decision within thirty (30) days of the conclusion of the hearing. The
parties shall be entitled to require production of documents prior to the
hearing in accordance with the procedures of the Federal Rule of Civil
Procedure, shall exchange a list of witnesses, and shall be entitled to
conduct up to five (5) depositions in accordance with the procedures of the
Federal Rules of Civil Procedure. The decision of the arbitrator shall be
binding and final. The arbitrator may award only compensatory damages, and
not exemplary or punitive damages. In the event a party asserts multiple
claims or causes of action, some but not all of which are subject to
arbitration under law, any and all claims subject to arbitration shall be
submitted to arbitration in accordance with this provision.
K.24. ATTORNEYS' FEES AND COSTS
If either party institutes an action against the other party for breach of
this Agreement, the successful party shall be entitled to recover costs,
expenses and attorneys' fees as the court (or if applicable, the
arbitrator) directs.
K.25. GOVERNING LAW
This Agreement is to be construed under the laws of the State of
California.
K.26. SAVINGS CLAUSE
If any one or more of the terms, provisions, promises, covenants or
conditions of this Agreement, or their application to any person,
corporation, other business entity, or circumstance is to any extent
adjudged invalid, unenforceable, void or voidable for any reason whatsoever
by a court of competent jurisdiction, each and all of the remaining terms,
provisions, promises, covenants and conditions of this Agreement and their
application to other persons, corporations, business entities, or
circumstances shall not be affected and shall be valid and enforceable to
the fullest extent permitted by law.
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K.27. ASSIGNMENT OR TRANSFER
(a) NON-ASSIGNABLE. This Agreement cannot be assigned, in whole or in
part, by Customer without the prior written consent of Security Union,
which consent shall not be unreasonably withheld.
(b) INVOLUNTARY TRANSFER. If Customer's rights and benefits in this
Agreement are transferred in whole or in part by involuntary method,
or by operation of law, Security Union shall have the right to
terminate this Agreement if the result is not satisfactory to Security
Union.
(c) BANKRUPTCY OF CUSTOMER. Notwithstanding the definite term of this
Agreement, it shall be automatically terminated upon the filing of a
petition in bankruptcy by Customer, or the appointment of a receiver
for Customer, or the adjudication in bankruptcy on an involuntary
partition against Customer, or if any general assignment for the
benefit of Customer's creditors, of its assets, occurs.
(d) CHANGE OF CONTROL OF CUSTOMER. If Customer or its stockholders engage
in any transaction which amounts to a change of control, including any
merger, consolidation, sale of assets, or sale of securities, Customer
shall promptly notify Security Union and in such event Security Union
may, at its option and upon written notice, terminate this Agreement.
(e) ASSIGNMENT BY SECURITY UNION. Security Union shall have the right,
without Customer's consent, to assign this Agreement: (1) to a
corporation with which it may merge or consolidate, (2) to any
affiliate of Security Union, or (3) to a purchaser of the line of
business to which this Agreement relates. If any such transfer relates
to fewer than all of the Counties covered by this Agreement, Security
Union may transfer that portion of this Agreement which relates to
such County(s).
K.28. BENEFIT OF THE AGREEMENT
This Agreement will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
K.29. NO THIRD PARTY BENEFICIARIES
This Agreement is solely for the benefit of the parties hereto and no third
party will have the right or claim to the benefits afforded either party
hereunder.
K.30. COMPLIANCE WITH LAWS AND REGULATIONS
Customer agrees to use information received from Security Union in
compliance with all applicable Federal, State and local laws and
regulations, including without limitation, the Federal Credit Reporting Act
(U.S.C.A. Title 15, Chapter 41, Subchapter III), as amended from time to
time.
K.31. SURVIVAL
Following the expiration or termination of this Agreement, whether by its
terms, operation of law or otherwise, all terms, provisions or conditions
required for the interpretation of this Agreement or necessary for the full
observation and performance by each party hereto of all rights and
obligations arising prior to the date of expiration or termination, shall
survive such expiration or termination.
K.32. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties
pertaining to the subject contained in it and supersedes all prior and
contemporaneous Agreements, both oral and written, representations and
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<PAGE>
understandings of the parties. No supplement, modification, or amendment of
this Agreement shall be binding unless executed in writing by the parties.
No waiver of any of the provisions of this Agreement is to be considered a
waiver of any other provision, whether or not similar, nor is any waiver to
constitute a continuing waiver. No waiver shall be binding unless executed
by the party making the waiver.
K.33. SCHEDULES, ADDENDA AND EXHIBITS
Each of the Schedules, Addenda and Exhibits attached to this Agreement
(initially or by way of amendment) are incorporated herein by reference as
if set forth in full.
K.34. COUNTERPART EXECUTION
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but which together shall
constitute one and the same instrument.
K.35. NOTICES
(a) METHODS AND ADDRESSES. All written notices permitted or required to be
given under this Agreement may be personally delivered to the office
of the other party(s), or shipped via a nationally recognized
overnight courier service or mailed to the office of the other
party(s) by Certified United States Mail when addressed to the address
set forth under the party's signature.
(b) EFFECTIVE DATE. Any notice delivered hereunder will be effective on
the date delivered when delivered personally or by overnight courier
and on the third business day after mailing if mailed by Certified
United States Mail.
(c) CHANGE OF ADDRESS. Either party may, by written notice to the other
via first class mail, change the address to which notices are to be
sent.
NOTICES TO SECURITY UNION: NOTICES TO CUSTOMER:
Security Union Title Insurance Company New Century Title Company
1007 East Cooley Drive 3131 Caminio Del Rio North, Ste 1250
Colton, California 92324 San Diego, Ca 92108
Attn: Vice President, General Manager Attn: Chief Executive Officer
- and -
Security Union Title Insurance Company
245 S. Los Robles, Suite 105
Pasadena Ca 91101
Attn: Division Counsel
The parties have executed this Agreement to be effective for each County as of
the Commencement Date set forth on the applicable County Schedule.
CUSTOMER: SECURITY UNION:
NEW CENTURY TITLE COMPANY SECURITY UNION TITLE INSURANCE COMPANY
BY: BY:
------------------------------------ -----------------------------------
TITLE: TITLE:
--------------------------------- --------------------------------
DATE: DATE:
---------------------------------- ---------------------------------
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<PAGE>
SCHEDULE OF FEES
LOS ANGELES, ORANGE, RIVERSIDE, SAN BERNARDINO,
SANTA BARBARA, AND VENTURA COUNTIES
The fees as set forth below, shall commence on the Effective Date of this
Agreement, which is ___________________ and continue through _________________
and each subsequent term of three years, unless amended and agreed to in writing
by both parties.
A. ACCESS CHARGES
1. INITIAL BACK PLANT CHARGE
The initial charge to Customer for access to the Back Title Plant
shall be Thirty Five Thousand Dollars ($35,000.00) which will be paid
in 6 payments of $5,833.33.
2. MONTHLY BASE FEE
PHASE I
Until such time as Customer has access to the Data Bases and Title
Records for all counties as shown on the Master Schedule, Security
Union agrees to charge the monthly base fee(s) per county, as follows:
OPEN ORDERS OPEN ORDERS
INCLUDED IN IN EXCESS OF
COUNTY BASE FEE BASE FEE (BASE AMOUNT) BASE AMOUNT
--------- -------- ---------------------- -----------
Los Angeles $10,000.00 300 $12.50
Orange $8,000.00 200 $12.50
Riverside $6,000.00 200 $12.50
San Bernardino $6,000.00 200 $12.50
Santa Barbara $6,000.00 150 $12.50
Ventura $6,000.00 150 $12.50
PHASE II
At such time when Customer has attained access to all Counties under
this Agreement, the charge to Customer for access to the Data Base and
Title Records shall be a monthly Base Fee of Forty-Two Thousand
Dollars ($42,000.00) for all counties, combined. This base fee shall
include up to 1,200 open orders, each month. Open Orders in excess of
1,200 shall be billed as follows:
NUMBER OF OPEN ORDERS FEE PER OPEN ORDER
--------------------- ------------------
1 - 1200 No Charge
1201 - 1799 $12.50
1800 and above $10.00
3. BASE FEE DISCOUNTS
Security Union and Customer have agreed that the Counties under this
Agreement will have different start dates. Customer agrees to notify
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Security Union in writing of the effective start date of a particular
county. During the first six months of the Customer's access to the
County, the following discounts shall be applied to the Customer's
base fee:
a. 50% discount off the Base Fee during months 1-3 shall be applied.
b. 25% discount off the Base Fee during months 4-6 shall be applied.
4. ON-LINE IMAGE CHARGES
Customer shall pay Security Union each month for Customer's on-line
image access in the prior month according to the following:
TYPE OF IMAGE CHARGE SCAN ON DEMAND IMAGES CHARGE
------------- ------- --------------------- ------
Document $0.35 Documents up to 25 pages $0.85
Map $0.15 Documents up to 49 pages $1.65
Starter $1.00 Documents up to 50 pages $3.00
5. DISCOUNTS
Security Union shall allow Customer a discount based upon the monthly
image totals. The discount shall be applied as follows:
Monthly documents over 25,000 5% discount from total Image charges
Monthly documents over 60,000 7% discount from total Image charges
Monthly documents over 100,000 10% discount from total Image charges
6. NETWORK ACCESS
Security Union shall bill and Customer shall pay a Network Access
charge of Four Hundred and Twenty Five Dollars ($425.00) each month,
per site.
B. ADDITIONAL SERVICE FEES
1. PLANT SERVICES
Security Union will provide personnel and equipment necessary for providing
plant services to Customers. Security Union shall bill and Customer shall
pay $15.00 per hour, plus copy and messenger costs for these services.
Services provided are:
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COPY SERVICES
CCNR's
TRI Starters (LA County only)
Starters
Maps (Tract, Assessors, Parcel, and Record Survey)
TRANSLATION SERVICES
Translations of Documents
Translations of Starters
SEARCH PACKAGES
Residential Search $75.00 per package
Commercial/Industrial $30.00 per hour
The parties agree that a Search packet does not constitute an abstract of
title or an insurance product.
The following paragraphs shall apply to Security Union's Search Package
Service:
(i) WAIVER OF LIABILITY Customer hereby waives any right or rights
that it may have or obtained against Security Union in connection
with its compiling Search Packages and otherwise providing
information under this Agreement, including but not limited to
any and all claims for damages, indemnity, loss, liability,
attorneys' fees, costs and expenses. Security Union shall not be
liable for any action taken or omitted by Security Union.
Security Union makes no representations or warranties regarding
the completeness of the search packages and/or Databases for any
purpose. No other person, firm, or corporation that is not a
party to this Agreement shall acquire any rights under this
Agreement. Security Union assumes no liability to the Customer,
or to any person to whom Customer may furnish any information
directly or indirectly.
(ii) INDEMNITY The Customer shall release, indemnify, defend and hold
harmless Security Union and each of its officers, directors,
affiliates, employees, nominees and agents to and from any claim,
liability, loss, damage or expense (including fees and expenses
of inside and outside counsel and accountants of Security Union
and/or any third party claimant) of any nature, directly or
indirectly arising out of or relating to this Agreement, and the
services provided under this Agreement. In no event shall
Security Union be liable for (i) special, consequential, punitive
or similar damages, or (ii) the actions or omissions, whether
constituting negligence, willful misconduct, or otherwise, of any
person who is not a party to this Agreement.
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<PAGE>
2. TAX SEARCH AND COURT SERVICE FEE. Customer agrees to pay to Title-Tax,
monthly, an access fee to obtain access to the retrieval of the information
contained in the Tax Plant and for the customer services described herein.
(i) The access fee shall be Six Dollars ($6.00) per order, for the
first six contiguous parcels. The fee for each additional parcel
over six contiguous parcels per order shall be $.50 each. No fee
shall be charged for partial tax searches (current taxes only).
(ii) During the period of this Agreement starting July 1, 2000 and
each July 1 thereafter, the access fee shall be set in accordance
with the provisions of Paragraph 1(iv) below.
(iii) REIMBURSEMENT OF EXPENSES. Customer agrees to reimburse
Title-Tax, monthly, for any out-of-pocket expenses incurred by
Title-Tax. "Out-of-pocket expenses" means any amount paid by
Title-Tax on behalf of Customer. Such out-of-pocket expenses
shall be billed monthly by Title-Tax to Customer. Such billing is
to be paid by Customer within ten (10) days of the receipt
thereof.
(iv) INCREASE TO ACCESS FEE. The access fee and additional parcel fee
as described at Paragraph 1(i) above, shall be increased annually
on July 1 (first adjustment year 2000) by the percentage amount
indicated by the annual change in the Consumer Price Index for
urban wage earners and clerical workers for the Los
Angeles/Anaheim/Riverside Area of the State of California, as
compiled by the U.S. Department of Labor, Bureau of Labor
Statistics ("Index") for the twelve (12) months immediately
preceding the adjustment date.
2. TICOR STARTERS FEES.
Security Union shall bill Customer and Customer shall pay To Security
Union, Twelve Dollars and Fifty Cents ($12.50) per Ticor Starter
requested and supplied by Security Union. The minimum monthly fees
shall be due and payable regardless of whether or not Customer
requests any Starters.
3. SPACE USE AT SECURITY UNION'S TITLE PLANT FACILITIES.
Security Union shall provide and bill Customer on a monthly basis and
Customer shall pay Security Union monthly, for the space occupied by
Customer's personnel, equipment and furniture at Security Union's
Title Plant facility.
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<PAGE>
a. SQUARE FOOTAGE RATE. The initial space use charge per facility
shall be as follows:
TITLE PLANT FACILITY CHARGE PER SQUARE FOOT
-------------------- ----------------------
Chatsworth $2.00
Colton $1.75
Orangewood $1.80
San Diego $
Adjustments shall be made to the space use charge effective the
first day of the months listed below each year of the current
term and each year of any additional terms of the Agreement:
TITLE PLANT FACILITY FIRST ADJUSTMENT DATE
-------------------- ---------------------
Chatsworth September 2000
Colton December 1999
Orangewood June 2000
San Diego January 2000
The adjustment in the charge shall be an increase or a decrease
as necessary to adjust the space use charge to an amount equal to
the actual average square foot building expense of the prior
twelve month period and the rent rate to be paid by Security
Union during the succeeding twelve month period. Building
expenses shall include, but not be limited to: utilities,
music/paging system, janitorial and refuse service, building,
parking lot, rest room, heating and air conditioning maintenance,
together with a ten percent (10%) administrative charge and rent.
b. MINIMUM SPACE USE CHARGE. Customer has designated the following
square feet per facility as initial space use requirements:
FACILITY SQUARE FEET
-------- -----------
Chatsworth - 0 -
Colton - 0 -
Orangewood - 0 -
San Diego - 0 -
Customer shall pay Security Union a minimum space use charge
based upon this initial space requirement. Customer's space use
may be increased, if available and Customer shall pay for
increased space at the same square footage rate as for the
minimum space. The space use minimum may be decreased only if
Security Union has a substitute use or other need for such
decreased amount of space. Any decrease in the minimum space must
be agreed to in writing by both parties.
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<PAGE>
4. CORPORATIONS, LIMITED PARTNERSHIP AND NOTARY INQUIRY SYSTEM ("CPN").
The initial charge for inquiries into the CPN database shall be $2.45
per each inquiry. Security Union reserves the right to review and to
increase this fee annually after providing Customer with thirty (30)
days written notice of such increase.
Access to the above referenced services, information and records relating to the
counties selected is granted to Customer in accordance with the terms and
conditions of the referenced Access Agreement between Customer and Security
Union.
Additional Provisions:
1) LOS ANGELES COUNTY STARTER FILM EXCHANGE: CUSTOMER agrees to join in and be
bound by the terms and conditions of the "Starter Film Exchange Agreement"
dated April 1, 1980, between Title Records Inc. And SAFECO Title Insurance
Company (now Security Union Title Insurance Company), and any existing and
future amendments and reinstatements of the Starter Film Exchange
Agreement.
2) LOS ANGELES COUNTY CANCELED AND CLOSED TITLE ORDERS: Customer agrees to
note canceled Title Orders on its 180 day report of open orders and return
the list to Security Union by the 25th day of each month. Information to
eliminate or purge "open order" postings of Customer's closed and canceled
Title Orders from Security Union's computer system are to be keyed by
Security Union.
3) ALL OTHER COUNTIES - CANCELED AND CLOSED TITLE ORDERS: Customer agrees to
purge the "open order" file in Security Union's computer system at the
close or cancellation of each of its Title Orders. Information to eliminate
or purge "open order postings of Customer's closed and canceled Title
Orders from Security Union's computer system is to be keyed by Customer at
Customer's remote PCs.
4) ORANGE, RIVERSIDE AND SAN BERNARDINO COUNTY JOINT PLANTS: Access to the
above referenced services, information and records relating to any or all
of these counties, if selected, is granted to Customer in accordance with
and is subject to the terms and conditions of the Joint Title Plant
Agreement(s) and Computer Service Agreement(s) between Security Union and
the undersigned co-owners.
Customer: Security Union:
NEW CENTURY TITLE COMPANY SECURITY UNION TITLE INSURANCE COMPANY
By: By:
-------------------------------- ------------------------------------
Title: Title:
----------------------------- ---------------------------------
Date: Date:
------------------------------ ----------------------------------
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TITLE PLANT LEASE AND SERVICE AGREEMENT
THIS AGREEMENT IS ENTERED INTO THIS 19TH DAY OF MAY 1999 BY AND BETWEEN SECURITY
UNION TITLE INSURANCE COMPANY, A CALIFORNIA CORPORATION, (HEREINAFTER "SUTIC"),
SECURITY TITLE AGENCY, (HEREINAFTER "STA") SEVERALLY AND INDIVIDUALLY AND
CAPITAL TITLE AGENCY INC, AN ARIZONA CORPORATION (HEREINAFTER "CUSTOMER").
WITNESSETH:
WHEREAS, SUTIC and STA are engaged in the business of collecting, storing, and
disseminating automated real estate information; and
WHEREAS, STA has constructed and maintains an indexed database, documents, maps,
and other relevant material pertaining to real property in Maricopa County,
Arizona, commonly known as a Title Plant; and
WHEREAS, SUTIC has constructed and maintains a database of electronic copies of
recorded documents, maps, and other relevant material pertaining to real
property in Maricopa County, Arizona, commonly known as Document Images; and
WHEREAS, SUTIC has constructed and maintains a database containing the current
status of relevant tax information pertaining to real property in Maricopa
County, Arizona, commonly known as a Tax System; and
WHEREAS, CUSTOMER is a duly qualified title agency, doing business in Maricopa
County, Arizona; and
WHEREAS, CUSTOMER is desirous of leasing a copy of the Title Plant and having
automated access to the Title Plant, Document Images and Tax System; and
WHEREAS, SUTIC and STA are desirous of providing these automated related
services to CUSTOMER.
NOW, THEREFORE, in consideration of the mutual promises set forth herein, SUTIC,
STA and CUSTOMER agree as follows:
1. DEFINITIONS
For the purposes of this Agreement the following terms are defined:
DOCUMENT....is defined as a unique item recorded in the office of the
County Recorder and given a separate recording number.
DOCUMENT IMAGES...are defined as electronic representations of items stored
in the Image Database including Documents, Maps, Starters, and other
material that may be included in electronic form for use in the System.
MAP(S)....are defined as follows:
PLAT MAPS are maps recorded in the office of the County Recorder and given
a unique Book and Page number. These maps represent official subdivision
plats.
ASSESSOR MAPS are unique maps maintained by the office of the County
Assessor. These maps show each parcel of land identified for tax collection
purposes.
<PAGE>
ARB MAPS are unique maps provided and owned by STA. These maps are
maintained to show specific land identifiers for the title plant index.
STARTERS....are evidences of policies of title insurance, preliminary
reports, guarantees, binders, or other forms issued by a customer in the
course of their title insurance or title agency business.
SYSTEM.... is defined as the computer equipment, software programs, and
database of Document Images, Starters, Maps, and other material for use in
SUTIC'S Automated Image Services in said County.
SUPPLIER(S).....are defined as other parties or entities whose products or
data are encompassed as part of the System.
FILE FOLDER.....is defined as the collection of document images stored in
an electronic form related to a specific unit of work that CUSTOMER has
initiated and manages.
IMMEDIATE RETRIEVAL..... is defined as providing CUSTOMER immediate access
to the document image data base during SUTIC'S AND STA'S operating hours:
Monday through Friday, except holidays, from 7:00 a.m. until 7:00 p.m.; and
Saturdays, except holiday weekends, from 7:00 a.m. until 12:00 p.m. (Noon).
STA & SUTIC will allow CUSTOMER access to the system outside of normal
operating hours with the understanding that the system will be unattended
and that there will be periods when the system will be unavailable due to
normal data maintenance requirements.
OVERNIGHT RETRIEVAL.....is defined as the ordering of Document Images
during the Immediate Retrieval hours for delivery or retrieval of such
images the following business day.
2. DATA BASE
2.1 DATA BASE CONTENT
STA has an indexed title plant back to 1947, SUTIC has Images for Documents
recorded on or after January 1, 1988. SUTIC has or will acquire electronically
scanned image copies of other items defined as Maps, Plat Folders, and Starters
subject to availability. The Tax System is maintained in a current condition
subject to availability of information. The term "Document" and "Document
Images" include all such items unless the context indicates otherwise.
2.2 DATA BASE CURRENCY
SUTIC and STA will use its best efforts to update their database daily.
Information acquired today will be posted to the appropriate database by the
working day following the availability of source data.
3. DATA BASE ACCESS AND SERVICE
SUTIC AND STA hereby agree to provide non-exclusive access and CUSTOMER hereby
agrees to acquire information described herein for title searching or other
related purposes through the use of electronic access, and/or terminal devices
approved by SUTIC and STA.
4. EQUIPMENT
Charges for equipment provided by SUTIC or STA to CUSTOMER, if any, shall be as
set forth in the Exhibits hereto or as added by amendment hereof. CUSTOMER
hereby agrees that no equipment shall be used to access SUTIC'S or STA'S
communication network and databases except as provided or approved by SUTIC and
STA.
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<PAGE>
5. ACCESS AND SERVICE FEES
5.1 ACCESS FEES
See Exhibit "A"
5.2 IMAGE RETRIEVAL-WORKFLOW SOFTWARE
SUTIC will provide CUSTOMER a non-exclusive right to use the associated Document
Image Retrieval and Workflow and software subject to the License Terms contained
in Exhibit "B"
5.3 NETWORK SUPPORT CHARGE
The Network Support Charge as shown in exhibit "A" includes the central and
remote site CSU/DSU, telecommunications control unit, and network management.
The Network Support Charge may vary depending on the CUSTOMER'S method of
access.
5.4 TELECOMMUNICATIONS SUPPORT CHARGE
SUTIC will arrange and manage the required telecommunication services through
the local vendor or suppliers of SUTIC'S choice. The cost for data lines,
including installation of the data lines, firewalls, routers, hubs and monthly
maintenance will be billed to CUSTOMER on a pass through basis. The data line
charge may be increased or decreased accordingly, whenever the telephone company
or related communications costs increase or decrease.
5.5 TRAINING SERVICES
SUTIC and STA will provide reasonable initial training in the use of the systems
to access and retrieve Document Images, Title Plant and Tax information at no
additional charge. Additional training will be scheduled and provided quarterly.
5.6 SPECIAL SERVICES
In the event that CUSTOMER requests SUTIC or STA to supply special reports,
services or other items, CUSTOMER will pay the then current charges for labor,
out-of-pocket expenses and an administrative fee. An estimate of such charges
will be provided upon request.
5.7 TAXES
The fees and charges do not include taxes. CUSTOMER will pay, or reimburse,
SUTIC and STA for payment of, any applicable sales, use, personal property or
similar taxes and any government charges based on transactions hereunder,
exclusive of corporate income or franchise taxes based on SUTIC'S or STA'S net
income.
5.8 DUE DATE
All monies due from CUSTOMER are due and payable to SUTIC and STA on the tenth
(10th) day after receipt of an invoice from SUTIC or STA. CUSTOMER will also pay
SUTIC or STA a late payment charge equal to one and one half percent (1.5%) per
month of the sum then due with respect to all amounts not paid within fifteen
(15) days after the sum has become due.
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<PAGE>
5.9 FEE ADJUSTMENTS
SUTIC and STA may increase the fees set forth herein annually as of January 1,
by the percentage amount indicated by the annual change in the Consumer Price
Index, for urban wage earners and clerical workers for the local area as
compiled by the U.S. Department of Labor, Bureau of Labor Statistics ("Index")
for the twelve (12) months immediately preceding the adjustment date or a
minimum of 2% per annum, of the then current fees being charged, whichever
amount is greater.
SUTIC, STA AND CUSTOMER.... hereby agree to the following service level:
1. SUTIC and STA will provide CUSTOMER title plant, image and tax system
access. This access will be available through their existing WAN. This
will provide the CUSTOMER with the ability to request and retrieve
their chain of title, images and taxes from a single workstation.
Total integration of these systems will be completed by December,
1999.
2. CUSTOMER will provide SUTIC and STA with the names of the technical
personnel who will be responsible for the maintenance and training at
the CUSTOMER"S site.
6. OWNERSHIP RIGHTS AND RESTRICTIONS
6.1 RESTRICTIONS
CUSTOMER agrees that all of the information contained in the Title Plant,
Document Image Database, Tax Database, Arb Maps and other information provided
by SUTIC or STA are for CUSTOMER'S use only in its title insurance or title
agency business by those of its employees engaged in such line of business.
6.2 OWNERSHIP RIGHTS
SUTIC and STA own the information contained in the Title Plant Information
System. Nothing in this Agreement restricts SUTIC and STA from using the
information provided hereunder for any purpose or granting access thereto to any
other person. Equipment provided by SUTIC or STA, if any, remains the property
of SUTIC or STA as the case may be. All systems, programs, documentation and
databases (including without limitation, compression, storage, and retrieval
techniques and formats and any enhancements made thereto), are and will remain
the property of SUTIC and STA, or if applicable, their suppliers. SUTIC supplied
software is licensed to CUSTOMER subject to the terms and conditions set forth
in "B".
6.3 PROPRIETARY INFORMATION
CUSTOMER agrees that all SUTIC and STA supplied software, manuals and
documentation provided as part of this service are proprietary and confidential
information of SUTIC and STA or their suppliers. CUSTOMER will permit only its
employees or authorized representatives to have access to such material.
CUSTOMER further agrees to not make copies of such manuals, documentation, or
agreements, attachments, and exhibits. CUSTOMER or authorized user will return
all SUTIC and STA property upon termination or expiration of this Agreement.
7. LIABILITY
7.1 WARRANTY EXCLUSION AND LIMITATION OF DAMAGE
NEITHER SUTIC OR STA NOR ITS SUPPLIERS MAKE ANY WARRANTIES OR REPRESENTATIONS,
EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, CONCERNING THE SYSTEM, DOCUMENT IMAGES OR
OTHER INFORMATION IN THE SYSTEM OR THEIR ACCURACY OR COMPLETENESS. CUSTOMER
agrees that in no event will SUTIC or STA or its suppliers be liable for any
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<PAGE>
lost profits or for any special, consequential or exemplary damages, even if
SUTIC or STA has been advised of the possibility of such damages.
7.2 DISCLAIMER OF LIABILITIES
SUTIC, STA and CUSTOMER agree that no other person, firm or corporation not a
party to this Agreement acquires any rights under this Agreement. SUTIC, STA and
CUSTOMER also agree that neither SUTIC, STA nor their suppliers assume any
liability and will not be held liable (a) to CUSTOMER, or (b) to customers of
CUSTOMER, or (c) to insureds of CUSTOMER, or (d) to any persons to whom CUSTOMER
may furnish any title policy, binder, guarantee, endorsement or other title
assurance, or any report or title information, in each case by reason of any
error, defect or omission, or assertion thereof, (1) in SUTIC or STA'S System or
procedures or (2) in any Title Plant Report. Tax Report, Document Image or other
information furnished to CUSTOMER by SUTIC or STA.
7.3 INDEMNITY
CUSTOMER will indemnify, defend and hold harmless SUTIC and STA, its affiliates
and its suppliers, and their respective directors, officers, employees and
agents (the "Indemnified Parties"), against and in respect to any and all
claims, demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries, and deficiencies (including but not limited to investigatory costs
and reasonable attorneys' fees) which any Indemnified Party may at any time
suffer, incur, or become subject to as a result of or in connection with any of
the following: (a) the inaccuracy of any representation made by CUSTOMER; (b)
CUSTOMER'S breach of, or failure to perform, any of its warranties, covenants,
promises, or obligations arising under this Agreement; (c) CUSTOMER'S violation
of any Federal or State law, statute, or regulation; or (d) a claim or assertion
by any person (including but not limited to customers of CUSTOMER) that either
SUTIC or STA or any of its suppliers has any responsibility or liability arising
from or related to the information, services or Document Images provided by
SUTIC or STA through its System. With the written approval of SUTIC and STA,
CUSTOMER , at its own cost, may (i) provide for the defense of SUTIC or STA in
any action or litigation based upon or involving the claim or assertion and (ii)
pursue such litigation to final determination. CUSTOMER will have the right,
whether or not any action or litigation results, to compromise or settle the
claim on behalf of SUTIC and STA, but at the sole cost of CUSTOMER and with
notice to SUTIC and STA.
7.4 REPRESENTATIONS
CUSTOMER hereby represents and warrants to SUTIC and STA that: (a) neither its
execution of this Agreement nor its performance under this Agreement will be a
violation of any other agreement, judgment or order; and (b) it has investigated
SUTIC'S and STA'S System and maintenance procedures and found them to be
satisfactory for CUSTOMER'S business purposes.
8. TERM
8.1 INITIAL TERM
The term of this agreement shall commence on 6/1/1999 and shall continue for a
60 month period thereafter. Installation and parallel testing to begin 5/15/99.
8.2 RENEWAL TERM
CUSTOMER shall have the option of renewing this Agreement by notifying STA and
SUTIC of its intention to do so at least 90 days prior to the end of the then
current term.
9. SYSTEMS CHANGES
SUTIC and STA may in the future develop or acquire enhancements to the System,
including new hardware requirements and software, but is not obligated to do so.
SUTIC and STA will own all enhancements made by it even if an enhancement was
made at the request, suggestion or expense of CUSTOMER. In the event such
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enhancements materially affect the basic service to CUSTOMER, SUTICAND STA agree
to notify CUSTOMER prior to implementation.
10. COMPLIANCE WITH LAWS AND REGULATIONS
CUSTOMER agrees to use the Document Images or other information received from
STA and SUTIC in compliance with all applicable State and Federal laws and
regulations, including the Fair Credit Reporting Act (U.S.C.A. title 15, Chapter
41, Subchapter III).
11. DEFAULT
11.1 TERMINATION ON DEFAULT
If either party does not faithfully perform, or fails to perform, any of its
obligations under this Agreement and does not cure that default within thirty
(30) days after receipt of written notice specifying the default, then this
Agreement may be terminated by the party not in default.
11.2 REMEDIES
In the event that CUSTOMER discovers an error, defect or omission in any Title
Plant Report, Tax Report, Document Image or other information, SUTIC'S and STA'S
sole obligation, and CUSTOMER'S exclusive remedy with respect thereto, is to
make the necessary correction to the affected database and replace the report or
image with a duplicate of the applicable report or document. In the case of a
document the replacement will be made if a better image is available from the
source thereof (for example, for a recorded document, in the official records of
the Recorder). In the event of default in payment, SUTIC or STA MAY, UPON 15
days written notice to CUSTOMER, suspend the CUSTOMER'S access to the System or
the performance of other services without liability. Except as otherwise
provided, any right of termination or suspension of service is in addition to
any other remedy provided by law or equity.
11.3 NONWAIVER
Failure by either party to take action with respect to any breach of this
Agreement will not be construed as a waiver of the breach or any subsequent
breach of the same or any other provision of this Agreement. Either party may at
any time act upon any breach in accordance with applicable provisions of this
Agreement OR AS ALLOWED BY LAW.
12. MISCELLANEOUS
12.1 EXCUSED PERFORMANCE
Neither SUTIC or STA will be liable for delay in delivery or performance, and is
excused from any failure to deliver or perform, due to causes beyond its
reasonable control. Such causes may include acts of nature, governmental
actions, fire, labor difficulty, shortages, civil disturbances, transportation
problems, interruptions of power or communications, failure of SUTIC or STA'S
suppliers or subcontractors, or natural disasters. In particular, CUSTOMER
agrees that SUTIC and STA will incur no liability to CUSTOMER in the event of
damage or destruction to the System or any part of the System from any cause
whatsoever. Neither SUTIC or STA will be required to reconstitute or reconstruct
the then existing System if it is damaged or destroyed from any cause
whatsoever. SUTIC and STA do, however, covenant and agree that they it will use
their best efforts to devise and implement reasonable and adequate security
measures to reduce the risk of damage or destruction of the System or other
interruptions of the use of the System, all in accordance with reasonable
prudent business practice.
12.2 ASSIGNMENT OR TRANSFER
(a) NONASSIGNABLE:
This Agreement cannot be assigned, in whole or in part, by CUSTOMER without the
prior written consent of SUTIC and STA, which consent shall not be unreasonably
withheld.
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<PAGE>
(b) OTHER TRANSFERS:
If CUSTOMER'S rights and benefits in this Agreement are transferred in whole or
in part by involuntary method, or by operation of law, or by merger, SUTIC and
STA will have the right to terminate this Agreement if the result is not
satisfactory to SUTIC or STA. The obligations of CUSTOMER, including
restrictions on use of title plant, tax and document images, will continue with
any entity which is the survivor of CUSTOMER by reorganization, merger, or
acquisition.
(c) BANKRUPTCY OF CUSTOMER:
Notwithstanding the definite term of this Agreement, it will automatically
terminate upon the filing of a petition in bankruptcy by CUSTOMER, or the
appointment of a receiver for CUSTOMER, or the adjudication in bankruptcy on an
involuntary partition against CUSTOMER, or if any general assignment for the
benefit of creditors by CUSTOMER of its assets is made.
(d) ASSIGNMENT BY SUTIC OR STA:
SUTIC or STA will have the right, without CUSTOMER'S consent, to assign this
Agreement to any affiliate of SUTIC or STA , to a corporation with which it may
merge or consolidate, or to a purchaser of substantially all of SUTIC.S or STA'S
assets related to the line of business to which this Agreement pertains.
12.3 BENEFIT OF THE AGREEMENT
This Agreement will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assignees.
12.4 NO THIRD PARTY BENEFICIARIES
This Agreement is solely for the benefit of the parties hereto and no third
party will have the right or claim to the benefits afforded any party hereunder.
12.5 HEADINGS
The headings used in this Agreement are for convenience only, will not be deemed
to limit, characterize or in any way affect the provisions of this Agreement.
12.6 CONSTRUCTION AND PERFORMANCE
This Agreement will not be construed against the party preparing it, but will be
construed as if all parties prepared this Agreement. The heading of each
numbered paragraph are to assist in reference only and are not to be used in the
interpretation of the paragraphs.
12.7 SAVINGS CLAUSE
If any one or more of the provisions of this Agreement, or its application to
any person or circumstance is to any extent adjudged invalid, unenforceable,
void or voidable for any reason by a court of competent jurisdiction, each and
all of the remaining provisions of this Agreement and their application to other
persons or circumstances will not be affected and will be valid and enforceable
to the fullest extent permitted by law.
12.8 SURVIVAL
Following the expiration or termination of this Agreement, whether by its terms,
operation of law or otherwise, any provision regarding ownership rights,
restrictions on use, liability, warranty exclusion, indemnification and monies
owed and any provision required for the interpretation of this Agreement or
necessary for the full observation and performance by each party hereto of all
rights and obligations arising prior to the date of expiration or termination
will survive such expiration or termination.
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<PAGE>
12.9 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties pertaining
to the subject contained in it and supersedes all prior and contemporaneous
agreements, representations, and understanding of the parties pertaining
thereto. No supplement, modification or amendment of this Agreement will be
binding unless executed in writing by the parties. No waiver will be binding
unless executed in writing by the party making the waiver.
12.10 COUNTERPART EXECUTION
This Agreement may be executed simultaneously in two or more counterparts, each
of which will be deemed an original but which together will constitute one and
the same instrument.
12.11 GOVERNING LAW
This Agreement shall be construed and enforced in accordance with the laws of
the State of Arizona. Any dispute between parties arising out of or related to
this agreement shall be resolved by arbitration in accordance with the
Commercial Arbitration Rules of the American Association unless expressly
prohibited by state or federal laws before resorting to court action. The
decision and award of the arbitrators shall be final and binding and the award
so rendered may be entered in any court having jurisdiction of the matter. All
fees and expenses of the arbitrator(s) and all other expenses of the arbitration
shall be borne by the parties to such arbitration in the manner determined by
the arbitrator(s). The prevailing party in any court action for enforcement of
this agreement shall be entitled to its costs and reasonable attorney's fees.
12.12 EXHIBITS
The Exhibits attached to this Agreement are incorporated herein by reference as
if set forth in full.
12.13 NOTICES
(a) METHODS AND ADDRESS:
All written notices permitted or required to be given under this Agreement may
be delivered personally or by reputable overnight courier to the office of each
of the parties, or mailed to the office of each party by Registered or Certified
United States Mail when addressed as set forth below its respective signature.
In addition, except for notices of default or termination, notices may be
delivered by facsimile or first class mail.
(b) CHANGES OF ADDRESS:
Either party may, by written notice to the other sent in the manner set forth
above, or via first class mail, change the address to which its notices are to
be sent.
(c) EFFECTIVE DATE:
Notices will be deemed communicated on the date delivered, if delivered
personally or by courier, and on the third business day after mailing, if
mailed.
Page VIII
<PAGE>
The parties have executed this Agreement as of the date first above written.
SECURITY UNION TITLE INSURANCE COMPANY
BY:
------------------------------------
Authorized Signature
------------------------------------
Name (prints or type)
------------------------------------
Title
Notice Address: 111 West Monroe
Suite 722
Phoenix, Az. 85003
Attn.: Rodger Johnson, Arizona Area Manager
SECURITY TITLE AGENCY
BY:
------------------------------------
Authorized Signature
------------------------------------
Name (print or type)
------------------------------------
Title
Notice Address: 3620 North Fourth Avenue
Phoenix, Az. 85013
Attn: Ronald H Erhardt, Senior Vice President
CAPITAL TITLE AGENCY INC.
By:
------------------------------------
Authorized Signature
------------------------------------
Name (print or type)
------------------------------------
Title
Notice Address:
Page IX
<PAGE>
EXHIBIT "A"
ACCESS AND SERVICE FEES
SUTIC and STA will authorize CUSTOMER access to their Maricopa County Title
Plant, Image and Tax Databases under the following pricing schedule:
SCHEDULE I
The base fee covers the opening of up to 2,000 orders per month and covers
access to the STA TITLE PLANT, the SUTIC DOCUMENT IMAGE DATABASE AND THE
SUTIC TAX SYSTEM Base Fee------------------------------$15,000.00 per month
Additional orders over 2,000 per month-------------- $3.00 per order opened
SCHEDULE II
Should customers order count drop below 1,800 orders opened per month for 3
consecutive months then customers order base will drop to 1,500 and the
base fee will be adjusted to: Base Fee-----------------$12,500.00 per month
Additional orders over 1,500 per month-------------- $5.00 per order opened
Once customer has returned to the estimated 2,000 orders per month then
schedule I will apply.
STARTERS
Stored Starters (To be determined)
EQUIPMENT
Specifications on equipment and assistance to integrate the SUTIC/STA
software with Customers LAN/WAN will be provided. Any equipment cost or
communication line charges will be the responsibility of CUSTOMER.
NETWORK SUPPORT CHARGE $400.00 per month per site
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<PAGE>
EXHIBIT "B"
SOFTWARE LICENSE TERMS
Attached to and made a part of that certain Agreement dated June 1, 1999 by and
between SECURIT UNION TITLE INSURANCE COMPANY ("SUTIC"),a California
corporation, and CAPITAL TITLE AGENCY, an Arizona corporation an Arizona
corporation ("CUSTOMER").
1. CERTAIN DEFINITIONS
The "Product" means the software delivered by SUTIC to CUSTOMER, and all
enhancements thereto, for use to access Document Images or other information per
the Agreement to which this License is attached as an exhibit. Other defined
terms have the meanings set forth in the Agreement.
2. COPYRIGHT
The Product is owned or licensed by SUTIC or its suppliers. It is protected by
United States copyright laws and international treaty provisions.
3. CERTAIN RIGHTS
This License grants CUSTOMER the right to use the Product during the Term of the
Agreement on any personal computer or workstation provided by SUTIC or which
meets SUTIC'S specifications solely for the purpose of accessing Document
Images. At the expiration or termination of the Agreement, CUSTOMER will remove
all copies of the Product from its computers and any storage media.
4. BACKUP COPIES
CUSTOMER may make one copy of the Product software for backup purposes, Written
documentation may not be copied or distributed to others.
5. CERTAIN RESTRICTIONS
CUSTOMER may not disclose or transfer the Product except in connection with a
permitted transfer of the Agreement. CUSTOMER may not reverse engineer,
decompile. disassemble, copy or create a derivative work of the Product contrary
to this License or applicable law.
6. LIMITED WARRANTY/LIMITATION OF LIABILITY
The Product is licensed "AS IS" and the exclusions, limitations, disclaimers,
and indemnities in paragraph 7 of the Agreement include the Product as part of
the System.
7. U. S. GOVERNMENT RESTRICTED RIGHTS
The Product and related materials are provided with RESTRICTED RIGHTS. Use,
duplication or disclosure by the Government is subject to restrictions as set
forth in subparagraph (c)(1)(ii) of the Rights of Technical Data and Computer
Software clause at DFARS 252.227-7013 or (c)(1) and (2) of the Commercial
Computer Software--Restricted Rights clause at 48 CFR 52.227o 19 as applicable.
Contractor/manufacturer is Chicago Title and Trust Company and or its affiliated
companies at the address set forth in the Agreement.
SECURITY UNION TITLE INSURANCE CAPITAL TITLE AGENCY
COMPANY
By: By:
---------------------------------- -------------------------------------
Name: Name:
-------------------------------- -----------------------------------
(Print) (Print)
Page XI
PROMISSORY NOTE
$3,130,000.00 JULY ___, 1999
FOR VALUE RECEIVED, and upon the terms and conditions set forth herein, CTG
BUILDING CO., an Arizona corporation ("BORROWER"), promises to pay to the order
of GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation ("LENDER"), at
Lender's office located at 650 Dresher Road, P. O. Box 809, Horsham,
Pennsylvania 19044-0809, Attn: Servicing - Accounting Manager, or at such other
place as Lender may designate to Borrower in writing from time to time, the
principal sum of Three Million One Hundred Thirty Thousand and No/100 Dollars
($3,130,000.00), or so much thereof as is outstanding and unpaid, together with
interest thereon at the rate of eight and thirty-two/100ths percent (8.32%) per
annum ("INTEREST RATE"), in lawful money of the United States of America, which,
at the time of payment, shall be legal tender in payment of all debts and dues,
public and private.
1. COMPUTATION OF INTEREST. Interest under this Note shall be paid in
arrears and shall be calculated based on a 360-day year and paid for the actual
number of days elapsed for any whole or partial month in which interest is being
calculated. Interest shall accrue from the date on which funds are advanced
(regardless of the time of day such advance is made) through and including the
day on which funds are repaid, unless payment is received by Lender prior to the
time set forth in Section 2.03 hereof.
2. PAYMENT OF PRINCIPAL AND INTEREST.
2.01 PRINCIPAL AND INTEREST PAYMENTS. Borrower shall pay principal and
interest due under this Note as follows:
Borrower shall pay consecutive monthly installments of principal and
interest in the amount of Twenty-three Thousand Nine Hundred Thirty-nine and
73/100ths Dollars ($23,939.73) (each a "MONTHLY AMOUNT"), beginning on the tenth
(10th) day of September, 1999 ("FIRST PAYMENT DATE"), and continuing on the
tenth (10th) day of each and every successive month thereafter (each a "PAYMENT
DATE") through and including the Payment Date immediately prior to the Maturity
Date (as defined below); and
On the tenth (10th) day of August, 2009 ("MATURITY DATE"), the entire
outstanding principal balance hereof, together with all accrued but unpaid
interest thereon and any other amounts due under the Note or the other Loan
Documents (hereafter defined) shall be due and payable in full.
2.02 PAYMENT OF SHORT INTEREST. If this Note is executed on a date other
than the tenth (10th) day of a calendar month, Borrower shall pay to Lender,
contemporaneously with the execution of this Note, an interest payment
calculated by multiplying (a) the number of days from and including the date of
this Note to and including the ninth (9th) day of the following month (b) by a
daily rate based on the Interest Rate calculated for a 360-day year.
2.03 METHOD OF PAYMENT. Each payment due hereunder shall not be deemed
received by Lender until received on a Business Day (as defined in the Security
Instrument) in federal funds immediately available to Lender prior to 2:00 p.m.
local time at the place then designated by Lender. Any payment received on a
Business Day after the time established by the preceding sentence, shall be
deemed to have been received on the immediately following Business Day for all
purposes, including, without limitation, the accrual of interest on principal.
2.04 APPLICATION OF PAYMENTS. Payments under this Note shall be applied
first to the payment of late fees and other costs and charges due in connection
with this Note, as Lender determines in its sole discretion, then to the payment
of accrued but unpaid interest, and then to reduction of the outstanding
principal balance (in inverse order of maturity whether or not then due), but
such application shall not reduce the amount of the fixed monthly installments
required to be paid hereunder unless partial prepayments are expressly permitted
in the event of partial release of collateral under Section 2.05(b) below. No
principal amount repaid may be reborrowed. All amounts due under this Note shall
be payable without setoff, counterclaim or any other deduction whatsoever.
2.05 LOAN REPAYMENT AND DEFEASANCE.
(a) REPAYMENT. Other than as set forth in this Section 2.05, or as
required or permitted pursuant hereto in connection with a casualty or
condemnation, Borrower shall have no right to prepay all or any portion of the
indebtedness evidenced by this Note (sometimes referred to in this Section 2.05
as "LOAN") during the period commencing on the date hereof through, but not
including, the Payment Date which is three (3) months prior to the Maturity Date
("OPTIONAL PREPAYMENT DATE".) From and after the Optional Prepayment Date, the
Loan may be prepaid in whole or in part, on any Payment Date, together with
accrued interest to the date of such prepayment on the principal amount prepaid,
without penalty or premium. Any such prepayment shall be subject, in each case,
to the satisfaction of the condition precedent that Borrower shall provide not
less than thirty (30) days' prior written notice to Lender specifying the
Payment Date on which such prepayment is to occur and indicating the principal
amount of the Note to be so prepaid.
(b) VOLUNTARY DEFEASANCE OF THE NOTE. On or after that date ("OPTIONAL
DEFEASANCE DATE") which is the earlier to occur of (i) three years after the
date of this Note or (ii) two years after the Loan is sold into a securitization
("SECURITIZATION"), and subject to confirmation from applicable rating agencies
("RATING Agencies") having been obtained therefor and to the terms and
conditions set forth in this Section 2.05(b), Borrower may defease all (but not
less than all) of the Loan (hereinafter, "DEFEASANCE"). No Defeasance shall be
required on or after the Optional Prepayment Date. Defeasance shall be subject
to satisfaction of each of the following conditions precedent:
(i) Borrower shall provide not less than thirty (30) days' prior
written notice to Lender specifying a date ("DEFEASANCE DATE") which
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<PAGE>
shall be a Payment Date, on which the amount required to defease the
Loan ("DEFEASANCE DEPOSIT") is to be made and on which the Defeasance
is to occur, as well as the anticipated outstanding principal amount
of this Note as of the Defeasance Date.
(ii) Borrower shall pay to Lender all accrued and unpaid interest
on the outstanding principal balance of this Note to but not including
the Defeasance Date.
(iii) Borrower shall pay to Lender all other sums, not including
scheduled interest or principal payments, then due under this Note,
the Security Instrument and any of the other Loan Documents.
(iv) No Event of Default shall exist on the Defeasance Date.
(v) Borrower shall pay to Lender the required Defeasance Deposit
for the Defeasance.
(vi) Borrower shall execute and deliver one or more security
agreements in form and satisfactory to Lender (collectively, "SECURITY
AGREEMENT"), creating a first priority lien on, and security interest
in, the Defeasance Deposit and the U.S. Government Securities
purchased with Defeasance Deposit in accordance with the provisions of
Section 2.05(c).
(vii) Borrower shall deliver to Lender an opinion of Borrower's
counsel, which opinion shall be in form and substance satisfactory to
Lender in its sole discretion, stating, among other things, that
Lender has a perfected first priority security interest in the U.S.
Government Securities purchased with the Defeasance Deposit.
(viii) If required by the applicable Rating Agencies, Borrower
also shall deliver or cause to be delivered from Borrower's counsel a
non-consolidation opinion with respect to the Successor Borrower (as
defined below), if any, which opinion shall be in form and substance
satisfactory to Lender in its sole discretion and to the applicable
Rating Agencies. In addition, if the Loan is included in any REMIC
formed pursuant to a Securitization, Borrower also shall deliver or
cause to be delivered an opinion of Borrower's counsel, which opinion
shall be in form and substance satisfactory to Lender in its sole
discretion, stating that (A) after a Defeasance, the Loan will
continue to be a "qualified mortgage" within the meaning of Section
860G of the United States Internal Revenue Code (as now or hereafter
amended, "CODE") and (B) the REMIC will not fail to maintain its
status as a "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code as a result of such Defeasance.
(ix) Borrower shall deliver to Lender a certification from
Borrower, in form and substance satisfactory to Lender, certifying
that the requirements set forth in this Section 2.05(b) have been
satisfied.
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<PAGE>
(x) Borrower shall deliver such other certificates, documents or
instruments as Lender may reasonably request, all of which shall be in
form and substance acceptable to Lender.
(xi) Borrower shall pay all reasonable costs and expenses of
Lender incurred in connection with the Defeasance, including any costs
and expenses associated with the Release Instruments (as defined in
Section 2.05(f) hereof) and reasonable attorneys fees and expenses.
(xii) Borrower shall deliver to Lender a confirmation, in form
and substance satisfactory to Lender, by a "Big Six" independent
certified public accounting firm, that Defeasance Deposit is
sufficient to pay all Scheduled Defeasance Payments and other amounts
required to be paid by Borrower hereunder in connection with the
proposed Defeasance.
(xiii) Borrower shall deliver to Lender confirmation, in form and
substance satisfactory to Lender, that all conditions to Defeasance
have been met from any applicable Rating Agency that has required as a
condition to Defeasance that such conditions have been met.
(c) PURCHASE OF U.S. GOVERNMENT SECURITIES. In connection with the
Defeasance of this Note, Borrower hereby appoints Lender as its agent and
attorney-in-fact for the purpose of using the Defeasance Deposit to purchase
U.S. Government Securities (which purchases, if made by Lender, shall be made on
an arms-length basis at then prevailing market rates) which provide payments on
or prior to, but as close as possible to, all successive Payment Dates after the
Defeasance Date (including the outstanding principal balance of this Note due on
the Maturity Date), and in amounts equal to the full amounts due on each Payment
Date under this Note ("SCHEDULED DEFEASANCE PAYMENTS"). Borrower, pursuant to
the Security Agreement or other appropriate document, shall irrevocably
authorize and direct that the payments received from the U.S. Government
Securities may be made directly to Lender and applied to satisfy the obligations
of the Borrower under this Note. In connection with the Defeasance of the Loan,
any portion of the Defeasance Deposit in excess of the amount necessary to
purchase the U.S. Government Securities required by this Section 2.05(c) and
satisfy Borrower's obligations under Section 2.05 shall be remitted to Borrower.
Any amounts received in payment on the U.S. Government Securities in excess of
the amounts necessary to make monthly payments pursuant to Section 2 (including
payments due on the Maturity Date) shall treated in accordance with the terms of
Section 2.04 hereof.
(d) SUCCESSOR BORROWER OPTION. If requested by Borrower, in connection
with a Defeasance of the Loan, Lender, at Borrower's expense, shall establish or
designate one or more successor entities ("SUCCESSOR BORROWER") and Borrower
shall transfer and assign all obligations, rights and duties under and to this
Note, together with the pledged U.S. Government Securities to the Successor
Borrower. The obligation of the Lender to establish or designate a Successor
Borrower shall be retained by the original Lender named herein notwithstanding
the sale or transfer of this Loan unless such obligation is specifically assumed
by the transferee. The Successor Borrower shall assume in writing the
obligations under this Note, the Security Agreement and the other Loan
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<PAGE>
Documents, by agreements in form and substance satisfactory to Lender, whereupon
Borrower shall be relieved of its obligations thereunder. Borrower shall pay
$1,000 to any such Successor Borrower as consideration for assuming Borrower's
obligations under the Note and the Security Agreement. Notwithstanding anything
in this Note or the Security Instrument to the contrary, no other assumption fee
shall be payable upon a transfer of this Note in accordance with this Section
2.05(d), but Borrower shall pay all out-of-pocket costs and expenses incurred by
Lender, including Lender's reasonable attorneys fees and expenses, incurred in
connection therewith.
(e) REPAYMENT UPON DEFAULT. If all or any part of the principal amount
of this Note is prepaid upon acceleration of this Note following the occurrence
of an Event of Default prior to the Optional Prepayment Date, then, in addition
to such principal payment, Borrower shall be required to make such payments
("YIELD MAINTENANCE PAYMENTS") in an amount equal to the greater of (i) one
percent (1%), or (ii) the excess, if any, of (A) the aggregate respective
present values of all scheduled interest and principal payments payable on each
Payment Date in respect of this Note for the period from the date of such
prepayment upon acceleration to the Maturity Date, discounted monthly at a rate
equal to the Treasury Constant Maturity Yield Index (defined below) and based on
a 360-day year of twelve 30-day months over (B) the then current outstanding
principal amount of this Note. For purposes hereof, "Treasury Constant Maturity
Yield Index" shall mean the average yield for "This Week" as reported by the
Federal Reserve Board in Federal Reserve Statistical Release H.15(519) ("FRB
RELEASE") published during the second full week preceding the Prepayment Date
for instruments having a maturity coterminous with the remaining term of this
Note. In the event the FRB Release is no longer published, Lender shall select a
comparable publication to determine the Treasury Constant Maturity Yield Index.
If there is no Treasury Constant Maturity Yield Index for instruments having a
maturity coterminous with the remaining term of this Note, then the weighted
average yield to maturity of the Treasury Constant Maturity Yield Indices with
maturities next longer and shorter than such remaining average life to maturity
shall be used, calculated by averaging (and rounding upward to the nearest whole
multiple of 1/100 of 1% per annum, if the average is not such a multiple) the
yields of the relevant Treasury Constant Maturity Yield Indices (rounded, if
necessary, to the nearest 1/100 of 1% with any figure of 1/200 of 1% or above
rounded upward). The Yield Maintenance Payments to be paid in connection with
any prepayment under this Section 2.05(e) shall be determined by Lender and
shall be conclusive and binding on Borrower (absent manifest error). For
purposes of this Section 2.05(e), the unpaid principal amount due on this Note
on the date of prepayment shall be determined after giving effect to any payment
of scheduled amortization made on such date.
(f) RELEASE OF THE MORTGAGED PROPERTY. No repayment, prepayment or
Defeasance of all or any portion of this Note shall cause, give rise to a right
to require, or otherwise result in, the release of the real or personal property
subject to the lien or mortgage created by the Security Instrument (referred to
in this Section 2.05(f) as "MORTGAGED PROPERTY"), except as follows:
(i) If Borrower has elected Defeasance, and the requirements of
Section 2.05(b) have been satisfied, the Mortgaged Property shall be
released from the lien and mortgage created by the Security
Instrument, whereupon the U.S. Government Securities pledged pursuant
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<PAGE>
to the Security Agreement shall be the sole source of Borrower's
collateral securing this Note. The Security Instrument shall otherwise
remain in full force and effect as to provisions not pertaining to the
Mortgaged Property, subject to Section 2.05(d) above.
(ii) In connection with the release of the Mortgaged Property
contemplated in this Section 2.05(f), Borrower shall submit to Lender,
not less than thirty (30) days prior to the Defeasance Date, a release
of the Mortgaged Property (and related Loan Documents approved by
Lender) for execution by Lender which shall be in a form appropriate
in the applicable state and otherwise satisfactory to Lender in its
reasonable discretion, along with all other documentation Lender
reasonably requires to be delivered by Borrower in connection with
such release (collectively, "RELEASE INSTRUMENTS"), together with a
certification from Borrower, in form and substance satisfactory to
Lender, certifying that such documentation (A) is in compliance with
all Legal Requirements, and (B) will effect such releases in
accordance with the terms of this Section 2.05.
3. SECURITY; LOAN DOCUMENTS. The indebtedness evidenced by this Note and
the obligations created hereby (including without limitation the amounts
authorized by Section 4 to be collected by Lender and the Prepayment
Consideration when due hereunder) are secured by, among other things, a first
mortgage, security interest and lien on certain real and personal property
collateral of Borrower, tangible and intangible, as described more particularly
in that certain Deed of Trust and Security Agreement ("SECURITY INSTRUMENT")
from Borrower to Lender, dated as of date hereof. The Security Instrument
together with this Note and all other documents to or of which Lender is a party
or a beneficiary now or hereafter evidencing, securing, guarantying, modifying
or otherwise relating to the indebtedness evidenced hereby, and all extensions,
renewals and modifications thereof, are collectively referred to herein as the
"LOAN DOCUMENTS."
4. DEFAULT.
4.01 EVENT OF DEFAULT. The occurrence of any of the following shall
constitute an event of default ("EVENT OF DEFAULT") under this Note: (a) if any
payment of principal and interest or any other payment required under this Note
is not received by Lender on the date such payment is due (except that no grace
period is provided for the payment of principal and interest due on the Maturity
Date or upon acceleration of indebtedness following the occurrence of an Event
of Default); or (b) if any default should occur under any of the other Loan
Documents which is not fully cured following applicable notice or prior to the
expiration of any applicable grace or cure period. Upon the occurrence of an
Event of Default, at Lender's option, the outstanding principal balance of this
Note, together with all unpaid interest accrued thereon and all other sums dues
hereunder or under any other of the other Loan Documents, shall, without notice
or prior demand, immediately become due and payable.
4.02 LATE CHARGES. If any payment is not received by Lender on or before
the date on which such payment originally was due (as such due date may be
extended by applicable grace period, if any), then, in addition to any default
interest payments due hereunder, Borrower also shall pay to Lender a late charge
in an amount equal to five percent (5.0%) of the amount of such overdue payment
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to defray the expenses incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of the
delinquent payment. Such late charge shall be immediately due and payable,
without notice or demand therefor.
4.03 DEFAULT INTEREST RATE. If this Note is not paid in full on or before
the Maturity Date or the date on which the due date of the indebtedness has been
accelerated pursuant to the provisions hereof, the unpaid principal and accrued
interest and other amounts then due shall bear interest at a rate per annum
("DEFAULT INTEREST RATE") equal to the lesser of (a) five percent (5.0%) in
excess of the Interest Rate or (b) the maximum rate of interest, if any, which
may be charged or collected from Borrower under applicable law. In addition,
Lender shall have the right, without acceleration of the indebtedness, to
collect interest at the Default Interest Rate on any payment due hereunder
(including without limitation late charges and fees for legal counsel) which is
not received by Lender on or before the date on which such payment originally
was due (as such due date may be extended by applicable grace period, if any).
Interest at the Default Interest Rate shall be immediately due and payable from
the due date specified herein and shall accrue until all Events of Default have
been fully cured or full payment is received, as applicable.
4.04 INTEREST ON JUDGMENTS. Interest shall accrue on any judgment obtained
by Lender in connection with the enforcement or collection of this Note until
such judgment amount is paid in full at a rate equal to the greater of (a) the
Default Interest Rate or (b) the legal rate applicable to judgments within such
jurisdiction; provided, however, that interest shall not accrue at a rate in
excess of the maximum rate of interest, if any, which may be charged or
collected from Borrower under applicable law.
4.05 CUMULATIVE REMEDIES; ATTORNEY FEES. The remedies of Lender in this
Note and in the other Loan Documents, or at law or in equity, shall be
cumulative and concurrent, and may be pursued singly, successively or together
in Lender's sole discretion and as often as occasion therefor shall arise. If
Borrower's obligations under this Note or any of the other Loan Documents are
enforced by Lender through an attorney-at-law, or any payment due under this
Note or the other Loan Documents is collected by or through an attorney-at-law
or collection agency, Borrower agrees to pay all costs incurred by Lender in
connection therewith, including, but not limited to, reasonable fees and
disbursements of legal counsel (whether with respect to a retained firm or
Lender's in-house staff) and collection agency costs, whether or not suit be
brought. No provision of this Section 4 shall be construed as an agreement or
privilege to extend the date on which any required payment is due (subject to
the applicable grace period, if any), nor as a waiver of any other right or
remedy accruing to Lender by reason of the occurrence of an Event of Default.
The payments required under this Section 4 shall be in addition to, and shall in
no way limit, any other rights and remedies provided for in this Note or any of
the other Loan Documents, nor any other remedies provided by law or in equity,
and shall be added to the principal evidenced by this Note and deemed secured by
the Security Instrument and other Loan Documents.
5. LIMITATIONS ON RECOURSE. Notwithstanding anything to the contrary
contained in this Note, the liability of Borrower and of any general partner,
principal or member of Borrower to pay the indebtedness evidenced by this Note
and for the performance of the other agreements, covenant and obligations
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contained herein and in the other Loan Documents shall be limited as set forth
in Article 15 of the Security Instrument.
6. NO USURY. This Note is subject to the express condition that at no time
shall Borrower be required or obligated to pay interest (or any other amount
agreed to be paid hereunder which shall be deemed to be interest) at a rate
which would subject Lender to either civil or criminal liability as a result of
being in excess of the maximum interest rate which Borrower is permitted by
applicable law to pay. If, from any circumstance whatsoever, Borrower is at any
time required or obligated to pay interest (or any other amount agreed to be
paid hereunder shall be deemed to be interest) at a rate in excess of such
maximum rate, then the amount to be paid immediately shall be reduced to such
maximum rate, and, as required by applicable law, all previous payments in
excess of such maximum shall be deemed to have been payments, in reduction of
the principal balance owing under this Note in the inverse order of maturity
(whether or not then due) or, at the option of Lender, be paid over to Borrower
and not to the payment of interest. All sums paid or agreed to be paid to Lender
for the use, forbearance or detention of the indebtedness evidenced hereby
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full stated term of this Note until payment
in full so that the rate or amount of interest on account of said indebtedness
does not exceed the maximum lawful rate of interest from time to time in effect
and applicable to this Note for so long as the Note is outstanding. This Section
will control all agreements between Borrower and Lender in connection with this
Note.
7. GENERAL CONDITIONS.
7.01 NO WAIVER BY LENDER. No failure to accelerate the debt evidenced
hereby nor failure or delay in exercising any other right or remedy upon the
occurrence of an Event of Default hereunder, or any acceptance of a partial or
past due payment, or indulgences granted from time to time shall be construed
(a) as a novation of this Note or as a reinstatement of the indebtedness
evidenced hereby, (b) as a waiver or impairment of Lender's right of
acceleration or any other right or remedy available to Lender upon the
occurrence of an Event of Default, or (c) as a waiver of Lender's right
thereafter to insist upon strict compliance with the terms of this Note or any
of the other Loan Documents; and Borrower hereby expressly waives the benefit of
any statute or rule of law or equity now provided, or which may hereafter be
provided, which would produce a result contrary to or in conflict with the
foregoing. No extension of the time for payment of any amount due under this
Note or under any of the other Loan Documents made by Lender's agreement with
any person now or hereafter liable for the payment thereof shall operate to
release, discharge, modify, change or affect the original liability of Borrower
under this Note or any such other person, either in whole or in part unless
Lender agrees otherwise in writing.
7.02 BORROWER'S WAIVERS. Borrower, for itself and all others who may become
liable for payment of all or any part of the indebtedness evidenced by this
Note, hereby waives presentment for payment, demand, protest, and notice of
dishonor, protest, nonpayment, demand, intent to accelerate, and acceleration.
Borrower, for itself and all others who may become liable for payment of all or
any part of the indebtedness evidenced by this Note, hereby further waives and
renounces, to the fullest extent permitted by law, all rights to the benefits of
any moratorium, reinstatement, marshaling, forbearance, valuation, stay,
extension, redemption, appraisement, exemption and homestead now or hereafter
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provided by the Constitution and laws of the United States of America and of
each state thereof, both as to party and property (real and personal), against
the enforcement and collection of the obligations evidenced by this Note or the
other Loan Documents.
7.03 UNCONDITIONAL PAYMENT. If any payment received by Lender hereunder
shall be deemed by a court of competent jurisdiction to have been a voidable
preference or fraudulent conveyance under any bankruptcy, insolvency or other
debtor relief law, then the obligation to make such payment shall survive any
cancellation or satisfaction of this Note or return thereof to Borrower and
shall not be discharged or satisfied with any prior payment thereof or
cancellation of this Note, but shall remain a valid and binding obligation
enforceable in accordance with the terms and provisions hereof, and such payment
shall be immediately due and payable upon demand. No release of any security for
this Note or any party liable for payment of this Note shall release or affect
the liability of Borrower or any other party who may become liable for payment
of all or any part of the indebtedness evidenced by this Note. Lender may
release any guarantor, surety or indemnitor of this Note from liability, in
every instance without the consent of Borrower hereunder and without waiving any
rights which Lender may have hereunder or under any of the other Loan Documents
or under applicable law or in equity.
7.04 AUTHORITY. Borrower represents that Borrower has full power, authority
and legal right to execute, deliver and perform its obligations pursuant to this
Note, that the execution, delivery and performance of this Note has been duly
authorized, that the person executing this Note on Borrower's behalf has
authority to do so, and that this Note, once executed by Borrower, constitutes
the valid and binding obligation of Borrower, enforceable in accordance with its
terms.
7.05 NEGOTIABLE INSTRUMENT. Borrower agrees that this Note shall be deemed
a negotiable instrument, even though this Note, absent this paragraph, may not
otherwise qualify as a negotiable instrument under applicable law.
7.06 SALE OF LOAN BY LENDER. Lender shall have the right to transfer, sell
or assign this Note, the Security Instrument and the other Loan Documents, and
the Obligations hereunder.
8. MISCELLANEOUS.
8.01 NOTICES. All notices and other communications under this Note or under
the other Loan Documents are to be in writing, addressed to the respective party
as set forth in this section, and shall be deemed to have been duly given (a)
upon delivery, if delivered in person with receipt acknowledged by the recipient
thereof, (b) one (1) business day after having been deposited for overnight
delivery, fee prepaid, with any reputable overnight courier service, or (c)
three (3) business days after having been deposited in any post office or mail
depository regularly maintained by the U.S. Postal Service and sent by
registered or certified mail, postage prepaid, return receipt requested. Initial
addresses for each party are as follows:
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Borrower: CTG BUILDING CO.
c/o Capital Title Group, Inc.
1455 North Scottsdale Road, Suite 320
Scottsdale, Arizona 85254
Lender: GMAC Commercial Mortgage Corporation
650 Dresher Road
P. O. Box 1015
Horsham, Pennsylvania 19044-8015
Attn: Servicing - Executive Vice President
Each party may establish a new address from time to time by written notice to
the other given in accordance with this section; provided, however, that no such
change of address will be effective until written notice thereof is actually
received by the party to whom such change of address is sent. Notice to
additional parties now or hereafter designated by a party entitled to notice are
for convenience only and are not required for notice to a party to be effective
in accordance with this section.
8.02 ENTIRE AGREEMENT; TIME OF ESSENCE. This Note, together with the other
Loan Documents and Lender's commitment letter to Borrower, contain the entire
agreements between Borrower and Lender relating to the subject matter hereof and
thereof, and supercede all prior discussions and agreements (oral or written)
relative hereto and thereto which are not contained herein or therein. Borrower
represents and warrants that it is not relying on any promises, covenants,
representations or agreements in connection with this Note or the other Loan
Documents, other than as expressly set forth herein or therein. In the event of
any conflict between the terms of the Loan Documents, the following order of
priority shall be used to resolve such conflict: The Note shall control over the
Security Instrument and the Security Instrument shall control over all other
Loan Documents. Time is of the essence with respect to all provisions of this
Note. Terms not otherwise defined herein shall have the meanings set forth in
the Security Instrument.
8.03 MODIFICATION. This Note and any of the other Loan Documents may not be
changed, waived, supplemented, discharged or terminated orally or by any act or
failure to act on the part of Borrower or Lender, except by an agreement in
writing signed by the party against whom enforcement thereof is sought and then
only to the extent expressly set forth in such writing. No person other than a
duly authorized officer or agent of Lender shall be deemed an agent of Lender
nor have any authority to waive, modify, supplement or terminate in any manner
whatsoever any of the terms of this Note.
8.04 BINDING EFFECT; JOINT AND SEVERAL OBLIGATIONS. The terms and
provisions of this Note and the other Loan Documents shall be binding upon and
inure to the benefit of Borrower and Lender and their respective heirs,
executors, legal representatives, successors and assigns, whether by voluntary
action of the parties or by operation of law. The foregoing shall not be
construed, however, to alter any limitations or restrictions applicable to
Borrower under the other Loan Documents. If Borrower consists of more than one
person or entity, each shall be jointly and severally liable to perform the
obligations of Borrower under this Note and the other Loan Documents.
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8.05 UNENFORCEABLE PROVISIONS. Any provision of this Note or the other Loan
Documents which may be determined by competent authority to be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
the remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
8.06 AMBIGUITY AND CONSTRUCTION OF CERTAIN TERMS. Neither this Note nor any
uncertainty or ambiguity herein shall be construed or resolved against Lender by
virtue of the fact that such document has originated with Lender as drafter.
Borrower acknowledges that it has reviewed this Note and has had the opportunity
to consult with counsel on same. This Note, therefore, shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of the parties hereto. All personal
pronouns used herein, whether used in the masculine, feminine or neuter gender,
shall be deemed to include all other genders; the singular shall include the
plural and vice versa. Titles of articles and sections are for convenience only
and in no way define, limit, amplify or describe the scope or intent of any
provisions hereof. "Herein," "hereof" and "hereunder" and other words of similar
import refer to this Note as a whole and not to any particular section,
paragraph or other subdivision; "SECTION" refers to the entire section and not
to any particular subsection, paragraph of other subdivision. Reference to days
for performance shall mean calendar days unless Business Days are expressly
indicated.
8.07 GOVERNING LAW. This Note and the other Loan Documents shall be
interpreted, construed and enforced according to the laws of the state in which
the real property encumbered by the Security Instrument is located (without
giving effect to its conflict of laws rules).
8.08 CONSENT TO JURISDICTION. Borrower and Lender, by its acceptance of
this Note, agree and consent to the exclusive jurisdiction and venue of any
state or federal court sitting in the county and state where the real property
encumbered by the Security Instrument is located with respect to any legal
action, proceeding, or controversy between them and hereby expressly waive any
and all rights under applicable law or in equity to object to the jurisdiction
and venue of said courts. Borrower further irrevocably consents to service of
process by certified mail, return receipt requested, to Borrower at the address
for Borrower last provided to Lender in accordance with the notice provision of
this Note and agrees that such service shall be effective ten (10) days after
mailing. Nothing herein shall, however, preclude or prevent Lender from bringing
any one or more actions against Borrower in any other jurisdiction as may be
necessary to enforce or realize upon the Collateral (as defined in the Security
Instrument) or other collateral provided for this Note.
8.09 WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY RIGHT BORROWER MAY HAVE TO TRIAL BY JURY IN ANY LEGAL
ACTION, PROCEEDING, OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE INDEBTEDNESS EVIDENCED BY THIS NOTE; THE
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APPLICATION OR COMMITMENT FOR THE LOAN EVIDENCED BY THIS NOTE; THE
INTERPRETATION, CONSTRUCTION, VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS NOTE
OR ANY OF THE OTHER LOAN DOCUMENTS; OR ANY ACTS OR OMISSION OF LENDER, ITS
OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION WITH ANY OF THE
FOREGOING.
(x) TAX IDENTIFICATION NUMBER. Borrower represents and warrants that its
current tax identification number is: __________________.
(xi) BORROWER AGREES THAT THE WRITTEN AGREEMENTS EVIDENCED BY THIS NOTE AND
THE OTHER SECURITY DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, Borrower has executed this Note under seal as of the
date first above written.
BORROWER:
CTG BUILDING CO.,
an Arizona corporation
By:
-------------------------------------
Donald R. Head
PAY TO THE ORDER OF _________________________________, WITHOUT RECOURSE.
GMAC COMMERCIAL MORTGAGE CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Date:
-----------------------------------
TITLE INSURANCE UNDERWRITING AGREEMENT
(NON-EXCLUSIVE FORM)
THIS AGREEMENT entered into this 1st day of July, 1999, between STEWART
TITLE GUARANTY COMPANY, a Texas Corporation (referred to herein as
"UNDERWRITER"), and NEW CENTURY TITLE COMPANY, a California Corporation
(referred to herein as "Company"). UNDERWRITER appoints COMPANY as its limited
agent only for the purpose of issuing title policies in the name of UNDERWRITER
with the authority, duties, limitations, and conditions set forth in this
Agreement and in accordance with UNDERWRITER's guidelines and instructions.
"Title policies" includes all contracts of title insurance or guaranty,
including title insurance policies, endorsements, binders, and commitments.
1. TERRITORY: COMPANY is a non-exclusive agent authorized to issue
UNDERWRITER's title policies covering property in the State of California,
in the Counties of Alameda, Contra Costa and Sonoma (hereinafter referred
to as "Territory"), and in those areas within said state where UNDERWRITER
does not now have, nor in the future acquires, an exclusive title insurance
representative. COMPANY shall not issue UNDERWRITER's title policies on
property located outside of said Territory.
2. DUTIES OF UNDERWRITER:
(a) UNDERWRITER shall furnish to COMPANY all regularly issued title
policy, binder, commitment, and endorsement forms necessary for the
issuance of title insurance.
(b) UNDERWRITER shall maintain a capacity for the research of matters
pertaining to title insurance risks and shall remain active in the
various trade associations relating to title insurance. In this regard
UNDERWRITER shall:
(1) Furnish COMPANY from time to time with rules and instructions
involving matters of importance to the business of title
insurance.
(2) Promptly determine questions submitted by COMPANY regarding the
issuance of title policies.
(c) UNDERWRITER shall pay premium and other similar taxes on the actual
cash (gross premium [risk rate]) charged for and remitted to
UNDERWRITER by COMPANY pursuant to paragraph 11 hereof. Except that
UNDERWRITER shall deduct therefor the cost of any reinsurance or
coinsurance purchased by UNDERWRITER, and UNDERWRITER shall not be
liable for any other taxes of any kind due on income derived by
COMPANY. Should UNDERWRITER be required to pay premium tax on any
amount greater than that specified above, COMPANY agrees to reimburse
UNDERWRITER for such additional tax.
(d) UNDERWRITER shall defend at its own expense all actions and pay all
losses under its title policies except as herein otherwise provided
subject to the right of reimbursement in paragraph 5 hereof.
UNDERWRITER does not have any obligation to defend COMPANY in any
action filed against COMPANY for COMPANY's malfeasance or negligence,
even though COMPANY may have issued UNDERWRITER's title policy.
(e) UNDERWRITER shall furnish its usual form of insured closing letter to
each of COMPANY's customers that requests such a letter.
3. DUTIES OF COMPANY:
(a) COMPANY shall conduct its business in a sound and ethical manner and
shall issue title policies according to recognized underwriting
practices, the rules and instructions given by UNDERWRITER, and those
rules and instructions imposed by the Department of Insurance or other
regulatory body.
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(b) All title policies must be based on a written report of title
resulting from a complete search and examination of those public
records, surveys, and inspections relevant to the insurance afforded
by such policies. Where outside attorneys are used for examination,
they shall act for and be paid by COMPANY but shall be approved by
UNDERWRITER. Each title policy shall be on a form designated by
UNDERWRITER and shall correctly reflect the status of title as of the
date and time of said policy with appropriate exceptions as to liens,
defects, encumbrances, and/or objections disclosed by the search and
examination of title or known by COMPANY to exist.
(c) For each title policy issued, COMPANY shall preserve in a separate
file all documents supporting the search, examination, and report of
title on which the title policy is based. UNDERWRITER shall have the
right to make copies of all said title reports and documents at any
time within ten (10) years after termination of this Agreement.
(d) No later than the fifteenth (15th) day of each month, COMPANY shall
send to UNDERWRITER a register which shall consist of the following:
(1) A numerical list of all policies issued or charged for or voided
during the previous month.
(2) A copy of each policy issued or charged for during the previous
month and the original of each policy voided.
(3) A check for the gross premiums charged for the account of
UNDERWRITER for the previous month.
(e) COMPANY agrees to keep safely in its escrow account, separate from
COMPANY's individual accounts, all funds received by COMPANY from any
source(s) in connection with transactions in which UNDERWRITER title
policies will be issued, and to disburse said funds only for the
purpose for which they were entrusted. Said account shall be
designated "New Century Title Company Escrow Account" COMPANY agrees
to reconcile said escrow account each month within thirty (30) days of
the date of the bank statement. UNDERWRITER may at any time make, but
shall have no obligation to make, an audit of said escrow account and
the general books of accounts and of all accounts, checks, records, or
files of COMPANY pertaining to transactions in which UNDERWRITER's
title policies are or will be issued.
(f) COMPANY shall at its own expense obtain a fidelity bond or insurance
policy which covers losses caused by misappropriation, disappearance
or wrongful use of escrow funds deposited with COMPANY. Said bond or
policy shall name UNDERWRITER as an additional insured, co-insured or
joint-loss payee, and shall be in an amount not less than ten (10)
times COMPANY'S required statutory net worth as set forth in Insurance
Code Section 12389. The bond or policy may not exclude coverage due to
acts or omissions of any officer, director, employee, or principal of
the COMPANY. A copy of said bond or policy naming UNDERWRITER as an
additional insured, co-insured or joint-loss payee shall be submitted
to UNDERWRITER by COMPANY within fourteen (14) days of the effective
date of this Agreement. Said bond or policy shall remain in effect
throughout the term of the AGREEMENT. And copies of paid renewal
receipts shall be directed to UNDERWRITER annually. Said bond or
policy shall provide that, in the event of cancellation or non-renewal
of said bond or policy, UNDERWRITER shall be given advance written
notice by the underwriter of the bond or policy.
(g) Prior to the issuance of a binder, commitment, or title policy in
excess of UNDERWRITER's single policy retention limit, as determined
by UNDERWRITER from year to year, or if a customer requests
reinsurance at any level, COMPANY shall immediately obtain
UNDERWRITER's consent and send a copy immediately to the Reinsurance
Department of UNDERWRITER in order that UNDERWRITER may contract for
such reinsurance as it deems necessary. UNDERWRITER will pay the
percentage of the reinsurance cost equal to the percentage remitted to
it by COMPANY pursuant to paragraph 11 hereof, and the balance of the
reinsurance costs will be paid by COMPANY. COMPANY shall obtain
UNDERWRITER's consent as specified in paragraph 4b.
(h) Pursuant to Section 2695.2(m) of California Code of Regulations, Title
10, Chapter 5, Subchapter 8, entitled "Unfair Claims Settlement
Practices Regulations", upon COMPANY'S receipt of a notification of a
claim against a policy of title insurance which the COMPANY issued or
participated in the issuance of, COMPANY shall immediately forward
such claim to UNDERWRITER in Houston, to the attention of the National
Legal Department-Claims. Pursuant to Section 2695.2 (m) of the
California Code of Regulations, COMPANY will not be handling title
insurance clams for UNDERWRITER. COMPANY shall give immediate notice
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thereof to UNDERWRITER and furnish to UNDERWRITER a Claim Report Form,
a copy of the title policy involved, and all documents and information
available relating to the claim. COMPANY shall conduct all
investigations requested by UNDERWRITER and shall cooperate with
UNDERWRITER in the defense or settlement of the claim, whether such
claim be made before or after the termination of this Agreement.
(i) COMPANY shall furnish UNDERWRITER with a copy of any audit or report
that COMPANY is required to make to the Department of Insurance (or
similar regulatory body) and a copy of those reports of operations and
financial status as stockholders and directors of the COMPANY are
permitted by law to see.
(j) COMPANY authorizes UNDERWRITER to verify and exchange information
regarding COMPANY and/or its principals and any current or subsequent
contractual agreement including, but not limited to, requesting
investigative consumer reports, records of criminal convictions,
credit reports, and/or consumer report information at any time.
Further, COMPANY and/or its principals understand that upon reasonable
written request they may obtain additional information about such
reports under the Fair Credit Reporting Act. COMPANY shall provide
UNDERWRITER with a list of COMPANY's ten (10) largest customers as
well as any entity in which COMPANY or its principals may have the
ability to direct such entity's activities.
4. COMPANY'S AUTHORITY AND LIMITATIONS THEREON:
(a) COMPANY is authorized to issue title insurance on forms furnished by
UNDERWRITER subject to the provisions of this paragraph, but COMPANY
shall not alter forms without the prior written consent of
UNDERWRITER.
(b) No title policy shall be issued by COMPANY in excess of One Million
Dollars ($1,000,000.00) without first obtaining the prior written
consent of UNDERWRITER.
(c) COMPANY's Board of Directors shall approve in writing the names of its
employees given authority to countersign UNDERWRITER's title policies,
and shall provide UNDERWRITER a list of said authorized employees.
(d) COMPANY shall not without UNDERWRITER's prior written consent settle,
compromise, or negotiate any claim under a title policy of
UNDERWRITER, or employ counsel for UNDERWRITER or an insured in regard
to a claim, or accept service of process on behalf of UNDERWRITER.
(e) COMPANY shall not without UNDERWRITER's prior written consent insure
over a title defect, lien, or encumbrance, regardless of any indemnity
or deposit that COMPANY shall obtain.
(f) COMPANY is expressly not appointed as an agent of UNDERWRITER for
purposes of providing abstracting and/or escrow services, and
UNDERWRITER shall have no liability or responsibility for any claims
or losses due to COMPANY acting as principal in providing such
abstracting and/or escrow services.
(g) COMPANY is expressly not appointed by UNDERWRITER as its agent for
receipt of service of process, a notice of claim and/or complaint. In
the event COMPANY receives said service of process, a notice of claim
and/or complaint, COMPANY shall immediately inform the person or
entity giving said service of process, notice of claim and/or
complaint that COMPANY is not the agent of UNDERWRITER for the purpose
of service of process, receipt of notice of claim, or receipt of
complaint. COMPANY shall immediately inform the Insured to file its
claim directly with the UNDERWRITER as required by the policy and
inform the UNDERWRITER of the attempt to deliver service of process,
notice of claim and/or complaint.
5. DIVISION OF LOSS AND LOSS EXPENSE: The term "Loss" shall include the amount
paid to or for the benefit of the insured as well as loss adjustment
expense including any cost of defending the claim resulting in the loss.
(a) On each such loss under a title policy issued pursuant to this
Agreement not due to COMPANY'S negligence or fraud, COMPANY shall be
liable to UNDERWRITER for the first $5,000.00 of such loss.
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(b) On each such loss due to the fraud or intentional act or omission of
COMPANY or its employees, representatives, or agents, or due to the
gross negligence thereof, COMPANY shall be liable to UNDERWRITER for
the entire amount of such loss including, but not limited to,
attorneys' fees, litigation expenses, and costs of settlement
negotiations. Such losses include but are not limited to:
(1) Failure of title plant to disclose matters causing losses.
(2) Failure to discover or report any instrument of record affecting
title.
(3) Violations of escrow instructions.
(4) Failure to follow underwriting guidelines and/or instructions of
UNDERWRITER.
(5) Failure to prepare a title policy which shows defects and matters
affecting title disclosed in the title search or which should
have been disclosed in the title search.
(c) On each loss suffered by UNDERWRITER by reason of its Insured Closing
Letter issued pursuant to paragraph 2E of this Agreement, COMPANY
shall be liable to UNDERWRITER for the entire amount of such loss
including, but not limited to, attorneys' fees, litigation expenses,
and costs of settlement negotiation.
6. TERMINATION OF AGREEMENT: This Agreement is terminable without cause by
either COMPANY or UNDERWRITER at any time on thirty (30) days written
notice.
7. TERMINATION UPON DEFAULT, ETC.: In addition to other termination provisions
contained in this Agreement, UNDERWRITER may immediately terminate this
Agreement at any time by written notice to COMPANY upon the happening of
any of the following:
(a) Any bankruptcy proceedings (voluntary or involuntary), insolvency,
receivership, or any like proceedings involving the financial
stability of COMPANY.
(b) Any Court or Administrative proceeding or decision against COMPANY for
the violation of any federal or state law or the breach of any rule or
regulation of the Department of Insurance or other regulatory agency.
(c) Any revocation, disqualification, suspension, or termination of
COMPANY's right to do business or any license it may have as a title
insurance agency or abstracter.
(d) Any notice or information of any act by COMPANY of apparent fraud or
dishonesty, or of any shortage in COMPANY's escrow account, or the
refusal of COMPANY to allow UNDERWRITER to perform an audit as set out
in Section 3e above.
(e) Any failure of COMPANY to keep proper accounting records of its escrow
accounts or any failure to reconcile same within thirty (30) days of
the date of the last bank statement.
(f) Any failure, refusal, or neglect by COMPANY to pay any remittances due
to UNDERWRITER within twenty (20) days after written notice from
UNDERWRITER to COMPANY of a deficiency.
(g) Any failure, refusal, or neglect to cure any default by COMPANY within
thirty (30) days after written notice from UNDERWRITER to COMPANY
concerning such default.
(h) Any determination by UNDERWRITER, in its sole discretion, that COMPANY
and/or its principals are pursuing a course of conduct not in keeping
with sound title insurance business practices, or possess a credit
rating which contains negative entries, or upon discovery that COMPANY
or its principals have furnished any misleading or false information
to UNDERWRITER or COMPANY.
8. RELATIONSHIP OF UNDERWRITER AND COMPANY SUBSEQUENT TO TERMINATION:
Subsequent to termination or cancellation of this Agreement under any
provisions of this Agreement:
4
<PAGE>
(a) COMPANY shall cease and discontinue the issuance of title policies of
UNDERWRITER; provided, however, that UNDERWRITER shall have the right
to have its title policies issued on those title transactions in
process.
(b) COMPANY shall cease the use and/or display of the Stewart name or to
hold itself out or to advertise itself as an issuing office of
UNDERWRITER.
(c) COMPANY shall return to UNDERWRITER all materials, forms, manuals, and
supplies furnished COMPANY by UNDERWRITER.
(d) COMPANY shall retain all evidence of insurability in its files for the
benefit of both UNDERWRITER and COMPANY, and to comply with any
governmental regulations or laws. UNDERWRITER shall have the right to
copy any such files, which right shall survive the termination of this
Agreement.
(e) COMPANY shall continue to account to UNDERWRITER for all policies in
accordance with the provisions of this Agreement.
9. ASSIGNMENT: This Agreement is binding on and inures to the benefit of any
successor of UNDERWRITER whether by merger, consolidation, affiliation, or
otherwise.
10. NOTICES: All notices provided for in this Agreement shall be given in
writing to the party affected and shall be personally delivered to the
other party or mailed to it by Certified or Registered United States Mail
at the appropriate address shown below.
11. GROSS PREMIUMS - SCHEDULE OF PAYMENTS:
(a) COMPANY may charge any fees it desires of whatever character for its
services which do not impose an obligation on UNDERWRITER, including
the search and examination of title (which are a necessary and
integral part of underwriting) in transactions where title insurance
is being issued, so long as same are permitted by law and not
inconsistent with any rate filing or any rules and regulations of the
Department of Insurance or other regulatory Agency. TEN percent (10%)
of the [X] rate filing, [ ] promulgated rate, [ ] attached schedule of
charges, [X] total customer charges (all fees charged the public),
including all changes in or amendments to any of the above bracketed
items, constitutes the gross premium (risk rate) to be charged for and
remitted to UNDERWRITER by COMPANY. Provided that UNDERWRITER shall
not receive less than thirty-five cents (.35) per $1,000 in policy
liability, excluding simultaneous issue policies. The gross premium
(risk rate) shall include Fifty Percent (50%) of all amounts charged
for standard endorsements not described in paragraph 11b. In the event
COMPANY, under this paragraph, pays UNDERWRITER according to an
attached schedule of charges and COMPANY increases its charges to the
public for title insurance and title examination in conjunction with
the issuance of a title policy, then the amount COMPANY shall pay to
UNDERWRITER shall be increased by the same percentage. COMPANY agrees
to promptly notify UNDERWRITER of any increase in charges to the
public. All amounts constituting the gross premium (risk rate) are the
property of UNDERWRITER, and shall be collected and held by COMPANY in
trust for UNDERWRITER.
(b) COMPANY shall promptly remit to UNDERWRITER as gross premium (risk
rate) One Hundred Percent (100%) of all charges made by COMPANY for
extra hazardous risks or coverage assumed by UNDERWRITER. Extra
hazardous risks shall include, but are not limited to, zoning
coverage, usury coverage, non-imputation coverage, shared application
endorsement, option endorsement, and tie-in endorsement. These
endorsements are not to be issued without permission of Houston Legal
Department or a Senior Underwriter.
(c) If loss and loss adjustment expenses (including attorney fees)
incurred by UNDERWRITER in any one calendar year exceed Thirty Percent
(30%) of the gross premium (risk rate) actually remitted to
UNDERWRITER by COMPANY in that calendar year, then COMPANY's
remittance to UNDERWRITER for gross premium (risk rate) shall increase
Ten Percent (10%) (One Hundred Ten Percent (110%) of the above
remittance rate to UNDERWRITER) until UNDERWRITER has recouped all
loss and loss adjustment expenses, including attorney fees, incurred
in the excess of said Thirty Percent (30%) of the gross premium (risk
rate). This clause is cumulative.
5
<PAGE>
(d) In the event COMPANY becomes delinquent in remitting UNDERWRITER's
gross premium (risk rate) as determined by paragraph 11a above,
COMPANY hereby grants to UNDERWRITER a lien against all the assets of
the COMPANY until UNDERWRITER is fully paid.
IN WITNESS WHEREOF, COMPANY and UNDERWRITER have executed this Agreement
as of the day and year first stated above.
UNDERWRITER: COMPANY:
STEWART TITLE GUARANTY COMPANY NEW CENTURY TITLE COMPANY
P.O. BOX 2029 1455 NORTH SCOTTSDALE ROAD, SUITE #320
HOUSTON, TEXAS 77252 SCOTTSDALE, ARIZONA 85254
By: By:
-------------------------------- --------------------------------------
Senior Vice President Dale A. Head, Executive Vice President
Attest: Attest:
---------------------------- ----------------------------------
6
<PAGE>
AMENDMENT TO UNDERWRITING AGREEMENT
This Amendment made and entered into this 28th day of September, 1999, by
and between STEWART TITLE GUARANTY COMPANY, a Texas corporation, referred to in
this Amendment as "UNDERWRITER," and NEW CENTURY TITLE COMPANY, a California
corporation, hereinafter referred to in this Amendment as "COMPANY."
WITNESSETH
Whereas, UNDERWRITER and COMPANY have heretofore entered into a certain
Underwriting Agreement dated July 1, 1999; and
Whereas, the parties hereto desire to further amend the terms of said
Agreement;
Now, therefore, for good and valuable consideration, the parties hereto
agree that the above referenced Agreement is hereby amended as follows:
AMENDMENT
Paragraph 1 of said Agreement is hereby deleted in its entirety and in the
place and stead thereof shall be substituted the following:
1. TERRITORY
COMPANY is authorized to issue UNDERWRITER's title policies on property
in the following additional county, San Diego County in the State of
CALIFORNIA (hereinafter referred to as Territory). In addition, Company
is authorized to issue Underwriter's title policies on property in Los
Angeles, San Bernardino, Santa Barbara, Ventura, Orange and Riverside
Counties in the State of CALIFORNIA (also herinafter referred to as
Territory) at such time as New Century Title has received license for
same from the California Department of Insurance and Stewart Title
Guaranty has received all completed forms required for same and has
approved such forms. COMPANY shall not issue title policies on property
located ouside of said Territory. UNDERWRITER expressly reserves the
right to appoint other agents of title assurances in said Territory.
Except as amended hereby, all other provisions contained in the
above referenced Agreement shall remain in full force and effect.
Executed on the date above indicated.
ATTEST: STEWART TITLE GUARANTY COMPANY
By: By:
------------------------------- --------------------------------
Secretary Sr. Vice President
ATTEST: NEW CENTURY TITLE COMPANY
By: By:
------------------------------- --------------------------------
Dale A. Head, Exec. Vice President
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
1. Capital Title Agency Inc., an Arizona corporation
2. New Century Insurance Services, Inc., an Arizona corporation
3. New Century Holding Company, a California corporation
4. CTG Building Co., an Arizona corporation
5. New Century Title Company, a California corporation
6. Northwestern Accommodation Company, a California corporation
7. Northwestern Service Company, a California corporation
8. Northwestern Title Insurance Company, a California corporation
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-66375) pertaining to the Capital Title Group, Inc. 1996 Stock Option
Plan of our report dated March 3, 2000 with respect to the consolidated
financial statements included in this Annual Report (Form 10-K) of Capital Title
Group, Inc.
/s/ Ernst & Young LLP
Phoenix, Arizona
March 24, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS EXHIBIT SHALL NOT BE DEEMED FILED FOR PURPOSES OF SECTION 11 OF THE
SECURITIES ACT OF 1933 AND SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934, OR
OTHERWISE SUBJECT TO THE LIABILITY OF SUCH SECTIONS, NOR SHALL IT BE DEEMED A
PART OF ANY OTHER FILING WHICH INCORPORATES THIS REPORT BY REFERENCE. UNLESS
SUCH OTHER FILING EXPRESSLY INCORPORATES THIS EXHIBIT BY REFERENCE.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,884,059
<SECURITIES> 0
<RECEIVABLES> 124,546
<ALLOWANCES> (13,750)
<INVENTORY> 0
<CURRENT-ASSETS> 2,696,828
<PP&E> 16,524,427
<DEPRECIATION> (5,265,373)
<TOTAL-ASSETS> 15,199,391
<CURRENT-LIABILITIES> 2,099,267
<BONDS> 4,173,032
0
0
<COMMON> 16,948
<OTHER-SE> 8,526,908
<TOTAL-LIABILITY-AND-EQUITY> 15,199,391
<SALES> 0
<TOTAL-REVENUES> 36,147,427
<CGS> 0
<TOTAL-COSTS> 37,829,934
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<INTEREST-EXPENSE> 286,520
<INCOME-PRETAX> (1,969,027)
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